-CITE-
26 USC Subchapter B - Computation of Taxable Income 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
-HEAD-
SUBCHAPTER B - COMPUTATION OF TAXABLE INCOME
-MISC1-
Part
I. Definition of gross income, adjusted gross income,
taxable income, etc.
II. Items specifically included in gross income.
III. Items specifically excluded from gross income.
IV. Determination of marital status.(!1)
V. Deductions for personal exemptions.
VI. Itemized deductions for individuals and corporations.
VII. Additional itemized deductions for individuals.
VIII. Special deductions for corporations.
IX. Items not deductible.
X. Terminal railroad corporations and their shareholders.
XI. Special rules relating to corporate preference items.
AMENDMENTS
1982 - Pub. L. 97-248, title II, Sec. 204(c)(2), Sept. 3, 1982,
96 Stat. 427, added item for part XI.
1977 - Pub. L. 95-30, title I, Sec. 101(e)(3), May 23, 1977, 91
Stat. 135, substituted "Determination of marital status" for
"Standard deduction for individuals" in item for part IV.
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(4)(C), Oct. 4,
1976, 90 Stat. 1793, substituted "taxable income, etc." for "and
taxable income." in item for part I.
1962 - Pub. L. 87-870, Sec. 1(b), Oct. 23, 1962, 76 Stat. 1160,
added item for part X.
-FOOTNOTE-
(!1) Part heading amended by Pub. L. 99-514 without corresponding
amendment of analysis.
-End-
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26 USC PART I - DEFINITION OF GROSS INCOME, ADJUSTED
GROSS INCOME, TAXABLE INCOME, ETC. 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-MISC1-
Sec.
61. Gross income defined.
62. Adjusted gross income defined.
63. Taxable income defined.
64. Ordinary income defined.
65. Ordinary loss defined.
66. Treatment of community income.
67. 2-percent floor on miscellaneous itemized deductions.
68. Overall limitation on itemized deductions.
AMENDMENTS
1990 - Pub. L. 101-508, title XI, Sec. 11103(d), Nov. 5, 1990,
104 Stat. 1388-407, added item 68.
1986 - Pub. L. 99-514, title I, Sec. 132(d), Oct. 22, 1986, 100
Stat. 2116, added item 67.
1984 - Pub. L. 98-369, div. A, title IV, Sec. 424(b)(2)(C), July
18, 1984, 98 Stat. 803, struck out "where spouses live apart" in
item 66.
1980 - Pub. L. 96-605, title I, Sec. 101(b), Dec. 28, 1980, 94
Stat. 3522, added item 66.
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(4)(A), (B), Oct.
4, 1976, 90 Stat. 1793, substituted "TAXABLE INCOME, ETC." for "AND
TAXABLE INCOME" in part heading, and added items 64 and 65.
-End-
-CITE-
26 USC Sec. 61 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 61. Gross income defined
-STATUTE-
(a) General definition
Except as otherwise provided in this subtitle, gross income means
all income from whatever source derived, including (but not limited
to) the following items:
(1) Compensation for services, including fees, commissions,
fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.
(b) Cross references
For items specifically included in gross income, see part II
(sec. 71 and following). For items specifically excluded from
gross income, see part III (sec. 101 and following).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 17; Pub. L. 98-369, div. A,
title V, Sec. 531(c), July 18, 1984, 98 Stat. 884.)
-MISC1-
AMENDMENTS
1984 - Subsec. (a)(1). Pub. L. 98-369 inserted reference to
fringe benefits.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 effective Jan. 1, 1985, see section
531(h) of Pub. L. 98-369, set out as an Effective Date note under
section 132 of this title.
TERMINATION DATE OF 1978 AMENDMENT
Pub. L. 95-615, Sec. 210(a), Nov. 8, 1978, 92 Stat. 3109,
provided that: "Title I of this Act [probably means sections 1 to 8
of Pub. L. 95-615, see Short Title of 1978 Amendment note under
section 1 of this title] (other than sections 4 and 5 thereof)
[amending section 167 of this title, enacting provisions set out as
notes under this section and sections 61 and 62 of this title, and
amending provisions set out as notes under sections 117, 167, and
382 of this title] shall cease to have effect on the day after the
date of the enactment of this Act [Nov. 8, 1978]."
REGULATIONS
Pub. L. 95-427, Sec. 1, Oct. 7, 1978, 92 Stat. 996, as amended by
Pub. L. 96-167, Sec. 1, Dec. 29, 1979, 93 Stat. 1275; Pub. L.
97-34, title VIII, Sec. 801, Aug. 13, 1981, 95 Stat. 349; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - No fringe benefit regulation shall be issued -
"(1) in final form on or after May 1, 1978, and on or before
December 31, 1983, or
"(2) in proposed or final form on or after May 1, 1978, if such
regulation has an effective date on or before December 31, 1983.
"(b) Definition of Fringe Benefit Regulation. - For purposes of
subsection (a), the term 'fringe benefit regulation' means a
regulation providing for the inclusion of any fringe benefit in
gross income by reason of section 61 of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954]."
Pub. L. 95-615, Sec. 3, Nov. 8, 1978, 92 Stat. 3097, as amended
by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that no regulations be issued in final form on or after Oct. 1,
1977, and before July 1, 1978, providing for inclusion of any
fringe benefit in gross income by reason of section 61 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954], ceased to
have effect on the day after Nov. 8, 1978, pursuant to section
210(a) of that Act.
NO GAIN RECOGNIZED FROM NET GIFTS MADE BEFORE MARCH 4, 1981
Section 1026 of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - In the case of any transfer of property
subject to gift tax made before March 4, 1981, for purposes of
subtitle A of the Internal Revenue Code of 1986 [formerly I.R.C.
1954, 26 U.S.C. 1 et seq.], gross income of the donor shall not
include any amount attributable to the donee's payment of (or
agreement to pay) any gift tax imposed with respect to such gift.
"(b) Gift Tax Defined. - For purposes of subsection (a), the term
'gift tax' means -
"(1) the tax imposed by chapter 12 of such Code [26 U.S.C. 2501
et seq.], and
"(2) any tax imposed by a State (or the District of Columbia)
on transfers by gifts.
"(c) Statute of Limitations. - If refund or credit of any
overpayment of tax resulting from subsection (a) is prevented on
the date of the enactment of this Act [July 18, 1984] (or at any
time within 1 year after such date) by the operation of any law or
rule of law (including res judicata), refund or credit of such
overpayment (to the extent attributable to subsection (a)) may
nevertheless be made or allowed if claim therefor is filed within 1
year after the date of the enactment of this Act."
PAYMENT-IN-KIND TAX TREATMENT ACT OF 1983
Pub. L. 98-4, Mar. 11, 1983, 97 Stat. 7, as amended by Pub. L.
98-369, div. A, title X, Sec. 1061(a), July 18, 1984, 98 Stat.
1046; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub.
L. 100-647, title VI, Sec. 6252(a)(1), Nov. 10, 1988, 102 Stat.
3752, provided that:
"SECTION 1. SHORT TITLE.
"This Act may be cited as the 'Payment-in-Kind Tax Treatment Act
of 1983'.
"SEC. 2. INCOME TAX TREATMENT OF AGRICULTURAL COMMODITIES
RECEIVED UNDER A 1983 PAYMENT-IN-KIND PROGRAM.
"(a) Income Tax Deferral, Etc. - Except as otherwise provided in
this Act, for purposes of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] -
"(1) a qualified taxpayer shall not be treated as having
realized income when he receives a commodity under a 1983
payment-in-kind program,
"(2) such commodity shall be treated as if it were produced by
such taxpayer, and
"(3) the unadjusted basis of such commodity in the hands of
such taxpayer shall be zero.
"(b) Effective Date. - This section shall apply to taxable years
ending after December 31, 1982, but only with respect to
commodities received for the 1983 crop year.
"SEC. 3. LAND DIVERTED UNDER 1983 PAYMENT-IN-KIND PROGRAM TREATED
AS USED IN FARMING BUSINESS, ETC.
"(a) General Rule. - For purposes of the provisions specified in
subsection (b), in the case of any land diverted from the
production of an agricultural commodity under a 1983
payment-in-kind program -
"(1) such land shall be treated as used during the 1983 crop
year by the qualified taxpayer in the active conduct of the trade
or business of farming, and
"(2) any qualified taxpayer who materially participates in the
diversion and devotion to conservation uses required under a 1983
payment-in-kind program shall be treated as materially
participating in the operation of such land during such crop
year.
"(b) Provisions to Which Subsection (a) Applies. - The provisions
specified in this subsection are -
"(1) section 2032A of the Internal Revenue Code of 1986
(relating to valuation of certain farm, etc., real property),
"(2) section 6166 of such Code (relating to extension of time
for payment of estate tax where estate consists largely of
interest in closely held business),
"(3) chapter 2 of such Code (relating to tax on self-employment
income), and
"(4) title II of the Social Security Act [42 U.S.C. 401 et
seq.] (relating to Federal old-age, survivors, and disability
insurance benefits).
"SEC. 4. ANTIABUSE RULES.
"(a) General Rule. - In the case of any person, sections 2 and 3
of this Act shall not apply with respect to any land acquired by
such person after February 23, 1983, unless such land was acquired
in a qualified acquisition.
"(b) Qualified Acquisition. - For purposes of this section, the
term 'qualified acquisition' means any acquisition -
"(1) by reason of the death of a qualified transferor,
"(2) by reason of a gift from a qualified transferor, or
"(3) from a qualified transferor who is a member of the family
of the person acquiring the land.
"(c) Definitions and Special Rules. - For purposes of this
section -
"(1) Qualified transferor. - The term 'qualified transferor'
means any person -
"(A) who held the land on February 23, 1983, or
"(B) who acquired the land after February 23, 1983, in a
qualified acquisition.
"(2) Member of family. - The term 'member of the family' has
the meaning given such term by section 2032A(e)(2) of the
Internal Revenue Code of 1986.
"(3) Mere change in form of business. - Subsection (a) shall
not apply to any change in ownership by reason of a mere change
in the form of conducting the trade or business so long as the
land is retained in such trade or business and the person holding
the land before such change retains a direct or indirect
80-percent interest in such land.
"(4) Treatment of certain acquisitions of right to the crop. -
The acquisition of a direct or indirect interest in 80 percent or
more of the crop from any land shall be treated as an acquisition
of such land.
"SEC. 5. DEFINITIONS AND SPECIAL RULES.
"(a) General Rule. - For purposes of this Act -
"(1) 1983 payment-in-kind program. - The term '1983
payment-in-kind program' means any program for the 1983 crop year
-
"(A) under which the Secretary of Agriculture (or his
delegate) makes payments in kind of any agricultural commodity
to any person in return for -
"(i) the diversion of farm acreage from the production of
an agricultural commodity, and
"(ii) the devotion of such acreage to conservation uses,
and
"(B) which the Secretary of Agriculture certifies to the
Secretary of the Treasury as being described in subparagraph
(A).
"(2) Crop year. - The term '1983 crop year' means the crop year
for any crop the planting or harvesting period for which occurs
during 1983. The term '1984 crop year' means the crop year for
wheat the planting and harvesting period for which occurs during
1984.
"(3) Qualified taxpayer. - The term 'qualified taxpayer' means
any producer of agricultural commodities (within the meaning of
the 1983 payment-in-kind programs) who receives any agricultural
commodity in return for meeting the requirements of clauses (i)
and (ii) of paragraph (1)(A).
"(4) Receipt includes right to receive, etc. - A right to
receive (or other constructive receipt of) a commodity shall be
treated the same as actual receipt of such commodity.
"(5) Amounts received by the taxpayer as reimbursement for
storage. - A qualified taxpayer reporting on the cash receipts
and disbursements method of accounting shall not be treated as
being entitled to receive any amount as reimbursement for storage
of commodities received under a 1983 payment-in-kind program
until such amount is actually received by the taxpayer.
"(6) Commodity credit loans treated separately. - Subsection
(a) of section 2 shall apply to the receipt of any commodity
under a 1983 payment-in-kind program separately from, and without
taking into account, any related transaction or series of
transactions involving the satisfaction of loans from the
Commodity Credit Corporation.
"(b) Extension to Wheat Planted and Harvested in 1984. - In the
case of wheat -
"(1) any reference in this Act to the 1983 crop year shall
include a reference to the 1984 crop year, and
"(2) any reference to the 1983 payment-in-kind program shall
include a reference to any program for the 1984 year for wheat
which meets the requirements of subparagraphs (A) and (B) of
subsection (a)(1).
"(c) Regulations. - The Secretary of the Treasury or his delegate
(after consultation with the Secretary of Agriculture) shall
prescribe such regulations as may be necessary to carry out the
purposes of this Act, including (but not limited to) such
regulations as may be necessary to carry out the purposes of this
Act where the commodity is received by a cooperative on behalf of
the qualified taxpayer."
[Section 1061(b) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending Pub. L. 98-4 set out above] shall
apply with respect to commodities received for the 1984 crop year
(as defined in section 5(a)(2) of the Payment-in-Kind Tax Treatment
Act of 1983 [Pub. L. 98-4, set out above] as amended by subsection
(a))."]
CANCELLATION OF CERTAIN STUDENT LOANS
Pub. L. 94-455, title XXI, Sec. 2117, Oct. 4, 1976, 90 Stat.
1911, as amended by Pub. L. 95-600, title I, Sec. 162, Nov. 6,
1978, 92 Stat. 2810; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100
Stat. 2095, provided that no amount be included in gross income of
an individual for purposes of 26 U.S.C. 61 by reason of the
discharge made before Jan. 1, 1983 of the indebtedness of the
individual under a student loan if the discharge was pursuant to a
provision of the loan under which the indebtedness of the
individual would be discharged if the individual worked for a
certain period of time in certain geographical areas or for certain
classes of employers.
REGULATIONS RELATING TO TAX TREATMENT OF CERTAIN PREPUBLICATION
EXPENDITURES OF PUBLISHERS
Pub. L. 94-455, title XXI, Sec. 2119, Oct. 4, 1976, 90 Stat.
1912, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100
Stat. 2095, provided that:
"(a) General Rule. - With respect to taxable years beginning on
or before the date on which regulations dealing with prepublication
expenditures are issued after the date of the enactment of this Act
[Oct. 4, 1976], the application of sections 61 (as it relates to
cost of goods sold), 162, 174, 263, and 471 of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954] to any prepublication
expenditure shall be administered -
"(1) without regard to Revenue Ruling 73-395, and
"(2) in the manner in which such sections were applied
consistently by the taxpayer to such expenditures before the date
of the issuance of such revenue ruling.
"(b) Regulations To Be Prospective Only. - Any regulations issued
after the date of the enactment of this Act [Oct. 4, 1976] which
deal with the application of sections 61 (as it relates to cost of
goods sold), 162, 174, 263, and 471 of the Internal Revenue Code of
1986 to prepublication expenditures shall apply only with respect
to taxable years beginning after the date on which such regulations
are issued.
"(c) Prepublication Expenditures Defined. - For purposes of this
section, the term 'prepublication expenditures' means expenditures
paid or incurred by the taxpayer (in connection with his trade or
business of publishing) for the writing, editing, compiling,
illustrating, designing, or other development or improvement of a
book, teaching aid, or similar product."
REIMBURSEMENT OF MOVING EXPENSES OF EMPLOYEES OF CERTAIN
CORPORATIONS EXCLUDED FROM GROSS INCOME; CLAIM FOR REFUND OR
CREDIT; LIMITATIONS; INTEREST
Pub. L. 86-780, Sec. 5, Sept. 14, 1960, 74 Stat. 1013, provided
for the exclusion from gross income of any amount received after
Dec. 31, 1949, and before Oct. 1, 1955, by employees of certain
corporations as reimbursement for moving expenses, and the refund
or credit of any overpayments.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 208A, 305, 351, 354, 355,
356, 408, 671, 707, 6103 of this title.
-End-
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26 USC Sec. 62 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 62. Adjusted gross income defined
-STATUTE-
(a) General rule
For purposes of this subtitle, the term "adjusted gross income"
means, in the case of an individual, gross income minus the
following deductions:
(1) Trade and business deductions
The deductions allowed by this chapter (other than by part VII
of this subchapter) which are attributable to a trade or business
carried on by the taxpayer, if such trade or business does not
consist of the performance of services by the taxpayer as an
employee.
(2) Certain trade and business deductions of employees
(A) Reimbursed expenses of employees
The deductions allowed by part VI (section 161 and following)
which consist of expenses paid or incurred by the taxpayer, in
connection with the performance by him of services as an
employee, under a reimbursement or other expense allowance
arrangement with his employer. The fact that the reimbursement
may be provided by a third party shall not be determinative of
whether or not the preceding sentence applies.
(B) Certain expenses of performing artists
The deductions allowed by section 162 which consist of
expenses paid or incurred by a qualified performing artist in
connection with the performances by him of services in the
performing arts as an employee.
(C) Certain expenses of officials
The deductions allowed by section 162 which consist of
expenses paid or incurred with respect to services performed by
an official as an employee of a State or a political
subdivision thereof in a position compensated in whole or in
part on a fee basis.
(D) Certain expenses of elementary and secondary school
teachers
In the case of taxable years beginning during 2002 or 2003,
the deductions allowed by section 162 which consist of
expenses, not in excess of $250, paid or incurred by an
eligible educator in connection with books, supplies (other
than nonathletic supplies for courses of instruction in health
or physical education), computer equipment (including related
software and services) and other equipment, and supplementary
materials used by the eligible educator in the classroom.
(E) Certain expenses of members of reserve components of the
Armed Forces of the United States
The deductions allowed by section 162 which consist of
expenses, determined at a rate not in excess of the rates for
travel expenses (including per diem in lieu of subsistence)
authorized for employees of agencies under subchapter I of
chapter 57 of title 5, United States Code, paid or incurred by
the taxpayer in connection with the performance of services by
such taxpayer as a member of a reserve component of the Armed
Forces of the United States for any period during which such
individual is more than 100 miles away from home in connection
with such services.
(3) Losses from sale or exchange of property
The deductions allowed by part VI (sec. 161 and following) as
losses from the sale or exchange of property.
(4) Deductions attributable to rents and royalties
The deductions allowed by part VI (sec. 161 and following), by
section 212 (relating to expenses for production of income), and
by section 611 (relating to depletion) which are attributable to
property held for the production of rents or royalties.
(5) Certain deductions of life tenants and income beneficiaries
of property
In the case of a life tenant of property, or an income
beneficiary of property held in trust, or an heir, legatee, or
devisee of an estate, the deduction for depreciation allowed by
section 167 and the deduction allowed by section 611.
(6) Pension, profit-sharing, and annuity plans of self-employed
individuals
In the case of an individual who is an employee within the
meaning of section 401(c)(1), the deduction allowed by section
404.
(7) Retirement savings
The deduction allowed by section 219 (relating to deduction of
certain retirement savings).
[(8) Repealed. Pub. L. 104-188, title I, Sec. 1401(b)(4), Aug.
20, 1996, 110 Stat. 1788]
(9) Penalties forfeited because of premature withdrawal of funds
from time savings accounts or deposits
The deductions allowed by section 165 for losses incurred in
any transaction entered into for profit, though not connected
with a trade or business, to the extent that such losses include
amounts forfeited to a bank, mutual savings bank, savings and
loan association, building and loan association, cooperative bank
or homestead association as a penalty for premature withdrawal of
funds from a time savings account, certificate of deposit, or
similar class of deposit.
(10) Alimony
The deduction allowed by section 215.
(11) Reforestation expenses
The deduction allowed by section 194.
(12) Certain required repayments of supplemental unemployment
compensation benefits
The deduction allowed by section 165 for the repayment to a
trust described in paragraph (9) or (17) of section 501(c) of
supplemental unemployment compensation benefits received from
such trust if such repayment is required because of the receipt
of trade readjustment allowances under section 231 or 232 of the
Trade Act of 1974 (19 U.S.C. 2291 and 2292).
(13) Jury duty pay remitted to employer
Any deduction allowable under this chapter by reason of an
individual remitting any portion of any jury pay to such
individual's employer in exchange for payment by the employer of
compensation for the period such individual was performing jury
duty. For purposes of the preceding sentence, the term "jury pay"
means any payment received by the individual for the discharge of
jury duty.
(14) Deduction for clean-fuel vehicles and certain refueling
property
The deduction allowed by section 179A.
(15) Moving expenses
The deduction allowed by section 217.
(16) Archer MSAs
The deduction allowed by section 220.
(17) Interest on education loans
The deduction allowed by section 221.
(18) Higher education expenses
The deduction allowed by section 222.
Nothing in this section shall permit the same item to be deducted
more than once.
(19) Health savings accounts
The deduction allowed by section 223.
(b) Qualified performing artist
(1) In general
For purposes of subsection (a)(2)(B), the term "qualified
performing artist" means, with respect to any taxable year, any
individual if -
(A) such individual performed services in the performing arts
as an employee during the taxable year for at least 2
employers,
(B) the aggregate amount allowable as a deduction under
section 162 in connection with the performance of such services
exceeds 10 percent of such individual's gross income
attributable to the performance of such services, and
(C) the adjusted gross income of such individual for the
taxable year (determined without regard to subsection
(a)(2)(B)) does not exceed $16,000.
(2) Nominal employer not taken into account
An individual shall not be treated as performing services in
the performing arts as an employee for any employer during any
taxable year unless the amount received by such individual from
such employer for the performance of such services during the
taxable year equals or exceeds $200.
(3) Special rules for married couples
(A) In general
Except in the case of a husband and wife who lived apart at
all times during the taxable year, if the taxpayer is married
at the close of the taxable year, subsection (a)(2)(B) shall
apply only if the taxpayer and his spouse file a joint return
for the taxable year.
(B) Application of paragraph (1)
In the case of a joint return -
(i) paragraph (1) (other than subparagraph (C) thereof)
shall be applied separately with respect to each spouse, but
(ii) paragraph (1)(C) shall be applied with respect to
their combined adjusted gross income.
(C) Determination of marital status
For purposes of this subsection, marital status shall be
determined under section 7703(a).
(D) Joint return
For purposes of this subsection, the term "joint return"
means the joint return of a husband and wife made under section
6013.
(c) Certain arrangements not treated as reimbursement arrangements
For purposes of subsection (a)(2)(A), an arrangement shall in no
event be treated as a reimbursement or other expense allowance
arrangement if -
(1) such arrangement does not require the employee to
substantiate the expenses covered by the arrangement to the
person providing the reimbursement, or
(2) such arrangement provides the employee the right to retain
any amount in excess of the substantiated expenses covered under
the arrangement.
The substantiation requirements of the preceding sentence shall not
apply to any expense to the extent that substantiation is not
required under section 274(d) for such expense by reason of the
regulations prescribed under the 2nd sentence thereof.
(d) Definition; special rules
(1) Eligible educator
(A) In general
For purposes of subsection (a)(2)(D), the term "eligible
educator" means, with respect to any taxable year, an
individual who is a kindergarten through grade 12 teacher,
instructor, counselor, principal, or aide in a school for at
least 900 hours during a school year.
(B) School
The term "school" means any school which provides elementary
education or secondary education (kindergarten through grade
12), as determined under State law.
(2) Coordination with exclusions
A deduction shall be allowed under subsection (a)(2)(D) for
expenses only to the extent the amount of such expenses exceeds
the amount excludable under section 135, 529(c)(1), or 530(d)(2)
for the taxable year.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 17; Pub. L. 87-792, Sec. 7(b),
Oct. 10, 1962, 76 Stat. 828; Pub. L. 88-272, title II, Sec. 213(b),
Feb. 26, 1964, 78 Stat. 52; Pub. L. 91-172, title V, Sec. 531(b),
Dec. 30, 1969, 83 Stat. 655; Pub. L. 93-406, title II, Secs.
2002(a)(2), 2005(c)(9), Sept. 2, 1974, 88 Stat. 959, 992; Pub. L.
93-483, Sec. 6(a), Oct. 26, 1974, 88 Stat. 1458; Pub. L. 94-455,
title V, Sec. 502(a), title XV, Sec. 1501(b)(1), title XIX, Sec.
1901(a)(8), (9), Oct. 4, 1976, 90 Stat. 1559, 1735, 1765; Pub. L.
95-615, Sec. 203(b), Nov. 8, 1978, 92 Stat. 3106; Pub. L. 96-451,
title III, Sec. 301(b), Oct. 14, 1980, 94 Stat. 1990; Pub. L.
96-608, Sec. 3(a), Dec. 28, 1980, 94 Stat. 3551; Pub. L. 97-34,
title I, Secs. 103(b), 112(b)(2), title III, Sec. 311(h)(1), Aug.
13, 1981, 95 Stat. 187, 195, 282; Pub. L. 97-354, Sec. 5(a)(17),
Oct. 19, 1982, 96 Stat. 1693; Pub. L. 98-369, div. A, title IV,
Sec. 491(d)(2), July 18, 1984, 98 Stat. 849; Pub. L. 99-514, title
I, Secs. 131(b)(1), 132(b), (c), title III, Sec. 301(b)(1), title
XVIII, Sec. 1875(c)(3), Oct. 22, 1986, 100 Stat. 2113, 2115, 2116,
2217, 2894; Pub. L. 100-485, title VII, Sec. 702(a), Oct. 13, 1988,
102 Stat. 2426; Pub. L. 100-647, title I, Sec. 1001(b)(3)(A), title
VI, Sec. 6007(b), Nov. 10, 1988, 102 Stat. 3349, 3687; Pub. L.
101-508, title XI, Sec. 11802(e)(1), Nov. 5, 1990, 104 Stat.
1388-530; Pub. L. 102-318, title V, Sec. 521(b)(2), July 3, 1992,
106 Stat. 310; Pub. L. 102-486, title XIX, Sec. 1913(a)(2), Oct.
24, 1992, 106 Stat. 3019; Pub. L. 103-66, title XIII, Sec.
13213(c)(1), Aug. 10, 1993, 107 Stat. 474; Pub. L. 104-188, title
I, Sec. 1401(b)(4), Aug. 20, 1996, 110 Stat. 1788; Pub. L. 104-191,
title III, Sec. 301(b), Aug. 21, 1996, 110 Stat. 2048; Pub. L.
105-34, title II, Sec. 202(b), title IX, Sec. 975(a), Aug. 5, 1997,
111 Stat. 808, 898; Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A-629; Pub. L.
107-16, title IV, Sec. 431(b), June 7, 2001, 115 Stat. 68; Pub. L.
107-147, title IV, Sec. 406(a), (b), Mar. 9, 2002, 116 Stat. 43;
Pub. L. 108-121, title I, Sec. 109(b), Nov. 11, 2003, 117 Stat.
1341; Pub. L. 108-173, title XII, Sec. 1201(b), Dec. 8, 2003, 117
Stat. 2476.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2003 - Subsec. (a)(2)(E). Pub. L. 108-121 added subpar. (E).
Subsec. (a)(19). Pub. L. 108-173 added par. (19).
2002 - Subsec. (a)(2)(D). Pub. L. 107-147, Sec. 406(a), added
subpar. (D).
Subsec. (d). Pub. L. 107-147, Sec. 406(b), added subsec. (d).
2001 - Subsec. (a)(18). Pub. L. 107-16, Secs. 431(b), 901,
temporarily added par. (18). See Effective and Termination Dates of
2001 Amendment note below.
2000 - Subsec. (a)(16). Pub. L. 106-554 amended heading and text
of par. (16) generally. Prior to amendment, text read as follows:
"The deduction allowed by section 220."
1997 - Subsec. (a)(2)(C). Pub. L. 105-34, Sec. 975(a), added
subpar. (C).
Subsec. (a)(17). Pub. L. 105-34, Sec. 202(b), added par. (17).
1996 - Subsec. (a)(8). Pub. L. 104-188 struck out par. (8) which
read as follows: "Certain portion of lump-sum distributions from
pension plans taxed under section 402(d). - The deduction allowed
by section 402(d)(3)."
Subsec. (a)(16). Pub. L. 104-191 added par. (16).
1993 - Subsec. (a)(15). Pub. L. 103-66 added par. (15).
1992 - Subsec. (a)(8). Pub. L. 102-318 substituted "402(d)" for
"402(e)" in heading and in text.
Subsec. (a)(14). Pub. L. 102-486 added par. (14).
1990 - Subsec. (a)(13). Pub. L. 101-508, Sec. 11802(e)(1),
amended par. (13) generally. Prior to amendment, par. (13) read as
follows: "The deduction allowed by section 220."
1988 - Subsec. (a)(2)(A). Pub. L. 100-647, Sec. 1001(b)(3)(A),
inserted at end "The fact that the reimbursement may be provided by
a third party shall not be determinative of whether or not the
preceding sentence applies."
Subsec. (a)(13). Pub. L. 100-647, Sec. 6007(b), added par. (13).
Subsec. (c). Pub. L. 100-485 added subsec. (c).
1986 - Subsec. (a). Pub. L. 99-514, Sec. 132(b)(2)(A), designated
existing provisions as subsec. (a) and added heading.
Subsec. (a)(2). Pub. L. 99-514, Sec. 132(b)(1), amended par. (2)
generally, substituting "Certain trade" for "Trade" in heading and
inserting "of employees" in subpar. (A) heading, substituting
provision relating to deduction of certain expenses of performing
artists for provision relating to deduction of expenses for travel
away from home in subpar. (B), and striking out subpar. (C)
relating to deduction of travel expenses and subpar. (D) relating
to deduction of expenses of outside salesmen.
Subsec. (a)(3) to (5). Pub. L. 99-514, Sec. 301(b)(1),
redesignated pars. (4) to (6) as (3) to (5), respectively, and
struck out former par. (3) which related to long-term capital gains
and read as follows: "The deduction allowed by section 1202."
Subsec. (a)(6). Pub. L. 99-514, Sec. 301(b)(1), redesignated par.
(7) as (6). Former par. (6) redesignated (5).
Pub. L. 99-514, Sec. 1875(c)(3), struck out "to the extent
attributable to contributions made on behalf of such individual"
after "section 404".
Subsec. (a)(7). Pub. L. 99-514, Sec. 301(b)(1), redesignated par.
(10) as (7). Former par. (7) redesignated (6).
Subsec. (a)(8). Pub. L. 99-514, Sec. 301(b)(1), redesignated par.
(11) as (8). Former par. (8) struck out.
Pub. L. 99-514, Sec. 132(c), struck out par. (8) which related to
moving expense deduction and read as follows: "The deduction
allowed by section 217."
Subsec. (a)(9) to (15). Pub. L. 99-514, Sec. 301(b)(1),
redesignated pars. (12) to (15) as (9) to (12), respectively.
Former pars. (10) and (11) redesignated (7) and (8), respectively.
Subsec. (a)(16). Pub. L. 99-514, Sec. 131(b)(1), struck out par.
(16) which related to deduction for two-earner married couples and
read as follows: "The deduction allowed by section 221."
Subsec. (b). Pub. L. 99-514, Sec. 132(b)(2)(B), added subsec.
(b).
1984 - Par. (7). Pub. L. 98-369, Sec. 491(d)(2), substituted "and
annuity" for "annuity, and bond purchase" in heading, and
substituted "the deduction allowed by section 404" for "the
deductions allowed by section 404 and section 405(c)" in text.
1983 - Par. (9). Pub. L. 97-354 repealed par. (9) relating to the
deduction allowed by section 1379(b)(3).
1981 - Par. (10). Pub. L. 97-34, Sec. 311(h)(1), struck out "and
the deduction allowed by section 220 (relating to retirement
savings for certain married individuals)" after "retirement
savings".
Par. (14). Pub. L. 97-34, Sec. 112(b)(2), redesignated par. (15)
as (14). Former par. (14), relating to deduction for certain
expenses of living abroad, was struck out.
Par. (15). Pub. L. 97-34, Sec. 112(b)(2), redesignated par. (16)
as (15). Former par. (15) redesignated (14).
Par. (16). Pub. L. 97-34, Secs. 103(b), 112(b)(2), added par.
(16). Former par. (16) redesignated (15).
1980 - Par. (15). Pub. L. 96-451 added par. (15).
Par. (16). Pub. L. 96-608 added par. (16).
1978 - Par. (14). Pub. L. 95-615 added par. (14).
1976 - Par. (10). Pub. L. 94-455, Sec. 1501(b)(1), inserted
reference to the deduction allowed by section 220 (relating to
retirement savings for certain married individuals).
Pars. (11), (12). Pub. L. 94-455, Sec. 1901(a)(8), (9),
redesignated par. (11) relating to penalties forfeited because of
premature withdrawal of funds from time savings accounts or
deposits, as par. (12), and substituted "trade or business, to the
extent" for "trade or business to the extent".
Par. (13). Pub. L. 94-455, Sec. 502(a), added par. (13).
1974 - Par. (10). Pub. L. 93-406, Sec. 2002(a)(2), added par.
(10).
Par. (11). Pub. L. 93-483 added par. (11) relating to penalties
forfeited because of premature withdrawal of funds from time
savings accounts or deposits. Another par. (11) relating to certain
portions of lump-sum distributions from pension plans taxed under
section 402(e) of this title, was added by Pub. L. 93-406, Sec.
2005(c)(9).
1969 - Par. (9). Pub. L. 91-172 added par. (9).
1964 - Par. (8). Pub. L. 88-272 added par. (8).
1962 - Par. (7). Pub. L. 87-792 added par. (7).
EFFECTIVE DATE OF 2003 AMENDMENTS
Pub. L. 108-173, title XII, Sec. 1201(k), Dec. 8, 2003, 117 Stat.
2479, provided that: "The amendments made by this section [enacting
sections 223 and 4980G of this title, amending this section and
sections 106, 125, 220, 848, 3231, 3306, 3401, 4973, 4975, 6051,
and 6693 of this title, and renumbering former section 223 of this
title as 224] shall apply to taxable years beginning after December
31, 2003."
Pub. L. 108-121, title I, Sec. 109(c), Nov. 11, 2003, 117 Stat.
1342, provided that: "The amendments made by this section [amending
this section and section 162 of this title] shall apply to amounts
paid or incurred in taxable years beginning after December 31,
2002."
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-147, title IV, Sec. 406(c), Mar. 9, 2002, 116 Stat.
44, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2001."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title IV, Sec. 431(d), June 7, 2001, 115 Stat.
69, provided that: "The amendments made by this section [enacting
section 222 of this title, amending this section and sections 86,
135, 137, 219, 221, and 469 of this title, and renumbering former
section 222 of this title as 223] shall apply to payments made in
taxable years beginning after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 202(e) of Pub. L. 105-34 provided that: "The amendments
made by this section [enacting section 221 of this title, amending
this section and section 6050S of this title, and renumbering
former section 221 of this title as section 222 of this title]
shall apply to any qualified education loan (as defined in section
221(e)(1) of the Internal Revenue Code of 1986, as added by this
section) incurred on, before, or after the date of the enactment of
this Act [Aug. 5, 1997], but only with respect to -
"(1) any loan interest payment due and paid after December 31,
1997, and
"(2) the portion of the 60-month period referred to in section
221(d) of the Internal Revenue Code of 1986 (as added by this
section) after December 31, 1997."
Section 975(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to
expenses paid or incurred in taxable years beginning after December
31, 1986."
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 301(j) of Pub. L. 104-191 provided that: "The amendments
made by this section [enacting sections 220 and 4980E of this
title, amending this section and sections 106, 125, 848, 3231,
3306, 3401, 4973, 4975, 6051, and 6693 of this title, and
renumbering section 220 of this title as section 221] shall apply
to taxable years beginning after December 31, 1996."
Amendment by Pub. L. 104-188 applicable to taxable years
beginning after Dec. 31, 1999, with retention of certain transition
rules, see section 1401(c) of Pub. L. 104-188, set out as a note
under section 402 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13213(e) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section and sections 67, 82,
132, 217, 1001, 1016, and 4977 of this title] shall apply to
expenses incurred after December 31, 1993; except that the
amendments made by subsection (d) [amending sections 82, 132, and
4977 of this title] shall apply to reimbursements or other payments
in respect of expenses incurred after such date."
EFFECTIVE DATE OF 1992 AMENDMENTS
Amendment by Pub. L. 102-486 applicable to property placed in
service after June 30, 1993, see section 1913(c) of Pub. L.
102-486, set out as an Effective Date note under section 30 of this
title.
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by section 1001(b)(3)(A) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6007(d) of Pub. L. 100-647 provided that: "The amendments
made by this section [enacting section 220 of this title, amending
this section, and renumbering former section 220 of this title as
section 221 of this title] shall apply as if included in the
amendments made by section 132 of the Tax Reform Act of 1986 [Pub.
L. 99-514]."
Section 702(b) of Pub. L. 100-485 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1988."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by sections 131(b)(1) and 132(b), (c) of Pub. L. 99-514
applicable to taxable years beginning after Dec. 31, 1986, see
section 151(a) of Pub. L. 99-514, set out as a note under section 1
of this title.
Section 301(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and sections 170, 172,
219, 220, 223, 642, 643, 691, 871, 1211, 1212, and 1402 of this
title and repealing section 1202 of this title] shall apply to
taxable years beginning after December 31, 1986."
Section 1875(c)(12) of Pub. L. 99-514 provided that: "The
amendments made by paragraphs (3), (4), and (6) [amending this
section and sections 219 and 408 of this title] shall take effect
as if included in the amendments made by section 238 of the Tax
Equity and Fiscal Responsibility Act of 1982 [section 238 of Pub.
L. 97-248, see section 241 of Pub. L. 97-248, set out as an
Effective Date note under section 416 of this title]."
EFFECTIVE DATE OF 1984 AMENDMENT
"Section 491(f)(1) of Pub. L. 98-369 provided that: "The
amendments and repeals made by subsections (a), (b), and (d)
[amending this section, sections 55, 72, 172, 219, 402, 403, 406,
407, 408, 412, 414, 415, 457, 2039, 2517, 3121, 3306, 3401, 4972,
4973, 4975, 6047, 6058, 6104, 6652, 7207, 7476, and 7701 of this
title, section 3107 of Title 31, Money and Finance, and section 409
of Title 42, The Public Health and Welfare, and repealing sections
405 and 409 of this title] shall apply to obligations issued after
December 31, 1983."
EFFECTIVE DATE OF 1983 AMENDMENT
Par. (9) as in effect before date of repeal by Pub. L. 97-354 to
remain in effect for years beginning before Jan. 1, 1984, see
section 6(b)(1) of Pub. L. 97-354, set out as an Effective Date
note under section 3761 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 103(d) of Pub. L. 97-34 provided that: "The amendments
made by this section [enacting section 219 of this title and
amending this section and sections 85 and 105 of this title] shall
apply to taxable years beginning after December 31, 1981."
Amendment by sections 112(b)(2) and 311(h)(1) of Pub. L. 97-34
applicable to taxable years beginning after Dec. 31, 1981, see
sections 115 and 311(i)(1) of Pub. L. 97-34, set out as notes under
sections 911 and 219, respectively, of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 3(b) of Pub. L. 96-608 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to repayments
made in taxable years beginning after the date of the enactment of
this Act [Dec. 28, 1980]."
Amendment by Pub. L. 96-451 applicable with respect to additions
to capital account made after Dec. 31, 1979, see section 301(d) of
Pub. L. 96-451, set out as an Effective Date note under section 194
of this title.
EFFECTIVE DATE OF 1978 AMENDMENT; ELECTION OF PRIOR LAW
Amendment by Pub. L. 95-615 applicable to taxable years beginning
after Dec. 31, 1977, with provision for election of prior law, see
section 209 of Pub. L. 95-615, set out as a note under section 911
of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 502(c) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and section 3402 of
this title] shall apply to taxable years beginning after December
31, 1976."
Section 1501(d) of Pub. L. 94-455 provided that: "The amendments
made by this section [enacting section 220 of this title, amending
this section and sections 219, 408, 409, 3401, 4973, and 6047 of
this title, and renumbering former section 220 as 221 of this
title], other than the amendment made by subsection (b)(3), shall
apply to taxable years beginning after December 31, 1976. The
amendment made by subsection (b)(3) [amending section 415 of this
title] shall apply to years beginning after December 31, 1976."
Amendment by section 1901(a)(8), (9) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1974 AMENDMENTS
Section 6(b) of Pub. L. 93-483 provided that: "The amendment made
by this section [amending this section] applies to taxable years
beginning after December 31, 1972."
Amendment by section 2002(a)(2) of Pub. L. 93-406 applicable to
taxable years beginning after Dec. 31, 1974, see section 2002(i)(1)
of Pub. L. 93-406, set out as an Effective Date note under section
219 of this title.
Amendment by section 2005(c)(9) of Pub. L. 93-406 applicable only
with respect to distributions or payments made after Dec. 31, 1973,
in taxable years beginning after Dec. 31, 1973, see section 2005(d)
of Pub. L. 93-406, set out as a note under section 402 of this
title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to taxable
years of electing small business corporations beginning after Dec.
31, 1970, see section 531(d) of Pub. L. 91-172, set out as an
Effective Date note under section 1379 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 213(d) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) [enacting section 217 and redesignating
former section 217 as 218] and (b) [amending this section] shall
apply to expenses incurred after December 31, 1963, in taxable
years ending after such date. The amendment made by subsection (c)
[amending section 3401 of this title] shall apply with respect to
remuneration paid after the seventh day following the date of the
enactment of this Act [Feb. 26, 1964]."
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
COMMUTING EXPENSES
Pub. L. 95-427, Sec. 2, Oct. 7, 1978, 92 Stat. 996, as amended by
Pub. L. 96-167, Sec. 2, Dec. 29, 1979, 93 Stat. 1275, provided that
with respect to transportation costs paid or incurred after
December 31, 1976, and on or before May 31, 1981, the application
of sections 62, 162, and 262 and of chapters 21, 23, and 24 of the
Internal Revenue Code of 1954 [now 1986] to transportation expenses
in traveling between a taxpayer's residence and place of work be
determined without regard to Revenue Ruling 76-453 or any other
regulation, ruling, or decision reaching the same or similar
result, and with full regard to the rules in effect before that
Revenue Ruling.
Pub. L. 95-615, Sec. 2, Nov. 8, 1978, 92 Stat. 3097, provided
that with respect to transportation costs paid or incurred after
Dec. 31, 1976, and before Apr. 30, 1978, the application of
sections 62, 162, and 262 and chapters 21, 23, and 24 of the
Internal Revenue Code of 1954 [now 1986] to transportation expenses
in traveling between a taxpayer's residence and place of work be
determined without regard to Revenue Ruling 76-453 or any other
regulation, ruling or decision reaching the same or similar result,
and with full regard to the rules in effect before that Revenue
Ruling, and ceased to have effect on the day after Nov. 8, 1978
pursuant to section 210(a) of that Act.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 162, 3402 of this title;
title 19 section 2401e; title 20 section 1087e; title 21 section
849; title 42 sections 1395r, 1396o.
-End-
-CITE-
26 USC Sec. 63 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 63. Taxable income defined
-STATUTE-
(a) In general
Except as provided in subsection (b), for purposes of this
subtitle, the term "taxable income" means gross income minus the
deductions allowed by this chapter (other than the standard
deduction).
(b) Individuals who do not itemize their deductions
In the case of an individual who does not elect to itemize his
deductions for the taxable year, for purposes of this subtitle, the
term "taxable income" means adjusted gross income, minus -
(1) the standard deduction, and
(2) the deduction for personal exemptions provided in section
151.
(c) Standard deduction
For purposes of this subtitle -
(1) In general
Except as otherwise provided in this subsection, the term
"standard deduction" means the sum of -
(A) the basic standard deduction, and
(B) the additional standard deduction.
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is
-
(A) the applicable percentage of the dollar amount in effect
under subparagraph (D) for the taxable year in the case of -
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2(a)),
(B) $4,400 in the case of a head of household (as defined in
section 2(b)),
(C) one-half of the amount in effect under subparagraph (A)
in the case of a married individual filing a separate return,
or
(D) $3,000 in any other case.
If any amount determined under subparagraph (A) is not a multiple
of $50, such amount shall be rounded to the next lowest multiple
of $50.
(3) Additional standard deduction for aged and blind
For purposes of paragraph (1), the additional standard
deduction is the sum of each additional amount to which the
taxpayer is entitled under subsection (f).
(4) Adjustments for inflation
In the case of any taxable year beginning in a calendar year
after 1988, each dollar amount contained in paragraph (2)(B),
(2)(D), or (5) or subsection (f) shall be increased by an amount
equal to -
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
by substituting for "calendar year 1992" in subparagraph (B)
thereof -
(i) "calendar year 1987" in the case of the dollar amounts
contained in paragraph (2)(B), (2)(D), or (5)(A) or
subsection (f), and
(ii) "calendar year 1997" in the case of the dollar amount
contained in paragraph (5)(B).
(5) Limitation on basic standard deduction in the case of certain
dependents
In the case of an individual with respect to whom a deduction
under section 151 is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's
taxable year begins, the basic standard deduction applicable to
such individual for such individual's taxable year shall not
exceed the greater of -
(A) $500, or
(B) the sum of $250 and such individual's earned income.
(6) Certain individuals, etc., not eligible for standard
deduction
In the case of -
(A) a married individual filing a separate return where
either spouse itemizes deductions,
(B) a nonresident alien individual,
(C) an individual making a return under section 443(a)(1) for
a period of less than 12 months on account of a change in his
annual accounting period, or
(D) an estate or trust, common trust fund, or partnership,
the standard deduction shall be zero.
(7) Applicable percentage
For purposes of paragraph (2), the applicable percentage shall
be determined in accordance with the following table:
For taxable years beginning The applicable
in calendar year - percentage is -
2003 and 2004 200
2005 174
2006 184
2007 187
2008 190
2009 and thereafter 200.
(d) Itemized deductions
For purposes of this subtitle, the term "itemized deductions"
means the deductions allowable under this chapter other than -
(1) the deductions allowable in arriving at adjusted gross
income, and
(2) the deduction for personal exemptions provided by section
151.
(e) Election to itemize
(1) In general
Unless an individual makes an election under this subsection
for the taxable year, no itemized deduction shall be allowed for
the taxable year. For purposes of this subtitle, the
determination of whether a deduction is allowable under this
chapter shall be made without regard to the preceding sentence.
(2) Time and manner of election
Any election under this subsection shall be made on the
taxpayer's return, and the Secretary shall prescribe the manner
of signifying such election on the return.
(3) Change of election
Under regulations prescribed by the Secretary, a change of
election with respect to itemized deductions for any taxable year
may be made after the filing of the return for such year. If the
spouse of the taxpayer filed a separate return for any taxable
year corresponding to the taxable year of the taxpayer, the
change shall not be allowed unless, in accordance with such
regulations -
(A) the spouse makes a change of election with respect to
itemized deductions, for the taxable year covered in such
separate return, consistent with the change of treatment sought
by the taxpayer, and
(B) the taxpayer and his spouse consent in writing to the
assessment (within such period as may be agreed on with the
Secretary) of any deficiency, to the extent attributable to
such change of election, even though at the time of the filing
of such consent the assessment of such deficiency would
otherwise be prevented by the operation of any law or rule of
law.
This paragraph shall not apply if the tax liability of the
taxpayer's spouse for the taxable year corresponding to the
taxable year of the taxpayer has been compromised under section
7122.
(f) Aged or blind additional amounts
(1) Additional amounts for the aged
The taxpayer shall be entitled to an additional amount of $600
-
(A) for himself if he has attained age 65 before the close of
his taxable year, and
(B) for the spouse of the taxpayer if the spouse has attained
age 65 before the close of the taxable year and an additional
exemption is allowable to the taxpayer for such spouse under
section 151(b).
(2) Additional amount for blind
The taxpayer shall be entitled to an additional amount of $600
-
(A) for himself if he is blind at the close of the taxable
year, and
(B) for the spouse of the taxpayer if the spouse is blind as
of the close of the taxable year and an additional exemption is
allowable to the taxpayer for such spouse under section 151(b).
For purposes of subparagraph (B), if the spouse dies during the
taxable year the determination of whether such spouse is blind
shall be made as of the time of such death.
(3) Higher amount for certain unmarried individuals
In the case of an individual who is not married and is not a
surviving spouse, paragraphs (1) and (2) shall be applied by
substituting "$750" for "$600".
(4) Blindness defined
For purposes of this subsection, an individual is blind only if
his central visual acuity does not exceed 20/200 in the better
eye with correcting lenses, or if his visual acuity is greater
than 20/200 but is accompanied by a limitation in the fields of
vision such that the widest diameter of the visual field subtends
an angle no greater than 20 degrees.
(g) Marital status
For purposes of this section, marital status shall be determined
under section 7703.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 18; Pub. L. 95-30, title I, Sec.
102(a), May 23, 1977, 91 Stat. 135; Pub. L. 95-600, title I, Sec.
101(b), Nov. 6, 1978, 92 Stat. 2769; Pub. L. 97-34, title I, Secs.
104(b), 111(b)(4), 121(b), (c)(2), Aug. 13, 1981, 95 Stat. 189,
194, 196, 197; Pub. L. 99-514, title I, Sec. 102(a), title XII,
Sec. 1272(d)(6), Oct. 22, 1986, 100 Stat. 2099, 2594; Pub. L.
100-647, title I, Sec. 1001(b)(1), Nov. 10, 1988, 102 Stat. 3349;
Pub. L. 101-508, title XI, Secs. 11101(d)(1)(D), 11801(a)(4), Nov.
5, 1990, 104 Stat. 1388-405, 1388-520; Pub. L. 103-66, title XIII,
Sec. 13201(b)(3)(D), Aug. 10, 1993, 107 Stat. 459; Pub. L. 105-34,
title XII, Sec. 1201(a), Aug. 5, 1997, 111 Stat. 993; Pub. L.
107-16, title III, Sec. 301(a), (b), (c)(2), June 7, 2001, 115
Stat. 53, 54; Pub. L. 107-147, title IV, Sec. 411(e), Mar. 9, 2002,
116 Stat. 46; Pub. L. 108-27, title I, Sec. 103(a), May 28, 2003,
117 Stat. 754.)
-STATAMEND-
STANDARD DEDUCTION ADJUSTMENTS FOR TAXABLE YEARS BEGINNING IN 2004
For adjustment of standard deduction, limitation on standard
deduction, and additional amounts under subsections (c)(2), (5) and
(f) of this section for taxable years beginning in 2004, see
section 3.10 of Revenue Procedure 2003-85, set out as a note under
section 1 of this title.
AMENDMENT OF SECTION
For termination of amendment by section 107 of Pub. L. 108-27,
see Effective and Termination Dates of 2003 Amendment note below.
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2003 - Subsec. (c)(7). Pub. L. 108-27, Secs. 103(a), 107,
temporarily inserted table item relating to years 2003 and 2004.
See Effective and Termination Dates of 2003 Amendment note below.
2002 - Subsec. (c)(2). Pub. L. 107-147, Sec. 411(e)(1)(E),
inserted "If any amount determined under subparagraph (A) is not a
multiple of $50, such amount shall be rounded to the next lowest
multiple of $50." at end.
Subsec. (c)(2)(A). Pub. L. 107-147, Sec. 411(e)(1)(A),
substituted "subparagraph (D)" for "subparagraph (C)".
Subsec. (c)(2)(B). Pub. L. 107-147, Sec. 411(e)(1)(B), struck out
"or" at end.
Subsec. (c)(2)(C), (D). Pub. L. 107-147, Sec. 411(e)(1)(C), (D),
added subpar. (C) and redesignated former subpar. (C) as (D).
Subsec. (c)(4). Pub. L. 107-147, Sec. 411(e)(2)(C), which
directed amendment by striking out the flush sentence at the end
added by section 301(c)(2) of Public Law 107-17, was executed by
striking out "The preceding sentence shall not apply to the amount
referred to in paragraph (2)(A).", which was inserted by section
301(c)(2) of Pub. L. 107-16, to reflect the probable intent of
Congress. See 2001 Amendment note below.
Pub. L. 107-147, Sec. 411(e)(2)(A), substituted "paragraph
(2)(B), (2)(D), or (5)" for "paragraph (2) or (5)" in introductory
provisions.
Subsec. (c)(4)(B)(i). Pub. L. 107-147, Sec. 411(e)(2)(B),
substituted "paragraph (2)(B), (2)(D)," for "paragraph (2)".
2001 - Subsec. (c)(2)(A). Pub. L. 107-16, Secs. 301(a)(1), 901,
temporarily substituted "the applicable percentage of the dollar
amount in effect under subparagraph (C) for the taxable year" for
"$5,000". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (c)(2)(B). Pub. L. 107-16, Secs. 301(a)(2), 901,
temporarily inserted "or" at end. See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (c)(2)(C). Pub. L. 107-16, Secs. 301(a)(3), 901,
temporarily substituted "in any other case." for "in the case of an
individual who is not married and who is not a surviving spouse or
head of household, or". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(2)(D). Pub. L. 107-16, Secs. 301(a)(4), 901,
temporarily struck out subpar. (D) which read as follows: "$2,500
in the case of a married individual filing a separate return." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c)(4). Pub. L. 107-16, Secs. 301(c)(2), 901, temporarily
inserted at end "The preceding sentence shall not apply to the
amount referred to in paragraph (2)(A)." See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(7). Pub. L. 107-16, Secs. 301(b), 901, temporarily
added par. (7). See Effective and Termination Dates of 2001
Amendment note below.
1997 - Subsec. (c)(4). Pub. L. 105-34, Sec. 1201(a)(2), in
introductory provisions, substituted "(5)" for "(5)(A)" and, in
subpar. (B), substituted "by substituting for 'calendar year 1992'
in subparagraph (B) thereof - " for "by substituting 'calendar year
1987' for 'calendar year 1992' in subparagraph (B) thereof" and
added cls. (i) and (ii).
Subsec. (c)(5)(B). Pub. L. 105-34, Sec. 1201(a)(1), substituted
"the sum of $250 and such individual's earned income" for "such
individual's earned income".
1993 - Subsec. (c)(4)(B). Pub. L. 103-66 substituted "1992" for
"1989".
1990 - Subsec. (c)(4)(B). Pub. L. 101-508, Sec. 11101(d)(1)(D),
inserted before period at end ", by substituting 'calendar year
1987' for 'calendar year 1989' in subparagraph (B) thereof".
Subsec. (h). Pub. L. 101-508, Sec. 11801(a)(4), struck out
subsec. (h) "Transitional rule for taxable years beginning in 1987"
which read as follows: "In the case of any taxable year beginning
in 1987, paragraph (2) of subsection (c) shall be applied -
"(1) by substituting '$3,760' for '$5,000',
"(2) by substituting '$2,540' for '$4,400',
"(3) by substituting '$2,540' for '$3,000', and
"(4) by substituting '$1,880' for '$2,500'.
The preceding sentence shall not apply if the taxpayer is entitled
to an additional amount determined under subsection (f) (relating
to additional amount for aged and blind) for the taxable year."
1988 - Subsec. (c)(5). Pub. L. 100-647 substituted "basic
standard deduction" for "standard deduction" in heading and text.
1986 - Subsec. (a). Pub. L. 99-514, Sec. 102(a), substituted "In
general" for "Corporations" in heading and amended text generally.
Prior to amendment, text read as follows: "For purposes of this
subtitle, in the case of a corporation, the term 'taxable income'
means gross income minus the deductions allowed by this chapter."
Subsec. (b). Pub. L. 99-514, Sec. 102(a), substituted
"Individuals who do not itemize their deductions" for "Individuals"
in heading and amended text generally. Prior to amendment, text
read as follows: "For purposes of this subtitle, in the case of an
individual, the term 'taxable income' means adjusted gross income -
"(1) reduced by the sum of -
"(A) the excess itemized deductions,
"(B) the deductions for personal exemptions provided by
section 151, and
"(C) the direct charitable deduction, and
"(2) increased (in the case of an individual for whom an unused
zero bracket amount computation is provided by subsection (e)) by
the unused zero bracket amount (if any)."
Subsec. (c). Pub. L. 99-514, Sec. 102(a), substituted "Standard
deduction" for "Excess itemized deductions" in heading and amended
text generally. Prior to amendment, text read as follows: "For
purposes of this subtitle, the term 'excess itemized deductions'
means the excess (if any) of -
"(1) the itemized deductions, over
"(2) the zero bracket amount."
Subsec. (c)(6)(C) to (E). Pub. L. 99-514, Sec. 1272(d)(6),
redesignated subpars. (D) and (E) as (C) and (D), respectively, and
struck out former subpar. (C) which read as follows: "a citizen of
the United States entitled to the benefits of section 931 (relating
to income from sources within possessions of the United States),".
Subsec. (d). Pub. L. 99-514, Sec. 102(a), substituted "Itemized
deductions" for "Zero bracket amount" in heading and amended text
generally. Prior to amendment, subsec. (d) read as follows: "For
purposes of this subtitle, the term 'zero bracket amount' means -
"(1) in the case of an individual to whom subsection (a), (b),
(c), or (d) of section 1 applies, the maximum amount of taxable
income on which no tax is imposed by the applicable subsection of
section 1, or
"(2) zero in any other case."
Subsec. (e). Pub. L. 99-514, Sec. 102(a), substituted "Election
to itemize" for "Unused zero bracket amount" in heading.
Subsec. (e)(1). Pub. L. 99-514, Sec. 102(a), substituted "In
general" for "Individuals for whom computation must be made" in
heading and amended text generally. Prior to amendment, text read
as follows: "A computation for the taxable year shall be made under
this subsection for the following individuals:
"(A) a married individual filing a separate return where either
spouse itemized deductions,
"(B) a nonresident alien individual,
"(C) a citizen of the United States entitled to the benefits of
section 931 (relating to income from sources within possessions
of the United States), and
"(D) an individual with respect to whom a deduction under
section 151(e) is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's
taxable year begins."
Subsec. (e)(2). Pub. L. 99-514, Sec. 102(a), substituted "Time
and manner of election" for "Computation" in heading and amended
text generally. Prior to amendment, text read as follows: "For
purposes of this subtitle, an individual's unused zero bracket
amount for the taxable year is an amount equal to the excess (if
any) of -
"(A) the zero bracket amount, over
"(B) the itemized deductions.
In the case of an individual referred to in paragraph (1)(D), if
such individual's earned income (as defined in section 911(d)(2))
exceeds the itemized deductions, such earned income shall be
substituted for the itemized deductions in subparagraph (B)."
Subsec. (e)(3). Pub. L. 99-514, Sec. 102(a), in amending subsec.
(e) generally, added par. (3).
Subsec. (f). Pub. L. 99-514, Sec. 102(a), substituted "Aged or
blind additional amounts" for "Itemized deductions" in heading and
amended text generally. Prior to amendment, text read as follows:
"For purposes of this subtitle, the term 'itemized deductions'
means the deductions allowable by this chapter other than -
"(1) the deductions allowable in arriving at adjusted gross
income,
"(2) the deductions for personal exemptions provided by section
151, and
"(3) the direct charitable deduction."
Subsec. (g). Pub. L. 99-514, Sec. 102(a), amended subsec. (g)
generally, substituting provision that marital status be determined
under section 7703 for provisions relating to election to itemize.
See subsec. (e).
Subsec. (h). Pub. L. 99-514, Sec. 102(a), substituted
"Transitional rule for taxable years beginning in 1987" for
"Marital status" in heading and amended text generally. Prior to
amendment, text read as follows: "For purposes of this section,
marital status shall be determined under section 143."
Subsec. (i). Pub. L. 99-514, Sec. 102(a), in amending section
generally, struck out subsec. (i), "Direct charitable deduction",
which read as follows: "For purposes of this section, the term
'direct charitable deduction' means that portion of the amount
allowable under section 170(a) which is taken as a direct
charitable deduction for the taxable year under section 170(i)."
1981 - Subsec. (b)(1)(C). Pub. L. 97-34, Sec. 121(b)(1), added
subpar. (C).
Subsec. (d). Pub. L. 97-34, Sec. 104(b), substituted a blanket
reference to individuals to whom subsection (a), (b), (c), or (d)
of section 1 applies and the maximum amount of taxable income on
which no tax is imposed by the applicable subsection of section 1
for provisions specifically referring to amounts of $3,400 in the
case of (A) a joint return under section 6013, or (B) a surviving
spouse (as defined in section 2(a)), $2,300 in the case of an
individual who is not married and who is not a surviving spouse (as
so defined), and $1,700 in the case of a married individual filing
a separate return.
Subsec. (e)(2). Pub. L. 97-34, Sec. 111(b)(4), substituted
"section 911(d)(2)" for "section 911(b)" in provisions following
subpar. (B).
Subsec. (f)(3). Pub. L. 97-34, Sec. 121(c)(2), added par. (3).
Subsec. (i). Pub. L. 97-34, Sec. 121(b)(2), added subsec. (i).
1978 - Pub. L. 95-600 substituted "$3,400" for "$3,200" in par.
(1), "$2,300" for "$2,200" in par. (2), and "$1,700" for "$1,600"
in par. (3).
1977 - Pub. L. 95-30 completely revised definition of taxable
income from one using the concept of a standard deduction and
consisting of subsecs. (a) and (b) entitled, respectively, "General
rule" and "Individuals electing standard deduction" to definition
using the concepts of zero bracket amounts and excess itemized
deductions and consisting of subsecs. (a) to (h) entitled,
respectively, "Corporations", "Individuals", "Excess itemized
deductions", "Zero bracket amount", "Unused zero bracket amount",
"Itemized deductions", "Election to itemize", and "Marital status".
EFFECTIVE AND TERMINATION DATES OF 2003 AMENDMENT
Pub. L. 108-27, title I, Sec. 103(c), May 28, 2003, 117 Stat.
754, provided that: "The amendments made by this section [amending
this section and provisions set out as an Effective and Termination
Dates of 2001 Amendment note under section 1 of this title] shall
apply to taxable years beginning after December 31, 2002."
Amendments by title I of Pub. L. 108-27 subject to title IX of
the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub.
L. 107-16, Sec. 901, to the same extent and in the same manner as
the provisions of such Act to which such amendments relate, see
section 107 of Pub. L. 108-27, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to taxable years beginning
after Dec. 31, 2002, see section 301(d) of Pub. L. 107-16, as
amended, set out as a note under section 1 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to taxable years beginning
after Dec. 31, 1997, see section 1201(c) of Pub. L. 105-34, set out
as a note under section 59 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to taxable years beginning
after Dec. 31, 1992, see section 13201(c) of Pub. L. 103-66, set
out as a note under section 1 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11101(d)(1)(D) of Pub. L. 101-508 applicable
to taxable years beginning after Dec. 31, 1990, see section
11101(e) of Pub. L. 101-508, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 102(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1272(d)(6) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1277 of Pub. L. 99-514,
set out as a note under section 931 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 104(b) of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1984, see section 104(e) of
Pub. L. 97-34, set out as a note under section 1 of this title.
Amendment by section 111(b)(4) of Pub. L. 97-34 applicable with
respect to taxable years beginning after Dec. 31, 1981, see section
115 of Pub. L. 97-34, set out as a note under section 911 of this
title.
Amendment by section 121(b), (c)(2) of Pub. L. 97-34 applicable
to contributions made after Dec. 31, 1981, in taxable years
beginning after such date, see section 121(d) of Pub. L. 97-34, set
out as a note under section 170 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 effective with respect to taxable
years beginning after Dec. 31, 1978, see section 101(f)(1) of Pub.
L. 95-600, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out
as a note under section 1 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by section 11801 of Pub.
L. 101-508 be construed to affect treatment of certain transactions
occurring, property acquired, or items of income, loss, deduction,
or credit taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 2, 3, 56, 161, 211,
1034, 1375, 3402, 6012, 6013, 6014, 6212, 6504 of this title.
-End-
-CITE-
26 USC Sec. 64 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 64. Ordinary income defined
-STATUTE-
For purposes of this subtitle, the term "ordinary income"
includes any gain from the sale or exchange of property which is
neither a capital asset nor property described in section 1231(b).
Any gain from the sale or exchange of property which is treated or
considered, under other provisions of this subtitle, as "ordinary
income" shall be treated as gain from the sale or exchange of
property which is neither a capital asset nor property described in
section 1231(b).
-SOURCE-
(Added Pub. L. 94-455, title XIX, Sec. 1901(a)(10), Oct. 4, 1976,
90 Stat. 1765.)
-End-
-CITE-
26 USC Sec. 65 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 65. Ordinary loss defined
-STATUTE-
For purposes of this subtitle, the term "ordinary loss" includes
any loss from the sale or exchange of property which is not a
capital asset. Any loss from the sale or exchange of property which
is treated or considered, under other provisions of this subtitle,
as "ordinary loss" shall be treated as loss from the sale or
exchange of property which is not a capital asset.
-SOURCE-
(Added Pub. L. 94-455, title XIX, Sec. 1901(a)(11), Oct. 4, 1976,
90 Stat. 1765.)
-End-
-CITE-
26 USC Sec. 66 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 66. Treatment of community income
-STATUTE-
(a) Treatment of community income where spouses live apart
If -
(1) 2 individuals are married to each other at any time during
a calendar year;
(2) such individuals -
(A) live apart at all times during the calendar year, and
(B) do not file a joint return under section 6013 with each
other for a taxable year beginning or ending in the calendar
year;
(3) one or both of such individuals have earned income for the
calendar year which is community income; and
(4) no portion of such earned income is transferred (directly
or indirectly) between such individuals before the close of the
calendar year,
then, for purposes of this title, any community income of such
individuals for the calendar year shall be treated in accordance
with the rules provided by section 879(a).
(b) Secretary may disregard community property laws where spouse
not notified of community income
The Secretary may disallow the benefits of any community property
law to any taxpayer with respect to any income if such taxpayer
acted as if solely entitled to such income and failed to notify the
taxpayer's spouse before the due date (including extensions) for
filing the return for the taxable year in which the income was
derived of the nature and amount of such income.
(c) Spouse relieved of liability in certain other cases
Under regulations prescribed by the Secretary, if -
(1) an individual does not file a joint return for any taxable
year,
(2) such individual does not include in gross income for such
taxable year an item of community income properly includible
therein which, in accordance with the rules contained in section
879(a), would be treated as the income of the other spouse,
(3) the individual establishes that he or she did not know of,
and had no reason to know of, such item of community income, and
(4) taking into account all facts and circumstances, it is
inequitable to include such item of community income in such
individual's gross income,
then, for purposes of this title, such item of community income
shall be included in the gross income of the other spouse (and not
in the gross income of the individual). Under procedures prescribed
by the Secretary, if, taking into account all the facts and
circumstances, it is inequitable to hold the individual liable for
any unpaid tax or any deficiency (or any portion of either)
attributable to any item for which relief is not available under
the preceding sentence, the Secretary may relieve such individual
of such liability.
(d) Definitions
For purposes of this section -
(1) Earned income
The term "earned income" has the meaning given to such term by
section 911(d)(2).
(2) Community income
The term "community income" means income which, under
applicable community property laws, is treated as community
income.
(3) Community property laws
The term "community property laws" means the community property
laws of a State, a foreign country, or a possession of the United
States.
-SOURCE-
(Added Pub. L. 96-605, title I, Sec. 101(a), Dec. 28, 1980, 94
Stat. 3521; amended Pub. L. 98-369, div. A, title IV, Sec.
424(b)(1)-(2)(B), July 18, 1984, 98 Stat. 802, 803; Pub. L.
101-239, title VII, Sec. 7841(d)(8), Dec. 19, 1989, 103 Stat. 2428;
Pub. L. 105-206, title III, Sec. 3201(b), July 22, 1998, 112 Stat.
739.)
-MISC1-
AMENDMENTS
1998 - Subsec. (c). Pub. L. 105-206 inserted at end "Under
procedures prescribed by the Secretary, if, taking into account all
the facts and circumstances, it is inequitable to hold the
individual liable for any unpaid tax or any deficiency (or any
portion of either) attributable to any item for which relief is not
available under the preceding sentence, the Secretary may relieve
such individual of such liability."
1989 - Subsec. (d)(1). Pub. L. 101-239 substituted "section
911(d)(2)" for "section 911(b)".
1984 - Pub. L. 98-369, Sec. 424(b)(2)(A), struck out "where
spouses live apart" in section catchline.
Subsec. (a). Pub. L. 98-369, Sec. 424(b)(2)(B), substituted
"Treatment of community income where spouses live apart" for
"General rule" in heading.
Subsecs. (b) to (d). Pub. L. 98-369, Sec. 424(b)(1), added
subsecs. (b) and (c) and redesignated former subsec. (b) as (d).
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 applicable to any liability for tax
arising after July 22, 1998, and any liability for tax arising on
or before such date but remaining unpaid as of such date, see
section 3201(g)(1) of Pub. L. 105-206, set out as a note under
section 6015 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to all taxable years to
which the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
applies with corresponding provisions deemed to be included in the
Internal Revenue Code of 1939 and applicable to all taxable years
to which such Code applies, except subsection (b) of this section
is applicable to taxable years beginning after December 31, 1984,
see section 424(c) of Pub. L. 98-369, set out as a note under
section 6013 of this title.
EFFECTIVE DATE
Section 101(c) of Pub. L. 96-605 provided that: "The amendments
made by this section [enacting this section] shall apply to
calendar years beginning after December 31, 1980."
-End-
-CITE-
26 USC Sec. 67 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 67. 2-percent floor on miscellaneous itemized deductions
-STATUTE-
(a) General rule
In the case of an individual, the miscellaneous itemized
deductions for any taxable year shall be allowed only to the extent
that the aggregate of such deductions exceeds 2 percent of adjusted
gross income.
(b) Miscellaneous itemized deductions
For purposes of this section, the term "miscellaneous itemized
deductions" means the itemized deductions other than -
(1) the deduction under section 163 (relating to interest),
(2) the deduction under section 164 (relating to taxes),
(3) the deduction under section 165(a) for casualty or theft
losses described in paragraph (2) or (3) of section 165(c) or for
losses described in section 165(d),
(4) the deductions under section 170 (relating to charitable,
etc., contributions and gifts) and section 642(c) (relating to
deduction for amounts paid or permanently set aside for a
charitable purpose),
(5) the deduction under section 213 (relating to medical,
dental, etc., expenses),
(6) any deduction allowable for impairment-related work
expenses,
(7) the deduction under section 691(c) (relating to deduction
for estate tax in case of income in respect of the decedent),
(8) any deduction allowable in connection with personal
property used in a short sale,
(9) the deduction under section 1341 (relating to computation
of tax where taxpayer restores substantial amount held under
claim of right),
(10) the deduction under section 72(b)(3) (relating to
deduction where annuity payments cease before investment
recovered),
(11) the deduction under section 171 (relating to deduction for
amortizable bond premium), and
(12) the deduction under section 216 (relating to deductions in
connection with cooperative housing corporations).
(c) Disallowance of indirect deduction through pass-thru entity
(1) In general
The Secretary shall prescribe regulations which prohibit the
indirect deduction through pass-thru entities of amounts which
are not allowable as a deduction if paid or incurred directly by
an individual and which contain such reporting requirements as
may be necessary to carry out the purposes of this subsection.
(2) Treatment of publicly offered regulated investment companies
(A) In general
Paragraph (1) shall not apply with respect to any publicly
offered regulated investment company.
(B) Publicly offered regulated investment companies
For purposes of this subsection -
(i) In general
The term "publicly offered regulated investment company"
means a regulated investment company the shares of which are
-
(I) continuously offered pursuant to a public offering
(within the meaning of section 4 of the Securities Act of
1933, as amended (15 U.S.C. 77a to 77aa)),
(II) regularly traded on an established securities
market, or
(III) held by or for no fewer than 500 persons at all
times during the taxable year.
(ii) Secretary may reduce 500 person requirement
The Secretary may by regulation decrease the minimum
shareholder requirement of clause (i)(III) in the case of
regulated investment companies which experience a loss of
shareholders through net redemptions of their shares.
(3) Treatment of certain other entities
Paragraph (1) shall not apply -
(A) with respect to cooperatives and real estate investment
trusts, and
(B) except as provided in regulations, with respect to
estates and trusts.
(d) Impairment-related work expenses
For purposes of this section, the term "impairment-related work
expenses" means expenses -
(1) of a handicapped individual (as defined in section
190(b)(3)) for attendant care services at the individual's place
of employment and other expenses in connection with such place of
employment which are necessary for such individual to be able to
work, and
(2) with respect to which a deduction is allowable under
section 162 (determined without regard to this section).
(e) Determination of adjusted gross income in case of estates and
trusts
For purposes of this section, the adjusted gross income of an
estate or trust shall be computed in the same manner as in the case
of an individual, except that -
(1) the deductions for costs which are paid or incurred in
connection with the administration of the estate or trust and
which would not have been incurred if the property were not held
in such trust or estate, and
(2) the deductions allowable under sections 642(b), 651, and
661,
shall be treated as allowable in arriving at adjusted gross income.
Under regulations, appropriate adjustments shall be made in the
application of part I of subchapter J of this chapter to take into
account the provisions of this section.
(f) Coordination with other limitation
This section shall be applied before the application of the
dollar limitation of the second sentence of section 162(a)
(relating to trade or business expenses).
-SOURCE-
(Added Pub. L. 99-514, title I, Sec. 132(a), Oct. 22, 1986, 100
Stat. 2113; amended Pub. L. 100-647, title I, Sec. 1001(f), title
IV, Sec. 4011(a), Nov. 10, 1988, 102 Stat. 3351, 3655; Pub. L.
101-239, title VII, Sec. 7814(f), Dec. 19, 1989, 103 Stat. 2414;
Pub. L. 103-66, title XIII, Sec. 13213(c)(2), Aug. 10, 1993, 107
Stat. 474; Pub. L. 105-277, div. J, title IV, Sec. 4004(b)(1), Oct.
21, 1998, 112 Stat. 2681-910; Pub. L. 106-554, Sec. 1(a)(7) [title
III, Sec. 319(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A-646.)
-REFTEXT-
REFERENCES IN TEXT
Section 4 of the Securities Act of 1933, referred to in subsec.
(c)(2)(B)(i)(I), is classified to section 77d of Title 15, Commerce
and Trade.
-MISC1-
AMENDMENTS
2000 - Subsec. (f). Pub. L. 106-554 substituted "the second
sentence" for "the last sentence".
1998 - Subsec. (b)(3). Pub. L. 105-277 substituted "for casualty
or theft losses described in paragraph (2) or (3) of section 165(c)
or for losses described in section 165(d)" for "for losses
described in subsection (c)(3) or (d) of section 165".
1993 - Subsec. (b)(6) to (13). Pub. L. 103-66 redesignated pars.
(7) to (13) as (6) to (12), respectively, and struck out former
par. (6) which read as follows: "the deduction under section 217
(relating to moving expenses),".
1989 - Subsec. (c)(4). Pub. L. 101-239 struck out par. (4) which
read as follows: "Termination. - This subsection shall not apply to
any taxable year beginning after December 31, 1989."
1988 - Subsec. (b)(4). Pub. L. 100-647, Sec. 1001(f)(2),
substituted "deductions" for "deduction" and inserted before comma
at end "and section 642(c) (relating to deduction for amounts paid
or permanently set aside for a charitable purpose)".
Subsec. (c). Pub. L. 100-647, Sec. 4011(a), amended subsec. (c)
generally. Prior to amendment subsec. (c) read as follows: "The
Secretary shall prescribe regulations which prohibit the indirect
deduction through pass-thru entities of amounts which are not
allowable as a deduction if paid or incurred directly by an
individual and which contain such reporting requirements as may be
necessary to carry out the purposes of this subsection. The
preceding sentence shall not apply -
"(1) with respect to cooperatives and real estate investment
trusts, and
"(2) except as provided in regulations, with respect to estates
and trusts."
Pub. L. 100-647, Sec. 1001(f)(4), amended last sentence
generally. Prior to amendment, last sentence read as follows: "The
preceding sentence shall not apply with respect to estates, trusts,
cooperatives, and real estate investment trusts."
Subsec. (e). Pub. L. 100-647, Sec. 1001(f)(3), amended subsec.
(e) generally. Prior to amendment, subsec. (e) read as follows:
"For purposes of this section, the adjusted gross income of an
estate or trust shall be computed in the same manner as in the case
of an individual, except that the deductions for costs which are
paid or incurred in connection with the administration of the
estate or trust and would not have been incurred if the property
were not held in such trust or estate shall be treated as allowable
in arriving at adjusted gross income."
Subsec. (f). Pub. L. 100-647, Sec. 1001(f)(1), added subsec. (f).
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-277, div. J, title IV, Sec. 4004(c)(2), Oct. 21,
1998, 112 Stat. 2681-911, provided that: "The amendment made by
subsection (b)(1) [amending this section] shall apply to taxable
years beginning after December 31, 1986."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to expenses incurred after
Dec. 31, 1993, see section 13213(e) of Pub. L. 103-66 set out as a
note under section 62 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1001(f) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 4011(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1987."
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1986, see section 151(a) of Pub. L. 99-514, set out as an Effective
Date of 1986 Amendment note under section 1 of this title.
1-YEAR DELAY IN TREATMENT OF PUBLICLY OFFERED REGULATED INVESTMENT
COMPANIES UNDER 2-PERCENT FLOOR
Pub. L. 100-203, title X, Sec. 10104(a), Dec. 22, 1987, 101 Stat.
1330-386, provided that:
"(1) General rule. - Section 67(c) of the Internal Revenue Code
of 1986 to the extent it relates to indirect deductions through a
publicly offered regulated investment company shall apply only to
taxable years beginning after December 31, 1987.
"(2) Publicly offered regulated investment company defined. - For
purposes of this subsection -
"(A) In general. - The term 'publicly offered regulated
investment company' means a regulated investment company the
shares of which are -
"(i) continuously offered pursuant to a public offering
(within the meaning of section 4 of the Securities Act of 1933,
as amended (15 U.S.C. 77a to 77aa) [15 U.S.C. 77d]),
"(ii) regularly traded on an established securities market,
or
"(iii) held by or for no fewer than 500 persons at all times
during the taxable year.
"(B) Secretary may reduce 500 person requirement. - The
Secretary of the Treasury or his delegate may by regulation
decrease the minimum shareholder requirement of subparagraph
(A)(iii) in the case of regulated investment companies which
experience a loss of shareholders through net redemptions of
their shares."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 642, 772, 773, 6654
of this title.
-End-
-CITE-
26 USC Sec. 68 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 68. Overall limitation on itemized deductions
-STATUTE-
(a) General rule
In the case of an individual whose adjusted gross income exceeds
the applicable amount, the amount of the itemized deductions
otherwise allowable for the taxable year shall be reduced by the
lesser of -
(1) 3 percent of the excess of adjusted gross income over the
applicable amount, or
(2) 80 percent of the amount of the itemized deductions
otherwise allowable for such taxable year.
(b) Applicable amount
(1) In general
For purposes of this section, the term "applicable amount"
means $100,000 ($50,000 in the case of a separate return by a
married individual within the meaning of section 7703).
(2) Inflation adjustments
In the case of any taxable year beginning in a calendar year
after 1991, each dollar amount contained in paragraph (1) shall
be increased by an amount equal to -
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
by substituting "calendar year 1990" for "calendar year 1992"
in subparagraph (B) thereof.
(c) Exception for certain itemized deductions
For purposes of this section, the term "itemized deductions" does
not include -
(1) the deduction under section 213 (relating to medical, etc.
expenses),
(2) any deduction for investment interest (as defined in
section 163(d)), and
(3) the deduction under section 165(a) for casualty or theft
losses described in paragraph (2) or (3) of section 165(c) or for
losses described in section 165(d).
(d) Coordination with other limitations
This section shall be applied after the application of any other
limitation on the allowance of any itemized deduction.
(e) Exception for estates and trusts
This section shall not apply to any estate or trust.
-SOURCE-
(Added Pub. L. 101-508, title XI, Sec. 11103(a), Nov. 5, 1990, 104
Stat. 1388-406; amended Pub. L. 103-66, title XIII, Secs.
13201(b)(3)(E), 13204, Aug. 10, 1993, 107 Stat. 459, 462; Pub. L.
105-277, div. J, title IV, Sec. 4004(b)(2), Oct. 21, 1998, 112
Stat. 2681-911; Pub. L. 107-16, title I, Sec. 103(a), June 7, 2001,
115 Stat. 44.)
-STATAMEND-
ADJUSTMENT OF APPLICABLE AMOUNT UNDER THIS SECTION FOR TAXABLE
YEARS BEGINNING IN 2004
For adjustment of "applicable amount" for determining limitation
on itemized deductions under this section for taxable years
beginning in 2004, see section 3.11 of Revenue Procedure 2003-85,
set out as a note under section 1 of this title.
ENACTMENT OF SUBSECTIONS (F) AND (G)
Pub. L. 107-16, title I, Secs. 103, 901, June 7, 2001, 115 Stat.
44, 150, provided that, applicable to taxable years beginning after
Dec. 31, 2005, this section is temporarily amended by adding
subsections (f) and (g) to read as follows:
(f) Phaseout of limitation
(1) In general
In the case of taxable years beginning after December 31, 2005,
and before January 1, 2010, the reduction under subsection (a)
shall be equal to the applicable fraction of the amount which
would (but for this subsection) be the amount of such reduction.
(2) Applicable fraction
For purposes of paragraph (1), the applicable fraction shall be
determined in accordance with the following table:
For taxable years beginning 3The applicable
in calendar year - fraction is -
--------------------------------------------------------------------
2006 and 2007 (!2/3)
2008 and 2009 1/3 .
--------------------------------------------------------------------
(g) Termination
This section shall not apply to any taxable year beginning after
December 31, 2009.
See Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
1998 - Subsec. (c)(3). Pub. L. 105-277 substituted "for casualty
or theft losses described in paragraph (2) or (3) of section 165(c)
or for losses described in section 165(d)" for "for losses
described in subsection (c)(3) or (d) of section 165".
1993 - Subsec. (b)(2)(B). Pub. L. 103-66, Sec. 13201(b)(3)(E),
substituted "1992" for "1989".
Subsec. (f). Pub. L. 103-66, Sec. 13204, struck out heading and
text of subsec. (f). Text read as follows: "This section shall not
apply to any taxable year beginning after December 31, 1995."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title I, Sec. 103(b), June 7, 2001, 115 Stat. 45,
provided that: "The amendment made by this section [amending this
section] shall apply to taxable years beginning after December 31,
2005."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-277, div. J, title IV, Sec. 4004(c)(3), Oct. 21,
1998, 112 Stat. 2681-911, provided that: "The amendment made by
subsection (b)(2) [amending this section] shall apply to taxable
years beginning after December 31, 1990."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by section 13201(b)(3)(E) of Pub. L. 103-66 applicable
to taxable years beginning after Dec. 31, 1992, see section
13201(c) of Pub. L. 103-66, set out as a note under section 1 of
this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1990, see section 11103(e) of Pub. L. 101-508, set out as an
Effective Date of 1990 Amendment note under section 1 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 56, 773 of this title.
-End-
-CITE-
26 USC PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS
INCOME 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-MISC1-
Sec.
71. Alimony and separate maintenance payments.
72. Annuities; certain proceeds of endowment and life
insurance contracts.
73. Services of child.
74. Prizes and awards.
75. Dealers in tax-exempt securities.
[76. Repealed.]
77. Commodity credit loans.
78. Dividends received from certain foreign corporations
by domestic corporations choosing foreign tax credit.
79. Group-term life insurance purchased for employees.
80. Restoration of value of certain securities.
[81. Repealed.]
82. Reimbursement of moving expenses.(!1)
83. Property transferred in connection with performance of
services.
84. Transfer of appreciated property to political
organizations.(!1)
85. Unemployment compensation.
86. Social security and tier 1 railroad retirement
benefits.
87. Alcohol fuel credit.
88. Certain amounts with respect to nuclear
decommissioning costs.
[89. Repealed.]
90. Illegal Federal irrigation subsidies.
AMENDMENTS
1989 - Pub. L. 101-239, title VII, Sec. 7822(c), Dec. 19, 1989,
103 Stat. 2425, substituted "Illegal Federal irrigation" for
"Federal irrigation" in item 90.
Pub. L. 101-140, title II, Sec. 202(b), Nov. 8, 1989, 103 Stat.
830, struck out item 89 "Benefits provided under certain employee
benefit plans".
1987 - Pub. L. 100-203, title X, Secs. 10201(b)(6), 10611(b),
Dec. 22, 1987, 101 Stat. 1330-387, 1330-452, struck out item 81
"Increase in vacation pay suspense account" and added item 90.
1986 - Pub. L. 99-514, title VIII, Sec. 805(c)(1)(B), title XI,
Sec. 1151(j)(1), Oct. 22, 1986, 100 Stat. 2362, 2508, substituted
"Increase in vacation pay suspense account" for "Certain increases
in suspense accounts" in item 81, and added item 89.
1984 - Pub. L. 98-369, div. A, title I, Sec. 91(f)(2), July 18,
1984, 98 Stat. 608, added item 88.
1983 - Pub. L. 98-21, title I, Sec. 121(f)(3), Apr. 20, 1983, 97
Stat. 84, added item 86 and redesignated former item 86 as 87.
1980 - Pub. L. 96-223, title II, Sec. 232(c)(3), Apr. 2, 1980, 94
Stat. 277, added item 86.
1978 - Pub. L. 95-600, title I, Sec. 112(c)(1), Nov. 6, 1978, 92
Stat. 2778, added item 85.
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(5), Oct. 4, 1976,
90 Stat. 1793, struck out item 76 "Mortgages made or obligations
issued by joint-stock land banks".
1975 - Pub. L. 93-625, Secs. 4(c)(2), 13(a)(2), Jan. 3, 1975, 88
Stat. 2111, 2121, substituted "Certain increases in suspense
accounts" for "Increases in suspense account under section 166(g)"
in item 81, and added item 84.
1969 - Pub. L. 91-172, title II, Sec. 231(c)(1), title III, Sec.
321(c), Dec. 30, 1969, 83 Stat. 579, 591, added items 82, 83.
1966 - Pub. L. 89-722, Sec. 1(b)(2), Nov. 2, 1966, 80 Stat. 1152,
added item 81.
Pub. L. 89-384, Sec. 1(b)(2), Apr. 8, 1966, 80 Stat. 102, added
item 80.
1964 - Pub. L. 88-272, title II, Sec. 204(a)(2), Feb. 26, 1964,
78 Stat. 36, added item 79.
1962 - Pub. L. 87-834, Sec. 9(d)(1), Oct. 16, 1962, 76 Stat.
1001, added item 78.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 61 of this title.
-FOOTNOTE-
(!1) So in original. Does not conform to section catchline.
-End-
-CITE-
26 USC Sec. 71 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 71. Alimony and separate maintenance payments
-STATUTE-
(a) General rule
Gross income includes amounts received as alimony or separate
maintenance payments.
(b) Alimony or separate maintenance payments defined
For purposes of this section -
(1) In general
The term "alimony or separate maintenance payment" means any
payment in cash if -
(A) such payment is received by (or on behalf of) a spouse
under a divorce or separation instrument,
(B) the divorce or separation instrument does not designate
such payment as a payment which is not includible in gross
income under this section and not allowable as a deduction
under section 215,
(C) in the case of an individual legally separated from his
spouse under a decree of divorce or of separate maintenance,
the payee spouse and the payor spouse are not members of the
same household at the time such payment is made, and
(D) there is no liability to make any such payment for any
period after the death of the payee spouse and there is no
liability to make any payment (in cash or property) as a
substitute for such payments after the death of the payee
spouse.
(2) Divorce or separation instrument
The term "divorce or separation instrument" means -
(A) a decree of divorce or separate maintenance or a written
instrument incident to such a decree,
(B) a written separation agreement, or
(C) a decree (not described in subparagraph (A)) requiring a
spouse to make payments for the support or maintenance of the
other spouse.
(c) Payments to support children
(1) In general
Subsection (a) shall not apply to that part of any payment
which the terms of the divorce or separation instrument fix (in
terms of an amount of money or a part of the payment) as a sum
which is payable for the support of children of the payor spouse.
(2) Treatment of certain reductions related to contingencies
involving child
For purposes of paragraph (1), if any amount specified in the
instrument will be reduced -
(A) on the happening of a contingency specified in the
instrument relating to a child (such as attaining a specified
age, marrying, dying, leaving school, or a similar
contingency), or
(B) at a time which can clearly be associated with a
contingency of a kind specified in subparagraph (A),
an amount equal to the amount of such reduction will be treated
as an amount fixed as payable for the support of children of the
payor spouse.
(3) Special rule where payment is less than amount specified in
instrument
For purposes of this subsection, if any payment is less than
the amount specified in the instrument, then so much of such
payment as does not exceed the sum payable for support shall be
considered a payment for such support.
(d) Spouse
For purposes of this section, the term "spouse" includes a former
spouse.
(e) Exception for joint returns
This section and section 215 shall not apply if the spouses make
a joint return with each other.
(f) Recomputation where excess front-loading of alimony payments
(1) In general
If there are excess alimony payments -
(A) the payor spouse shall include the amount of such excess
payments in gross income for the payor spouse's taxable year
beginning in the 3rd post-separation year, and
(B) the payee spouse shall be allowed a deduction in
computing adjusted gross income for the amount of such excess
payments for the payee's taxable year beginning in the 3rd
post-separation year.
(2) Excess alimony payments
For purposes of this subsection, the term "excess alimony
payments" mean the sum of -
(A) the excess payments for the 1st post-separation year, and
(B) the excess payments for the 2nd post-separation year.
(3) Excess payments for 1st post-separation year
For purposes of this subsection, the amount of the excess
payments for the 1st post-separation year is the excess (if any)
of -
(A) the amount of the alimony or separate maintenance
payments paid by the payor spouse during the 1st
post-separation year, over
(B) the sum of -
(i) the average of -
(I) the alimony or separate maintenance payments paid by
the payor spouse during the 2nd post-separation year,
reduced by the excess payments for the 2nd post-separation
year, and
(II) the alimony or separate maintenance payments paid by
the payor spouse during the 3rd post-separation year, plus
(ii) $15,000.
(4) Excess payments for 2nd post-separation year
For purposes of this subsection, the amount of the excess
payments for the 2nd post-separation year is the excess (if any)
of -
(A) the amount of the alimony or separate maintenance
payments paid by the payor spouse during the 2nd
post-separation year, over
(B) the sum of -
(i) the amount of the alimony or separate maintenance
payments paid by the payor spouse during the 3rd
post-separation year, plus
(ii) $15,000.
(5) Exceptions
(A) Where payment ceases by reason of death or remarriage
Paragraph (1) shall not apply if -
(i) either spouse dies before the close of the 3rd
post-separation year, or the payee spouse remarries before
the close of the 3rd post-separation year, and
(ii) the alimony or separate maintenance payments cease by
reason of such death or remarriage.
(B) Support payments
For purposes of this subsection, the term "alimony or
separate maintenance payment" shall not include any payment
received under a decree described in subsection (b)(2)(C).
(C) Fluctuating payments not within control of payor spouse
For purposes of this subsection, the term "alimony or
separate maintenance payment" shall not include any payment to
the extent it is made pursuant to a continuing liability (over
a period of not less than 3 years) to pay a fixed portion or
portions of the income from a business or property or from
compensation for employment or self-employment.
(6) Post-separation years
For purposes of this subsection, the term "1st post-separation
years" means the 1st calendar year in which the payor spouse paid
to the payee spouse alimony or separate maintenance payments to
which this section applies. The 2nd and 3rd post-separation years
shall be the 1st and 2nd succeeding calendar years, respectively.
(g) Cross references
(1) For deduction of alimony or separate maintenance
payments, see section 215.
(2) For taxable status of income of an estate or trust in the
case of divorce, etc., see section 682.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 19; Pub. L. 98-369, div. A,
title IV, Sec. 422(a), July 18, 1984, 98 Stat. 795; Pub. L. 99-514,
title XVIII, Sec. 1843(a)-(c)(1), (d), Oct. 22, 1986, 100 Stat.
2853, 2855.)
-MISC1-
AMENDMENTS
1986 - Subsec. (b)(1)(D). Pub. L. 99-514, Sec. 1843(b), struck
out "(and the divorce or separation instrument states that there is
no such liability)" after "for such payments after the death of the
payee spouse".
Subsec. (c)(2)(B). Pub. L. 99-514, Sec. 1843(d), substituted
"specified in subparagraph (A)" for "specified in paragraph (1)".
Subsec. (f). Pub. L. 99-514, Sec. 1843(c)(1), amended subsec. (f)
generally, substituting provisions for the recomputation of
liability where there has been excess front-loading of alimony
payments for provisions setting forth special rules to prevent
excess front-loading of alimony payments.
Subsec. (g). Pub. L. 99-514, Sec. 1843(a), added subsec. (g).
1984 - Pub. L. 98-369 amended section generally, substituting
present provisions for provisions which had declared in: subsec.
(a), a general rule as to decree of divorce or separate maintenance
in par. (1), written separation agreement in par. (2), and decree
for support in par. (3); subsec. (b), payments to support minor
children; subsec. (c), principal sum paid in installments, par. (1)
stating a general rule and par. (2) the rule where period for
payment is more than 10 years; subsec. (d), the rule for husband in
case of transferred property; and subsec. (e), cross references to
sections 7701(a)(17), 215, and 682.
EFFECTIVE DATE OF 1986 AMENDMENT; TRANSITIONAL RULE
Section 1843(c)(2), (3) of Pub. L. 99-514 provided that:
"(2) Effective dates. -
"(A) In general. - The amendment made by paragraph (1)
[amending this section] shall apply with respect to divorce or
separation instruments (as defined in section 71(b)(2)) of the
Internal Revenue Code of 1986 executed after December 31, 1986.
"(B) Modifications of instruments executed before january 1,
1987. - The amendments made by paragraph (1) [amending this
section] shall also apply to any divorce or separation instrument
(as so defined) executed before January 1, 1987, but modified on
or after such date if the modification expressly provides that
the amendments made by paragraph (1) shall apply to such
modification.
"(3) Transitional rule. - In the case of any instrument to which
the amendment made by paragraph (1) [amending this section] does
not apply, paragraph (2) of section 71(f) of the Internal Revenue
Code of 1954 [now 1986] (as in effect on the day before the date of
the enactment of this Act [Oct. 22, 1986]) shall apply only with
respect to the first 3 post-separation years."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 422(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 215, 219, 682, 6676, and 7701 of this title]
shall apply with respect to divorce or separation instruments (as
defined in section 71(b)(2) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954], as amended by this section) executed after
December 31, 1984.
"(2) Modifications of instruments executed before january 1,
1985. - The amendments made by this section shall also apply to any
divorce or separation instrument (as so defined) executed before
January 1, 1985, but modified on or after such date if the
modification expressly provides that the amendments made by this
section shall apply to such modification.
"(3) Requirement of identification number. - Section 215(c) of
the Internal Revenue Code of 1986 (as amended by subsection (b))
and the amendments made by subsection (c) [amending section 6676 of
this title] shall apply to payments made after December 31, 1984."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 121, 152, 215, 219, 220,
223, 382, 408 of this title.
-End-
-CITE-
26 USC Sec. 72 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 72. Annuities; certain proceeds of endowment and life
insurance contracts
-STATUTE-
(a) General rule for annuities
Except as otherwise provided in this chapter, gross income
includes any amount received as an annuity (whether for a period
certain or during one or more lives) under an annuity, endowment,
or life insurance contract.
(b) Exclusion ratio
(1) In general
Gross income does not include that part of any amount received
as an annuity under an annuity, endowment, or life insurance
contract which bears the same ratio to such amount as the
investment in the contract (as of the annuity starting date)
bears to the expected return under the contract (as of such
date).
(2) Exclusion limited to investment
The portion of any amount received as an annuity which is
excluded from gross income under paragraph (1) shall not exceed
the unrecovered investment in the contract immediately before the
receipt of such amount.
(3) Deduction where annuity payments cease before entire
investment recovered
(A) In general
If -
(i) after the annuity starting date, payments as an annuity
under the contract cease by reason of the death of an
annuitant, and
(ii) as of the date of such cessation, there is unrecovered
investment in the contract,
the amount of such unrecovered investment (in excess of any
amount specified in subsection (e)(5) which was not included in
gross income) shall be allowed as a deduction to the annuitant
for his last taxable year.
(B) Payments to other persons
In the case of any contract which provides for payments
meeting the requirements of subparagraphs (B) and (C) of
subsection (c)(2), the deduction under subparagraph (A) shall
be allowed to the person entitled to such payments for the
taxable year in which such payments are received.
(C) Net operating loss deductions provided
For purposes of section 172, a deduction allowed under this
paragraph shall be treated as if it were attributable to a
trade or business of the taxpayer.
(4) Unrecovered investment
For purposes of this subsection, the unrecovered investment in
the contract as of any date is -
(A) the investment in the contract (determined without regard
to subsection (c)(2)) as of the annuity starting date, reduced
by
(B) the aggregate amount received under the contract on or
after such annuity starting date and before the date as of
which the determination is being made, to the extent such
amount was excludable from gross income under this subtitle.
(c) Definitions
(1) Investment in the contract
For purposes of subsection (b), the investment in the contract
as of the annuity starting date is -
(A) the aggregate amount of premiums or other consideration
paid for the contract, minus
(B) the aggregate amount received under the contract before
such date, to the extent that such amount was excludable from
gross income under this subtitle or prior income tax laws.
(2) Adjustment in investment where there is refund feature
If -
(A) the expected return under the contract depends in whole
or in part on the life expectancy of one or more individuals;
(B) the contract provides for payments to be made to a
beneficiary (or to the estate of an annuitant) on or after the
death of the annuitant or annuitants; and
(C) such payments are in the nature of a refund of the
consideration paid,
then the value (computed without discount for interest) of such
payments on the annuity starting date shall be subtracted from
the amount determined under paragraph (1). Such value shall be
computed in accordance with actuarial tables prescribed by the
Secretary. For purposes of this paragraph and of subsection
(e)(2)(A), the term "refund of the consideration paid" includes
amounts payable after the death of an annuitant by reason of a
provision in the contract for a life annuity with minimum period
of payments certain, but (if part of the consideration was
contributed by an employer) does not include that part of any
payment to a beneficiary (or to the estate of the annuitant)
which is not attributable to the consideration paid by the
employee for the contract as determined under paragraph (1)(A).
(3) Expected return
For purposes of subsection (b), the expected return under the
contract shall be determined as follows:
(A) Life expectancy
If the expected return under the contract, for the period on
and after the annuity starting date, depends in whole or in
part on the life expectancy of one or more individuals, the
expected return shall be computed with reference to actuarial
tables prescribed by the Secretary.
(B) Installment payments
If subparagraph (A) does not apply, the expected return is
the aggregate of the amounts receivable under the contract as
an annuity.
(4) Annuity starting date
For purposes of this section, the annuity starting date in the
case of any contract is the first day of the first period for
which an amount is received as an annuity under the contract;
except that if such date was before January 1, 1954, then the
annuity starting date is January 1, 1954.
(d) Special rules for qualified employer retirement plans
(1) Simplified method of taxing annuity payments
(A) In general
In the case of any amount received as an annuity under a
qualified employer retirement plan -
(i) subsection (b) shall not apply, and
(ii) the investment in the contract shall be recovered as
provided in this paragraph.
(B) Method of recovering investment in contract
(i) In general
Gross income shall not include so much of any monthly
annuity payment under a qualified employer retirement plan as
does not exceed the amount obtained by dividing -
(I) the investment in the contract (as of the annuity
starting date), by
(II) the number of anticipated payments determined under
the table contained in clause (iii) (or, in the case of a
contract to which subsection (c)(3)(B) applies, the number
of monthly annuity payments under such contract).
(ii) Certain rules made applicable
Rules similar to the rules of paragraphs (2) and (3) of
subsection (b) shall apply for purposes of this paragraph.
(iii) Number of anticipated payments
If the annuity is payable over the life of a single
individual, the number of anticipated payments shall be
determined as follows:
If the age of the
annuitant on The number
the annuity starting of anticipated
date is: payments is:
Not more than 55 360
More than 55 but not more than 60 310
More than 60 but not more than 65 260
More than 65 but not more than 70 210
More than 70 160.
(iv) Number of anticipated payments where more than one life
If the annuity is payable over the lives of more than 1
individual, the number of anticipated payments shall be
determined as follows:
If the combined ages of
annuitants are: The number is:
Not more than 110 410
More than 110 but not more than 120 360
More than 120 but not more than 130 310
More than 130 but not more than 140 260
More than 140 210.
(C) Adjustment for refund feature not applicable
For purposes of this paragraph, investment in the contract
shall be determined under subsection (c)(1) without regard to
subsection (c)(2).
(D) Special rule where lump sum paid in connection with
commencement of annuity payments
If, in connection with the commencement of annuity payments
under any qualified employer retirement plan, the taxpayer
receives a lump-sum payment -
(i) such payment shall be taxable under subsection (e) as
if received before the annuity starting date, and
(ii) the investment in the contract for purposes of this
paragraph shall be determined as if such payment had been so
received.
(E) Exception
This paragraph shall not apply in any case where the primary
annuitant has attained age 75 on the annuity starting date
unless there are fewer than 5 years of guaranteed payments
under the annuity.
(F) Adjustment where annuity payments not on monthly basis
In any case where the annuity payments are not made on a
monthly basis, appropriate adjustments in the application of
this paragraph shall be made to take into account the period on
the basis of which such payments are made.
(G) Qualified employer retirement plan
For purposes of this paragraph, the term "qualified employer
retirement plan" means any plan or contract described in
paragraph (1), (2), or (3) of section 4974(c).
(2) Treatment of employee contributions under defined
contribution plans
For purposes of this section, employee contributions (and any
income allocable thereto) under a defined contribution plan may
be treated as a separate contract.
(e) Amounts not received as annuities
(1) Application of subsection
(A) In general
This subsection shall apply to any amount which -
(i) is received under an annuity, endowment, or life
insurance contract, and
(ii) is not received as an annuity,
if no provision of this subtitle (other than this subsection)
applies with respect to such amount.
(B) Dividends
For purposes of this section, any amount received which is in
the nature of a dividend or similar distribution shall be
treated as an amount not received as an annuity.
(2) General rule
Any amount to which this subsection applies -
(A) if received on or after the annuity starting date, shall
be included in gross income, or
(B) if received before the annuity starting date -
(i) shall be included in gross income to the extent
allocable to income on the contract, and
(ii) shall not be included in gross income to the extent
allocable to the investment in the contract.
(3) Allocation of amounts to income and investment
For purposes of paragraph (2)(B) -
(A) Allocation to income
Any amount to which this subsection applies shall be treated
as allocable to income on the contract to the extent that such
amount does not exceed the excess (if any) of -
(i) the cash value of the contract (determined without
regard to any surrender charge) immediately before the amount
is received, over
(ii) the investment in the contract at such time.
(B) Allocation to investment
Any amount to which this subsection applies shall be treated
as allocable to investment in the contract to the extent that
such amount is not allocated to income under subparagraph (A).
(4) Special rules for application of paragraph (2)(B)
For purposes of paragraph (2)(B) -
(A) Loans treated as distributions
If, during any taxable year, an individual -
(i) receives (directly or indirectly) any amount as a loan
under any contract to which this subsection applies, or
(ii) assigns or pledges (or agrees to assign or pledge) any
portion of the value of any such contract,
such amount or portion shall be treated as received under the
contract as an amount not received as an annuity. The preceding
sentence shall not apply for purposes of determining investment
in the contract, except that the investment in the contract
shall be increased by any amount included in gross income by
reason of the amount treated as received under the preceding
sentence.
(B) Treatment of policyholder dividends
Any amount described in paragraph (1)(B) shall not be
included in gross income under paragraph (2)(B)(i) to the
extent such amount is retained by the insurer as a premium or
other consideration paid for the contract.
(C) Treatment of transfers without adequate consideration
(i) In general
If an individual who holds an annuity contract transfers it
without full and adequate consideration, such individual
shall be treated as receiving an amount equal to the excess
of -
(I) the cash surrender value of such contract at the time
of transfer, over
(II) the investment in such contract at such time,
under the contract as an amount not received as an annuity.
(ii) Exception for certain transfers between spouses or
former spouses
Clause (i) shall not apply to any transfer to which section
1041(a) (relating to transfers of property between spouses or
incident to divorce) applies.
(iii) Adjustment to investment in contract of transferee
If under clause (i) an amount is included in the gross
income of the transferor of an annuity contract, the
investment in the contract of the transferee in such contract
shall be increased by the amount so included.
(5) Retention of existing rules in certain cases
(A) In general
In any case to which this paragraph applies -
(i) paragraphs (2)(B) and (4)(A) shall not apply, and
(ii) if paragraph (2)(A) does not apply,
the amount shall be included in gross income, but only to the
extent it exceeds the investment in the contract.
(B) Existing contracts
This paragraph shall apply to contracts entered into before
August 14, 1982. Any amount allocable to investment in the
contract after August 13, 1982, shall be treated as from a
contract entered into after such date.
(C) Certain life insurance and endowment contracts
Except as provided in paragraph (10) and except to the extent
prescribed by the Secretary by regulations, this paragraph
shall apply to any amount not received as an annuity which is
received under a life insurance or endowment contract.
(D) Contracts under qualified plans
Except as provided in paragraph (8), this paragraph shall
apply to any amount received -
(i) from a trust described in section 401(a) which is
exempt from tax under section 501(a),
(ii) from a contract -
(I) purchased by a trust described in clause (i),
(II) purchased as part of a plan described in section
403(a),
(III) described in section 403(b), or
(IV) provided for employees of a life insurance company
under a plan described in section 818(a)(3), or
(iii) from an individual retirement account or an
individual retirement annuity.
Any dividend described in section 404(k) which is received by a
participant or beneficiary shall, for purposes of this
subparagraph, be treated as paid under a separate contract to
which clause (ii)(I) applies.
(E) Full refunds, surrenders, redemptions, and maturities
This paragraph shall apply to -
(i) any amount received, whether in a single sum or
otherwise, under a contract in full discharge of the
obligation under the contract which is in the nature of a
refund of the consideration paid for the contract, and
(ii) any amount received under a contract on its complete
surrender, redemption, or maturity.
In the case of any amount to which the preceding sentence
applies, the rule of paragraph (2)(A) shall not apply.
(6) Investment in the contract
For purposes of this subsection, the investment in the contract
as of any date is -
(A) the aggregate amount of premiums or other consideration
paid for the contract before such date, minus
(B) the aggregate amount received under the contract before
such date, to the extent that such amount was excludable from
gross income under this subtitle or prior income tax laws.
[(7) Repealed. Pub. L. 100-647, title I, Sec. 1011A(b)(9)(A),
Nov. 10, 1988, 102 Stat. 3474]
(8) Extension of paragraph (2)(b) (!1) to qualified plans
(A) In general
Notwithstanding any other provision of this subsection, in
the case of any amount received before the annuity starting
date from a trust or contract described in paragraph (5)(D),
paragraph (2)(B) shall apply to such amounts.
(B) Allocation of amount received
For purposes of paragraph (2)(B), the amount allocated to the
investment in the contract shall be the portion of the amount
described in subparagraph (A) which bears the same ratio to
such amount as the investment in the contract bears to the
account balance. The determination under the preceding sentence
shall be made as of the time of the distribution or at such
other time as the Secretary may prescribe.
(C) Treatment of forfeitable rights
If an employee does not have a nonforfeitable right to any
amount under any trust or contract to which subparagraph (A)
applies, such amount shall not be treated as part of the
account balance.
(D) Investment in the contract before 1987
In the case of a plan which on May 5, 1986, permitted
withdrawal of any employee contributions before separation from
service, subparagraph (A) shall apply only to the extent that
amounts received before the annuity starting date (when
increased by amounts previously received under the contract
after December 31, 1986) exceed the investment in the contract
as of December 31, 1986.
(9) Extension of paragraph (2)(B) to qualified tuition programs
and Coverdell education savings accounts
Notwithstanding any other provision of this subsection,
paragraph (2)(B) shall apply to amounts received under a
qualified tuition program (as defined in section 529(b)) or under
a Coverdell education savings account (as defined in section
530(b)). The rule of paragraph (8)(B) shall apply for purposes of
this paragraph.
(10) Treatment of modified endowment contracts
(A) In general
Notwithstanding paragraph (5)(C), in the case of any modified
endowment contract (as defined in section 7702A) -
(i) paragraphs (2)(B) and (4)(A) shall apply, and
(ii) in applying paragraph (4)(A), "any person" shall be
substituted for "an individual".
(B) Treatment of certain burial contracts
Notwithstanding subparagraph (A), paragraph (4)(A) shall not
apply to any assignment (or pledge) of a modified endowment
contract if such assignment (or pledge) is solely to cover the
payment of expenses referred to in section 7702(e)(2)(C)(iii)
and if the maximum death benefit under such contract does not
exceed $25,000.
(11) Anti-abuse rules
(A) In general
For purposes of determining the amount includible in gross
income under this subsection -
(i) all modified endowment contracts issued by the same
company to the same policyholder during any calendar year
shall be treated as 1 modified endowment contract, and
(ii) all annuity contracts issued by the same company to
the same policyholder during any calendar year shall be
treated as 1 annuity contract.
The preceding sentence shall not apply to any contract
described in paragraph (5)(D).
(B) Regulatory authority
The Secretary may by regulations prescribe such additional
rules as may be necessary or appropriate to prevent avoidance
of the purposes of this subsection through serial purchases of
contracts or otherwise.
(f) Special rules for computing employees' contributions
In computing, for purposes of subsection (c)(1)(A), the aggregate
amount of premiums or other consideration paid for the contract,
and for purposes of subsection (e)(6), the aggregate premiums or
other consideration paid, amounts contributed by the employer shall
be included, but only to the extent that -
(1) such amounts were includible in the gross income of the
employee under this subtitle or prior income tax laws; or
(2) if such amounts had been paid directly to the employee at
the time they were contributed, they would not have been
includible in the gross income of the employee under the law
applicable at the time of such contribution.
Paragraph (2) shall not apply to amounts which were contributed by
the employer after December 31, 1962, and which would not have been
includible in the gross income of the employee by reason of the
application of section 911 if such amounts had been paid directly
to the employee at the time of contribution. The preceding sentence
shall not apply to amounts which were contributed by the employer,
as determined under regulations prescribed by the Secretary, to
provide pension or annuity credits, to the extent such credits are
attributable to services performed before January 1, 1963, and are
provided pursuant to pension or annuity plan provisions in
existence on March 12, 1962, and on that date applicable to such
services, or to the extent such credits are attributable to
services performed as a foreign missionary (within the meaning of
section 403(b)(2)(D)(iii), as in effect before the enactment of the
Economic Growth and Tax Relief Reconciliation Act of 2001.(!2)
(g) Rules for transferee where transfer was for value
Where any contract (or any interest therein) is transferred (by
assignment or otherwise) for a valuable consideration, to the
extent that the contract (or interest therein) does not, in the
hands of the transferee, have a basis which is determined by
reference to the basis in the hands of the transferor, then -
(1) for purposes of this section, only the actual value of such
consideration, plus the amount of the premiums and other
consideration paid by the transferee after the transfer, shall be
taken into account in computing the aggregate amount of the
premiums or other consideration paid for the contract;
(2) for purposes of subsection (c)(1)(B), there shall be taken
into account only the aggregate amount received under the
contract by the transferee before the annuity starting date, to
the extent that such amount was excludable from gross income
under this subtitle or prior income tax laws; and
(3) the annuity starting date is January 1, 1954, or the first
day of the first period for which the transferee received an
amount under the contract as an annuity, whichever is the later.
For purposes of this subsection, the term "transferee" includes a
beneficiary of, or the estate of, the transferee.
(h) Option to receive annuity in lieu of lump sum
If -
(1) a contract provides for payment of a lump sum in full
discharge of an obligation under the contract, subject to an
option to receive an annuity in lieu of such lump sum;
(2) the option is exercised within 60 days after the day on
which such lump sum first became payable; and
(3) part or all of such lump sum would (but for this
subsection) be includible in gross income by reason of subsection
(e)(1),
then, for purposes of this subtitle, no part of such lump sum shall
be considered as includible in gross income at the time such lump
sum first became payable.
[(i) Repealed. Pub. L. 94-455, title XIX, Sec. 1951(b)(1)(A), Oct.
4, 1976, 90 Stat. 1836]
(j) Interest
Notwithstanding any other provision of this section, if any
amount is held under an agreement to pay interest thereon, the
interest payments shall be included in gross income.
[(k) Repealed. Pub. L. 98-369, div. A, title IV, Sec. 421(b)(1),
July 18, 1984, 98 Stat. 794]
(l) Face-amount certificates
For purposes of this section, the term "endowment contract"
includes a face-amount certificate, as defined in section 2(a)(15)
of the Investment Company Act of 1940 (15 U.S.C., sec. 80a-2),
issued after December 31, 1954.
(m) Special rules applicable to employee annuities and
distributions under employee plans
[(1) Repealed. Pub. L. 93-406, title II, Sec. 2001(h)(2), Sept.
2, 1974, 88 Stat. 957]
(2) Computation of consideration paid by the employee
In computing -
(A) the aggregate amount of premiums or other consideration
paid for the contract for purposes of subsection (c)(1)(A)
(relating to the investment in the contract), and
(B) the aggregate premiums or other consideration paid for
purposes of subsection (e)(6) (relating to certain amounts not
received as an annuity),
any amount allowed as a deduction with respect to the contract
under section 404 which was paid while the employee was an
employee within the meaning of section 401(c)(1) shall be treated
as consideration contributed by the employer, and there shall not
be taken into account any portion of the premiums or other
consideration for the contract paid while the employee was an
owner-employee which is properly allocable (as determined under
regulations prescribed by the Secretary) to the cost of life,
accident, health, or other insurance.
(3) Life insurance contracts
(A) This paragraph shall apply to any life insurance contract
-
(i) purchased as a part of a plan described in section
403(a), or
(ii) purchased by a trust described in section 401(a) which
is exempt from tax under section 501(a) if the proceeds of
such contract are payable directly or indirectly to a
participant in such trust or to a beneficiary of such
participant.
(B) Any contribution to a plan described in subparagraph
(A)(i) or a trust described in subparagraph (A)(ii) which is
allowed as a deduction under section 404, and any income of a
trust described in subparagraph (A)(ii), which is determined in
accordance with regulations prescribed by the Secretary to have
been applied to purchase the life insurance protection under a
contract described in subparagraph (A), is includible in the
gross income of the participant for the taxable year when so
applied.
(C) In the case of the death of an individual insured under a
contract described in subparagraph (A), an amount equal to the
cash surrender value of the contract immediately before the
death of the insured shall be treated as a payment under such
plan or a distribution by such trust, and the excess of the
amount payable by reason of the death of the insured over such
cash surrender value shall not be includible in gross income
under this section and shall be treated as provided in section
101.
[(4) Repealed. Pub. L. 97-248, title II, Sec. 236(b)(1), Sept. 3,
1982, 96 Stat. 510]
(5) Penalties applicable to certain amounts received by 5-percent
owners
(A) This paragraph applies to amounts which are received from
a qualified trust described in section 401(a) or under a plan
described in section 403(a) at any time by an individual who
is, or has been, a 5-percent owner, or by a successor of such
an individual, but only to the extent such amounts are
determined, under regulations prescribed by the Secretary, to
exceed the benefits provided for such individual under the plan
formula.
(B) If a person receives an amount to which this paragraph
applies, his tax under this chapter for the taxable year in
which such amount is received shall be increased by an amount
equal to 10 percent of the portion of the amount so received
which is includible in his gross income for such taxable year.
(C) For purposes of this paragraph, the term "5-percent
owner" means any individual who, at any time during the 5 plan
years preceding the plan year ending in the taxable year in
which the amount is received, is a 5-percent owner (as defined
in section 416(i)(1)(B)).
(6) Owner-employee defined
For purposes of this subsection, the term "owner-employee" has
the meaning assigned to it by section 401(c)(3) and includes an
individual for whose benefit an individual retirement account or
annuity described in section 408(a) or (b) is maintained. For
purposes of the preceding sentence, the term "owner-employee"
shall include an employee within the meaning of section
401(c)(1).
(7) Meaning of disabled
For purposes of this section, an individual shall be considered
to be disabled if he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or
to be of long-continued and indefinite duration. An individual
shall not be considered to be disabled unless he furnishes proof
of the existence thereof in such form and manner as the Secretary
may require.
[(8) Repealed. Pub. L. 97-248, title II, Sec. 236(b)(1), Sept. 3,
1982, 96 Stat. 510]
[(9) Repealed. Pub. L. 98-369, div. A, title VII, Sec. 713(d)(1),
July 18, 1984, 98 Stat. 957]
(10) Determination of investment in the contract in the case of
qualified domestic relations orders
Under regulations prescribed by the Secretary, in the case of a
distribution or payment made to an alternate payee who is the
spouse or former spouse of the participant pursuant to a
qualified domestic relations order (as defined in section
414(p)), the investment in the contract as of the date prescribed
in such regulations shall be allocated on a pro rata basis
between the present value of such distribution or payment and the
present value of all other benefits payable with respect to the
participant to which such order relates.
(n) Annuities under retired serviceman's family protection plan or
survivor benefit plan
Subsection (b) shall not apply in the case of amounts received
after December 31, 1965, as an annuity under chapter 73 of title 10
of the United States Code, but all such amounts shall be excluded
from gross income until there has been so excluded (under section
122(b)(1) or this section, including amounts excluded before
January 1, 1966) an amount equal to the consideration for the
contract (as defined by section 122(b)(2)), plus any amount treated
pursuant to section 101(b)(2)(D) (as in effect on the day before
the date of the enactment of the Small Business Job Protection Act
of 1996) as additional consideration paid by the employee.
Thereafter all amounts so received shall be included in gross
income.
(o) Special rules for distributions from qualified plans to which
employee made deductible contributions
(1) Treatment of contributions
For purposes of this section and sections 402 and 403,
notwithstanding section 414(h), any deductible employee
contribution made to a qualified employer plan or government plan
shall be treated as an amount contributed by the employer which
is not includible in the gross income of the employee.
[(2) Repealed. Pub. L. 100-647, title I, Sec. 1011A(c)(8), Nov.
10, 1988, 102 Stat. 3476]
(3) Amounts constructively received
(A) In general
For purposes of this subsection, rules similar to the rules
provided by subsection (p) (other than the exception contained
in paragraph (2) thereof) shall apply.
(B) Purchase of life insurance
To the extent any amount of accumulated deductible employee
contributions of an employee are applied to the purchase of
life insurance contracts, such amount shall be treated as
distributed to the employee in the year so applied.
(4) Special rule for treatment of rollover amounts
For purposes of sections 402(c), 403(a)(4), and 403(b)(8),
408(d)(3), and 457(e)(16), the Secretary shall prescribe
regulations providing for such allocations of amounts
attributable to accumulated deductible employee contributions,
and for such other rules, as may be necessary to insure that such
accumulated deductible employee contributions do not become
eligible for additional tax benefits (or freed from limitations)
through the use of rollovers.
(5) Definitions and special rules
For purposes of this subsection -
(A) Deductible employee contributions
The term "deductible employee contributions" means any
qualified voluntary employee contribution (as defined in
section 219(e)(2)) made after December 31, 1981, in a taxable
year beginning after such date and made for a taxable year
beginning before January 1, 1987, and allowable as a deduction
under section 219(a) for such taxable year.
(B) Accumulated deductible employee contributions
The term "accumulated deductible employee contributions"
means the deductible employee contributions -
(i) increased by the amount of income and gain allocable to
such contributions, and
(ii) reduced by the sum of the amount of loss and expense
allocable to such contributions and the amounts distributed
with respect to the employee which are attributable to such
contributions (or income or gain allocable to such
contributions).
(C) Qualified employer plan
The term "qualified employer plan" has the meaning given to
such term by subsection (p)(3)(A)(i).
(D) Government plan
The term "government plan" has the meaning given such term by
subsection (p)(3)(B).
(6) Ordering rules
Unless the plan specifies otherwise, any distribution from such
plan shall not be treated as being made from the accumulated
deductible employee contributions, until all other amounts to the
credit of the employee have been distributed.
(p) Loans treated as distributions
For purposes of this section -
(1) Treatment as distributions
(A) Loans
If during any taxable year a participant or beneficiary
receives (directly or indirectly) any amount as a loan from a
qualified employer plan, such amount shall be treated as having
been received by such individual as a distribution under such
plan.
(B) Assignments or pledges
If during any taxable year a participant or beneficiary
assigns (or agrees to assign) or pledges (or agrees to pledge)
any portion of his interest in a qualified employer plan, such
portion shall be treated as having been received by such
individual as a loan from such plan.
(2) Exception for certain loans
(A) General rule
Paragraph (1) shall not apply to any loan to the extent that
such loan (when added to the outstanding balance of all other
loans from such plan whether made on, before, or after August
13, 1982), does not exceed the lesser of -
(i) $50,000, reduced by the excess (if any) of -
(I) the highest outstanding balance of loans from the
plan during the 1-year period ending on the day before the
date on which such loan was made, over
(II) the outstanding balance of loans from the plan on
the date on which such loan was made, or
(ii) the greater of (I) one-half of the present value of
the nonforfeitable accrued benefit of the employee under the
plan, or (II) $10,000.
For purposes of clause (ii), the present value of the
nonforfeitable accrued benefit shall be determined without
regard to any accumulated deductible employee contributions (as
defined in subsection (o)(5)(B)).
(B) Requirement that loan be repayable within 5 years
(i) In general
Subparagraph (A) shall not apply to any loan unless such
loan, by its terms, is required to be repaid within 5 years.
(ii) Exception for home loans
Clause (i) shall not apply to any loan used to acquire any
dwelling unit which within a reasonable time is to be used
(determined at the time the loan is made) as the principal
residence of the participant.
(C) Requirement of level amortization
Except as provided in regulations, this paragraph shall not
apply to any loan unless substantially level amortization of
such loan (with payments not less frequently than quarterly) is
required over the term of the loan.
(D) Related employers and related plans
For purposes of this paragraph -
(i) the rules of subsections (b), (c), and (m) of section
414 shall apply, and
(ii) all plans of an employer (determined after the
application of such subsections) shall be treated as 1 plan.
(3) Denial of interest deductions in certain cases
(A) In general
No deduction otherwise allowable under this chapter shall be
allowed under this chapter for any interest paid or accrued on
any loan to which paragraph (1) does not apply by reason of
paragraph (2) during the period described in subparagraph (B).
(B) Period to which subparagraph (A) applies
For purposes of subparagraph (A), the period described in
this subparagraph is the period -
(i) on or after the 1st day on which the individual to whom
the loan is made is a key employee (as defined in section
416(i)), or
(ii) such loan is secured by amounts attributable to
elective deferrals described in subparagraph (A) or (C) of
section 402(g)(3).
(4) Qualified employer plan, etc.
For purposes of this subsection -
(A) Qualified employer plan
(i) In general
The term "qualified employer plan" means -
(I) a plan described in section 401(a) which includes a
trust exempt from tax under section 501(a),
(II) an annuity plan described in section 403(a), and
(III) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
(ii) Special rule
The term "qualified employer plan" shall include any plan
which was (or was determined to be) a qualified employer plan
or a government plan.
(B) Government plan
The term "government plan" means any plan, whether or not
qualified, established and maintained for its employees by the
United States, by a State or political subdivision thereof, or
by an agency or instrumentality of any of the foregoing.
(5) Special rules for loans, etc., from certain contracts
For purposes of this subsection, any amount received as a loan
under a contract purchased under a qualified employer plan (and
any assignment or pledge with respect to such a contract) shall
be treated as a loan under such employer plan.
(q) 10-percent penalty for premature distributions from annuity
contracts
(1) Imposition of penalty
If any taxpayer receives any amount under an annuity contract,
the taxpayer's tax under this chapter for the taxable year in
which such amount is received shall be increased by an amount
equal to 10 percent of the portion of such amount which is
includible in gross income.
(2) Subsection not to apply to certain distributions
Paragraph 1 shall not apply to any distribution -
(A) made on or after the date on which the taxpayer attains
age 59 1/2 ,
(B) made on or after the death of the holder (or, where the
holder is not an individual, the death of the primary annuitant
(as defined in subsection (s)(6)(B))),
(C) attributable to the taxpayer's becoming disabled within
the meaning of subsection (m)(7),
(D) which is a part of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of such taxpayer and his
designated beneficiary,
(E) from a plan, contract, account, trust, or annuity
described in subsection (e)(5)(D),
(F) allocable to investment in the contract before August 14,
1982, or (!3)
(G) under a qualified funding asset (within the meaning of
section 130(d), but without regard to whether there is a
qualified assignment),
(H) to which subsection (t) applies (without regard to
paragraph (2) thereof),
(I) under an immediate annuity contract (within the meaning
of section 72(u)(4)), or
(J) which is purchased by an employer upon the termination of
a plan described in section 401(a) or 403(a) and which is held
by the employer until such time as the employee separates from
service.
(3) Change in substantially equal payments
If -
(A) paragraph (1) does not apply to a distribution by reason
of paragraph (2)(D), and
(B) the series of payments under such paragraph are
subsequently modified (other than by reason of death or
disability) -
(i) before the close of the 5-year period beginning on the
date of the first payment and after the taxpayer attains age
59 1/2 , or
(ii) before the taxpayer attains age 59 1/2 ,
the taxpayer's tax for the 1st taxable year in which such
modification occurs shall be increased by an amount, determined
under regulations, equal to the tax which (but for paragraph
(2)(D)) would have been imposed, plus interest for the deferral
period (within the meaning of subsection (t)(4)(B)).
(r) Certain railroad retirement benefits treated as received under
employer plans
(1) In general
Notwithstanding any other provision of law, any benefit
provided under the Railroad Retirement Act of 1974 (other than a
tier 1 railroad retirement benefit) shall be treated for purposes
of this title as a benefit provided under an employer plan which
meets the requirements of section 401(a).
(2) Tier 2 taxes treated as contributions
(A) In general
For purposes of paragraph (1) -
(i) the tier 2 portion of the tax imposed by section 3201
(relating to tax on employees) shall be treated as an
employee contribution,
(ii) the tier 2 portion of the tax imposed by section 3211
(relating to tax on employee representatives) shall be
treated as an employee contribution, and
(iii) the tier 2 portion of the tax imposed by section 3221
(relating to tax on employers) shall be treated as an
employer contribution.
(B) Tier 2 portion
For purposes of subparagraph (A) -
(i) After 1984
With respect to compensation paid after 1984, the tier 2
portion shall be the taxes imposed by sections 3201(b),
3211(b), and 3221(b).
(ii) After September 30, 1981, and before 1985
With respect to compensation paid before 1985 for services
rendered after September 30, 1981, the tier 2 portion shall
be -
(I) so much of the tax imposed by section 3201 as is
determined at the 2 percent rate, and
(II) so much of the taxes imposed by sections 3211 and
3221 as is determined at the 11.75 percent rate.
With respect to compensation paid for services rendered after
December 31, 1983, and before 1985, subclause (I) shall be
applied by substituting "2.75 percent" for "2 percent", and
subclause (II) shall be applied by substituting "12.75
percent" for "11.75 percent".
(iii) Before October 1, 1981
With respect to compensation paid for services rendered
during any period before October 1, 1981, the tier 2 portion
shall be the excess (if any) of -
(I) the tax imposed for such period by section 3201,
3211, or 3221, as the case may be (other than any tax
imposed with respect to man-hours), over
(II) the tax which would have been imposed by such
section for such period had the rates of the comparable
taxes imposed by chapter 21 for such period applied under
such section.
(C) Contributions not allocable to supplemental annuity or
windfall benefits
For purposes of paragraph (1), no amount treated as an
employee contribution under this paragraph shall be allocated
to -
(i) any supplemental annuity paid under section 2(b) of the
Railroad Retirement Act of 1974, or
(ii) any benefit paid under section 3(h), 4(e), or 4(h) of
such Act.
(3) Tier 1 railroad retirement benefit
For purposes of paragraph (1), the term "tier 1 railroad
retirement benefit" has the meaning given such term by section
86(d)(4).
(s) Required distributions where holder dies before entire interest
is distributed
(1) In general
A contract shall not be treated as an annuity contract for
purposes of this title unless it provides that -
(A) if any holder of such contract dies on or after the
annuity starting date and before the entire interest in such
contract has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the
method of distributions being used as of the date of his death,
and
(B) if any holder of such contract dies before the annuity
starting date, the entire interest in such contract will be
distributed within 5 years after the death of such holder.
(2) Exception for certain amounts payable over life of
beneficiary
If -
(A) any portion of the holder's interest is payable to (or
for the benefit of) a designated beneficiary,
(B) such portion will be distributed (in accordance with
regulations) over the life of such designated beneficiary (or
over a period not extending beyond the life expectancy of such
beneficiary), and
(C) such distributions begin not later than 1 year after the
date of the holder's death or such later date as the Secretary
may by regulations prescribe,
then for purposes of paragraph (1), the portion referred to in
subparagraph (A) shall be treated as distributed on the day on
which such distributions begin.
(3) Special rule where surviving spouse beneficiary
If the designated beneficiary referred to in paragraph (2)(A)
is the surviving spouse of the holder of the contract, paragraphs
(1) and (2) shall be applied by treating such spouse as the
holder of such contract.
(4) Designated beneficiary
For purposes of this subsection, the term "designated
beneficiary" means any individual designated a beneficiary by the
holder of the contract.
(5) Exception for certain annuity contracts
This subsection shall not apply to any annuity contract -
(A) which is provided -
(i) under a plan described in section 401(a) which includes
a trust exempt from tax under section 501, or
(ii) under a plan described in section 403(a),
(B) which is described in section 403(b),
(C) which is an individual retirement annuity or provided
under an individual retirement account or annuity, or
(D) which is a qualified funding asset (as defined in section
130(d), but without regard to whether there is a qualified
assignment).
(6) Special rule where holder is corporation or other
non-individual
(A) In general
For purposes of this subsection, if the holder of the
contract is not an individual, the primary annuitant shall be
treated as the holder of the contract.
(B) Primary annuitant
For purposes of subparagraph (A), the term "primary
annuitant" means the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of
the payout under the contract.
(7) Treatment of changes in primary annuitant where holder of
contract is not an individual
For purposes of this subsection, in the case of a holder of an
annuity contract which is not an individual, if there is a change
in a primary annuitant (as defined in paragraph (6)(B)), such
change shall be treated as the death of the holder.
(t) 10-percent additional tax on early distributions from qualified
retirement plans
(1) Imposition of additional tax
If any taxpayer receives any amount from a qualified retirement
plan (as defined in section 4974(c)), the taxpayer's tax under
this chapter for the taxable year in which such amount is
received shall be increased by an amount equal to 10 percent of
the portion of such amount which is includible in gross income.
(2) Subsection not to apply to certain distributions
Except as provided in paragraphs (3) and (4), paragraph (1)
shall not apply to any of the following distributions:
(A) In general
Distributions which are -
(i) made on or after the date on which the employee attains
age 59 1/2 ,
(ii) made to a beneficiary (or to the estate of the
employee) on or after the death of the employee,
(iii) attributable to the employee's being disabled within
the meaning of subsection (m)(7),
(iv) part of a series of substantially equal periodic
payments (not less frequently than annually) made for the
life (or life expectancy) of the employee or the joint lives
(or joint life expectancies) of such employee and his
designated beneficiary,
(v) made to an employee after separation from service after
attainment of age 55,
(vi) dividends paid with respect to stock of a corporation
which are described in section 404(k), or
(vii) made on account of a levy under section 6331 on the
qualified retirement plan.
(B) Medical expenses
Distributions made to the employee (other than distributions
described in subparagraph (A), (C), or (D)) to the extent such
distributions do not exceed the amount allowable as a deduction
under section 213 to the employee for amounts paid during the
taxable year for medical care (determined without regard to
whether the employee itemizes deductions for such taxable
year).
(C) Payments to alternate payees pursuant to qualified domestic
relations orders
Any distribution to an alternate payee pursuant to a
qualified domestic relations order (within the meaning of
section 414(p)(1)).
(D) Distributions to unemployed individuals for health
insurance premiums
(i) In general
Distributions from an individual retirement plan to an
individual after separation from employment -
(I) if such individual has received unemployment
compensation for 12 consecutive weeks under any Federal or
State unemployment compensation law by reason of such
separation,
(II) if such distributions are made during any taxable
year during which such unemployment compensation is paid or
the succeeding taxable year, and
(III) to the extent such distributions do not exceed the
amount paid during the taxable year for insurance described
in section 213(d)(1)(D) with respect to the individual and
the individual's spouse and dependents (as defined in
section 152).
(ii) Distributions after reemployment
Clause (i) shall not apply to any distribution made after
the individual has been employed for at least 60 days after
the separation from employment to which clause (i) applies.
(iii) Self-employed individuals
To the extent provided in regulations, a self-employed
individual shall be treated as meeting the requirements of
clause (i)(I) if, under Federal or State law, the individual
would have received unemployment compensation but for the
fact the individual was self-employed.
(E) Distributions from individual retirement plans for higher
education expenses
Distributions to an individual from an individual retirement
plan to the extent such distributions do not exceed the
qualified higher education expenses (as defined in paragraph
(7)) of the taxpayer for the taxable year. Distributions shall
not be taken into account under the preceding sentence if such
distributions are described in subparagraph (A), (C), or (D) or
to the extent paragraph (1) does not apply to such
distributions by reason of subparagraph (B).
(F) Distributions from certain plans for first home purchases
Distributions to an individual from an individual retirement
plan which are qualified first-time homebuyer distributions (as
defined in paragraph (8)). Distributions shall not be taken
into account under the preceding sentence if such distributions
are described in subparagraph (A), (C), (D), or (E) or to the
extent paragraph (1) does not apply to such distributions by
reason of subparagraph (B).
(3) Limitations
(A) Certain exceptions not to apply to individual retirement
plans
Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply
to distributions from an individual retirement plan.
(B) Periodic payments under qualified plans must begin after
separation
Paragraph (2)(A)(iv) shall not apply to any amount paid from
a trust described in section 401(a) which is exempt from tax
under section 501(a) or from a contract described in section
72(e)(5)(D)(ii) unless the series of payments begins after the
employee separates from service.
(4) Change in substantially equal payments
(A) In general
If -
(i) paragraph (1) does not apply to a distribution by
reason of paragraph (2)(A)(iv), and
(ii) the series of payments under such paragraph are
subsequently modified (other than by reason of death or
disability) -
(I) before the close of the 5-year period beginning with
the date of the first payment and after the employee
attains age 59 1/2 , or
(II) before the employee attains age 59 1/2 ,
the taxpayer's tax for the 1st taxable year in which such
modification occurs shall be increased by an amount, determined
under regulations, equal to the tax which (but for paragraph
(2)(A)(iv)) would have been imposed, plus interest for the
deferral period.
(B) Deferral period
For purposes of this paragraph, the term "deferral period"
means the period beginning with the taxable year in which
(without regard to paragraph (2)(A)(iv)) the distribution would
have been includible in gross income and ending with the
taxable year in which the modification described in
subparagraph (A) occurs.
(5) Employee
For purposes of this subsection, the term "employee" includes
any participant, and in the case of an individual retirement
plan, the individual for whose benefit such plan was established.
(6) Special rules for simple retirement accounts
In the case of any amount received from a simple retirement
account (within the meaning of section 408(p)) during the 2-year
period beginning on the date such individual first participated
in any qualified salary reduction arrangement maintained by the
individual's employer under section 408(p)(2), paragraph (1)
shall be applied by substituting "25 percent" for "10 percent".
(7) Qualified higher education expenses
For purposes of paragraph (2)(E) -
(A) In general
The term "qualified higher education expenses" means
qualified higher education expenses (as defined in section
529(e)(3)) for education furnished to -
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any child (as defined in section 151(c)(3)) or
grandchild of the taxpayer or the taxpayer's spouse,
at an eligible educational institution (as defined in section
529(e)(5)).
(B) Coordination with other benefits
The amount of qualified higher education expenses for any
taxable year shall be reduced as provided in section 25A(g)(2).
(8) Qualified first-time homebuyer distributions
For purposes of paragraph (2)(F) -
(A) In general
The term "qualified first-time homebuyer distribution" means
any payment or distribution received by an individual to the
extent such payment or distribution is used by the individual
before the close of the 120th day after the day on which such
payment or distribution is received to pay qualified
acquisition costs with respect to a principal residence of a
first-time homebuyer who is such individual, the spouse of such
individual, or any child, grandchild, or ancestor of such
individual or the individual's spouse.
(B) Lifetime dollar limitation
The aggregate amount of payments or distributions received by
an individual which may be treated as qualified first-time
homebuyer distributions for any taxable year shall not exceed
the excess (if any) of -
(i) $10,000, over
(ii) the aggregate amounts treated as qualified first-time
homebuyer distributions with respect to such individual for
all prior taxable years.
(C) Qualified acquisition costs
For purposes of this paragraph, the term "qualified
acquisition costs" means the costs of acquiring, constructing,
or reconstructing a residence. Such term includes any usual or
reasonable settlement, financing, or other closing costs.
(D) First-time homebuyer; other definitions
For purposes of this paragraph -
(i) First-time homebuyer
The term "first-time homebuyer" means any individual if -
(I) such individual (and if married, such individual's
spouse) had no present ownership interest in a principal
residence during the 2-year period ending on the date of
acquisition of the principal residence to which this
paragraph applies, and
(II) subsection (h) or (k) of section 1034 (!4) (as in
effect on the day before the date of the enactment of this
paragraph) did not suspend the running of any period of
time specified in section 1034 (!4) (as so in effect) with
respect to such individual on the day before the date the
distribution is applied pursuant to subparagraph (A).
(ii) Principal residence
The term "principal residence" has the same meaning as when
used in section 121.
(iii) Date of acquisition
The term "date of acquisition" means the date -
(I) on which a binding contract to acquire the principal
residence to which subparagraph (A) applies is entered
into, or
(II) on which construction or reconstruction of such a
principal residence is commenced.
(E) Special rule where delay in acquisition
If any distribution from any individual retirement plan fails
to meet the requirements of subparagraph (A) solely by reason
of a delay or cancellation of the purchase or construction of
the residence, the amount of the distribution may be
contributed to an individual retirement plan as provided in
section 408(d)(3)(A)(i) (determined by substituting "120th day"
for "60th day" in such section), except that -
(i) section 408(d)(3)(B) shall not be applied to such
contribution, and
(ii) such amount shall not be taken into account in
determining whether section 408(d)(3)(B) applies to any other
amount.
(9) Special rule for rollovers to section 457 plans
For purposes of this subsection, a distribution from an
eligible deferred compensation plan (as defined in section
457(b)) of an eligible employer described in section 457(e)(1)(A)
shall be treated as a distribution from a qualified retirement
plan described in 4974(c)(1) to the extent that such distribution
is attributable to an amount transferred to an eligible deferred
compensation plan from a qualified retirement plan (as defined in
section 4974(c)).
(u) Treatment of annuity contracts not held by natural persons
(1) In general
If any annuity contract is held by a person who is not a
natural person -
(A) such contract shall not be treated as an annuity contract
for purposes of this subtitle (other than subchapter L), and
(B) the income on the contract for any taxable year of the
policyholder shall be treated as ordinary income received or
accrued by the owner during such taxable year.
For purposes of this paragraph, holding by a trust or other
entity as an agent for a natural person shall not be taken into
account.
(2) Income on the contract
(A) In general
For purposes of paragraph (1), the term "income on the
contract" means, with respect to any taxable year of the
policyholder, the excess of -
(i) the sum of the net surrender value of the contract as
of the close of the taxable year plus all distributions under
the contract received during the taxable year or any prior
taxable year, reduced by
(ii) the sum of the amount of net premiums under the
contract for the taxable year and prior taxable years and
amounts includible in gross income for prior taxable years
with respect to such contract under this subsection.
Where necessary to prevent the avoidance of this subsection,
the Secretary may substitute "fair market value of the
contract" for "net surrender value of the contract" each place
it appears in the preceding sentence.
(B) Net premiums
For purposes of this paragraph, the term "net premiums" means
the amount of premiums paid under the contract reduced by any
policyholder dividends.
(3) Exceptions
This subsection shall not apply to any annuity contract which -
(A) is acquired by the estate of a decedent by reason of the
death of the decedent,
(B) is held under a plan described in section 401(a) or
403(a), under a program described in section 403(b), or under
an individual retirement plan,
(C) is a qualified funding asset (as defined in section
130(d), but without regard to whether there is a qualified
assignment),
(D) is purchased by an employer upon the termination of a
plan described in section 401(a) or 403(a) and is held by the
employer until all amounts under such contract are distributed
to the employee for whom such contract was purchased or the
employee's beneficiary, or
(E) is an immediate annuity.
(4) Immediate annuity
For purposes of this subsection, the term "immediate annuity"
means an annuity -
(A) which is purchased with a single premium or annuity
consideration,
(B) the annuity starting date (as defined in subsection
(c)(4)) of which commences no later than 1 year from the date
of the purchase of the annuity, and
(C) which provides for a series of substantially equal
periodic payments (to be made not less frequently than
annually) during the annuity period.
(v) 10-percent additional tax for taxable distributions from
modified endowment contracts
(1) Imposition of additional tax
If any taxpayer receives any amount under a modified endowment
contract (as defined in section 7702A), the taxpayer's tax under
this chapter for the taxable year in which such amount is
received shall be increased by an amount equal to 10 percent of
the portion of such amount which is includible in gross income.
(2) Subsection not to apply to certain distributions
Paragraph (1) shall not apply to any distribution -
(A) made on or after the date on which the taxpayer attains
age 59 1/2 ,
(B) which is attributable to the taxpayer's becoming disabled
(within the meaning of subsection (m)(7)), or
(C) which is part of a series of substantially equal periodic
payments (not less frequently than annually) made for the life
(or life expectancy) of the taxpayer or the joint lives (or
joint life expectancies) of such taxpayer and his beneficiary.
(w) Cross reference
For limitation on adjustments to basis of annuity contracts
sold, see section 1021.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 20; Pub. L. 87-792, Sec. 4(a),
(b), Oct. 10, 1962, 76 Stat. 821; Pub. L. 87-834, Sec. 11(b), Oct.
16, 1962, 76 Stat. 1005; Pub. L. 88-272, title II, Sec. 232(b),
Feb. 26, 1964, 78 Stat. 110; Pub. L. 89-44, title VIII, Sec.
809(d)(2), June 21, 1965, 79 Stat. 167; Pub. L. 89-97, title I,
Sec. 106(d)(2), July 30, 1965, 79 Stat. 337; Pub. L. 89-365, Sec.
1(b), Mar. 8, 1966, 80 Stat. 32; Pub. L. 91-172, title V, Sec.
515(b), Dec. 30, 1969, 83 Stat. 644; Pub. L. 93-406, title II,
Secs. 2001(e)(5), (g)(1), (2)(A), (h)(2), (3), 2002(g)(10),
2005(c)(3), 2007(b)(2), Sept. 2, 1974, 88 Stat. 955, 957, 970, 991,
994; Pub. L. 94-455, title XIX, Secs. 1901(a)(12), (13),
1906(b)(13)(A), 1951(b)(1)(A), Oct. 4, 1976, 90 Stat. 1765, 1834,
1836; Pub. L. 97-34, title III, Secs. 311(b)(1), 312(d), (e)(1),
Aug. 13, 1981, 95 Stat. 278, 284; Pub. L. 97-248, title II, Secs.
236(a), (b), 237(d), 265(a), (b)(1), Sept. 3, 1982, 96 Stat.
509-511, 544-546; Pub. L. 97-448, title I, Sec. 103(c)(3)(B)(i),
(6), Jan. 12, 1983, 96 Stat. 2376; Pub. L. 98-76, title II, Sec.
224(a), Aug. 12, 1983, 97 Stat. 421; Pub. L. 98-369, div. A, title
II, Secs. 211(b)(1), 222(a), (b), title IV, Secs. 421(b)(1),
491(d)(3), (4), title V, Secs. 521(d), 523(a), (b), title VII, Sec.
713(b)(1)-(c)(1)(B), (d)(1), July 18, 1984, 98 Stat. 754, 774, 794,
849, 868, 871, 872, 956, 957; Pub. L. 98-397, title II, Sec.
204(c)(2), Aug. 23, 1984, 98 Stat. 1448; Pub. L. 99-514, title XI,
Secs. 1101(b)(2)(B), (C), 1122(c), 1123(a), (b), (d)(1),
1134(a)-(d), 1135(a), title XVIII, Secs. 1826(a), (b)(1)-(3), (c),
(d), 1852(a)(2), (c)(1)-(4), 1854(b)(1), 1898(c)(1)(B), Oct. 22,
1986, 100 Stat. 2413, 2414, 2467, 2472, 2474, 2475, 2483, 2484,
2848-2850, 2864, 2867, 2878, 2951; Pub. L. 100-647, title I, Secs.
1011A(b)(1)(A), (B), (2), (9), (c)(1)-(8), (h), (i), 1018(k),
(t)(1)(A), (B), (u)(8), title V, Sec. 5012(a), (b)(1), (d), Nov.
10, 1988, 102 Stat. 3472, 3474-3476, 3482, 3583, 3587, 3590, 3661,
3662, 3664; Pub. L. 101-239, title VII, Secs. 7811(m)(4),
7815(a)(3), (5), Dec. 19, 1989, 103 Stat. 2412, 2414; Pub. L.
101-508, title XI, Sec. 11802(a), Nov. 5, 1990, 104 Stat. 1388-529;
Pub. L. 102-318, title V, Sec. 521(b)(3), July 3, 1992, 106 Stat.
310; Pub. L. 104-188, title I, Secs. 1403(a), 1421(b)(4)(A),
1463(a), 1704(l)(1), (t)(2), (77), Aug. 20, 1996, 110 Stat. 1790,
1796, 1824, 1882, 1887, 1891; Pub. L. 104-191, title III, Sec.
361(a)-(c), Aug. 21, 1996, 110 Stat. 2071, 2072; Pub. L. 105-34,
title II, Sec. 203(a), (b), title III, Sec. 303(a), (b), title X,
Sec. 1075(a), (b), Aug. 5, 1997, 111 Stat. 809, 829, 949; Pub. L.
105-206, title III, Sec. 3436(a), title VI, Secs. 6004(d)(3)(B),
6005(c)(1), 6023(3), (4), July 22, 1998, 112 Stat. 761, 794, 800,
824; Pub. L. 107-16, title IV, Sec. 402(a)(4)(A), (B), title VI,
Secs. 632(a)(3)(A), 641(a)(2)(C), (e)(1), June 7, 2001, 115 Stat.
60, 61, 113, 120; Pub. L. 107-22, Sec. 1(b)(1)(A), (3)(A), July 26,
2001, 115 Stat. 196, 197; Pub. L. 107-90, title II, Sec. 204(e)(2),
Dec. 21, 2001, 115 Stat. 893.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The enactment of the Economic Growth and Tax Relief
Reconciliation Act of 2001, referred to in subsec. (f), means the
enactment of Pub. L. 107-16, which was approved June 7, 2001.
The date of the enactment of the Small Business Job Protection
Act of 1996, referred to in subsec. (n), is the date of enactment
of Pub. L. 104-188, which was approved Aug. 20, 1996.
The Railroad Retirement Act of 1974, referred to in subsec.
(r)(1), (2)(C)(i), (ii), is act Aug. 29, 1935, ch. 812, as amended
generally by Pub. L. 93-445, title I, Sec. 101, Oct. 16, 1974, 88
Stat. 1305, which is classified generally to subchapter IV (Sec.
231 et seq.) of chapter 9 of Title 45, Railroads. Sections 2(b),
3(h), and 4(e) and (h) of the Act are classified to sections
231a(b), 231b(h), and 231c(e) and (h), respectively, of Title 45.
For further details and complete classification of this Act to the
Code, see Codification note set out preceding section 231 of Title
45, section 231t of Title 45, and Tables.
Section 1034 (as in effect on the day before the date of the
enactment of this paragraph), referred to in subsec.
(t)(8)(D)(i)(II), means section 1034 of this title as in effect on
the day before Aug. 5, 1997. Section 1034 was repealed by Pub. L.
105-34, title III, Sec. 312(b), Aug. 5, 1997, 111 Stat. 839.
-MISC1-
AMENDMENTS
2001 - Subsec. (e)(9). Pub. L. 107-22, Sec. 1(b)(3)(A), which
directed amendment of par. (9) by substituting "Coverdell education
savings" for "education individual retirement" in heading, was
executed by making the substitution for "educational individual
retirement", to reflect the probable intent of Congress.
Pub. L. 107-22, Sec. 1(b)(1)(A), substituted "a Coverdell
education savings" for "an education individual retirement".
Pub. L. 107-16, Secs. 402(a)(4)(A), (B), 901, temporarily
substituted "qualified tuition" for "qualified State tuition" in
heading and text. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (f). Pub. L. 107-16, Secs. 632(a)(3)(A), 901, temporarily
substituted "section 403(b)(2)(D)(iii), as in effect before the
enactment of the Economic Growth and Tax Relief Reconciliation Act
of 2001" for "section 403(b)(2)(D)(iii))" in concluding provisions.
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (o)(4). Pub. L. 107-16, Secs. 641(e)(1), 901, temporarily
substituted "403(b)(8), 408(d)(3), and 457(e)(16)" for "and
408(d)(3)". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (r)(2)(B)(i). Pub. L. 107-90 substituted "3211(b)" for
"3211(a)(2)".
Subsec. (t)(9). Pub. L. 107-16, Secs. 641(a)(2)(C), 901,
temporarily added par. (9). See Effective and Termination Dates of
2001 Amendments note below.
1998 - Subsec. (e)(9). Pub. L. 105-206, Sec. 6004(d)(3)(B), added
par. (9).
Subsec. (n). Pub. L. 105-206, Sec. 6023(3), inserted "(as in
effect on the day before the date of the enactment of the Small
Business Job Protection Act of 1996)" after "section 101(b)(2)(D)".
Subsec. (t)(2)(A)(iv). Pub. L. 105-206, Sec. 3436(a), which
directed amendment of cl. (iv) by striking out "or" at end, could
not be executed because the word "or" did not appear at end.
Subsec. (t)(2)(A)(vii). Pub. L. 105-206, Sec. 3436(a), added cl.
(vii).
Subsec. (t)(3)(A). Pub. L. 105-206, Sec. 6023(4), substituted
"(A)(v)" for "(A)(v),".
Subsec. (t)(8)(E). Pub. L. 105-206, Sec. 6005(c)(1), in
introductory provisions, substituted "120th day" for "120 days" and
"60th day" for "60 days".
1997 - Subsec. (d)(1)(B)(iii). Pub. L. 105-34, Sec. 1075(b),
inserted "If the annuity is payable over the life of a single
individual, the number of anticipated payments shall be determined
as follows:" before table and struck out "primary" after "If the
age of the" in table.
Subsec. (d)(1)(B)(iv). Pub. L. 105-34, Sec. 1075(a), added cl.
(iv).
Subsec. (t)(2)(E). Pub. L. 105-34, Sec. 203(a), added subpar.
(E).
Subsec. (t)(2)(F). Pub. L. 105-34, Sec. 303(a), added subpar.
(F).
Subsec. (t)(7). Pub. L. 105-34, Sec. 203(b), added par. (7).
Subsec. (t)(8). Pub. L. 105-34, Sec. 303(b), added par. (8).
1996 - Subsec. (b)(4)(A). Pub. L. 104-188, Sec. 1704(l)(1),
inserted "(determined without regard to subsection (c)(2))" after
"contract".
Subsec. (d). Pub. L. 104-188, Sec. 1403(a), amended subsec. (d)
generally. Prior to amendment, subsec. (d) read as follows:
"Treatment of Employee Contributions Under Defined Contribution
Plans as Separate Contracts. - For purposes of this section,
employee contributions (and any income allocable thereto) under a
defined contribution plan may be treated as a separate contract."
Subsec. (f). Pub. L. 104-188, Sec. 1463(a), in closing
provisions, inserted before period at end ", or to the extent such
credits are attributable to services performed as a foreign
missionary (within the meaning of section 403(b)(2)(D)(iii))".
Subsec. (m)(2)(A) to (C). Pub. L. 104-188, Sec. 1704(t)(2),
inserted "and" at end of subpar. (A), redesignated subpar. (C) as
(B), and struck out former subpar. (B) which read as follows: "the
consideration for the contract contributed by the employee for
purposes of subsection (d)(1) (relating to employee's contributions
recoverable in 3 years) and subsection (e)(7) (relating to plans
where substantially all contributions are employee contributions),
and".
Subsec. (p)(4)(A)(ii). Pub. L. 104-188, Sec. 1704(t)(77), amended
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows:
"Special rules. - The term 'qualified employer plan' -
"(I) shall include any plan which was (or was determined to be)
a qualified employer plan or a government plan, but
"(II) shall not include a plan described in subsection (e)(7)."
Subsec. (t)(2)(B). Pub. L. 104-191, Sec. 361(c), substituted ",
(C), or (D)" for "or (C)".
Subsec. (t)(2)(D). Pub. L. 104-191, Sec. 361(b), added subpar.
(D).
Subsec. (t)(3)(A). Pub. L. 104-191, Sec. 361(a), struck out
"(B)," after "Subparagraphs (A)(v),".
Subsec. (t)(6). Pub. L. 104-188, Sec. 1421(b)(4)(A), added par.
(6).
1992 - Subsec. (o)(4). Pub. L. 102-318 substituted "402(c)" for
"402(a)(5), 402(a)(7)".
1990 - Subsec. (t)(2)(C), (D). Pub. L. 101-508, Sec. 11802(a)(1),
(2), redesignated subpar. (D) as (C) and struck out former subpar.
(C) "Exceptions for distributions from employee stock ownership
plans" which read as follows: "Any distribution made before January
1, 1990, to an employee from an employee stock ownership plan (as
defined in section 4975(e)(7)) or a tax credit employee stock
ownership plan (as defined in section 409) if -
"(i) such distribution is attributable to assets which have
been invested in employer securities (within the meaning of
section 409(l)) at all times during the 5-plan-year period
preceding the plan year in which the distribution is made, and
"(ii) at all times during such period the requirements of
sections 401(a)(28) and 409 (as in effect at such times) are met
with respect to such employer securities."
Subsec. (t)(3)(A). Pub. L. 101-508, Sec. 11802(a)(3), substituted
"and (C)" for "(C), and (D)".
1989 - Subsec. (e)(11)(A). Pub. L. 101-239, Sec. 7815(a)(3), (5),
substituted "calendar year" for "12-month period" in cls. (i) and
(ii), and inserted at end "The preceding sentence shall not apply
to any contract described in paragraph (5)(D)."
Subsec. (q)(2)(B). Pub. L. 101-239, Sec. 7811(m)(4), inserted an
additional closing parenthesis after "subsection (s)(6)(B))".
1988 - Subsec. (d). Pub. L. 100-647, Sec. 1011A(b)(2)(A), added
subsec. (d).
Subsec. (e)(4)(A). Pub. L. 100-647, Sec. 5012(d)(1), inserted at
end "The preceding sentence shall not apply for purposes of
determining investment in the contract, except that the investment
in the contract shall be increased by any amount included in gross
income by reason of the amount treated as received under the
preceding sentence."
Subsec. (e)(5)(C). Pub. L. 100-647, Sec. 5012(a)(2), substituted
"Except as provided in paragraph (10) and except to the extent" for
"Except to the extent".
Subsec. (e)(5)(D). Pub. L. 100-647, Sec. 1011A(b)(9)(B),
substituted "paragraph (8)" for "paragraphs (7) and (8)".
Subsec. (e)(7). Pub. L. 100-647, Sec. 1011A(b)(9)(A), struck out
par. (7) which related to special rules for plans where
substantially all contributions are employee contributions.
Subsec. (e)(8)(A). Pub. L. 100-647, Sec. 1011A(b)(9)(C), struck
out "(other than paragraph (7))" after "this subsection".
Subsec. (e)(9). Pub. L. 100-647, Sec. 1011A(b)(2)(B), struck out
par. (9) which related to treatment of employee contributions as
separate contract.
Subsec. (e)(10). Pub. L. 100-647, Sec. 5012(a)(1), added par.
(10).
Subsec. (e)(11). Pub. L. 100-647, Sec. 5012(d)(2), added par.
(11).
Subsec. (f). Pub. L. 100-647, Sec. 1011A(b)(1)(A), struck out
"for purposes of subsections (d)(1) and (e)(7), the consideration
for the contract contributed by the employee," after "contract," in
introductory provisions.
Subsec. (n). Pub. L. 100-647, Sec. 1011A(b)(1)(B), substituted
"Subsection (b)" for "Subsections (b) and (d)".
Subsec. (o)(2). Pub. L. 100-647, Sec. 1011A(c)(8), struck out
par. (2) which related to additional tax if amount received before
age 59 1/2 .
Subsec. (p)(3)(A). Pub. L. 100-647, Sec. 1011A(h)(1), inserted
"to which paragraph (1) does not apply by reason of paragraph (2)
during the period" after "loan".
Subsec. (p)(3)(B). Pub. L. 100-647, Sec. 1011A(h)(2), substituted
"Period" for "Loans" in heading and amended text generally. Prior
to amendment, text read as follows: "For purposes of subparagraph
(A), a loan is described in this subparagraph -
"(i) if paragraph (1) does not apply to such loan by reason of
paragraph (2), and
"(ii) if -
"(I) such loan is made to a key employee (as defined in
section 416(i)), or
"(II) such loan is secured by amounts attributable to
elective 401(k) or 403(b) deferrals (as defined in section
402(g)(3))."
Subsec. (q)(2)(B). Pub. L. 100-647, Sec. 1018(t)(1)(B),
substituted "subsection (s)(6)(B))" for "subsection (s)(6)(B)))".
Subsec. (q)(2)(D). Pub. L. 100-647, Sec. 1011A(c)(7), inserted
"designated" before "beneficiary".
Pub. L. 100-647, Secs. 1011A(c)(4), 1018(u)(8), amended subpar.
(D) identically, substituting a comma for period at end.
Subsec. (q)(2)(E). Pub. L. 100-647, Sec. 1011A(b)(9)(D), struck
out "(determined without regard to subsection (e)(7))" after
"subsection (e)(5)(D)".
Subsec. (q)(2)(G). Pub. L. 100-647, Sec. 1011A(c)(4), substituted
a comma for period at end.
Subsec. (q)(2)(H). Pub. L. 100-647, Sec. 1011A(c)(6), added
subpar. (H).
Subsec. (q)(3)(B). Pub. L. 100-647, Sec. 1011A(c)(5), substituted
"taxpayer" for "employee" in cls. (i) and (ii).
Subsec. (s)(5). Pub. L. 100-647, Sec. 1018(k)(2), substituted
"certain annuity contracts" for "annuity contracts which are part
of qualified plans" in heading.
Subsec. (s)(5)(D). Pub. L. 100-647, Sec. 1018(k)(1), added
subpar. (D).
Subsec. (s)(7). Pub. L. 100-647, Sec. 1018(t)(1)(A), substituted
"primary annuitant" for "primary annuity".
Subsec. (t)(2)(A)(iv). Pub. L. 100-647, Sec. 1011A(c)(7),
inserted "designated" before "beneficiary".
Subsec. (t)(2)(A)(v). Pub. L. 100-647, Sec. 1011A(c)(1), struck
out "on account of early retirement under the plan" after
"separation from service".
Subsec. (t)(2)(C). Pub. L. 100-647, Sec. 1011A(c)(2), substituted
"Exceptions for distributions from employee stock ownership plans"
for "Certain plans" in heading and amended text generally. Prior to
amendment, text read as follows:
"(i) In general. - Except as provided in clause (ii), any
distribution made before January 1, 1990, to an employee from an
employee stock ownership plan defined in section 4975(e)(7) to the
extent that, on average, a majority of assets in the plan have been
invested in employer securities (as defined in section 409(l)) for
the 5-plan-year period preceding the plan year in which the
distribution is made.
"(ii) Benefits distributed must be invested in employer
securities for 5 years. - Clause (i) shall not apply to any
distribution which is attributable to assets which have not been
invested in employer securities at all times during the period
referred to in clause (i)."
Subsec. (t)(3)(A). Pub. L. 100-647, Sec. 1011A(c)(3), substituted
"(C), and (D)" for "and (C)".
Subsec. (u)(1)(A). Pub. L. 100-647, Sec. 1011A(i)(1), inserted
"(other than subchapter L)" after "subtitle".
Subsec. (u)(3)(D). Pub. L. 100-647, Sec. 1011A(i)(3), substituted
"is purchased" for "which is purchased" and "is held" for "which is
held".
Pub. L. 100-647, Sec. 1011A(i)(2), substituted "until all amounts
under such contract are distributed to the employee for whom such
contract was purchased or the employee's beneficiary" for "until
such time as the employee separates from service".
Subsec. (u)(3)(E). Pub. L. 100-647, Sec. 1011A(i)(3), substituted
"is" for "which is".
Subsec. (u)(4)(C). Pub. L. 100-647, Sec. 1011A(i)(4), added
subpar. (C).
Subsecs. (v), (w). Pub. L. 100-647, Sec. 5012(b)(1), added
subsec. (v) and redesignated former subsec. (v) as (w).
1986 - Subsec. (b). Pub. L. 99-514, Sec. 1122(c)(2), amended
subsec. (b) generally. Prior to amendment, subsec. (b) read as
follows: "Gross income does not include that part of any amount
received as an annuity under an annuity, endowment, or life
insurance contract which bears the same ratio to such amount as the
investment in the contract (as of the annuity starting date) bears
to the expected return under the contract (as of such date). This
subsection shall not apply to any amount to which subsection (d)(1)
(relating to certain employee annuities) applies."
Subsec. (d). Pub. L. 99-514, Sec. 1122(c)(1), struck out subsec.
(d) which related to employee's annuities where the employee's
contributions were recoverable in 3 years.
Subsec. (e)(4)(C). Pub. L. 99-514, Sec. 1826(b)(3), added subpar.
(C).
Subsec. (e)(5)(D). Pub. L. 99-514, Sec. 1122(c)(3)(B),
substituted "paragraphs (7) and (8)" for "paragraph (7)" in
introductory provisions.
Pub. L. 99-514, Sec. 1854(b)(1), inserted closing provisions
which read as follows: "Any dividend described in section 404(k)
which is received by a participant or beneficiary shall, for
purposes of this subparagraph, be treated as paid under a separate
contract to which clause (ii)(I) applies."
Subsec. (e)(7)(B). Pub. L. 99-514, Sec. 1852(c)(1), in
introductory provisions substituted "any plan or contract" for "any
trust or contract", in cl. (ii) substituted "85 percent or more of"
for "85 percent of", and inserted closing provision: "For purposes
of clause (ii), deductible employee contributions (as defined in
subsection (o)(5)(A)) shall not be taken into account."
Subsec. (e)(8), (9). Pub. L. 99-514, Sec. 1122(c)(3)(A), added
pars. (8) and (9).
Subsec. (f). Pub. L. 99-514, Sec. 1852(c)(3), in introductory
provisions, substituted "subsections (d)(1) and (e)(7)" for
"subsection (d)(1)" and "subsection (e)(6)" for "subsection
(e)(1)(B)".
Subsec. (m)(2)(B). Pub. L. 99-514, Sec. 1852(c)(4)(A), inserted
"and subsection (e)(7) (relating to plans where substantially all
contributions are employee contributions)".
Subsec. (m)(2)(C). Pub. L. 99-514, Sec. 1852(c)(4)(B),
substituted "subsection (e)(6)" for "subsection (e)(1)(B)".
Subsec. (m)(5). Pub. L. 99-514, Sec. 1852(a)(2)(C), which
directed that par. (5) be amended by substituting "5-percent
owners" for "owner-employees" in heading, was executed by
substituting "5-percent owners" for "key employees", to reflect the
probable intent of Congress and intervening amendment by section
713(c)(1)(B) of Pub. L. 98-369.
Subsec. (m)(5)(A). Pub. L. 99-514, Sec. 1123(d)(1), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "This subparagraph shall apply -
"(i) to amounts which -
"(I) are received from a qualified trust described in section
401(a) or under a plan described in section 403(a), and
"(II) are received by a 5-percent owner before such owner
attains the age of 59 1/2 years, for any reason other than
such owner becoming disabled (within the meaning of paragraph
(7) of this section), and
"(ii) to amounts which are received from a qualified trust
described in section 401(a) or under a plan described in section
403(a) at any time by a 5-percent owner, or by the successor of
such owner, but only to the extent that such amounts are
determined (under regulations prescribed by the Secretary) to
exceed the benefits provided for such individual under the plan
formula.
Clause (i) shall not apply to any amount received by an individual
in his capacity as a policyholder of an annuity, endowment, or life
insurance contract which is in the nature of a dividend or similar
distribution and clause (i) shall not apply to amounts attributable
to benefits accrued before January 1, 1985."
Pub. L. 99-514, Sec. 1852(a)(2)(A), amended subpar. (A)
generally. Prior to amendment, subpar. (A) read as follows: "This
paragraph shall apply -
"(i) to amounts (other than any amount received by an
individual in his capacity as a policyholder of an annuity,
endowment, or life insurance contract which is in the nature of a
dividend or similar distribution) which are received from a
qualified trust described in section 401(a) or under a plan
described in section 403(a) and which are received by an
individual, who is, or has been, a 5-percent owner, before such
individual attains the age of 59 1/2 years, for any reason other
than the individual's becoming disabled (within the meaning of
paragraph (7) of this subsection), but only to the extent that
such amounts are attributable to contributions paid on behalf of
such individual (other than contributions made by him as a
5-percent owner) while he was a 5-percent owner, and
"(ii) to amounts which are received from a qualified trust
described in section 401(a) or under a plan described in section
403(a) at any time by an individual who is, or has been, a
5-percent owner or by the successor of such individual, but only
to the extent that such amounts are determined, under regulations
prescribed by the Secretary, to exceed the benefits provided for
such individual under the plan formula."
Subsec. (m)(5)(C). Pub. L. 99-514, Sec. 1852(a)(2)(B), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "For purposes of this paragraph, the term '5 percent
owner' have the same meanings as when used in section 416."
Subsec. (m)(10). Pub. L. 99-514, Sec. 1898(c)(1)(B), inserted
"who is the spouse or former spouse of the participant".
Subsec. (o)(5). Pub. L. 99-514, Sec. 1101(b)(2)(C), inserted "and
made for a taxable year beginning before January 1, 1987," in
subpar. (A), substituted "subsection (p)(3)(A)(i)" for "section
219(e)(3)" in subpar. (C), and substituted "subsection (p)(3)(B)"
for "section 219(e)(4)" in subpar. (D).
Subsec. (p)(2)(A)(i). Pub. L. 99-514, Sec. 1134(a), amended cl.
(i) generally. Prior to amendment, cl. (i) read as follows:
"$50,000, or".
Subsec. (p)(2)(B)(ii). Pub. L. 99-514, Sec. 1134(d), amended cl.
(ii) generally. Prior to amendment, cl. (ii) read as follows:
"Clause (i) shall not apply to any loan used to acquire, construct,
reconstruct, or substantially rehabilitate any dwelling unit which
within a reasonable time is to be used (determined at the time the
loan is made) as a principal residence of the participant or a
member of the family (within the meaning of section 267(c)(4)) of
the participant."
Subsec. (p)(2)(C), (D). Pub. L. 99-514, Sec. 1134(b), added
subpar. (C) and redesignated former subpar. (C) as (D).
Subsec. (p)(3). Pub. L. 99-514, Sec. 1134(c), added par. (3) and
redesignated former par. (3) as (4).
Pub. L. 99-514, Sec. 1101(b)(2)(B), amended par. (3) generally.
Prior to amendment, par. (3) read as follows: "For purposes of this
subsection, the term 'qualified employer plan' means any plan which
was (or was determined to be) a qualified employer plan (as defined
in section 219(e)(3) other than a plan described in subsection
(e)(7)). For purposes of this subsection, such term includes any
government plan (as defined in section 219(e)(4))."
Subsec. (p)(4), (5). Pub. L. 99-514, Sec. 1134(c), redesignated
former pars. (3) and (4) as (4) and 5, respectively.
Subsec. (q). Pub. L. 99-514, Sec. 1123(b)(1)(B), substituted
"10-percent" for "5-percent" in heading.
Subsec. (q)(1). Pub. L. 99-514, Sec. 1123(b)(1)(A), substituted
"10 percent" for "5 percent".
Subsec. (q)(2). Pub. L. 99-514, Sec. 1123(b)(3), substituted
"Paragraph (1)" for "This subsection" in introductory provisions.
Subsec. (q)(2)(B). Pub. L. 99-514, Sec. 1826(c), amended subpar.
(B) generally. Prior to amendment, subpar. (B) read as follows:
"made to a beneficiary (or to the estate of an annuitant) on or
after the death of an annuitant,".
Subsec. (q)(2)(D). Pub. L. 99-514, Sec. 1123(b)(2), amended
subpar. (D) generally. Prior to amendment, subpar. (D) read as
follows: "which is one of a series of substantially equal periodic
payments made for the life of a taxpayer or over a period extending
for at least 60 months after the annuity starting date,".
Subsec. (q)(2)(E). Pub. L. 99-514, Sec. 1852(c)(2), inserted
"(determined without regard to subsection (e)(7))".
Subsec. (q)(2)(G). Pub. L. 99-514, Sec. 1826(d), added subpar.
(G).
Subsec. (q)(2)(I), (J). Pub. L. 99-514, Sec. 1123(b)(4), which
added subpars. (I) and (J) directed the amendment of subpar. (G) by
striking out "or" at the end thereof, and of subpar. (H) by
striking out the period at the end thereof, could not be executed
to subpars. (G) and (H) because subpar. (G) does not contain "or",
and no subpar. (H) was enacted.
Subsec. (q)(3). Pub. L. 99-514, Sec. 1123(b)(3), added par. (3).
Subsec. (s)(1). Pub. L. 99-514, Sec. 1826(b)(2), substituted "any
holder of such contract" for "the holder of such contract" in
subpars. (A) and (B).
Subsec. (s)(5). Pub. L. 99-514, Sec. 1826(a), added par. (5).
Subsec. (s)(6), (7). Pub. L. 99-514, Sec. 1826(b)(1), added pars.
(6) and (7).
Subsec. (t). Pub. L. 99-514, Sec. 1123(a), added subsec. (t) and
redesignated former subsec. (t) as (u).
Subsecs. (u), (v). Pub. L. 99-514, Sec. 1135(a), added subsec.
(u) and redesignated former subsec. (u) as (v).
1984 - Subsec. (e)(5)(D). Pub. L. 98-369, Sec. 523(b)(1),
substituted "Except as provided in paragraph (7), this" for "This".
Subsec. (e)(5)(D)(ii)(IV). Pub. L. 98-369, Sec. 211(b)(1), which
directed substitution of "section 818(a)(3)" for "805(d)(3)" in
subpar. (D)(i)(IV), was executed to subpar. (D)(ii)(IV) to reflect
the probable intent of Congress.
Subsec. (e)(7). Pub. L. 98-369, Sec. 523(a), added par. (7).
Subsec. (k). Pub. L. 98-369, Sec. 421(b)(1), repealed subsec. (k)
relating to payments in discharge of alimony.
Subsec. (m)(5). Pub. L. 98-369, Sec. 713(c)(1)(B), substituted
"key employees" for "owner-employees" in heading.
Subsec. (m)(5)(A). Pub. L. 98-369, Sec. 521(d)(1), (2),
substituted "5-percent owner" for "key employee" wherever appearing
and struck out "in a top-heavy plan" at end of cl. (i).
Pub. L. 98-369, Sec. 713(c)(1)(A), substituted "as a key
employee" for "as an owner-employee" in cl. (i).
Subsec. (m)(5)(C). Pub. L. 98-369, Sec. 521(d)(3), substituted
"the term '5 percent owner' " for "the terms 'key employee' and
'top-heavy plan' ".
Subsec. (m)(9). Pub. L. 98-369, Sec. 713(d)(1), repealed par. (9)
relating to return of excess contributions before due date of
return.
Subsec. (m)(10). Pub. L. 98-397 added par. (10).
Subsec. (o)(1). Pub. L. 98-369, Sec. 491(d)(3), substituted "402
and 403" for "402, 403, and 405".
Subsec. (o)(3)(A). Pub. L. 98-369, Sec. 713(b)(1)(A), inserted
"(other than the exception contained in paragraph (2) thereof)".
Subsec. (o)(4). Pub. L. 98-369, Sec. 491(d)(4), substituted "and
408(d)(3)" for "408(d)(3), and 409(b)(3)(C)".
Subsec. (p)(2)(A). Pub. L. 98-369, Sec. 713(b)(1)(B), inserted at
end "For purposes of clause (ii), the present value of the
nonforfeitable accrued benefit shall be determined without regard
to any accumulated deductible employee contributions (as defined in
subsection (o)(5)(B))."
Subsec. (p)(2)(A)(ii). Pub. L. 98-369, Sec. 713(b)(4),
substituted as cl. (ii) "the greater of (I) one-half of the present
value of the nonforfeitable accrued benefit of the employee under
the plan, or (II) $10,000" for " 1/2 of the present value of the
nonforfeitable accrued benefit of the employee under the plan (but
not less than $10,000)".
Subsec. (p)(3). Pub. L. 98-369, Sec. 523(b)(2), inserted "other
than a plan described in subsection (e)(7)".
Subsec. (q)(1). Pub. L. 98-369, Sec. 222(a), amended par. (1)
generally, striking out designation "(A) In general. - " preceding
text, substituting "which is includible in gross income" for
"includible in gross income which is properly allocable to any
investment in the annuity contract made during the 10-year period
ending on the date such amount was received by the taxpayer", and
striking out former subpar. (B), which had provided that for
purposes of subpar. (A), the amount includible in gross income
would be allocated to the earliest investment in the contract with
respect to which amounts had not been previously fully allocated
under this par.
Subsecs. (s), (t). Pub. L. 98-369, Sec. 222(b), added subsec. (s)
and redesignated former subsec. (s) as (t).
1983 - Subsec. (o)(2)(A). Pub. L. 97-448, Sec. 103(c)(6), struck
out "to which the employee made one or more deductible employee
contributions" after "from a qualified employer plan or government
plan".
Subsec. (p)(3). Pub. L. 97-448, Sec. 103(c)(3)(B)(i), struck out
"without regard to subparagraph (D) thereof" after "as defined in
section 219(e)(3)".
Subsecs. (r), (s). Pub. L. 98-76 added subsec. (r) and
redesignated former subsec. (r) as (s).
1982 - Subsec. (e). Pub. L. 97-248, Sec. 265(a), in par. (1)
substituted provisions relating to the application of this
subsection to amounts received under annuity, endowment, or life
insurance contracts which are not received as annuities and to
amounts received as dividends for provisions which stated a general
rule relating to the includability as gross income of amounts that
were received under annuity, endowment, or life insurance contracts
which were not received as annuities and also stated that for the
purposes of this section amounts which were received as dividends
would be treated as amounts not received as an annuity, in par. (2)
substituted provisions stating a general rule as to the
includability as gross income of amounts received before or after
the annuity starting date for provisions which set out those
amounts which would be treated as amounts not received as an
annuity, and added pars. (3) to (6).
Subsec. (m)(4). Pub. L. 97-248, Sec. 236(b)(1), struck out par.
(4) which related to amounts constructively received with respect
to assignments or pledges, and loans on contracts.
Subsec. (m)(5). Pub. L. 97-248, Sec. 237(d)(1), (2), in subpar.
(A) substituted applicability to key employees for applicability to
owner-employees and added subpar. (C).
Subsec. (m)(6). Pub. L. 97-248, Sec. 237(d)(3), struck out
"except in applying paragraph (5)," after "shall".
Subsec. (m)(8). Pub. L. 97-248, Sec. 236(b)(1), struck out par.
(8) which related to loans to owner-employees.
Subsec. (o)(3)(A). Pub. L. 97-248, Sec. 236(b)(2), substituted
reference to subsec. (p) of this section for references to subsec.
(m)(4) and (8) of this section.
Subsec. (p). Pub. L. 97-248, Sec. 236(a), added subsec. (p).
Former subsec. (p) redesignated (q).
Subsec. (q). Pub. L. 97-248, Sec. 265(b)(1), added subsec. (q).
Former subsec. (q) redesignated (r).
Pub. L. 97-248, Sec. 236(a), redesignated former subsec. (p) as
(q).
Subsec. (r). Pub. L. 97-248, Secs. 236(a), 265(b)(1),
redesignated former subsec. (p) as (r).
1981 - Subsec. (m)(6). Pub. L. 97-34, Sec. 312(d)(1), expanded
definition of "owner-employee" to include an employee within the
meaning of section 401(c)(1) except in applying paragraph (5).
Subsec. (m)(8). Pub. L. 97-34, Sec. 312(d)(2), added par. (8).
Subsec. (m)(9). Pub. L. 97-34, Sec. 312(e)(1), added par. (9).
Subsecs. (o), (p). Pub. L. 97-34, Sec. 311(b)(1), added subsec.
(o) and redesignated former subsec. (o) as (p).
1976 - Subsec. (c)(2), (3)(A). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (d)(1). Pub. L. 94-455, Sec. 1901(a)(12), struck out in
subpar. (B) "(whether or not before January 1, 1954)" after
"beginning on the date", and in provisions following subpar. (B)
struck out "(under this paragraph and prior income tax laws)" after
"until there has been so excluded".
Subsec. (f). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or
his delegate" after "Secretary".
Subsec. (i). Pub. L. 94-455, Sec. 1951(b)(1)(A), struck out
subsec. (i) which related to joint annuities where first annuitant
died in 1951, 1952, or 1953.
Subsec. (m)(2), (3). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (m)(4)(A). Pub. L. 94-455, Sec. 1901(a)(13), substituted
"an individual retirement account" for "an individual retirement
amount".
Subsec. (m)(5)(A)(ii), (7). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
1974 - Subsec. (m)(1). Pub. L. 93-406, Sec. 2001(h)(2), struck
out par. (1) which related to certain amounts received before
annuity starting date.
Subsec. (m)(4)(A). Pub. L. 93-406, Sec. 2002(g)(10)(A), inserted
references to an individual retirement amount described in section
408(a) and an individual retirement annuity described in section
408(b).
Subsec. (m)(5)(A). Pub. L. 93-406, Sec. 2001(e)(5), (h)(3),
substituted "(other than contributions made by him as an
owner-employee)" for "(whether or not paid by him)" in cl. (i), and
struck out cl. (iii) which had made reference to amounts which were
received, by an individual who was or had been, an owner-employee,
by reason of the distribution under the provisions of section
401(e)(2)(E) of his entire interest in all qualified trusts
described in section 401(a) and in all plans described in section
403(a).
Subsec. (m)(5)(B). Pub. L. 93-406, Sec. 2001(g)(1), substituted
provisions that if a person receives an amount to which subsec.
(m)(5) applies, his tax under this chapter for the taxable year in
which such amount is received shall be increased by an amount equal
to 10 percent of the portion of the amount so received which is
includible in his gross income for such taxable year for provisions
that if the aggregate amounts to which subsec. (m)(5) applied
received by any person in his taxable year equalled or exceeded
$2,500, the increase in his tax for the taxable year in which such
amounts were received and attributable to such amounts could not be
less than 110 percent of the aggregate increase in taxes, for the
taxable year and the 4 immediately preceding taxable years, which
would have resulted if such amounts had been included in such
person's gross income ratably over such taxable years, with
provision for alternate computation if deductions had been allowed
under section 404 for contributions paid for a number of prior
taxable years less than 4.
Subsec. (m)(5)(C) to (E). Pub. L. 93-406, Sec. 2001(g)(2)(A),
struck out subpars. (C) to (E) which contained special rules for
the application of subsec. (m)(5).
Subsec. (m)(6). Pub. L. 93-406, Sec. 2002(g)(10)(B), inserted
reference to an individual for whose benefit an individual
retirement account or annuity described in section 408(a) or (b) is
maintained.
Subsec. (n). Pub. L. 93-406, Secs. 2005(c)(3), 2007(b)(2),
redesignated former subsec. (o) as (n) and in heading of subsec.
(n) as so redesignated inserted reference to survivor benefit plan.
Former subsec. (n), which set out provisions covering the treatment
to be accorded total distributions, was struck out.
Subsec. (o). Pub. L. 93-406, Sec. 2005(c)(3), redesignated former
subsec. (p) as (o). Former subsec. (o) redesignated (n) and
amended.
Subsec. (p). Pub. L. 93-406, Sec. 2005(c)(3), redesignated
subsec. (p) as (o).
1969 - Subsec. (n)(1). Pub. L. 91-172, Sec. 515(b)(1), altered
section to accommodate the insertion into sections 402 and 403 of
provisions under which employer contributions to qualified pension,
profit sharing, stock bonus, and annuity plans for plan years
beginning after 1969 are to be treated as ordinary income when
received in a lump sum distribution, but with such amounts to be
eligible for a special averaging procedure.
Subsec. (n)(4). Pub. L. 91-172, Sec. 515(b)(2), added par. (4).
1966 - Subsecs. (o), (p). Pub. L. 89-365 added subsec. (o) and
redesignated former subsec. (o) as (p).
1965 - Subsec. (m)(5)(A)(i). Pub. L. 89-97, Sec. 106(d)(2)(A),
substituted "paragraph (7) of this subsection" for "section
213(g)(3)".
Subsec. (m)(7). Pub. L. 89-97, Sec. 106(d)(2)(B), added par. (7).
Subsec. (n)(1). Pub. L. 89-97, Sec. 106(d)(2)(C), substituted in
subpars. (A)(iii) and (B)(iii) "subsection (m)(7)" for "section
213(g)(3)".
Subsec. (n)(3). Pub. L. 89-44 substituted "sections 31 and 39"
for "section 31" in sentence following subpar. (B).
1964 - Subsec. (e)(3). Pub. L. 88-272 struck out par. (3) which
provided for a limit on the tax attributable to the receipt of a
lump sum.
1962 - Subsec. (d)(2). Pub. L. 87-792, Sec. 4(a), designated
existing provisions as cl. (A) and added cl. (B).
Subsec. (f). Pub. L. 87-834 inserted sentence providing that par.
(2) shall not apply to amounts which were contributed by the
employer after Dec. 31, 1962, and which would not have been
includible in the gross income of the employee by reason of the
application of Section 911 if such amounts had been paid directly
to the employee at the time of contribution, and making such
sentence inapplicable to amounts which were contributed by the
employer, as determined under regulations, to provide pension or
annuity credits, to the extent such credits are attributable to
services performed before Jan. 1, 1963, and are provided pursuant
to pension or annuity plan provisions in existence on Mar. 12,
1962, and on that date applicable to such services.
Subsecs. (m) to (o). Pub. L. 87-792, Sec. 4(b), added subsecs.
(m) and (n) and redesignated former subsec. (m) as (o).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-90 applicable to calendar years
beginning after Dec. 31, 2001, see section 204(f) of Pub. L.
107-90, set out as a note under section 24 of this title.
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Pub. L. 107-16, title IV, Sec. 402(h), June 7, 2001, 115 Stat.
63, provided that: "The amendments made by this section [amending
this section and sections 135, 221, 529, 530, 4973, and 6693 of
this title] shall apply to taxable years beginning after December
31, 2001."
Pub. L. 107-16, title VI, Sec. 632(a)(4), June 7, 2001, 115 Stat.
115, provided that: "The amendments made by this subsection
[amending this section and sections 402, 403, 404, 415, and 664 of
this title] shall apply to years beginning after December 31,
2001."
Amendment by section 641(a)(2)(C), (e)(1) of Pub. L. 107-16
applicable to distributions after Dec. 31, 2001, see section
641(f)(1) of Pub. L. 107-16, set out as a note under section 402 of
this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-206, title III, Sec. 3436(b), July 22, 1998, 112
Stat. 761, provided that: "The amendments made by this section
[amending this section] shall apply to distributions after December
31, 1999."
Amendment by section 6023(3), (4) of Pub. L. 105-206 effective
July 22, 1998, see section 6023(32) of Pub. L. 105-206, set out as
a note under section 34 of this title.
Amendment by sections 6004(d)(3)(B) and 6005(c)(1) of Pub. L.
105-206 effective, except as otherwise provided, as if included in
the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34,
to which such amendment relates, see section 6024 of Pub. L.
105-206, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 203(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to
distributions after December 31, 1997, with respect to expenses
paid after such date (in taxable years ending after such date), for
education furnished in academic periods beginning after such date."
Section 303(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to
payments and distributions in taxable years beginning after
December 31, 1997."
Section 1075(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply with
respect to annuity starting dates beginning after December 31,
1997."
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 361(d) of Pub. L. 104-191 provided that: "The amendments
made by this section [amending this section] shall apply to
distributions after December 31, 1996."
Section 1403(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply in cases
where the annuity starting date is after the 90th day after the
date of the enactment of this Act [Aug. 20, 1996]."
Section 1421(e) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section, sections 219, 280G,
402, 404, 408, 414, 416, 457, 3121, 3306, 3401, 4972, and 6693 of
this title, sections 1021 and 1104 of Title 29, Labor, and section
409 of Title 42, The Public Health and Welfare] shall apply to
taxable years beginning after December 31, 1996."
Section 1463(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1996."
Section 1704(l)(2) of Pub. L. 104-188 provided that: "The
amendment made by paragraph (1) [amending this section] shall take
effect as if included in the amendments made by section 1122(c) of
the Tax Reform Act of 1986 [Pub. L. 99-514]."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011A(b)(1)(A), (B), (2), (9), (c)(1)-(8),
(h), (i), and 1018(k), (t)(1)(A), (B), and (u)(8) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 5012(a), (b)(1), (d) of Pub. L. 100-647
applicable to contracts entered into on or after June 21, 1988,
with special rule where death benefit increases by more than
$150,000, certain other material changes taken into account,
certain exchanges permitted, and special rule in the case of
annuity contracts, see section 5012(e) of Pub. L. 100-647, set out
as an Effective Date note under section 7702A of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1101(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and section 219 of this
title] shall apply to contributions for taxable years beginning
after December 31, 1986."
Amendment by section 1122(c)(1) of Pub. L. 99-514 applicable to
individuals whose annuity starting date is after July 1, 1986,
amendment by section 1122(c)(2) of Pub. L. 99-514 applicable to
individuals whose annuity starting date is after Dec. 31, 1986, and
amendment by section 1122(c)(3) of Pub. L. 99-514 applicable to
amounts received after July 1, 1986, in the case of any plan not
described in section 72(e)(8)(D) of this title, see section
1122(h)(2) of Pub. L. 99-514, set out as a note under section 402
of this title.
Section 1123(e) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(c)(11), (12), Nov. 10, 1988, 102 Stat. 3476,
provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 403 and 408 of this title] shall apply to
taxable years beginning after December 31, 1986.
"(2) Subsection (c). - The amendments made by subsection (c)
[amending section 403 of this title] shall apply to years beginning
after December 31, 1988, but only with respect to distributions
from contracts described in section 403(b) of the Internal Revenue
Code of 1986 which are attributable to assets other than assets
held as of the close of the last year beginning before January 1,
1989.
"(3) Exception where distribution commences. - The amendments
made by this section shall not apply to distributions to any
employee from a plan maintained by any employer if -
"(A) as of March 1, 1986, the employee separated from service
with the employer,
"(B) as of March 1, 1986, the accrued benefit of the employee
was in pay status pursuant to a written election providing a
specific schedule for the distribution of the entire accrued
benefit of the employee, and
"(C) such distribution is made pursuant to such written
election.
"(4) Transition rule. - The amendments made by this section shall
not apply with respect to any benefits with respect to which a
designation is in effect under section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act of 1982 [section 242(b)(2) of Pub. L.
97-248, formerly set out as an Effective Date of 1982 Amendment
note under section 401 of this title].
"(5) Special rule for distributions under an annuity contract. -
The amendments made by paragraphs (1), (2), and (3) of subsection
(b) [amending this section] shall not apply to any distribution
under an annuity contract if -
"(A) as of March 1, 1986, payments were being made under such
contract pursuant to a written election providing a specific
schedule for the distribution of the taxpayer's interest in such
contract, and
"(B) such distribution is made pursuant to such written
election."
Section 1134(e) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to loans
made, renewed, renegotiated, modified, or extended after December
31, 1986."
Section 1135(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
contributions to annuity contracts after February 28, 1986."
Amendment by sections 1826(a), (d), 1852(a)(2), (c)(1)-(4), and
1854(b)(1) of Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
Section 1826(b)(4) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to contracts issued after the date which is 6 months after
the date of the enactment of this Act [Oct. 22, 1986] in taxable
years ending after such date."
Section 1826(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1018(t)(1)(D), Nov. 10, 1988, 102 Stat. 3587,
provided that the amendment made by section 1826(c) of Pub. L.
99-514 is effective with respect to distributions commencing after
the date 6 months after Oct. 22, 1986.
Section 1854(b)(6) of Pub. L. 99-514 provided that: "The
amendments made by paragraphs (1) and (2) [amending this section
and section 404 of this title] shall not apply to dividends paid
before January 1, 1986, if the taxpayer treated such dividends in a
manner inconsistent with such amendments on a return filed with the
Secretary before the date of the enactment of this Act [Oct. 22,
1986]."
Section 1898(c)(1)(C) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section and
section 402 of this title] shall apply to payments made after the
date of the enactment of this Act [Oct. 22, 1986]."
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by Pub. L. 98-397 effective Jan. 1, 1985, except as
otherwise provided, see section 303(d) of Pub. L. 98-397, set out
as a note under section 1001 of Title 29, Labor.
Amendment by section 211(b)(1) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
Section 222(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to contracts issued after the day which
is 6 months after the date of the enactment of this Act [July 18,
1984] in taxable years ending after such date.
"(2) Transitional rules for contracts issued before effective
date. - In the case of any contract (other than a single premium
contract) which is issued on or before the day which is 6 months
after the date of the enactment of this Act, for purposes of
section 72(q)(1)(A) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as in effect on the day before the date of the
enactment of this Act), any investment in such contract which is
made during any calendar year shall be treated as having been made
on January 1 of such calendar year."
Amendment by section 421(b)(1) of Pub. L. 98-369 applicable to
transfers after July 18, 1984, in taxable years ending after such
date, subject to election to have repeal apply to transfers after
1983 or to transfers pursuant to existing decrees, see section
421(d) of Pub. L. 98-369, set out as an Effective Date note under
section 1041 of this title.
Amendment by section 491(d)(3), (4) of Pub. L. 98-369 applicable
to obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 521(d) of Pub. L. 98-369 applicable to years
beginning after Dec. 31, 1984, see section 521(e) of Pub. L.
98-369, set out as a note under section 401 of this title.
Section 523(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section] shall apply to any
amount received or loan made after the 90th day after the date of
enactment of this Act [July 18, 1984]."
Amendment by section 713(b)(1), (4), (c)(1)(A), (B) of Pub. L.
98-369 effective as if included in the provision of the Tax Equity
and Fiscal Responsibility Act of 1982, Pub. L. 97-248, to which
such amendment relates, see section 715 of Pub. L. 98-369, set out
as a note under section 31 of this title.
Section 713(d)(1) of Pub. L. 98-369, as amended by Pub. L.
99-514, title XVIII, Sec. 1875(c)(5), Oct. 22, 1986, 100 Stat.
2895, provided that the amendment made by section 713(d)(1) of Pub.
L. 98-369 is effective with respect to contributions made in
taxable years beginning after Dec. 31, 1983.
EFFECTIVE DATE OF 1983 AMENDMENTS
Section 227(b) of Pub. L. 98-76, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by section 224 [enacting section 6050G of this
title, amending this section and section 86 of this title, and
enacting provisions set out as a note under section 231n of Title
45, Railroads] shall apply to benefits received after December 31,
1983, in taxable years ending after such date.
"(2) Treatment of certain lump-sum payments received after
december 31, 1983. - The amendments made by section 224 shall not
apply to any portion of a lump-sum payment received after December
31, 1983, if the generally applicable payment date for such portion
was before January 1, 1984.
"(3) No fresh start. - For purposes of determining whether any
benefit received after December 31, 1983, is includible in gross
income by reason of section 72(r) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954], as added by this Act, the amendments
made by section 224 be treated as having been in effect during all
periods before 1984."
Section 103(c)(3)(B)(ii) of Pub. L. 97-448 provided that: "The
amendment made by clause (i) [amending this section] shall take
effect as if the matter struck out had never been included in such
paragraph."
Amendment by title I of Pub. L. 97-448 effective, except as
otherwise provided, as if it had been included in the provision of
the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 236(c) of Pub. L. 97-248, as amended by Pub. L. 97-448,
title III, Sec. 306(a)(11), Jan. 12, 1983, 96 Stat. 2404; Pub. L.
98-369, div. A, title V, Sec. 554, title VII, Sec. 713(b)(2), July
18, 1984, 98 Stat. 897, 957; Pub. L. 99-514, Sec. 2, Oct. 22, 1986,
100 Stat. 2095, provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to loans, assignments, and pledges made
after August 13, 1982. For purposes of the preceding sentence, the
outstanding balance of any loan which is renegotiated, extended,
renewed, or revised after such date shall be treated as an amount
received as a loan on the date of such renegotiation, extension,
renewal, or revision.
"(2) Exception for certain loans used to repay outstanding
obligations. -
"(A) In general. - Any qualified refunding loan shall not be
treated as a distribution by reason of the amendments made by
this section to the extent such loan is repaid before August 14,
1983.
"(B) Qualified refunding loan. - For purposes of subparagraph
(A), the term 'qualified refunding loan' means any loan made
after August 13, 1982, and before August 14, 1983, to the extent
such loan is used to make a required principal payment.
"(C) Required principal payment. - For purposes of subparagraph
(B), the term 'required principal payment' means any principal
repayment on a loan made under the plan which was outstanding on
August 13, 1982, if such repayment is required to be made after
August 13, 1982, and before August 14, 1983 or if such loan was
payable on demand.
"(D) Special rule for non-key employees. - In the case of a
non-key employee (within the meaning of section 416(i)(2) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954]), this
paragraph shall be applied by substituting 'January 1, 1985' for
'August 14, 1983' each place it appears.
"(3) Treatment of certain renegotiations. - If -
"(A) the taxpayer after August 13, 1982, and before September
4, 1982, borrows money from a government plan (as defined in
section 219(e)(4) of the Internal Revenue Code of 1986),
"(B) under the applicable State law, such loan requires the
renegotiation of all outstanding prior loans made to the taxpayer
under such plan, and
"(C) the renegotiation described in subparagraph (B) does not
change the interest rate on, or extend the duration of, any such
outstanding prior loan,
then the renegotiation described in subparagraph (B) shall not be
treated as a renegotiation, extension, renewal, or revision for
purposes of paragraph (1). If the renegotiation described in
subparagraph (B) does not meet the requirements of subparagraph (C)
solely because it extends the duration of any such outstanding
prior loan, the requirements of subparagraph (C) shall be treated
as met with respect to such renegotiation if, before April 1, 1983,
such extension is eliminated."
Section 265(c) of Pub. L. 97-248 provided that:
"(1) Subsection (a). - The amendments made by subsection (a)
[amending this section] shall take effect on August 13, 1982.
"(2) Subsection (b). - The amendments made by subsection (b)
[amending this section and sections 46, 50A, 53, 901, 1302, and
1304 of this title] shall apply to distributions after December 31,
1982."
Amendment by section 237(d) of Pub. L. 97-248 applicable to years
beginning after Dec. 31, 1983, see section 241 of Pub. L. 97-248,
set out as an Effective Date note under section 416 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 312(f) of Pub. L. 97-34, as amended by Pub. L. 97-448,
title I, Sec. 103(d)(3), 96 Stat. 2378, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
219, 401, 404, 408, 1379, and 4972 of this title] shall apply to
taxable years beginning after December 31, 1981.
"(2) Transitional rule. - The amendments made by subsection (d)
[amending this section] shall not apply to any loan from a plan to
a self-employed individual who is an employee within the meaning of
section 401(c)(1) which is outstanding on December 31, 1981. For
purposes of the preceding sentence, any loan which is renegotiated,
extended, renewed, or revised after such date shall be treated as a
new loan."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(12), (13) of Pub. L. 94-455
applicable with respect to taxable years beginning after Dec. 31,
1976, see section 1901(d) of Pub. L. 94-455, set out as a note
under section 2 of this title.
Section 1951(d) of Pub. L. 94-455 provided that: "Except as
otherwise expressly provided, the amendments made by this section
[see Tables for classification of section 1951 of Pub. L. 94-455]
shall apply with respect to taxable years beginning after December
31, 1976."
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by section 2001(e)(5) of Pub. L. 93-406 applicable to
contributions made in taxable years beginning after Dec. 31, 1975,
see section 2001(i)(4) of Pub. L. 93-406, set out as a note under
section 401 of this title.
Section 2001(i)(5), (6) of Pub. L. 93-406 provided that:
"(5) The amendments made by subsection (g) [amending this
section and sections 46, 50A, 56, 404, and 901 of this title]
apply to distributions made in taxable years beginning after
December 31, 1975.
"(6) The amendments made by subsection (h) [amending this
section and section 401 of this title] apply to taxable years
ending after the date of enactment of this Act [Sept. 2, 1974]."
Amendment by section 2002(g)(10) of Pub. L. 93-406 effective on
Jan. 1, 1975, see section 2002(i)(2) of Pub. L. 93-406, set out as
an Effective Date note under section 4973 of this title.
Amendment by section 2005(c)(3) of Pub. L. 93-406, applicable
only with respect to distributions or payments made after Dec. 31,
1973, in taxable years beginning after Dec. 31, 1973, see section
2005(d) of Pub. L. 93-406, set out as a note under section 402 of
this title.
Amendment by section 2007(b)(2) of Pub. L. 93-406 applicable to
taxable years ending on or after Sept. 21, 1972, see section
2007(c) of Pub. L. 93-406, set out as a note under section 122 of
this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years ending
after Dec. 31, 1969, see section 515(d) of Pub. L. 91-172, set out
as a note under section 402 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-365 applicable with respect to taxable
years ending after Dec. 31, 1965, see section 1(d) of Pub. L.
89-365, set out as an Effective Date note under section 122 of this
title.
EFFECTIVE DATE OF 1965 AMENDMENTS
Amendment by Pub. L. 89-97 applicable to taxable years beginning
after Dec. 31, 1966, see section 106(e) of Pub. L. 89-97, set out
as a note under section 213 of this title.
Amendment by Pub. L. 89-44 applicable to taxable years beginning
on or after July 1, 1965, see section 809(f) of Pub. L. 89-44, set
out as a note under section 6420 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to taxable years beginning
after Dec. 31, 1963, see section 232(g) of Pub. L. 88-272, set out
as a note under section 5 of this title.
EFFECTIVE DATE OF 1962 AMENDMENTS
Section 11(c)(2) of Pub. L. 87-834 provided that: "The amendment
made by subsection (b) [amending this section] shall apply to
taxable years ending after December 31, 1962."
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Section 1951(b)(1)(B) of Pub. L. 94-455 provided that:
"Notwithstanding subparagraph (A) [repealing subsec. (i) of this
section], if the provisions of section 72(i) applied to amounts
received in taxable years beginning before January 1, 1977, under
an annuity contract, then amounts received under such contract on
or after such date shall be treated as if such provisions were not
repealed."
APPLICABILITY OF SUBSECTION (T)
Section 1011A(c)(13) of Pub. L. 100-647 provided that: "Section
72(t) of the 1986 Code shall apply to any distribution without
regard to whether such distribution is made without the consent of
the participant pursuant to section 411(a)(11) or section 417(e) of
the 1986 Code."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 22, 25B, 26, 67, 79, 101,
122, 135, 138, 220, 221, 223, 264, 401, 402, 402A, 403, 406, 407,
408, 408A, 414, 457, 529, 530, 691, 805, 817, 817A, 953, 1014,
1275, 4973, 4978, 5891, 6050G, 7702, 7702A, 7702B of this title;
title 5 section 8433; title 12 sections 24a, 1813; title 15 section
6712; title 29 sections 1002, 1345; title 45 section 726.
-FOOTNOTE-
(!1) So in original. Probably should be paragraph "(2)(B)".
(!2) So in original. The period probably should be preceded by a
closing parenthesis.
(!3) So in original. The word "or" probably should not appear.
(!4) See References in Text note below.
-End-
-CITE-
26 USC Sec. 73 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 73. Services of child
-STATUTE-
(a) Treatment of amounts received
Amounts received in respect of the services of a child shall be
included in his gross income and not in the gross income of the
parent, even though such amounts are not received by the child.
(b) Treatment of expenditures
All expenditures by the parent or the child attributable to
amounts which are includible in the gross income of the child (and
not of the parent) solely by reason of subsection (a) shall be
treated as paid or incurred by the child.
(c) Parent defined
For purposes of this section, the term "parent" includes an
individual who is entitled to the services of a child by reason of
having parental rights and duties in respect of the child.
(d) Cross reference
For assessment of tax against parent in certain cases, see
section 6201(c).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 24.)
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 6201 of this title.
-End-
-CITE-
26 USC Sec. 74 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 74. Prizes and awards
-STATUTE-
(a) General rule
Except as otherwise provided in this section or in section 117
(relating to qualified scholarships), gross income includes amounts
received as prizes and awards.
(b) Exception for certain prizes and awards transferred to
charities
Gross income does not include amounts received as prizes and
awards made primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic achievement,
but only if -
(1) the recipient was selected without any action on his part
to enter the contest or proceeding;
(2) the recipient is not required to render substantial future
services as a condition to receiving the prize or award; and
(3) the prize or award is transferred by the payor to a
governmental unit or organization described in paragraph (1) or
(2) of section 170(c) pursuant to a designation made by the
recipient.
(c) Exception for certain employee achievement awards
(1) In general
Gross income shall not include the value of an employee
achievement award (as defined in section 274(j)) received by the
taxpayer if the cost to the employer of the employee achievement
award does not exceed the amount allowable as a deduction to the
employer for the cost of the employee achievement award.
(2) Excess deduction award
If the cost to the employer of the employee achievement award
received by the taxpayer exceeds the amount allowable as a
deduction to the employer, then gross income includes the greater
of -
(A) an amount equal to the portion of the cost to the
employer of the award that is not allowable as a deduction to
the employer (but not in excess of the value of the award), or
(B) the amount by which the value of the award exceeds the
amount allowable as a deduction to the employer.
The remaining portion of the value of such award shall not be
included in the gross income of the recipient.
(3) Treatment of tax-exempt employers
In the case of an employer exempt from taxation under this
subtitle, any reference in this subsection to the amount
allowable as a deduction to the employer shall be treated as a
reference to the amount which would be allowable as a deduction
to the employer if the employer were not exempt from taxation
under this subtitle.
(4) Cross reference
For provisions excluding certain de minimis fringes from
gross income, see section 132(e).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 24; Pub. L. 99-514, title I,
Secs. 122(a)(1), 123(b)(1), Oct. 22, 1986, 100 Stat. 2109, 2113.)
-MISC1-
AMENDMENTS
1986 - Subsec. (a). Pub. L. 99-514, Sec. 123(b)(1), which
directed that subsec. (a) be amended by substituting "(relating to
qualified scholarships)" for "(relating to scholarship and
fellowship grants)", was executed by making the substitution for
"(relating to scholarships and fellowship grants)" to reflect the
probable intent of Congress.
Pub. L. 99-514, Sec. 122(a)(1)(A), substituted "Except as
otherwise provided in this section or" for "Except as provided in
subsection (b) and".
Subsec. (b). Pub. L. 99-514, Sec. 122(a)(1)(B), (C), inserted
"for certain prizes and awards transferred to charities" in heading
and added par. (3).
Subsec. (c). Pub. L. 99-514, Sec. 122(a)(1)(D), added subsec.
(c).
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 122(a)(1) of Pub. L. 99-514 applicable to
prizes and awards granted after Dec. 31, 1986, see section 151(c)
of Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 123(b)(1) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, but only in the case
of scholarships and fellowships granted after Aug. 16, 1986, see
section 151(d) of Pub. L. 99-514, set out as a note under section 1
of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99-514 IN
RELATION TO TREATY OBLIGATIONS OF UNITED STATES
For nonapplication of amendment by section 123(b)(1) of Pub. L.
99-514 to the extent application of such amendment would be
contrary to any treaty obligation of the United States in effect on
Oct. 22, 1986, see section 1012(aa)(3) of Pub. L. 100-647, set out
as a note under section 861 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 102, 274, 3121, 3231,
3306, 3401, 4941, 4945 of this title; title 42 section 409.
-End-
-CITE-
26 USC Sec. 75 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 75. Dealers in tax-exempt securities
-STATUTE-
(a) Adjustment for bond premium
In computing the gross income of a taxpayer who holds during the
taxable year a short-term municipal bond (as defined in subsection
(b)(1) primarily for sale to customers in the ordinary course of
his trade or business -
(1) if the gross income of the taxpayer from such trade or
business is computed by the use of inventories and his
inventories are valued on any basis other than cost, the cost of
securities sold (as defined in subsection (b)(2) during such year
shall be reduced by an amount equal to the amortizable bond
premium which would be disallowed as a deduction for such year by
section 171(a)(2) (relating to deduction for amortizable bond
premium) if the definition in section 171(d) of the term "bond"
did not exclude such municipal bond; or
(2) if the gross income of the taxpayer from such trade or
business is computed without the use of inventories, or by use of
inventories valued at cost, and the municipal bond is sold or
otherwise disposed of during such year, the adjusted basis
(computed without regard to this paragraph) of the municipal bond
shall be reduced by the amount of the adjustment which would be
required under section 1016(a)(5) (relating to adjustment to
basis for amortizable bond premium) if the definition in section
171(d) of the term "bond" did not exclude such municipal bond.
Notwithstanding the provisions of paragraph (1), no reduction to
the cost of securities sold during the taxable year shall be made
in respect of any obligation described in subsection (b)(1)(A)(ii)
which is held by the taxpayer at the close of the taxable year; but
in the taxable year in which any such obligation is sold or
otherwise disposed of, if such obligation is a municipal bond (as
defined in subsection (b)(1)), the cost of securities sold during
such year shall be reduced by an amount equal to the adjustment
described in paragraph (2), without regard to the fact that the
taxpayer values his inventories on any basis other than cost.
(b) Definitions
For purposes of subsection (a) -
(1) The term "municipal bond" means any obligation issued by a
government or political subdivision thereof if the interest on
such obligation is excludable from gross income; but such term
does not include such an obligation if -
(A)(i) it is sold or otherwise disposed of by the taxpayer
within 30 days after the date of its acquisition by him, or
(ii) its earliest maturity or call date is a date more than 5
years from the date on which it was acquired by the taxpayer;
and
(B) when it is sold or otherwise disposed of by the taxpayer
-
(i) in the case of a sale, the amount realized, or
(ii) in the case of any other disposition, its fair market
value at the time of such disposition,
is higher than its adjusted basis (computed without regard to
this section and section 1016(a)(6)).
Determinations under subparagraph (B) shall be exclusive of
interest.
(2) The term "cost of securities sold" means the amount
ascertained by subtracting the inventory value of the closing
inventory of a taxable year from the sum of -
(A) the inventory value of the opening inventory for such
year, and
(B) the cost of securities and other property purchased
during such year which would properly be included in the
inventory of the taxpayer if on hand at the close of the
taxable year.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 25; Pub. L. 85-866, title I,
Sec. 2(a), Sept. 2, 1958, 72 Stat. 1606.)
-MISC1-
AMENDMENTS
1958 - Subsec. (a). Pub. L. 85-866, Sec. 2(a)(2), (3), struck out
"short-term" each place it appeared, and inserted sentence to
provide that no reduction to cost of securities sold during taxable
year shall be made in respect of subsec. (b)(1)(A)(ii) obligations
held at close of year, and to permit reduction in cost of
securities sold in taxable year sold if obligation is municipal
bond.
Subsec. (b)(1). Pub. L. 85-866, Sec. 2(a)(1), substituted
"municipal bond" for "short-term municipal bond", designated former
subpars. (A) and (B) as (A)(i) and (ii), respectively, and added
subpar. (B).
EFFECTIVE DATE OF 1958 AMENDMENT
Section 2(c) of Pub. L. 85-866 provided that: "The amendments
made by subsections (a) and (b) [amending this section and section
1016 of this title] shall apply with respect to taxable years
ending after December 31, 1957, but only with respect to
obligations acquired after such date."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1016 of this title.
-End-
-CITE-
26 USC Sec. 76 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
[Sec. 76. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(14),
Oct. 4, 1976, 90 Stat. 1765]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 25, related to
inclusion in gross of all income derived from mortgages made, or
obligations issued, by a joint-stock land bank.
-End-
-CITE-
26 USC Sec. 77 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 77. Commodity credit loans
-STATUTE-
(a) Election to include loans in income
Amounts received as loans from the Commodity Credit Corporation
shall, at the election of the taxpayer, be considered as income and
shall be included in gross income for the taxable year in which
received.
(b) Effect of election on adjustments for subsequent years
If a taxpayer exercises the election provided for in subsection
(a) for any taxable year, then the method of computing income so
adopted shall be adhered to with respect to all subsequent taxable
years unless with the approval of the Secretary a change to a
different method is authorized.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 25; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (b). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1016, 3402 of this title.
-End-
-CITE-
26 USC Sec. 78 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 78. Dividends received from certain foreign corporations by
domestic corporations choosing foreign tax credit
-STATUTE-
If a domestic corporation chooses to have the benefits of subpart
A of part III of subchapter N (relating to foreign tax credit) for
any taxable year, an amount equal to the taxes deemed to be paid by
such corporation under section 902(a) (relating to credit for
corporate stockholder in foreign corporation) or under section
960(a)(1) (relating to taxes paid by foreign corporation) for such
taxable year shall be treated for purposes of this title (other
than section 245) as a dividend received by such domestic
corporation from the foreign corporation.
-SOURCE-
(Added Pub. L. 87-834, Sec. 9(b), Oct. 16, 1962, 76 Stat. 1001;
amended Pub. L. 94-455, title X, Sec. 1033(b)(1), Oct. 4, 1976, 90
Stat. 1628.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455 substituted "section 902(a)" for "section
902(a)(1)" and "section 960(a)(1)" for "section 960(a)(1)(C)".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable on different dates
depending on the date the distributions were received, see section
1033(c) of Pub. L. 94-455, set out as a note under section 902 of
this title.
EFFECTIVE DATE
Section applicable in respect of any distribution received by a
domestic corporation after Dec. 31, 1964, and in respect of any
distribution received by a domestic corporation before Jan. 1,
1965, in a taxable year of such corporation beginning after Dec.
31, 1962, but only to the extent that such distribution is made out
of the accumulated profits of a foreign corporation for a taxable
year (of such foreign corporation) beginning after Dec. 31, 1962,
see section 9(e) of Pub. L. 87-834, set out as an Effective Date of
1962 Amendment note under section 902 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 814, 901, 902, 904, 906,
908, 1291 of this title.
-End-
-CITE-
26 USC Sec. 79 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 79. Group-term life insurance purchased for employees
-STATUTE-
(a) General rule
There shall be included in the gross income of an employee for
the taxable year an amount equal to the cost of group-term life
insurance on his life provided for part or all of such year under a
policy (or policies) carried directly or indirectly by his employer
(or employers); but only to the extent that such cost exceeds the
sum of -
(1) the cost of $50,000 of such insurance, and
(2) the amount (if any) paid by the employee toward the
purchase of such insurance.
(b) Exceptions
Subsection (a) shall not apply to -
(1) the cost of group-term life insurance on the life of an
individual which is provided under a policy carried directly or
indirectly by an employer after such individual has terminated
his employment with such employer and is disabled (within the
meaning of section 72(m)(7)),
(2) the cost of any portion of the group-term life insurance on
the life of an employee provided during part or all of the
taxable year of the employee under which -
(A) the employer is directly or indirectly the beneficiary,
or
(B) a person described in section 170(c) is the sole
beneficiary,
for the entire period during such taxable year for which the
employee receives such insurance, and
(3) the cost of any group-term life insurance which is provided
under a contract to which section 72(m)(3) applies.
(c) Determination of cost of insurance
For purposes of this section and section 6052, the cost of
group-term insurance on the life of an employee provided during any
period shall be determined on the basis of uniform premiums
(computed on the basis of 5-year age brackets) prescribed by
regulations by the Secretary.
(d) Nondiscrimination requirements
(1) In general
In the case of a discriminatory group-term life insurance plan
-
(A) subsection (a)(1) shall not apply with respect to any key
employee, and
(B) the cost of group-term life insurance on the life of any
key employee shall be the greater of -
(i) such cost determined without regard to subsection (c),
or
(ii) such cost determined with regard to subsection (c).
(2) Discriminatory group-term life insurance plan
For purposes of this subsection, the term "discriminatory
group-term life insurance plan" means any plan of an employer for
providing group-term life insurance unless -
(A) the plan does not discriminate in favor of key employees
as to eligibility to participate, and
(B) the type and amount of benefits available under the plan
do not discriminate in favor of participants who are key
employees.
(3) Nondiscriminatory eligibility classification
(A) In general
A plan does not meet requirements of subparagraph (A) of
paragraph (2) unless -
(i) such plan benefits 70 percent or more of all employees
of the employer,
(ii) at least 85 percent of all employees who are
participants under the plan are not key employees,
(iii) such plan benefits such employees as qualify under a
classification set up by the employer and found by the
Secretary not to be discriminatory in favor of key employees,
or
(iv) in the case of a plan which is part of a cafeteria
plan, the requirements of section 125 are met.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from
consideration -
(i) employees who have not completed 3 years of service;
(ii) part-time or seasonal employees;
(iii) employees not included in the plan who are included
in a unit of employees covered by an agreement between
employee representatives and one or more employers which the
Secretary finds to be a collective bargaining agreement, if
the benefits provided under the plan were the subject of good
faith bargaining between such employee representatives and
such employer or employers; and
(iv) employees who are nonresident aliens and who receive
no earned income (within the meaning of section 911(d)(2))
from the employer which constitutes income from sources
within the United States (within the meaning of section
861(a)(3)).
(4) Nondiscriminatory benefits
A plan does not meet the requirements of paragraph (2)(B)
unless all benefits available to participants who are key
employees are available to all other participants.
(5) Special rule
A plan shall not fail to meet the requirements of paragraph
(2)(B) merely because the amount of life insurance on behalf of
the employees under the plan bears a uniform relationship to the
total compensation or the basic or regular rate of compensation
of such employees.
(6) Key employee defined
For purposes of this subsection, the term "key employee" has
the meaning given to such term by paragraph (1) of section
416(i). Such term also includes any former employee if such
employee when he retired or separated from service was a key
employee.
(7) Exemption for church plans
(A) In general
This subsection shall not apply to a church plan maintained
for church employees.
(B) Definitions
For purposes of subparagraph (A), the terms "church plan" and
"church employee" have the meaning given such terms by
paragraphs (1) and (3)(B) of section 414(e), respectively,
except that -
(i) section 414(e) shall be applied by substituting
"section 501(c)(3)" for "section 501" each place it appears,
and
(ii) the term "church employee" shall not include an
employee of -
(I) an organization described in section 170(b)(1)(A)(ii)
above the secondary school level (other than a school for
religious training),
(II) an organization described in section
170(b)(1)(A)(iii), and
(III) an organization described in section 501(c)(3), the
basis of the exemption for which is substantially similar
to the basis for exemption of an organization described in
subclause (II).
(8) Treatment of former employees
To the extent provided in regulations, this subsection shall be
applied separately with respect to former employees.
(e) Employee includes former employee
For purposes of this section, the term "employee" includes a
former employee.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 204(a)(1), Feb. 26, 1964, 78
Stat. 36; amended Pub. L. 89-97, title I, Sec. 106(d)(3), July 30,
1965, 79 Stat. 337; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97-248, title II, Sec. 244(a),
Sept. 3, 1982, 96 Stat. 523; Pub. L. 98-369, div. A, title II, Sec.
223(a), (b), July 18, 1984, 98 Stat. 775; Pub. L. 99-514, title XI,
Sec. 1151(c)(1), title XVIII, Sec. 1827(a)(1), (c), (d), Oct. 22,
1986, 100 Stat. 2503, 2850, 2851; Pub. L. 100-647, title V, Sec.
5013(a), Nov. 10, 1988, 102 Stat. 3666; Pub. L. 101-140, title II,
Sec. 203(a)(1), (b)(1)(A), Nov. 8, 1989, 103 Stat. 830, 831; Pub.
L. 101-508, title XI, Sec. 11703(e)(1), Nov. 5, 1990, 104 Stat.
1388-517.)
-MISC1-
AMENDMENTS
1990 - Subsec. (d)(6). Pub. L. 101-508 substituted "any former
employee" for "any retired employee".
1989 - Subsec. (d). Pub. L. 101-140, Sec. 203(a)(1), amended
subsec. (d) to read as if amendments by Pub. L. 99-514, Sec.
1151(c)(1), had not been enacted, see 1986 Amendment note below.
Subsec. (d)(7). Pub. L. 101-140, Sec. 203(b)(1)(A), amended par.
(7) generally. Prior to amendment, par. (7) read as follows: "All
employees who are treated as employed by a single employer under
subsection (b), (c), or (m) of section 414 shall be treated as
employed by a single employer for purposes of this section."
1988 - Subsec. (c). Pub. L. 100-647 struck out at end "In the
case of an employee who has attained age 64, the cost prescribed
shall not exceed the cost with respect to such individual if he
were age 63."
1986 - Subsec. (d). Pub. L. 99-514, Sec. 1151(c)(1), amended
subsec. (d) generally, substituting "In the case of a group-term
life insurance plan which is a discriminatory employee benefit
plan, subsection (a)(1) shall apply only to the extent provided in
section 89." for provisions formerly designated as pars. (1)(A) and
(B) that in the case of a discriminatory group-term life insurance
plan subsec. (a)(1) shall not apply with respect to any key
employee and the cost of group-term life insurance on the life of
any key employee shall be determined without regard to subsec. (c),
and striking out pars. (2) to (7) relating to classifications and
eligibility classifications of nondiscriminatory plans.
Subsec. (d)(1)(B). Pub. L. 99-514, Sec. 1827(a)(1), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "the cost of group-term life insurance on the life of any
key employee shall be determined without regard to subsection (c)."
Subsec. (d)(6). Pub. L. 99-514, Sec. 1827(c), struck out ",
except that subparagraph (A)(iv) of such paragraph shall be applied
by not taking into account employees described in paragraph (3)(B)
who are not participants in the plan" from first sentence and
inserted provision that such term also includes any retired
employee if such employee when he retired or separated from service
was a key employee.
Subsec. (d)(8). Pub. L. 99-514, Sec. 1827(d), added par. (8).
1984 - Subsec. (b)(1). Pub. L. 98-369, Sec. 223(a)(2), struck out
"either has reached the retirement age with respect to such
employer or" before "is disabled".
Subsec. (d)(1). Pub. L. 98-369, Sec. 223(b), designated existing
provisions as subpar. (A) and added subpar. (B).
Subsec. (e). Pub. L. 98-369, Sec. 223(a)(1), added subsec. (e).
1982 - Subsec. (d). Pub. L. 97-248 added subsec. (d).
1976 - Subsec. (c). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
1965 - Subsec. (b)(1). Pub. L. 89-97 substituted "section
72(m)(7)" for "paragraph (3) of section 213(g), determined without
regard to paragraph (4) thereof".
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11703(e)(2) of Pub. L. 101-508 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to employees separating from service after the date of the
enactment of this Act [Nov. 5, 1990]."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 203(c) of Pub. L. 101-140 provided that: "The amendments
made by this section [amending this section and sections 105, 117,
120, 125, 127, 129, 132, 162, 401, 414, 505, 3121, 3231, 3306,
3401, 4976, and 6652 of this title, section 409 of title 42, The
Public Health and Welfare, and provisions set out as notes under
sections 89 and 3121 of this title] shall take effect as if
included in section 1151 of the Tax Reform Act of 1986 [Pub. L.
99-514, see section 1151(k) set out below]."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 5013(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1988."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1151(k) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011B(a)(25), (26), Nov. 10, 1988, 102 Stat. 3486,
provided that:
"(1) In general. - The amendments made by this section [enacting
section 89 of this title and amending this section and sections
105, 106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D, and 6652
of this title] shall apply to years beginning after the later of -
"(A) December 31, 1987, or
"(B) the earlier of -
"(i) the date which is 3 months after the date on which the
Secretary of the Treasury or his delegate issues such
regulations as are necessary to carry out the provisions of
section 89 of the Internal Revenue Code of 1986 (as added by
this section), or
"(ii) December 31, 1988.
Notwithstanding the preceding sentence, the amendments made by
subsections (e)(1) and (i)(3)(C) [amending section 414 of this
title] shall, to the extent they relate to sections 106, 162(i)(2),
and 162(k) of the Internal Revenue Code of 1986, apply to years
beginning after 1986.
"(2) Special rule for collective bargaining plan. - In the case
of a plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more employers
ratified before March 1, 1986, the amendments made by this section
[enacting section 89 of this title and amending this section and
sections 105, 106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D,
and 6652 of this title] shall not apply to employees covered by
such an agreement in years beginning before the earlier of -
"(A) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any extension
thereof after February 28, 1986), or
"(B) January 1, 1991.
A plan shall not be required to take into account employees to
which the preceding sentence applies for purposes of applying
section 89 of the Internal Revenue Code of 1986 (as added by this
section) to employees to which the preceding sentence does not
apply for any year preceding the year described in the preceding
sentence.
"(3) Exception for certain group-term insurance plans. - In the
case of a plan described in section 223(d)(2) of the Tax Reform Act
of 1984 [section 232(d)(2) of Pub. L. 98-369, set out as an
Effective Date of 1984 Amendment note below], such plan shall be
treated as meeting the requirements of section 89 of the Internal
Revenue Code of 1986 (as added by this section) with respect to
individuals described in section 223(d)(2) of such Act. An employer
may elect to disregard such individuals in applying section 89 of
such Code (as so added) to other employees of the employer.
"(4) Special rule for church plans. - In the case of a church
plan (within the meaning of section 414(e)(3) of the Internal
Revenue Code of 1986) maintaining an insured accident and health
plan, the amendments made by this section [enacting section 89 of
this title and amending this section and sections 105, 106, 117,
120, 125, 127, 129, 132, 414, 505, 6039D, and 6652 of this title]
shall apply to years beginning after December 31, 1988.
"(5) Cafeteria plans. - The amendments made by subsection (d)(2)
[amending sections 3121 and 3306 of this title and section 409 of
Title 42, The Public Health and Welfare] shall apply to taxable
years beginning after December 31, 1983.
"(6) Certain plans maintained by educational institutions. - If
an educational organization described in section 170(b)(1)(A)(ii)
of the Internal Revenue Code of 1986 makes an election under this
paragraph with respect to a plan described in section 125(c)(2)(C)
of such Code, the amendments made by this section shall apply with
respect to such plan for plan years beginning after the date of the
enactment of this Act [Oct. 22, 1986]."
Section 1827(a)(2) of Pub. L. 99-514 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to taxable years ending after the date of the enactment of this Act
[Oct. 22, 1986]."
Amendment by section 1827(c), (d) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 223(d) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1827(b), Oct. 22, 1986, 100 Stat. 2095,
2850, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
83 of this title] shall apply to taxable years beginning after
December 31, 1983.
"(2) Inclusion of former employees in the case of existing
group-term insurance plans. -
"(A) In general. - The amendments made by subsection (a)
[amending this section] shall not apply -
"(i) to any group-term life insurance plan of the employer in
existence on January 1, 1984, or
"(ii) to any group-term life insurance plan of the employer
(or a successor employer) which is a comparable successor to a
plan described in clause (i),
but only with respect to an individual who attained age 55 on or
before January 1, 1984, and was employed by such employer (or a
predecessor employer) at any time during 1983. Such amendments
also shall not apply to any employee who retired from employment
on or before January 1, 1984, and who, when he retired, was
covered by the plan (or a predecessor plan).
"(B) Special rule in the case of discriminatory group-term life
insurance plan. - In the case of any plan which, after December
31, 1986, is a discriminatory group-term life insurance plan (as
defined in section 79(d) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]), subparagraph (A) shall not apply in the
case of any individual retiring under such plan after December
31, 1986.
"(C) Benefits to certain retired individuals not taken into
account for purposes of determining whether plan is
discriminatory. - For purposes of determining whether a plan
described in subparagraph (A) meets the requirements of section
79(d) of the Internal Revenue Code of 1986 with respect to
group-term life insurance for former employees, coverage provided
to employees who retired on or before December 31, 1986, may, at
the employer's election, be disregarded.
"(D) Comparable successor plans. - For purposes of subparagraph
(A), a plan shall not fail to be treated as a comparable
successor to a plan described in subparagraph (A)(i) with respect
to any employee whose benefits do not increase under the
successor plan."
EFFECTIVE DATE OF 1982 AMENDMENT
Section 244(b) of Pub. L. 97-248 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1983."
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by Pub. L. 89-97 applicable to taxable years beginning
after Dec. 31, 1966, see section 106(e) of Pub. L. 89-97, set out
as a note under section 213 of this title.
EFFECTIVE DATE
Section 204(d) of Pub. L. 88-272, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by subsections (a) [amending this section and
section 7701 of this title] and (c) [amending sections 6052 and
6678 of this title] and paragraph (3) of section 6652(a) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by
section 221(b)(2) of this Act), shall apply with respect to
group-term life insurance provided after December 31, 1963, in
taxable years ending after such date. The amendments made by
subsection (b) [amending section 3401 of this title] shall apply
with respect to remuneration paid after December 31, 1963, in the
form of group-term life insurance provided after such date. In
applying section 79(b) of the Internal Revenue Code of 1986 (as
added by subsection (a)(1) of this section) to a taxable year
beginning before May 1, 1964, if paragraph (2)(B) of such section
applies with respect to an employee for the period beginning May 1,
1964, and ending with the close of his first taxable year ending
after April 30, 1964, such paragraph (2)(B) shall be treated as
applying with respect to such employee for the period beginning
January 1, 1964, and ending April 30, 1964."
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 83, 125, 414, 505, 6039D,
6052, 7701 of this title.
-End-
-CITE-
26 USC Sec. 80 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 80. Restoration of value of certain securities
-STATUTE-
(a) General rule
In the case of a domestic corporation subject to the tax imposed
by section 11 or 801, if the value of any security (as defined in
section 165(g)(2)) -
(1) which became worthless by reason of the expropriation,
intervention, seizure, or similar taking by the government of any
foreign country, any political subdivision thereof, or any agency
or instrumentality of the foregoing of property to which such
security was related, and
(2) which was taken into account as a loss from the sale or
exchange of a capital asset or with respect to which a deduction
for a loss was allowed under section 165,
is restored in whole or in part during any taxable year by reason
of any recovery of money or other property in respect of the
property to which such security was related, the value so restored
(to the extent that, when added to the value so restored during
prior taxable years, it does not exceed the amount of the loss
described in paragraph (2)) shall, except as provided in subsection
(b), be included in gross income for the taxable year in which such
restoration occurs.
(b) Reduction for failure to receive tax benefit
The amount otherwise includible in gross income under subsection
(a) in respect of any security shall be reduced by an amount equal
to the amount (if any) of the loss described in subsection (a)(2)
which did not result in a reduction of the taxpayer's tax under
this subtitle for any taxable year, determined under regulations
prescribed by the Secretary.
(c) Character of income
For purposes of this subtitle -
(1) Except as provided in paragraph (2), the amount included in
gross income under this section shall be treated as ordinary
income.
(2) If the loss described in subsection (a)(2) was taken into
account as a loss from the sale or exchange of a capital asset,
the amount included in gross income under this section shall be
treated as long-term capital gain.
(d) Treatment under foreign expropriation loss recovery provisions
This section shall not apply to any recovery of a foreign
expropriation loss to which section 1351 applies.
-SOURCE-
(Added Pub. L. 89-384, Sec. 1(b)(1), Apr. 8, 1966, 80 Stat. 101;
amended Pub. L. 94-455, title XIX, Secs. 1901(b)(3)(K),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1793, 1834; Pub. L. 98-369,
div. A, title II, Sec. 211(b)(2), July 18, 1984, 98 Stat. 754.)
-MISC1-
AMENDMENTS
1984 - Subsec. (a). Pub. L. 98-369 substituted "801" for "802".
1976 - Subsec. (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (c)(1). Pub. L. 94-455, Sec. 1901(b)(3)(K), substituted
"ordinary income" for "gain from the sale or exchange of property
which is neither a capital asset nor property described in section
1231".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, see section 215 of Pub. L. 98-369, set out as
an Effective Date note under section 801 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(b)(3)(K) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE
Section 1(b)(3) of Pub. L. 89-384, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this subsection [enacting this section] shall
apply to taxable years beginning after December 31, 1965, but only
with respect to losses described in section 80(a)(2) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by
paragraph (1) of this subsection) which were sustained after
December 31, 1958."
-End-
-CITE-
26 USC Sec. 81 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
[Sec. 81. Repealed. Pub. L. 100-203, title X, Sec. 10201(b)(1),
Dec. 22, 1987, 101 Stat. 1330-387]
-MISC1-
Section, added Pub. L. 89-722, Sec. 1(b)(1), Nov. 2, 1966, 80
Stat. 1152; amended Pub. L. 93-625, Sec. 4(c)(1), Jan. 3, 1975, 88
Stat. 2111; Pub. L. 94-455, title VI, Sec. 605(b), Oct. 4, 1976, 90
Stat. 1575; Pub. L. 99-514, title VIII, Sec. 805(c)(1)(A), Oct. 22,
1986, 100 Stat. 2362, included increase in vacation pay suspense
account in gross income.
EFFECTIVE DATE OF REPEAL
Repeal applicable to taxable years beginning after Dec. 31, 1987,
see section 10201(c)(1) of Pub. L. 100-203, set out as an Effective
Date of 1987 Amendment note under section 404 of this title.
-End-
-CITE-
26 USC Sec. 82 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 82. Reimbursement for expenses of moving
-STATUTE-
Except as provided in section 132(a)(6), there shall be included
in gross income (as compensation for services) any amount received
or accrued, directly or indirectly, by an individual as a payment
for or reimbursement of expenses of moving from one residence to
another residence which is attributable to employment or
self-employment.
-SOURCE-
(Added Pub. L. 91-172, title II, Sec. 231(b), Dec. 30, 1969, 83
Stat. 579; amended Pub. L. 103-66, title XIII, Sec. 13213(d)(3)(A),
Aug. 10, 1993, 107 Stat. 474.)
-MISC1-
AMENDMENTS
1993 - Pub. L. 103-66 substituted "Except as provided in section
132(a)(6), there shall" for "There shall".
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to reimbursements or other
payments in respect of expenses incurred after Dec. 31, 1993, see
section 13213(e) of Pub. L. 103-66, set out as a note under section
62 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after December 31,
1969, except that it does not apply to moving expenses paid or
incurred before July 1, 1970, in connection with the commencement
of work by the taxpayer as an employee at a new principal place of
work of which the taxpayer had been notified by his employer on or
before December 19, 1969, see section 231(d) of Pub. L. 91-172, set
out as an Effective Date of 1969 Amendment note under section 217
of this title.
MOVING EXPENSES OF MEMBERS OF THE UNIFORMED SERVICES
Withholding, reporting, inclusion within adjusted gross income,
and deduction for reimbursement for moving expenses of members of
the uniformed services, see section 2 of Pub. L. 93-490, Oct. 26,
1974, 88 Stat. 1466, set out as a note under section 217 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 274 of this title.
-End-
-CITE-
26 USC Sec. 83 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 83. Property transferred in connection with performance of
services
-STATUTE-
(a) General rule
If, in connection with the performance of services, property is
transferred to any person other than the person for whom such
services are performed, the excess of -
(1) the fair market value of such property (determined without
regard to any restriction other than a restriction which by its
terms will never lapse) at the first time the rights of the
person having the beneficial interest in such property are
transferable or are not subject to a substantial risk of
forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property, shall be
included in the gross income of the person who performed such
services in the first taxable year in which the rights of the
person having the beneficial interest in such property are
transferable or are not subject to a substantial risk of
forfeiture, whichever is applicable. The preceding sentence shall
not apply if such person sells or otherwise disposes of such
property in an arm's length transaction before his rights in such
property become transferable or not subject to a substantial risk
of forfeiture.
(b) Election to include in gross income in year of transfer
(1) In general
Any person who performs services in connection with which
property is transferred to any person may elect to include in his
gross income for the taxable year in which such property is
transferred, the excess of -
(A) the fair market value of such property at the time of
transfer (determined without regard to any restriction other
than a restriction which by its terms will never lapse), over
(B) the amount (if any) paid for such property.
If such election is made, subsection (a) shall not apply with
respect to the transfer of such property, and if such property is
subsequently forfeited, no deduction shall be allowed in respect
of such forfeiture.
(2) Election
An election under paragraph (1) with respect to any transfer of
property shall be made in such manner as the Secretary prescribes
and shall be made not later than 30 days after the date of such
transfer. Such election may not be revoked except with the
consent of the Secretary.
(c) Special rules
For purposes of this section -
(1) Substantial risk of forfeiture
The rights of a person in property are subject to a substantial
risk of forfeiture if such person's rights to full enjoyment of
such property are conditioned upon the future performance of
substantial services by any individual.
(2) Transferability of property
The rights of a person in property are transferable only if the
rights in such property of any transferee are not subject to a
substantial risk of forfeiture.
(3) Sales which may give rise to suit under section 16(b) of the
Securities Exchange Act of 1934
So long as the sale of property at a profit could subject a
person to suit under section 16(b) of the Securities Exchange Act
of 1934, such person's rights in such property are -
(A) subject to a substantial risk of forfeiture, and
(B) not transferable.
(d) Certain restrictions which will never lapse
(1) Valuation
In the case of property subject to a restriction which by its
terms will never lapse, and which allows the transferee to sell
such property only at a price determined under a formula, the
price so determined shall be deemed to be the fair market value
of the property unless established to the contrary by the
Secretary, and the burden of proof shall be on the Secretary with
respect to such value.
(2) Cancellation
If, in the case of property subject to a restriction which by
its terms will never lapse, the restriction is canceled, then,
unless the taxpayer establishes -
(A) that such cancellation was not compensatory, and
(B) that the person, if any, who would be allowed a deduction
if the cancellation were treated as compensatory, will treat
the transaction as not compensatory, as evidenced in such
manner as the Secretary shall prescribe by regulations,
the excess of the fair market value of the property (computed
without regard to the restrictions) at the time of cancellation
over the sum of -
(C) the fair market value of such property (computed by
taking the restriction into account) immediately before the
cancellation, and
(D) the amount, if any, paid for the cancellation,
shall be treated as compensation for the taxable year in which
such cancellation occurs.
(e) Applicability of section
This section shall not apply to -
(1) a transaction to which section 421 applies,
(2) a transfer to or from a trust described in section 401(a)
or a transfer under an annuity plan which meets the requirements
of section 404(a)(2),
(3) the transfer of an option without a readily ascertainable
fair market value,
(4) the transfer of property pursuant to the exercise of an
option with a readily ascertainable fair market value at the date
of grant, or
(5) group-term life insurance to which section 79 applies.
(f) Holding period
In determining the period for which the taxpayer has held
property to which subsection (a) applies, there shall be included
only the period beginning at the first time his rights in such
property are transferable or are not subject to a substantial risk
of forfeiture, whichever occurs earlier.
(g) Certain exchanges
If property to which subsection (a) applies is exchanged for
property subject to restrictions and conditions substantially
similar to those to which the property given in such exchange was
subject, and if section 354, 355, 356, or 1036 (or so much of
section 1031 as relates to section 1036) applied to such exchange,
or if such exchange was pursuant to the exercise of a conversion
privilege -
(1) such exchange shall be disregarded for purposes of
subsection (a), and
(2) the property received shall be treated as property to which
subsection (a) applies.
(h) Deduction by employer
In the case of a transfer of property to which this section
applies or a cancellation of a restriction described in subsection
(d), there shall be allowed as a deduction under section 162, to
the person for whom were performed the services in connection with
which such property was transferred, an amount equal to the amount
included under subsection (a), (b), or (d)(2) in the gross income
of the person who performed such services. Such deduction shall be
allowed for the taxable year of such person in which or with which
ends the taxable year in which such amount is included in the gross
income of the person who performed such services.
-SOURCE-
(Added Pub. L. 91-172, title III, Sec. 321(a), Dec. 30, 1969, 83
Stat. 588; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(15),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1765, 1834; Pub. L. 97-34,
title II, Sec. 252(a), Aug. 13, 1981, 95 Stat. 260; Pub. L. 97-448,
title I, Sec. 102(k)(1), Jan. 12, 1983, 96 Stat. 2374; Pub. L.
98-369, div. A, title II, Sec. 223(c), July 18, 1984, 98 Stat. 775;
Pub. L. 99-514, title XVIII, Sec. 1827(e), Oct. 22, 1986, 100 Stat.
2851; Pub. L. 101-508, title XI, Sec. 11801(a)(5), Nov. 5, 1990,
104 Stat. 1388-520.)
-REFTEXT-
REFERENCES IN TEXT
Section 16(b) of the Securities Exchange Act of 1934, referred to
in subsec. (c)(3), is classified to section 78p(b) of Title 15,
Commerce and Trade.
-MISC1-
AMENDMENTS
1990 - Subsec. (i). Pub. L. 101-508 struck out subsec. (i)
"Transition rules" which read as follows: "This section shall apply
to property transferred after June 30, 1969, except that this
section shall not apply to property transferred -
"(1) pursuant to a binding written contract entered into before
April 22, 1969,
"(2) upon the exercise of an option granted before April 22,
1969,
"(3) before May 1, 1970, pursuant to a written plan adopted and
approved before July 1, 1969,
"(4) before January 1, 1973, upon the exercise of an option
granted pursuant to a binding written contract entered into
before April 22, 1969, between a corporation and the transferor
requiring the transferor to grant options to employees of such
corporation (or a subsidiary of such corporation) to purchase a
determinable number of shares of stock of such corporation, but
only if the transferee was an employee of such corporation (or a
subsidiary of such corporation) on or before April 22, 1969, or
"(5) in exchange for (or pursuant to the exercise of a
conversion privilege contained in) property transferred before
July 1, 1969, or for property to which this section does not
apply (by reason of paragraphs (1), (2), (3), or (4)), if section
354, 355, 356, or 1036 (or so much of section 1031 as relates to
section 1036) applies, or if gain or loss is not otherwise
required to be recognized upon the exercise of such conversion
privilege, and if the property received in such exchange is
subject to restrictions and conditions substantially similar to
those to which the property given in such exchange was subject."
1986 - Subsec. (e)(5). Pub. L. 99-514 struck out "the cost of"
before "group-life insurance".
1984 - Subsec. (e)(5). Pub. L. 98-369 added par. (5).
1983 - Subsec. (c)(3). Pub. L. 97-448 substituted "Securities
Exchange Act of 1934" for "Securities and Exchange Act of 1934" in
heading and text.
1981 - Subsec. (c)(3). Pub. L. 97-34 added par. (3).
1976 - Subsec. (b)(2). Pub. L. 94-455, Sec. 1901(a)(15), struck
out "(or, if later, 30 days after the date of the enactment of the
Tax Reform Act of 1969)" after "after the date of such transfer",
and Sec. 1906(b)(13)(A), "or his delegate" after "Secretary"
wherever appearing.
Subsec. (d)(1), (2)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, see section 223(d)(1) of Pub. L. 98-369, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 252(c) of Pub. L. 97-34, as amended by Pub. L. 97-448,
title I, Sec. 102(k)(2), 96 Stat. 2374, provided that: "The
amendment made by subsection (a) [amending this section] and the
provisions of subsection (b) [set out below] shall apply to
transfers after December 31, 1981."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(15) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE
Section 321(d) of Pub. L. 91-172 provided that: "The amendments
made by subsections (a) and (c) [amending sections 402, 403, and
404 of this title] shall apply to taxable years ending after June
30, 1969. The amendments made by subsection (b) [enacting this
section] shall apply with respect to contributions made and
premiums paid after August 1, 1969."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
APPLICATION OF AMENDMENTS MADE BY SECTION 252 OF PUB. L. 97-34
Section 1879(p) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1018(q)(3), Nov. 10, 1988, 102 Stat. 3585, provided
that:
"(1) Notwithstanding subsection (c) of section 252 of the
Economic Recovery Tax Act of 1981 [section 252(c) of Pub. L. 97-34,
set out above], the amendment made by subsection (a) of such
section 252 [amending this section] (and the provisions of
subsection (b) of such section 252 [set out below]) shall apply to
any transfer of stock to any person if -
"(A) such transfer occurred in November or December of 1973 and
was pursuant to the exercise of an option granted in November or
December of 1971,
"(B) in December 1973 the corporation granting the option was
acquired by another corporation in a transaction qualifying as a
reorganization under section 368 of the Internal Revenue Code of
1954 [now 1986],
"(C) the fair market value (as of July 1, 1974) of the stock
received by such person in the reorganization in exchange for the
stock transferred to him pursuant to the exercise of such option
was less than 50 percent of the fair market value of the stock so
received (as of December 4, 1973),
"(D) in 1975 or 1976 such person sold substantially all of the
stock received in such reorganization, and
"(E) such person makes an election under this section at such
time and in such manner as the Secretary of the Treasury or his
delegate shall prescribe.
"(2) Limitation on amount of benefit. - Paragraph (1) shall not
apply to transfers with respect to any employee to the extent that
the application of paragraph (1) with respect to such employee
would (but for this paragraph) result in a reduction in liability
for income tax with respect to such employee for all taxable years
in excess of $100,000 (determined without regard to any interest).
"(3) Statute of limitations. -
"(A) Overpayments. - If refund or credit of any overpayment of
tax resulting from the application of paragraph (1) is prevented
on the date of the enactment of this Act [Oct. 22, 1986] (or at
any time within 6 months after such date of enactment) by the
operation of any law or rule of law, refund or credit of such
overpayment (to the extent attributable to the application of
paragraph (1)) may, nevertheless, be made or allowed if claim
therefor is filed before the close of such 6-month period.
"(B) Deficiencies. - If the assessment of any deficiency of tax
resulting from the application of paragraph (1) is prevented on
the date of the enactment of this Act [Oct. 22, 1986] (or at any
time within 6 months after such date of enactment) by the
operation of any law or rule of law, assessment of such
deficiency (to the extent attributable to the application of
paragraph (1)) may, nevertheless, be made within such 6-month
period."
TIME FOR MAKING CERTAIN SECTION 83(B) ELECTIONS
Section 556 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, title XVIII, Sec. 1855(b), Oct. 22, 1986, 100 Stat. 2095, 2882,
provided that: "In the case of any transfer of property in
connection with the performance of services on or before November
18, 1982, the election permitted by section 83(b) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] may be made,
notwithstanding paragraph (2) of such section 83(b), with the
income tax return for any taxable year ending after July 18, 1984,
and beginning before the date of the enactment of the Tax Reform
Act of 1986 [Oct. 22, 1986 if -
"(1) the amount paid for such property was not less than its
fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its
terms will never lapse), and
"(2) the election is consented to by the person transferring
such property.
The election shall contain that information required by the
Secretary of the Treasury or his delegate for elections permitted
by such section 83(b). The period for assessing any tax
attributable to a transfer of property which is the subject of an
election made pursuant to this section shall not expire before the
date which is 3 years after the date such election was made."
PROPERTY SUBJECT TO TRANSFER RESTRICTIONS TO COMPLY WITH
"POOLING-OF-INTERESTS ACCOUNTING" RULES
Section 252(b) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided, effective with
respect to taxable years ending after Dec. 31, 1981, that: "For
purposes of section 83 of the Internal Revenue Code of 1986
[formerly I.R.C. 1954], property is subject to substantial risk of
forfeiture and is not transferable so long as such property is
subject to a restriction on transfer to comply with the
"Pooling-of-Interests Accounting" rules set forth in Accounting
Series Release Numbered 130 ((10/5/72) 37 FR 20937; 17 CFR 211.130)
and Accounting Series Release Numbered 135 ((1/18/73) 38 FR 1734;
17 CFR 211.135)."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 402, 403, 419, 422A, 457,
1042, 3121 of this title.
-End-
-CITE-
26 USC Sec. 84 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 84. Transfer of appreciated property to political organization
-STATUTE-
(a) General rule
If -
(1) any person transfers property to a political organization,
and
(2) the fair market value of such property exceeds its adjusted
basis,
then for purposes of this chapter the transferor shall be treated
as having sold such property to the political organization on the
date of the transfer, and the transferor shall be treated as having
realized an amount equal to the fair market value of such property
on such date.
(b) Basis of property
In the case of a transfer of property to a political organization
to which subsection (a) applies, the basis of such property in the
hands of the political organization shall be the same as it would
be in the hands of the transferor, increased by the amount of gain
recognized to the transferor by reason of such transfer.
(c) Political organization defined
For purposes of this section, the term "political organization"
has the meaning given to such term by section 527(e)(1).
-SOURCE-
(Added Pub. L. 93-625, Sec. 13(a)(1), Jan. 3, 1975, 88 Stat. 2120.)
-MISC1-
EFFECTIVE DATE
Section 13(b) of Pub. L. 93-625 provided that: "The amendments
made by subsection (a) [enacting this section] shall apply to
transfers made after May 7, 1974, in taxable years ending after
such date."
NONRECOGNITION OF GAIN OR LOSS WHERE ORGANIZATION SOLD CONTRIBUTED
PROPERTY BEFORE AUGUST 2, 1973
Section 13(c) of Pub. L. 93-625 provided that in the case of the
sale or exchange of property before Aug. 2, 1973, which was
acquired by the exempt political organization by contribution, no
gain or loss shall be recognized by such organization.
-End-
-CITE-
26 USC Sec. 85 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 85. Unemployment compensation
-STATUTE-
(a) General rule
In the case of an individual, gross income includes unemployment
compensation.
(b) Unemployment compensation defined
For purposes of this section, the term "unemployment
compensation" means any amount received under a law of the United
States or of a State which is in the nature of unemployment
compensation.
-SOURCE-
(Added Pub. L. 95-600, title I, Sec. 112(a), Nov. 6, 1978, 92 Stat.
2777; amended Pub. L. 97-34, title I, Sec. 103(c)(1), Aug. 13,
1981, 95 Stat. 188; Pub. L. 97-248, title VI, Sec. 611(a), Sept. 3,
1982, 96 Stat. 706; Pub. L. 98-21, title I, Secs. 121(f)(1),
122(c)(2), Apr. 20, 1983, 97 Stat. 84, 87; Pub. L. 99-514, title I,
Sec. 121, Oct. 22, 1986, 100 Stat. 2109.)
-MISC1-
AMENDMENTS
1986 - Subsec. (a). Pub. L. 99-514 substituted "General rule" for
"In general" in heading and amended text generally. Prior to
amendment, text read as follows: "If the sum for the taxable year
of the adjusted gross income of the taxpayer (determined without
regard to this section, section 86 and section 221) and the
unemployment compensation exceeds the base amount, gross income for
the taxable year includes unemployment compensation in an amount
equal to the lesser of -
"(1) one-half of the amount of the excess of such sum over the
base amount, or
"(2) the amount of the unemployment compensation."
Subsecs. (b), (c). Pub. L. 99-514, in amending section generally,
redesignated former subsec. (c) as (b) and struck out former
subsec. (b), "Base amount defined", which read as follows: "For
purposes of this section, the term 'base amount' means -
"(1) except as provided in paragraphs (2) and (3), $12,000,
"(2) $18,000, in the case of a joint return under section 6013,
or
"(3) zero, in the case of a taxpayer who -
"(A) is married at the close of the taxable year (within the
meaning of section 143) but does not file a joint return for
such year, and
"(B) does not live apart from his spouse at all times during
the taxable year."
1983 - Subsec. (a). Pub. L. 98-21, Sec. 122(c)(2), struck out ",
section 105(d)," after "section 86".
Pub. L. 98-21, Sec. 121(f)(1), inserted "section 86," after "this
section,".
1982 - Subsec. (b)(1). Pub. L. 97-248, Sec. 611(a)(1),
substituted "$12,000" for "$20,000".
Subsec. (b)(2). Pub. L. 97-248, Sec. 611(a)(2), substituted
"$18,000" for "$25,000".
1981 - Subsec. (a). Pub. L. 97-34 substituted "this section,
section 105(d), and section 221" for "this section and without
regard to section 105(d)" in parenthetical provision preceding par.
(1).
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to amounts received after
Dec. 31, 1986, in taxable years ending after such date, see section
151(b) of Pub. L. 99-514, set out as a note under section 1 of this
title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by section 121(f)(1) of Pub. L. 98-21 applicable to
benefits received after Dec. 31, 1983, in taxable years ending
after such date, except for any portion of a lump-sum payment of
social security benefits received after Dec. 31, 1983, if the
generally applicable payment date for such portion was before Jan.
1, 1984, see section 121(g) of Pub. L. 98-21, set out as an
Effective Date note under section 86 of this title.
Amendment by section 122(c)(2) of Pub. L. 98-21 applicable to
taxable years beginning after Dec. 31, 1983, except that if an
individual's annuity starting date was deferred under section
105(d)(6) of this title as in effect on the day before Apr. 20,
1983, such deferral shall end on the first day of such individual's
first taxable year beginning after Dec. 31, 1983, see section
122(d) of Pub. L. 98-21, set out as a note under section 22 of this
title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 611(b) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Compensation paid after 1981. - The amendments made by this
section [amending this section] shall apply to payments of
unemployment compensation made after December 31, 1981, in taxable
years ending after such date.
"(2) No addition to tax for underpayment of estimated tax
attributable to application of amendments to compensation paid in
1982. - No addition to tax shall be made under section 6654 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] with respect
to any underpayment to the extent such underpayment is attributable
to unemployment compensation which is received during 1982 and
which (but for the amendments made by subsection (a)) would not be
includable in gross income.
"(3) Special rule for fiscal year taxpayers. - In the case of a
taxable year (other than a calendar year) which includes January 1,
1982 -
"(A) the amendments made by this section shall be applied by
taking into account the entire amount of unemployment
compensation received during such taxable year, but
"(B) the increase in gross income for such taxable year as a
result of such amendments shall not exceed the amount of
unemployment compensation paid after December 31, 1981.
"(4) Unemployment compensation defined. - For purposes of this
subsection, the term 'unemployment compensation' has the meaning
given to such term by section 85(c) of the Internal Revenue Code of
1986."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see section 103(d) of Pub. L. 97-34, set out
as a note under section 62 of this title.
EFFECTIVE DATE
Section 112(d) of Pub. L. 95-600, as amended by Pub. L. 98-369,
div. A, title X, Sec. 1075(a), July 18, 1984, 98 Stat. 1053,
provided that: "The amendments made by this section [enacting this
section and section 6050B of this title] shall apply to payments of
unemployment compensation made after December 31, 1978, in taxable
years ending after such date, except that such amendments shall not
apply to payments made for weeks of unemployment ending before
December 1, 1978."
WAIVER OF STATUTE OF LIMITATIONS
Pub. L. 98-369, div. A, title X, Sec. 1075(b), July 18, 1984, 98
Stat. 1053, provided that: "If credit or refund of any overpayment
of tax resulting from the amendment made by subsection (a)
[amending section 112(d) of Pub. L. 95-600, set out as an Effective
Date note above] is barred on the date of the enactment of this Act
[July 18, 1984] or at any time during the 1-year period beginning
on the date of the enactment of this Act by the operation of any
law or rule of law (including res judicata), refund or credit of
such overpayment (to the extent attributable to the amendment made
by subsection (a)) may, nevertheless, be made or allowed if claim
therefor is filed before the close of such 1-year period."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 3402, 6050B of this
title; title 42 section 5177.
-End-
-CITE-
26 USC Sec. 86 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 86. Social security and tier 1 railroad retirement benefits
-STATUTE-
(a) In general
(1) In general
Except as provided in paragraph (2), gross income for the
taxable year of any taxpayer described in subsection (b)
(notwithstanding section 207 of the Social Security Act) includes
social security benefits in an amount equal to the lesser of -
(A) one-half of the social security benefits received during
the taxable year, or
(B) one-half of the excess described in subsection (b)(1).
(2) Additional amount
In the case of a taxpayer with respect to whom the amount
determined under subsection (b)(1)(A) exceeds the adjusted base
amount, the amount included in gross income under this section
shall be equal to the lesser of -
(A) the sum of -
(i) 85 percent of such excess, plus
(ii) the lesser of the amount determined under paragraph
(1) or an amount equal to one-half of the difference between
the adjusted base amount and the base amount of the taxpayer,
or
(B) 85 percent of the social security benefits received
during the taxable year.
(b) Taxpayers to whom subsection (a) applies
(1) In general
A taxpayer is described in this subsection if -
(A) the sum of -
(i) the modified adjusted gross income of the taxpayer for
the taxable year, plus
(ii) one-half of the social security benefits received
during the taxable year, exceeds
(B) the base amount.
(2) Modified adjusted gross income
For purposes of this subsection, the term "modified adjusted
gross income" means adjusted gross income -
(A) determined without regard to this section and sections
135, 137, 221, 222, 911, 931, and 933, and
(B) increased by the amount of interest received or accrued
by the taxpayer during the taxable year which is exempt from
tax.
(c) Base amount and adjusted base amount
For purposes of this section -
(1) Base amount
The term "base amount" means -
(A) except as otherwise provided in this paragraph, $25,000,
(B) $32,000 in the case of a joint return, and
(C) zero in the case of a taxpayer who -
(i) is married as of the close of the taxable year (within
the meaning of section 7703) but does not file a joint return
for such year, and
(ii) does not live apart from his spouse at all times
during the taxable year.
(2) Adjusted base amount
The term "adjusted base amount" means -
(A) except as otherwise provided in this paragraph, $34,000,
(B) $44,000 in the case of a joint return, and
(C) zero in the case of a taxpayer described in paragraph
(1)(C).
(d) Social security benefit
(1) In general
For purposes of this section, the term "social security
benefit" means any amount received by the taxpayer by reason of
entitlement to -
(A) a monthly benefit under title II of the Social Security
Act, or
(B) a tier 1 railroad retirement benefit.
(2) Adjustment for repayments during year
(A) In general
For purposes of this section, the amount of social security
benefits received during any taxable year shall be reduced by
any repayment made by the taxpayer during the taxable year of a
social security benefit previously received by the taxpayer
(whether or not such benefit was received during the taxable
year).
(B) Denial of deduction
If (but for this subparagraph) any portion of the repayments
referred to in subparagraph (A) would have been allowable as a
deduction for the taxable year under section 165, such portion
shall be allowable as a deduction only to the extent it exceeds
the social security benefits received by the taxpayer during
the taxable year (and not repaid during such taxable year).
(3) Workmen's compensation benefits substituted for social
security benefits
For purposes of this section, if, by reason of section 224 of
the Social Security Act (or by reason of section 3(a)(1) of the
Railroad Retirement Act of 1974), any social security benefit is
reduced by reason of the receipt of a benefit under a workmen's
compensation act, the term "social security benefit" includes
that portion of such benefit received under the workmen's
compensation act which equals such reduction.
(4) Tier 1 railroad retirement benefit
For purposes of paragraph (1), the term "tier 1 railroad
retirement benefit" means -
(A) the amount of the annuity under the Railroad Retirement
Act of 1974 equal to the amount of the benefit to which the
taxpayer would have been entitled under the Social Security Act
if all of the service after December 31, 1936, of the employee
(on whose employment record the annuity is being paid) had been
included in the term "employment" as defined in the Social
Security Act, and
(B) a monthly annuity amount under section 3(f)(3) of the
Railroad Retirement Act of 1974.
(5) Effect of early delivery of benefit checks
For purposes of subsection (a), in any case where section 708
of the Social Security Act causes social security benefit checks
to be delivered before the end of the calendar month for which
they are issued, the benefits involved shall be deemed to have
been received in the succeeding calendar month.
(e) Limitation on amount included where taxpayer receives lump-sum
payment
(1) Limitation
If -
(A) any portion of a lump-sum payment of social security
benefits received during the taxable year is attributable to
prior taxable years, and
(B) the taxpayer makes an election under this subsection for
the taxable year,
then the amount included in gross income under this section for the
taxable year by reason of the receipt of such portion shall not
exceed the sum of the increases in gross income under this chapter
for prior taxable years which would result solely from taking into
account such portion in the taxable years to which it is
attributable.
(2) Special rules
(A) Year to which benefit attributable
For purposes of this subsection, a social security benefit is
attributable to a taxable year if the generally applicable
payment date for such benefit occurred during such taxable
year.
(B) Election
An election under this subsection shall be made at such time
and in such manner as the Secretary shall by regulations
prescribe. Such election, once made, may be revoked only with
the consent of the Secretary.
(f) Treatment as pension or annuity for certain purposes
For purposes of -
(1) section 22(c)(3)(A) (relating to reduction for amounts
received as pension or annuity),
(2) section 32(c)(2) (defining earned income),
(3) section 219(f)(1) (defining compensation), and
(4) section 911(b)(1) (defining foreign earned income),
any social security benefit shall be treated as an amount received
as a pension or annuity.
-SOURCE-
(Added and amended Pub. L. 98-21, title I, Sec. 121(a), title III,
Sec. 335(b)(2)(A), Apr. 20, 1983, 97 Stat. 80, 130; Pub. L. 98-76,
title II, Sec. 224(d), Aug. 12, 1983, 97 Stat. 424; Pub. L. 98-369,
div. A, title IV, Sec. 474(r)(2), div. B, title VI, Sec.
2661(o)(1), July 18, 1984, 98 Stat. 839, 1158; Pub. L. 99-272,
title XII, Sec. 12111(b), title XIII, Sec. 13204(a), Apr. 7, 1986,
100 Stat. 287, 313; Pub. L. 99-514, title I, Sec. 131(b)(2), title
XIII, Sec. 1301(j)(8), title XVIII, Sec. 1847(b)(2), Oct. 22, 1986,
100 Stat. 2113, 2658, 2856; Pub. L. 100-647, title I, Sec. 1001(e),
title VI, Sec. 6009(c)(1), Nov. 10, 1988, 102 Stat. 3351, 3690;
Pub. L. 103-66, title XIII, Sec. 13215(a), (b), Aug. 10, 1993, 107
Stat. 475, 476; Pub. L. 103-296, title III, Sec. 309(d), Aug. 15,
1994, 108 Stat. 1523; Pub. L. 104-188, title I, Secs. 1704(t)(3),
1807(c)(2), Aug. 20, 1996, 110 Stat. 1887, 1902; Pub. L. 105-277,
div. J, title IV, Sec. 4003(a)(2)(B), Oct. 21, 1998, 112 Stat.
2681-908; Pub. L. 107-16, title IV, Sec. 431(c)(1), June 7, 2001,
115 Stat. 68.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Social Security Act, referred to in subsecs. (a)(1) and
(d)(1)(A), (3), (4)(A), (5), is act Aug. 14, 1935, ch. 531, 49
Stat. 620, as amended, which is classified generally to chapter 7
(Sec. 301 et seq.) of Title 42, The Public Health and Welfare.
Title II of the Act is classified generally to subchapter II (Sec.
401 et seq.) of Title 42. Sections 207, 224, and 708 of the Act are
classified to sections 407, 424a, and 909 of Title 42,
respectively. For complete classification of this Act to the Code,
see section 1305 of Title 42 and Tables.
The Railroad Retirement Act of 1974, referred to in subsec.
(d)(3), (4), is act Aug. 29, 1935, ch. 812, as amended generally by
Pub. L. 93-445, title I, Sec. 101, Oct. 16, 1974, 88 Stat. 1305,
which is classified generally to subchapter IV (Sec. 231 et seq.)
of chapter 9 of Title 45, Railroads. Section 3(a)(1), (f)(3) of the
Act is classified to section 231b(a)(1), (f)(3) of Title 45. For
further details and complete classification of this Act to the
Code, see Codification note set out preceding section 231 of Title
45, section 231t of Title 45, and Tables.
-MISC1-
PRIOR PROVISIONS
A prior section 86 was renumbered section 87 of this title.
AMENDMENTS
2001 - Subsec. (b)(2)(A). Pub. L. 107-16, Secs. 431(c)(1), 901,
temporarily inserted "222," after "221,". See Effective and
Termination Dates of 2001 Amendment note below.
1998 - Subsec. (b)(2)(A). Pub. L. 105-277 inserted "221," after
"137,".
1996 - Subsec. (b)(2). Pub. L. 104-188, Sec. 1704(t)(3),
substituted "means adjusted" for "means adusted" in introductory
provisions.
Subsec. (b)(2)(A). Pub. L. 104-188, Sec. 1807(c)(2), inserted
"137," before "911".
1994 - Subsec. (d)(1). Pub. L. 103-296 struck out at end "For
purposes of the preceding sentence, the amount received by any
taxpayer shall be determined as if the Social Security Act did not
contain section 203(i) thereof."
1993 - Subsec. (a). Pub. L. 103-66, Sec. 13215(a), designated
existing provisions as par. (1), inserted par. (1) heading,
substituted "Except as provided in paragraph (2), gross" for
"Gross", redesignated former pars. (1) and (2) as subpars. (A) and
(B), respectively, and added par. (2).
Subsec. (c). Pub. L. 103-66, Sec. 13215(b), amended heading and
text of subsec. (c) generally. Prior to amendment, text read as
follows: "For purposes of this section, the term 'base amount'
means -
"(1) except as otherwise provided in this subsection, $25,000,
"(2) $32,000, in the case of a joint return, and
"(3) zero, in the case of a taxpayer who -
"(A) is married at the close of the taxable year (within the
meaning of section 7703) but does not file a joint return for
such year, and
"(B) does not live apart from his spouse at all times during
the taxable year."
1988 - Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 6009(c)(1),
inserted "135," before "911".
Subsec. (f)(4), (5). Pub. L. 100-647, Sec. 1001(e), redesignated
par. (5) as (4) and struck out former par. (4) which read as
follows: "section 221(b)(2) (defining earned income), and".
1986 - Subsec. (b)(2)(A). Pub. L. 99-514, Sec. 131(b)(2),
substituted "sections" for "sections 221,".
Subsec. (c)(3)(A). Pub. L. 99-514, Sec. 1301(j)(8), substituted
"section 7703" for "section 143".
Subsec. (d)(4). Pub. L. 99-272, Sec. 13204(a), in amending par.
(4) generally, designated existing provisions as introductory
clause of par. (4), struck out "a monthly benefit under section
3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retirement Act of
1974", and added cls. (A) and (B).
Subsec. (d)(5). Pub. L. 99-272, Sec. 12111(b), added par. (5).
Subsec. (f)(1). Pub. L. 99-514, Sec. 1847(b)(2), substituted
"section 22(c)(3)(A)" for "section 37(c)(3)(A)".
1984 - Subsec. (f)(1). Pub. L. 98-369, Sec. 2661(o)(1), added
par. (1). Former par. (1) redesignated par. (2).
Pub. L. 98-369, Sec. 474(r)(2), substituted "section 32(c)(2)"
for "section 43(c)(2)".
Subsec. (f)(2)-(5). Pub. L. 98-369, Sec. 2661(o)(1), redesignated
pars. (1) to (4) as (2) to (5), respectively.
1983 - Subsec. (a). Pub. L. 98-21, Sec. 335(b)(2)(A), inserted
"(notwithstanding section 207 of the Social Security Act)".
Subsec. (d)(4). Pub. L. 98-76 inserted "3(f)(3)," after "3(a),".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to payments made in
taxable years beginning after Dec. 31, 2001, see section 431(d) of
Pub. L. 107-16, set out as a note under section 62 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-277, div. J, title IV, Sec. 4003(l), Oct. 21, 1998,
112 Stat. 2681-910, provided that: "The amendments made by this
section [amending this section and sections 135, 137, 163, 172,
219, 221, 264, 351, 368, 469, 954, 2001, 6311, 6404, and 9510 of
this title and amending provisions set out as a note under section
7508A of this title] shall take effect as if included in the
provisions of the 1997 Act [Pub. L. 105-34] to which they relate."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1807(c)(2) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1807(e) of
Pub. L. 104-188, set out as an Effective Date note under section 23
of this title.
EFFECTIVE DATE OF 1994 AMENDMENT
Section 309(e)(2) of Pub. L. 103-296 provided that: "The
amendment made by subsection (d) [amending this section] shall
apply with respect to benefits received after December 31, 1995, in
taxable years ending after such date."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13215(d) of Pub. L. 103-66 provided that: "The amendments
made by subsections (a) and (b) [amending this section] shall apply
to taxable years beginning after December 31, 1993."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1001(e) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6009(d) of Pub. L. 100-647 provided that: "The amendments
made by this section [enacting section 135 of this title, amending
this section and sections 219 and 469 of this title, and
renumbering former section 135 as section 136 of this title] shall
apply to taxable years beginning after December 31, 1989."
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 131(b)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311-1318 of Pub. L. 99-514, set out as an Effective Date;
Transitional Rules note under section 141 of this title.
Amendment by section 1847(b)(2) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
Amendment by section 12111(b) of Pub. L. 99-272 applicable with
respect to benefit checks issued for months ending after Apr. 7,
1986, see section 12111(c) of Pub. L. 99-272, set out as a note
under section 909 of Title 42, The Public Health and Welfare.
Section 13204(b) of Pub. L. 99-272 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to any
monthly benefit for which the generally applicable payment date is
after December 31, 1985."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(2) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 2661 of Pub. L. 98-369 effective as though
included in the enactment of the Social Security Amendments of
1983, Pub. L. 98-21, see section 2664(a) of Pub. L. 98-369, set out
as a note under section 401 of Title 42, The Public Health and
Welfare.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 98-76 applicable to benefits received after
Dec. 31, 1983, in taxable years ending after such date, except for
portions of lump-sum payments received after Dec. 31, 1983, if the
generally applicable payment date for such portion was before Jan.
1, 1984, see section 227(b) of Pub. L. 98-76 set out as a note
under section 72 of this title.
EFFECTIVE DATE
Section 121(g) of Pub. L. 98-21, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [enacting this section and section
6050F of this title, amending sections 85, 128, 861, 871, 1441, and
6103 of this title and section 3413 of Title 12, Banks and Banking,
and enacting provisions set out as a note under section 401 of
Title 42, The Public Health and Welfare] shall apply to benefits
received after December 31, 1983, in taxable years ending after
such date.
"(2) Treatment of certain lump-sum payments received after
december 31, 1983. - The amendments made by this section shall not
apply to any portion of a lump-sum payment of social security
benefits (as defined in section 86(d) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954]) received after December 31, 1983,
if the generally applicable payment date for such portion was
before January 1, 1984."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 22, 72, 135, 137, 219,
221, 222, 469, 861, 871, 3402, 6015, 6050F, 6050G, 6103 of this
title.
-End-
-CITE-
26 USC Sec. 87 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 87. Alcohol fuel credit
-STATUTE-
Gross income includes the amount of the alcohol fuel credit
determined with respect to the taxpayer for the taxable year under
section 40(a).
-SOURCE-
(Added Pub. L. 96-223, title II, Sec. 232(c)(1), Apr. 2, 1980, 94
Stat. 276, Sec. 86; renumbered Sec. 87, Pub. L. 98-21, title I,
Sec. 121(a), Apr. 20, 1983, 97 Stat. 80; amended Pub. L. 98-369,
div. A, title IV, Sec. 474(r)(3), July 18, 1984, 98 Stat. 839.)
-MISC1-
AMENDMENTS
1984 - Pub. L. 98-369 amended section generally, substituting
"the amount of the alcohol fuel credit determined with respect to
the taxpayer for the taxable year under section 40(a)" for "an
amount equal to the amount of the credit allowable to the taxpayer
under section 44E for the taxable year (determined without regard
to subsection (e) thereof)".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, and to carrybacks from such years, see section
475(a) of Pub. L. 98-369, set out as a note under section 21 of
this title.
EFFECTIVE DATE
Section applicable to sales or uses after Sept. 30, 1980, in
taxable years ending after such date, see section 232(h)(1) of Pub.
L. 96-223, set out as a note under section 40 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 56 of this title.
-End-
-CITE-
26 USC Sec. 88 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 88. Certain amounts with respect to nuclear decommissioning
costs
-STATUTE-
In the case of any taxpayer who is required to include the amount
of any nuclear decommissioning costs in the taxpayer's cost of
service for ratemaking purposes, there shall be includible in the
gross income of such taxpayer the amount so included for any
taxable year.
-SOURCE-
(Added Pub. L. 98-369, div. A, title I, Sec. 91(f)(1), July 18,
1984, 98 Stat. 607; amended Pub. L. 99-514, title XVIII, Sec.
1807(a)(4)(E)(vii), Oct. 22, 1986, 100 Stat. 2813.)
-MISC1-
AMENDMENTS
1986 - Pub. L. 99-514 substituted "for ratemaking purposes" for
"of ratemaking purposes".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE
Section effective July 18, 1984, with respect to taxable years
ending after such date, see section 91(g)(5) of Pub. L. 98-369, as
amended, set out as an Effective Date of 1984 Amendment note under
section 461 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-End-
-CITE-
26 USC Sec. 89 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
[Sec. 89. Repealed. Pub. L. 101-140, title II, Sec. 202(a), Nov. 8,
1989, 103 Stat. 830]
-MISC1-
Section, added Pub. L. 99-514, title XI, Sec. 1151(a), Oct. 22,
1986, 100 Stat. 2494; amended Pub. L. 100-647, title I, Sec.
1011B(a)(1)-(9), (21), (28), (29), (34), title III, Sec.
3021(a)(1)(A), (B), (2)(A), (3)-(9), (11)-(13)(A), (b)(2)(B), (3),
title VI, Sec. 6051(a), Nov. 10, 1988, 102 Stat. 3483-3485, 3487,
3488, 3625-3632, 3695, related to nondiscrimination rules regarding
benefits provided under employee benefit plans.
EFFECTIVE DATE OF REPEAL
Section 202(c) of Pub. L. 101-140 provided that: "The amendments
made by this section [repealing this section] shall take effect as
if included in section 1151 of the Tax Reform Act of 1986 [Pub. L.
99-514, see section 1151(k) set out as a note under section 79 of
this title]."
NONENFORCEMENT OF SECTION FOR FISCAL YEAR 1990
Pub. L. 101-136, title V, Sec. 528, Nov. 3, 1989, 103 Stat. 816,
provided that: "No monies appropriated by this Act [see Tables for
classification] may be used to implement or enforce section 1151 of
the Tax Reform Act of 1986 or the amendments made by such section
[section 1151 of Pub. L. 99-514, which enacted section 89 of this
title, amended sections 79, 105, 106, 117, 120, 125, 127, 129, 132,
414, 505, 3121, 3306, 6039D, and 6652 of this title and section 409
of Title 42, The Public Health and Welfare, and enacted provisions
set out as a note under section 89 of this title]."
TRANSITIONAL PROVISIONS
Section 3021(c) of Pub. L. 100-647 provided for the first issue
of valuation rules, the interim impact on former employees, the
meeting of the written requirement for covered plans in connection
with implementation of section 89 of the Code, and the issuance by
Nov. 15, 1988, of rules necessary to carry out section 89, prior to
repeal by Pub. L. 101-140, title II, Sec. 203(a)(7), Nov. 8, 1989,
103 Stat. 831.
PART-TIME EMPLOYEE DEFINED FOR PURPOSES OF SUBSECTION (F)
Section 6070 of Pub. L. 100-647 increased the number of employees
who would be excluded from consideration under this section during
plan years 1989 and 1990, in the case of a plan maintained by an
employer which employs fewer than 10 employees on a normal working
day during a plan year, prior to repeal by Pub. L. 101-140, title
II, Sec. 203(a)(7), Nov. 8, 1989, 103 Stat. 831.
-End-
-CITE-
26 USC Sec. 90 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART II - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
-HEAD-
Sec. 90. Illegal Federal irrigation subsidies
-STATUTE-
(a) General rule
Gross income shall include an amount equal to any illegal Federal
irrigation subsidy received by the taxpayer during the taxable
year.
(b) Illegal Federal irrigation subsidy
For purposes of this section -
(1) In general
The term "illegal Federal irrigation subsidy" means the excess
(if any) of -
(A) the amount required to be paid for any Federal irrigation
water delivered to the taxpayer during the taxpayer year, over
(B) the amount paid for such water.
(2) Federal irrigation water
The term "Federal irrigation water" means any water made
available for agricultural purposes from the operation of any
reclamation or irrigation project referred to in paragraph (8) of
section 202 of the Reclamation Reform Act of 1982.
(c) Denial of deduction
No deduction shall be allowed under this subtitle by reason of
any inclusion in gross income under subsection (a).
-SOURCE-
(Added Pub. L. 100-203, title X, Sec. 10611(a), Dec. 22, 1987, 101
Stat. 1330-451.)
-REFTEXT-
REFERENCES IN TEXT
Section 202 of the Reclamation Reform Act of 1982, referred to in
subsec. (b)(2), is classified to section 390bb of Title 43, Public
Lands.
-MISC1-
EFFECTIVE DATE
Section 10611(c) of Pub. L. 100-203 provided that: "The
amendments made by this section [enacting this section] shall apply
to water delivered to the taxpayer in months beginning after the
date of the enactment of this Act [Dec. 22, 1987]."
-End-
-CITE-
26 USC PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS
INCOME 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-MISC1-
Sec.
101. Certain death payments.(!1)
102. Gifts and inheritances.
103. Interest on State and local bonds.
[103A. Repealed.]
104. Compensation for injuries or sickness.
105. Amounts received under accident and health plans.
106. Contributions by employer to accident and health
plans.
107. Rental value of parsonages.
108. Income from discharge of indebtedness.
109. Improvements by lessee on lessor's property.
110. Qualified lessee construction allowances for
short-term leases.
111. Recovery of tax benefit items.
112. Certain combat zone compensation of members of the
Armed Forces.
[113. Repealed.]
114. Extraterritorial income.
115. Income of States, municipalities, etc.(!1)
[116. Repealed.]
117. Qualified scholarships.
118. Contributions to the capital of a corporation.
119. Meals or lodging furnished for convenience of
employer.(!1)
120. Amounts received under qualified group legal services
plans.
121. Exclusion of gain from sale of principal residence.
122. Certain reduced uniformed services retirement pay.
123. Amounts received under insurance contracts for certain
living expenses.
[124. Repealed.]
125. Cafeteria plans.
126. Certain cost-sharing payments.
127. Educational assistance programs.
[128. Repealed.]
129. Dependent care assistance programs.(!2)
130. Certain personal injury liability assignments.
131. Certain foster care payments.
132. Certain fringe benefits.
[133. Repealed.]
134. Certain military benefits.
135. Income from United States savings bonds used to pay
higher education tuition and fees.
136. Energy conservation subsidies provided by public
utilities.
137. Adoption assistance programs.
138. Medicare+Choice MSA.
139. Disaster relief payments.
139A. Federal subsidies for prescription drug plans.
140. Cross references to other Acts.
AMENDMENTS
2003 - Pub. L. 108-173, title XII, Sec. 1202(c), Dec. 8, 2003,
117 Stat. 2480, added item 139A.
2002 - Pub. L. 107-134, title I, Sec. 111(b), Jan. 23, 2002, 115
Stat. 2433, added item 139 and redesignated former item 139 as 140.
2000 - Pub. L. 106-519, Sec. 4(6), Nov. 15, 2000, 114 Stat. 2433,
added item 114.
1997 - Pub. L. 105-34, title III, Sec. 312(d)(14), title XII,
Sec. 1213(d), Aug. 5, 1997, 111 Stat. 841, 1001, added item 110 and
substituted "Exclusion of gain from sale of principal residence"
for "One-time exclusion of gain from sale of principal residence by
individual who has attained age 55" in item 121.
Pub. L. 105-33, title IV, Sec. 4006(b)(3), Aug. 5, 1997, 111
Stat. 334, added items 138 and 139 and struck out former item 138
"Cross reference to other Acts".
1996 - Pub. L. 104-188, title I, Secs. 1602(b)(8), 1704(t)(4)(B),
1807(c)(7), Aug. 20, 1996, 110 Stat. 1834, 1887, 1902, substituted
"combat zone compensation" for "combat pay" in item 112, struck out
item 133 "Interest on certain loans used to acquire employer
securities", added items 137 and 138, and struck out former item
137 "Cross reference to other Acts".
1992 - Pub. L. 102-486, title XIX, Sec. 1912(b), Oct. 24, 1992,
106 Stat. 3016, added items 136 and 137 and struck out former item
136 "Cross references to other Acts".
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(2), Nov. 5, 1990,
104 Stat. 1388-522, struck out item 110 "Income taxes paid by
lessee corporation", item 113 "Mustering-out payments for members
of the Armed Forces", item 114 "Sports programs conducted for the
American National Red Cross", item 124 "Qualified transportation
provided by employer", and item 128 "Interest on certain savings
certificates".
1988 - Pub. L. 100-647, title I, Sec. 1013(a)(37), title VI, Sec.
6009(c)(4), Nov. 10, 1988, 102 Stat. 3544, 3690, substituted
"Interest on State and local bonds" for "Interest on certain
governmental obligations" in item 103, struck out item 103A
"Mortgage subsidy bonds", added item 135 and redesignated former
item 135 "Cross references to other Acts" as item 136.
1986 - Pub. L. 99-514, title I, Sec. 123(b)(4), title VI, Sec.
612(b)(8), title XI, Sec. 1168(b), Oct. 22, 1986, 100 Stat. 2113,
2251, 2512, struck out item 116 "Partial exclusion of dividends
received by individuals", substituted in item 117 "Qualified
scholarships" for "Scholarships and fellowship grants", added item
134, and redesignated former item 134 as 135.
1984 - Pub. L. 98-369, div. A, title I, Sec. 171(b), title V,
Secs. 531(a)(2), 543(b), July 18, 1984, 98 Stat. 699, 881, 892,
substituted "Recovery of tax benefit items" for "Recovery of bad
debts, prior taxes, and delinquency amounts" in item 111, added
items 132 (relating to certain fringe benefits) and 133 (relating
to interest on certain loans used to acquire employer securities),
and redesignated former item 132 (relating to cross references to
other Acts) as item 134.
Pub. L. 98-369, div. A, title I, Sec. 16(a), July 18, 1984, 98
Stat. 505, repealed an amendment made by Pub. L. 97-34, Sec.
302(c). See 1981 Amendment note below.
1983 - Pub. L. 97-473, title I, Sec. 101(b)(2), Jan. 14, 1983, 96
Stat. 2606, purported to strike out the item relating to section
130, and added items 130 (relating to certain personal injury
liability assignments) and 131 (relating to cross references to
other Acts).
Pub. L. 97-473, title I, Sec. 102(b), Jan. 14, 1983, 96 Stat.
2607, struck out item 131 (relating to cross references to other
Acts) and added items 131 (relating to certain foster care
payments) and 132 (relating to cross references to other Acts).
1981 - Pub. L. 97-34, title III, Secs. 301(b)(1), 302(c)(1),
(d)(1), Aug. 13, 1981, 95 Stat. 270, 272, 274, effective with
regard to taxable years beginning after Sept. 30, 1981,
redesignated item 128 "Cross References to other Acts" as 129 and
added item 128 "Interest on certain savings certificates" and,
section 302(c)(1), with regard to taxable years beginning after
Dec. 31, 1984, provided that "Partial exclusion of interest" is
substituted for "Interest on certain savings certificates" in item
128. Section 16(a) of Pub. L. 98-369, repealed section 302(c) of
Pub. L. 97-34, and provided that this title shall be applied and
administered as if section 302(c), and the amendments made by
section 302(c), had not been enacted.
1980 - Pub. L. 96-499, title XI, Sec. 1102(b), Dec. 5, 1980, 94
Stat. 2669, added item 103A.
Pub. L. 96-223, title IV, Sec. 404(b)(1), Apr. 2, 1980, 94 Stat.
306, inserted "and interest" after "dividends" in item 116.
1978 - Pub. L. 95-618, title II, Sec. 242(b), Nov. 9, 1978, 92
Stat. 3194, redesignated former item 124 as 125 and added item 124.
Pub. L. 95-600, title I, Secs. 134(b), 164(c), title IV, Sec.
404(c)(3), title V, Sec. 543(b), Nov. 6, 1978, 92 Stat. 2785, 2814,
2870, 2890, in item 121 substituted "One-time exclusion of gain
from sale of principal residence by individual who has attained age
55" for "Gain from sale of exchange of residence of individual who
has attained age 65", redesignated former item 124 as 128, and
added items 125 to 127.
1976 - Pub. L. 94-455, title XXI, Sec. 2134(c), Oct. 4, 1976, 90
Stat. 1928, added item 120.
1969 - Pub. L. 91-172, title IX, Sec. 901(b), Dec. 30, 1969, 83
Stat. 709, redesignated former item 123 as 124, and added item 123.
1966 - Pub. L. 89-365, Sec. 1(a)(2), Mar. 8, 1966, 80 Stat. 32,
redesignated former item 122 as 123, and added item 122.
1964 - Pub. L. 88-272, title II, Sec. 206(b)(2), Feb. 26, 1964,
78 Stat. 40, redesignated former item 121 as 122, and added item
121.
1958 - Pub. L. 85-866, title I, Sec. 3(b), Sept. 2, 1958, 72
Stat. 1607, struck out item 120 "Statutory subsistence allowance
received by police".
NO FEDERAL INCOME TAX ON RESTITUTION RECEIVED BY VICTIMS OF THE
NAZI REGIME OR THEIR HEIRS OR ESTATES
Pub. L. 107-16, title VIII, Sec. 803, June 7, 2001, 115 Stat.
149, provided that:
"(a) In General. - For purposes of the Internal Revenue Code of
1986, any excludable restitution payments received by an eligible
individual (or the individual's heirs or estate) and any excludable
interest -
"(1) shall not be included in gross income; and
"(2) shall not be taken into account for purposes of applying
any provision of such Code which takes into account excludable
income in computing adjusted gross income, including section 86
of such Code (relating to taxation of Social Security benefits).
For purposes of such Code, the basis of any property received by an
eligible individual (or the individual's heirs or estate) as part
of an excludable restitution payment shall be the fair market value
of such property as of the time of the receipt.
"(b) Eligible Individual. - For purposes of this section, the
term 'eligible individual' means a person who was persecuted on the
basis of race, religion, physical or mental disability, or sexual
orientation by Nazi Germany, any other Axis regime, or any other
Nazi-controlled or Nazi-allied country.
"(c) Excludable Restitution Payment. - For purposes of this
section, the term 'excludable restitution payment' means any
payment or distribution to an individual (or the individual's heirs
or estate) which -
"(1) is payable by reason of the individual's status as an
eligible individual, including any amount payable by any foreign
country, the United States of America, or any other foreign or
domestic entity, or a fund established by any such country or
entity, any amount payable as a result of a final resolution of a
legal action, and any amount payable under a law providing for
payments or restitution of property;
"(2) constitutes the direct or indirect return of, or
compensation or reparation for, assets stolen or hidden from, or
otherwise lost to, the individual before, during, or immediately
after World War II by reason of the individual's status as an
eligible individual, including any proceeds of insurance under
policies issued on eligible individuals by European insurance
companies immediately before and during World War II; or
"(3) consists of interest which is payable as part of any
payment or distribution described in paragraph (1) or (2).
"(d) Excludable Interest. - For purposes of this section, the
term 'excludable interest' means any interest earned by -
"(1) escrow accounts or settlement funds established pursuant
to the settlement of the action entitled 'In re: Holocaust Victim
Assets Litigation,' (E.D.N.Y.) C.A. No. 96-4849,
"(2) funds to benefit eligible individuals or their heirs
created by the International Commission on Holocaust Insurance
Claims as a result of the Agreement between the Government of the
United States of America and the Government of the Federal
Republic of Germany concerning the Foundation 'Remembrance,
Responsibility, and Future,' dated July 17, 2000, or
"(3) similar funds subject to the administration of the United
States courts created to provide excludable restitution payments
to eligible individuals (or eligible individuals' heirs or
estates).
"(e) Effective Date. -
"(1) In general. - This section shall apply to any amount
received on or after January 1, 2000.
"(2) No inference. - Nothing in this Act [see Tables for
classification] shall be construed to create any inference with
respect to the proper tax treatment of any amount received before
January 1, 2000."
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 61 of this title.
-FOOTNOTE-
(!1) So in original. Does not conform to section catchline.
(!2) Editorially supplied. Section 129 added by Pub. L. 97-34
without corresponding amendment of part analysis.
-End-
-CITE-
26 USC Sec. 101 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 101. Certain death benefits
-STATUTE-
(a) Proceeds of life insurance contracts payable by reason of death
(1) General rule
Except as otherwise provided in paragraph (2), subsection (d),
and subsection (f), gross income does not include amounts
received (whether in a single sum or otherwise) under a life
insurance contract, if such amounts are paid by reason of the
death of the insured.
(2) Transfer for valuable consideration
In the case of a transfer for a valuable consideration, by
assignment or otherwise, of a life insurance contract or any
interest therein, the amount excluded from gross income by
paragraph (1) shall not exceed an amount equal to the sum of the
actual value of such consideration and the premiums and other
amounts subsequently paid by the transferee. The preceding
sentence shall not apply in the case of such a transfer -
(A) if such contract or interest therein has a basis for
determining gain or loss in the hands of a transferee
determined in whole or in part by reference to such basis of
such contract or interest therein in the hands of the
transferor, or
(B) if such transfer is to the insured, to a partner of the
insured, to a partnership in which the insured is a partner, or
to a corporation in which the insured is a shareholder or
officer.
The term "other amounts" in the first sentence of this paragraph
includes interest paid or accrued by the transferee on
indebtedness with respect to such contract or any interest
therein if such interest paid or accrued is not allowable as a
deduction by reason of section 264(a)(4).
[(b) Repealed. Pub. L. 104-188, title I, Sec. 1402(a), Aug. 20,
1996, 110 Stat. 1789]
(c) Interest
If any amount excluded from gross income by subsection (a) is
held under an agreement to pay interest thereon, the interest
payments shall be included in gross income.
(d) Payment of life insurance proceeds at a date later than death
(1) General rule
The amounts held by an insurer with respect to any beneficiary
shall be prorated (in accordance with such regulations as may be
prescribed by the Secretary) over the period or periods with
respect to which such payments are to be made. There shall be
excluded from the gross income of such beneficiary in the taxable
year received any amount determined by such proration. Gross
income includes, to the extent not excluded by the preceding
sentence, amounts received under agreements to which this
subsection applies.
(2) Amount held by an insurer
An amount held by an insurer with respect to any beneficiary
shall mean an amount to which subsection (a) applies which is -
(A) held by any insurer under an agreement provided for in
the life insurance contract, whether as an option or otherwise,
to pay such amount on a date or dates later than the death of
the insured, and
(B) equal to the value of such agreement to such beneficiary
(i) as of the date of death of the insured (as if any
option exercised under the life insurance contract were
exercised at such time), and
(ii) as discounted on the basis of the interest rate used
by the insurer in calculating payments under the agreement
and mortality tables prescribed by the Secretary.
(3) Application of subsection
This subsection shall not apply to any amount to which
subsection (c) is applicable.
[(e) Repealed. Pub. L. 98-369, div. A, title IV, Sec. 421(b)(2),
July 18, 1984, 98 Stat. 794]
(f) Proceeds of flexible premium contracts issued before January 1,
1985 payable by reason of death
(1) In general
Any amount paid by reason of the death of the insured under a
flexible premium life insurance contract issued before January 1,
1985 shall be excluded from gross income only if -
(A) under such contract -
(i) the sum of the premiums paid under such contract does
not at any time exceed the guideline premium limitation as of
such time, and
(ii) any amount payable by reason of the death of the
insured (determined without regard to any qualified
additional benefit) is not at any time less than the
applicable percentage of the cash value of such contract at
such time, or
(B) by the terms of such contract, the cash value of such
contract may not at any time exceed the net single premium with
respect to the amount payable by reason of the death of the
insured (determined without regard to any qualified additional
benefit) at such time.
(2) Guideline premium limitation
For purposes of this subsection -
(A) Guideline premium limitation
The term "guideline premium limitation" means, as of any
date, the greater of -
(i) the guideline single premium, or
(ii) the sum of the guideline level premiums to such date.
(B) Guideline single premium
The term "guideline single premium" means the premium at
issue with respect to future benefits under the contract
(without regard to any qualified additional benefit), and with
respect to any charges for qualified additional benefits, at
the time of a determination under subparagraph (A) or (E) and
which is based on -
(i) the mortality and other charges guaranteed under the
contract, and
(ii) interest at the greater of an annual effective rate of
6 percent or the minimum rate or rates guaranteed upon issue
of the contract.
(C) Guideline level premium
The term "guideline level premium" means the level annual
amount, payable over the longest period permitted under the
contract (but ending not less than 20 years from date of issue
or not later than age 95, if earlier), computed on the same
basis as the guideline single premium, except that subparagraph
(B)(ii) shall be applied by substituting "4 percent" for "6
percent".
(D) Computational rules
In computing the guideline single premium or guideline level
premium under subparagraph (B) or (C) -
(i) the excess of the amount payable by reason of the death
of the insured (determined without regard to any qualified
additional benefit) over the cash value of the contract shall
be deemed to be not greater than such excess at the time the
contract was issued,
(ii) the maturity date shall be the latest maturity date
permitted under the contract, but not less than 20 years
after the date of issue or (if earlier) age 95, and
(iii) the amount of any endowment benefit (or sum of
endowment benefits) shall be deemed not to exceed the least
amount payable by reason of the death of the insured
(determined without regard to any qualified additional
benefit) at any time under the contract.
(E) Adjustments
The guideline single premium and guideline level premium
shall be adjusted in the event of a change in the future
benefits or any qualified additional benefit under the contract
which was not reflected in any guideline single premiums or
guideline level premium previously determined.
(3) Other definitions and special rules
For purposes of this subsection -
(A) Flexible premium life insurance contract
The terms "flexible premium life insurance contract" and
"contract" mean a life insurance contract (including any
qualified additional benefits) which provides for the payment
of one or more premiums which are not fixed by the insurer as
to both timing and amount. Such terms do not include that
portion of any contract which is treated under State law as
providing any annuity benefits other than as a settlement
option.
(B) Premiums paid
The term "premiums paid" means the premiums paid under the
contract less any amounts (other than amounts includible in
gross income) to which section 72(e) applies. If, in order to
comply with the requirements of paragraph (1)(A), any portion
of any premium paid during any contract year is returned by the
insurance company (with interest) within 60 days after the end
of a contract year -
(i) the amount so returned (excluding interest) shall be
deemed to reduce the sum of the premiums paid under the
contract during such year, and
(ii) notwithstanding the provisions of section 72(e), the
amount of any interest so returned shall be includible in the
gross income of the recipient.
(C) Applicable percentage
The term "applicable percentage" means -
(i) 140 percent in the case of an insured with an attained
age at the beginning of the contract year of 40 or less, and
(ii) in the case of an insured with an attained age of more
than 40 as of the beginning of the contract year, 140 percent
reduced (but not below 105 percent) by one percent for each
year in excess of 40.
(D) Cash value
The cash value of any contract shall be determined without
regard to any deduction for any surrender charge or policy
loan.
(E) Qualified additional benefits
The term "qualified additional benefits" means any -
(i) guaranteed insurability,
(ii) accidental death benefit,
(iii) family term coverage, or
(iv) waiver of premium.
(F) Premium payments not disqualifying contract
The payment of a premium which would result in the sum of the
premiums paid exceeding the guideline premium limitation shall
be disregarded for purposes of paragraph (1)(A)(i) if the
amount of such premium does not exceed the amount necessary to
prevent the termination of the contract without cash value on
or before the end of the contract year.
(G) Net single premium
In computing the net single premium under paragraph (1)(B) -
(i) the mortality basis shall be that guaranteed under the
contract (determined by reference to the most recent
mortality table allowed under all State laws on the date of
issuance),
(ii) interest shall be based on the greater of -
(I) an annual effective rate of 4 percent (3 percent for
contracts issued before July 1, 1983), or
(II) the minimum rate or rates guaranteed upon issue of
the contract, and
(iii) the computational rules of paragraph (2)(D) shall
apply, except that the maturity date referred to in clause
(ii) thereof shall not be earlier than age 95.
(H) Correction of errors
If the taxpayer establishes to the satisfaction of the
Secretary that -
(i) the requirements described in paragraph (1) for any
contract year was not satisfied due to reasonable error, and
(ii) reasonable steps are being taken to remedy the error,
the Secretary may waive the failure to satisfy such
requirements.
(I) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection.
(g) Treatment of certain accelerated death benefits
(1) In general
For purposes of this section, the following amounts shall be
treated as an amount paid by reason of the death of an insured:
(A) Any amount received under a life insurance contract on
the life of an insured who is a terminally ill individual.
(B) Any amount received under a life insurance contract on
the life of an insured who is a chronically ill individual.
(2) Treatment of viatical settlements
(A) In general
If any portion of the death benefit under a life insurance
contract on the life of an insured described in paragraph (1)
is sold or assigned to a viatical settlement provider, the
amount paid for the sale or assignment of such portion shall be
treated as an amount paid under the life insurance contract by
reason of the death of such insured.
(B) Viatical settlement provider
(i) In general
The term "viatical settlement provider" means any person
regularly engaged in the trade or business of purchasing, or
taking assignments of, life insurance contracts on the lives
of insureds described in paragraph (1) if -
(I) such person is licensed for such purposes (with
respect to insureds described in the same subparagraph of
paragraph (1) as the insured) in the State in which the
insured resides, or
(II) in the case of an insured who resides in a State not
requiring the licensing of such persons for such purposes
with respect to such insured, such person meets the
requirements of clause (ii) or (iii), whichever applies to
such insured.
(ii) Terminally ill insureds
A person meets the requirements of this clause with respect
to an insured who is a terminally ill individual if such
person -
(I) meets the requirements of sections 8 and 9 of the
Viatical Settlements Model Act of the National Association
of Insurance Commissioners, and
(II) meets the requirements of the Model Regulations of
the National Association of Insurance Commissioners
(relating to standards for evaluation of reasonable
payments) in determining amounts paid by such person in
connection with such purchases or assignments.
(iii) Chronically ill insureds
A person meets the requirements of this clause with respect
to an insured who is a chronically ill individual if such
person -
(I) meets requirements similar to the requirements
referred to in clause (ii)(I), and
(II) meets the standards (if any) of the National
Association of Insurance Commissioners for evaluating the
reasonableness of amounts paid by such person in connection
with such purchases or assignments with respect to
chronically ill individuals.
(3) Special rules for chronically ill insureds
In the case of an insured who is a chronically ill individual -
(A) In general
Paragraphs (1) and (2) shall not apply to any payment
received for any period unless -
(i) such payment is for costs incurred by the payee (not
compensated for by insurance or otherwise) for qualified
long-term care services provided for the insured for such
period, and
(ii) the terms of the contract giving rise to such payment
satisfy -
(I) the requirements of section 7702B(b)(1)(B), and
(II) the requirements (if any) applicable under
subparagraph (B).
For purposes of the preceding sentence, the rule of section
7702B(b)(2)(B) shall apply.
(B) Other requirements
The requirements applicable under this subparagraph are -
(i) those requirements of section 7702B(g) and section
4980C which the Secretary specifies as applying to such a
purchase, assignment, or other arrangement,
(ii) standards adopted by the National Association of
Insurance Commissioners which specifically apply to
chronically ill individuals (and, if such standards are
adopted, the analogous requirements specified under clause
(i) shall cease to apply), and
(iii) standards adopted by the State in which the
policyholder resides (and if such standards are adopted, the
analogous requirements specified under clause (i) and
(subject to section 4980C(f)) standards under clause (ii),
shall cease to apply).
(C) Per diem payments
A payment shall not fail to be described in subparagraph (A)
by reason of being made on a per diem or other periodic basis
without regard to the expenses incurred during the period to
which the payment relates.
(D) Limitation on exclusion for periodic payments
For limitation on amount of periodic payments which are
treated as described in paragraph (1), see section 7702B(d).
(4) Definitions
For purposes of this subsection -
(A) Terminally ill individual
The term "terminally ill individual" means an individual who
has been certified by a physician as having an illness or
physical condition which can reasonably be expected to result
in death in 24 months or less after the date of the
certification.
(B) Chronically ill individual
The term "chronically ill individual" has the meaning given
such term by section 7702B(c)(2); except that such term shall
not include a terminally ill individual.
(C) Qualified long-term care services
The term "qualified long-term care services" has the meaning
given such term by section 7702B(c).
(D) Physician
The term "physician" has the meaning given to such term by
section 1861(r)(1) of the Social Security Act (42 U.S.C.
1395x(r)(1)).
(5) Exception for business-related policies
This subsection shall not apply in the case of any amount paid
to any taxpayer other than the insured if such taxpayer has an
insurable interest with respect to the life of the insured by
reason of the insured being a director, officer, or employee of
the taxpayer or by reason of the insured being financially
interested in any trade or business carried on by the taxpayer.
(h) Survivor benefits attributable to service by a public safety
officer who is killed in the line of duty
(1) In general
Gross income shall not include any amount paid as a survivor
annuity on account of the death of a public safety officer (as
such term is defined in section 1204 of the Omnibus Crime Control
and Safe Streets Act of 1968) killed in the line of duty -
(A) if such annuity is provided, under a governmental plan
which meets the requirements of section 401(a), to the spouse
(or a former spouse) of the public safety officer or to a child
of such officer; and
(B) to the extent such annuity is attributable to such
officer's service as a public safety officer.
(2) Exceptions
Paragraph (1) shall not apply with respect to the death of any
public safety officer if, as determined in accordance with the
provisions of the Omnibus Crime Control and Safe Streets Act of
1968 -
(A) the death was caused by the intentional misconduct of the
officer or by such officer's intention to bring about such
officer's death;
(B) the officer was voluntarily intoxicated (as defined in
section 1204 of such Act) at the time of death;
(C) the officer was performing such officer's duties in a
grossly negligent manner at the time of death; or
(D) the payment is to an individual whose actions were a
substantial contributing factor to the death of the officer.
(i) Certain employee death benefits payable by reason of death of
certain terrorist victims or astronauts
(1) In general
Gross income does not include amounts (whether in a single sum
or otherwise) paid by an employer by reason of the death of an
employee who is a specified terrorist victim (as defined in
section 692(d)(4)).
(2) Limitation
(A) In general
Subject to such rules as the Secretary may prescribe,
paragraph (1) shall not apply to amounts which would have been
payable after death if the individual had died other than as a
specified terrorist victim (as so defined).
(B) Exception
Subparagraph (A) shall not apply to incidental death benefits
paid from a plan described in section 401(a) and exempt from
tax under section 501(a).
(3) Treatment of self-employed individuals
For purposes of paragraph (1), the term "employee" includes a
self-employed individual (as defined in section 401(c)(1)).
(4) Relief with respect to astronauts
The provisions of this subsection shall apply to any astronaut
whose death occurs in the line of duty.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 26; Pub. L. 85-866, title I,
Sec. 23(d), Sept. 2, 1958, 72 Stat. 1622; Pub. L. 87-792, Sec.
7(c), Oct. 10, 1962, 76 Stat. 829; Pub. L. 89-365, Sec. 1(c), Mar.
8, 1966, 80 Stat. 32; Pub. L. 91-172, title I, Sec. 101(j)(l), Dec.
30, 1969, 83 Stat. 526; Pub. L. 93-406, title II, Secs.
2005(c)(15), 2007(b)(3), Sept. 2, 1974, 88 Stat. 992, 994; Pub. L.
94-455, title XIX, Secs. 1901(a)(16), 1906(b)(13)(A), Oct. 4, 1976,
90 Stat. 1765, 1834; Pub. L. 97-248, title II, Secs. 239, 266(a),
(b), Sept. 3, 1982, 96 Stat. 514, 547, 550; Pub. L. 98-369, div. A,
title II, Sec. 221(b)(2), title IV, Sec. 421(b)(2), title VII, Sec.
713(e), July 18, 1984, 98 Stat. 772, 794, 958; Pub. L. 99-514,
title X, Sec. 1001(a)-(c), Oct. 22, 1986, 100 Stat. 2387; Pub. L.
104-188, title I, Sec. 1402(a), (b)(1), Aug. 20, 1996, 110 Stat.
1789; Pub. L. 104-191, title III, Sec. 331(a), Aug. 21, 1996, 110
Stat. 2067; Pub. L. 105-34, title X, Sec. 1084(b)(2), title XV,
Sec. 1528(a), Aug. 5, 1997, 111 Stat. 952, 1074; Pub. L. 107-134,
title I, Sec. 102(a), Jan. 23, 2002, 115 Stat. 2429; Pub. L.
108-121, title I, Sec. 110(b)(1), (2), Nov. 11, 2003, 117 Stat.
1342.)
-REFTEXT-
REFERENCES IN TEXT
The Omnibus Crime Control and Safe Streets Act of 1968, referred
to in subsec. (h), is Pub. L. 90-351, June 19, 1968, 82 Stat. 197,
as amended. Section 1204 of the Act is classified to section 3796b
of Title 42, The Public Health and Welfare. For complete
classification of this Act to the Code, see Short Title note set
out under section 3711 of Title 42 and Tables.
-COD-
CODIFICATION
Another section 1084(b) of Pub. L. 105-34 amended sections 805,
807, 812, and 832 of this title.
-MISC1-
AMENDMENTS
2003 - Subsec. (i). Pub. L. 108-121, Sec. 110(b)(2), inserted "or
astronauts" after "victims" in heading.
Subsec. (i)(4). Pub. L. 108-121, Sec. 110(b)(1), added par. (4).
2002 - Subsec. (i). Pub. L. 107-134 added subsec. (i).
1997 - Subsec. (a)(2). Pub. L. 105-34, Sec. 1084(b)(2), inserted
at end "The term 'other amounts' in the first sentence of this
paragraph includes interest paid or accrued by the transferee on
indebtedness with respect to such contract or any interest therein
if such interest paid or accrued is not allowable as a deduction by
reason of section 264(a)(4)."
Subsec. (h). Pub. L. 105-34, Sec. 1528(a), added subsec. (h).
1996 - Subsec. (b). Pub. L. 104-188, Sec. 1402(a), struck out
subsec. (b) which related to employees' death benefits.
Subsec. (c). Pub. L. 104-188, Sec. 1402(b)(1), substituted
"subsection (a)" for "subsection (a) or (b)".
Subsec. (g). Pub. L. 104-191 added subsec. (g).
1986 - Subsec. (d)(1). Pub. L. 99-514, Sec. 1001(a), amended
second sentence generally, which prior to amendment read as
follows: "There shall be excluded from the gross income of such
beneficiary in the taxable year received -
"(A) any amount determined by such proration, and
"(B) in the case of the surviving spouse of the insured, that
portion of the excess of the amounts received under one or more
agreements specified in paragraph (2)(A) (whether or not payment
of any part of such amounts is guaranteed by the insurer) over
the amount determined in subparagraph (A) of this paragraph which
is not greater than $1,000 with respect to any insured."
Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1001(c)(2), substituted
"equal" for "is equal" in introductory provisions.
Subsec. (d)(2)(B)(ii). Pub. L. 99-514, Sec. 1001(b), amended cl.
(ii) generally. Prior to amendment, cl. (ii) read as follows: "as
discounted on the basis of the interest rate and mortality tables
used by the insurer in calculating payments under the agreement."
Subsec. (d)(3), (4). Pub. L. 99-514, Sec. 1001(c)(1),
redesignated par. (4) as (3), and struck out former par. (3),
"Surviving spouse", which read as follows: "For purposes of this
subsection, the term 'surviving spouse' means the spouse of the
insured as of the date of death, including a spouse legally
separated but not under a decree of absolute divorce."
1984 - Subsec. (b)(3)(B). Pub. L. 98-369, Sec. 713(e), amended
subpar. (B) generally, substituting "certain distributions" for
"certain lump sum distributions" in heading, substituting "amount
paid or distributed" for "lump sum distribution described in the
second sentence of paragraph (2)(B)" in introductory text and
adding cls. (i) and (ii).
Subsec. (e). Pub. L. 98-369, Sec. 421(b)(2), repealed subsec. (e)
relating to payments of alimony or of income of an estate or trust
in case of divorce, etc.
Subsec. (f). Pub. L. 98-369, Sec. 221(b)(2)(B), inserted "issued
before January 1, 1985" in heading.
Subsec. (f)(1). Pub. L. 98-369, Sec. 221(b)(2)(A), inserted
"issued before January 1, 1985" in introductory text.
1982 - Subsec. (a)(1). Pub. L. 97-248, Sec. 266(b), substituted
", subsection (d), and subsection (f)" for "and in subsection (d)".
Subsec. (b)(3). Pub. L. 97-248, Sec. 239, amended par. (3)
generally, substituting "Treatment of self-employed individuals"
for "Self-employed individual not considered an employee" in
heading, designating existing provisions as subparagraph (A) and,
as so designated, adding heading and exception for subpar. (B), and
adding subparagraph (B).
Subsec. (f). Pub. L. 97-248, Sec. 266(a), added subsec. (f).
1976 - Subsec. (d)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(16), struck out subsec.
(f) relating to effective date of section.
1974 - Subsec. (b)(2)(B). Pub. L. 93-406, Sec. 2005(c)(15),
substituted "a lump sum distribution (as defined in section
402(e)(4)" for "total distributions payable (as defined in section
402(a)(3)) which are paid to a distributee within one taxable year
of the distributee by reason of the employee's death".
Subsec. (b)(2)(D). Pub. L. 93-406, Sec. 2007(b)(3), substituted
"if the member or former member of the uniformed services by reason
of whose death such annuity is payable" for "if the individual who
made the election under such chapter".
1969 - Subsec. (b)(2)(B)(iii). Pub. L. 91-172 substituted
references to section 170(b)(1)(A) (ii) and (vi), and to religious
organizations, for references to section 503(b)(1), (2), or (3).
1966 - Subsec. (b)(2)(D). Pub. L. 89-365 provided that par. (1)
shall not apply in the case of an annuity under chapter 73 of title
10 if the individual who made the election under that chapter died
after attaining retirement age.
1962 - Subsec. (b)(2)(B)(ii). Pub. L. 87-792, Sec. 7(c)(1),
substituted "described in section 403(a)" for "which meets the
requirements of paragraphs (3), (4), (5), and (6) of section
401(a)".
Subsec. (b)(3). Pub. L. 87-792, Sec. 7(c)(2), added par. (3).
1958 - Subsec. (b)(2)(B). Pub. L. 85-866 substituted "This
subparagraph shall not apply to total distributions payable (as
defined in section 402(a)(3) which are paid to a distributee within
one taxable year of the distributee by reason of the employee's
death - " for "(other than total distributions payable, as defined
in section 402(a)(3), which are paid to distributee, by a stock
bonus, pension, or profit-sharing trust described in section 401(a)
which is exempt from tax under section 501(a), or under an annuity
contract under a plan which meets the requirements of paragraphs
(3), (4), (5), and (6) of section 401(a), within one taxable year
of the distributee by reason of the employee's death)", and added
cls. (i), (ii), and (iii).
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 110(b)(3), Nov. 11, 2003, 117
Stat. 1342, provided that: "The amendments made by this subsection
[amending this section] shall apply to amounts paid after December
31, 2002, with respect to deaths occurring after such date."
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-134, title I, Sec. 102(b), Jan. 23, 2002, 115 Stat.
2429, provided that:
"(1) Effective date. - The amendment made by this section
[amending this section] shall apply to taxable years ending before,
on, or after September 11, 2001.
"(2) Waiver of limitations. - If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-year
period beginning on the date of the enactment of this Act [Jan. 23,
2002] by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period."
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1084(d) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6010(o)(3)(B), July 22, 1998, 112 Stat. 816,
provided that: "The amendments made by this section [amending this
section and sections 264, 265, 805, 807, 812, and 832 of this
title] shall apply to contracts issued after June 8, 1997, in
taxable years ending after such date. For purposes of the preceding
sentence, any material increase in the death benefit or other
material change in the contract shall be treated as a new contract
except that, in the case of a master contract (within the meaning
of section 264(f)(4)(E) of the Internal Revenue Code of 1986), the
addition of covered lives shall be treated as a new contract only
with respect to such additional covered lives. For purposes of this
subsection, an increase in the death benefit under a policy or
contract issued in connection with a lapse described in section
501(d)(2) of the Health Insurance Portability and Accountability
Act of 1996 [Pub. L. 104-191, set out as a note under section 264
of this title] shall not be treated as a new contract."
Section 1528(b) of Pub. L. 105-34, as amended by Pub. L. 107-15,
Sec. 2, June 5, 2001, 115 Stat. 37, provided that: "The amendments
made by this section [amending this section] shall apply to amounts
received in taxable years beginning after December 31, 1996, with
respect to individuals dying after such date, and to amounts
received in taxable years beginning after December 31, 2001, with
respect to individuals dying on or before December 31, 1996."
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 331(b) of Pub. L. 104-191 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts received after December 31, 1996."
Section 1402(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and sections 406, 407,
and 7701 of this title] shall apply with respect to decedents dying
after the date of the enactment of this Act [Aug. 20, 1996]."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1001(d) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to amounts
received with respect to deaths occurring after the date of the
enactment of this section [Oct. 22, 1986] in taxable years ending
after such date."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 221(b)(2) of Pub. L. 98-369 effective Jan.
1, 1984, see section 221(d)(4) of Pub. L. 98-369, set out as an
Effective Date note under section 7702 of this title.
Amendment by section 421(b)(2) of Pub. L. 98-369 applicable to
transfers after July 18, 1984, in taxable years ending after such
date, subject to election to have repeal apply to transfers after
1983 or to transfers pursuant to existing decrees, see section
421(d) of Pub. L. 98-369, set out as an Effective Date note under
section 1041 of this title.
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1982 AMENDMENTS
Section 266(c)(1) of Pub. L. 97-248, as amended by Pub. L.
98-369, div. A, title II, Sec. 221(b)(1), July 18, 1984, 98 Stat.
772, provided that: "The amendments made by this section [amending
this section] shall apply to contracts entered into before January
1, 1985."
Amendment by section 239 of Pub. L. 97-248 applicable to
decedents dying after Dec. 31, 1983, see section 241(b) of Pub. L.
97-248, set out as an Effective Date note under section 416 of this
title. Such amendment is applicable, in the case of amounts
received under the plan of an S corporation, with respect to
decedents dying after Dec. 31, 1982, notwithstanding section 241(b)
of Pub. L. 97-248, see section 6(b)(2) of Pub. L. 97-354, Oct. 19,
1982, 96 Stat. 1697, set out as a note under section 1361 of this
title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(16) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Amendment by section 1906(b)(13)(A) of Pub. L. 94-455 effective
Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94-455, set out as
a note under section 6013 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by section 2005(c)(15) of Pub. L. 93-406 applicable
only with respect to distributions and payments made after Dec. 31,
1973, in taxable years beginning after Dec. 31, 1973, see section
2005(d) of Pub. L. 93-406, set out as a note under section 402 of
this title.
Amendment by section 2007(b)(3) of Pub. L. 93-406 applicable to
taxable years ending on or after Sept. 21, 1972, with respect to
individuals dying on or after Sept. 21, 1972, see section 2007(c)
of Pub. L. 93-406, set out as a note under section 122 of this
title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 effective Jan. 1, 1970, see section
101(k)(1) of Pub. L. 91-172, set out as an Effective Date note
under section 4940 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-365 applicable with respect to
individuals making an election under chapter 73 of Title 10 who
died after Dec. 31, 1965, see section 1(d) of Pub. L. 89-365, set
out as an Effective Date note under section 122 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1957, see section 23(g) of Pub. L. 85-866, set out
as a note under section 403 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
FLEXIBLE PREMIUM CONTRACTS ISSUED DURING 1984 WHICH MEET
REQUIREMENTS OF SECTION 7702 TREATED AS MEETING REQUIREMENTS OF
SECTION 101(F)
Flexible premium contracts issued during 1984 which meet
requirements of section 7702 of this title treated as meeting
requirements of subsec. (f) of this section, see section 221(b)(3)
of Pub. L. 98-369, as added by Pub. L. 99-514, set out as a note
under section 7702 of this title.
SPECIAL RULES FOR CONTRACTS ENTERED INTO BEFORE JANUARY 1, 1983
Section 266(c)(2), (3) of Pub. L. 97-248, as amended by Pub. L.
97-448, title III, Sec. 306(a)(13), Jan. 12, 1983, 96 Stat. 2405;
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
"(2) Special rule for contracts entered into before january 1,
1983. - Any contract entered into before January 1, 1983, which
meets the requirements of section 101(f) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954] on the date which is 1 year
after the date of the enactment of this Act [Sept. 3, 1982] shall
be treated as meeting the requirements of such section for any
period before the date on which such contract meets such
requirements. Any death benefits paid under a flexible premium life
insurance contract (within the meaning of section 101(f)(3)(A) of
such Code) before the date which is 1 year after such date of
enactment [Sept. 3, 1982] shall be excluded from gross income.
"(3) Special rule for certain contracts. - Any contract entered
into before January 1, 1983, shall be treated as meeting the
requirements of subparagraph (A) of section 101(f)(1) of such Code
if such contract would meet such requirements if section
101(f)(2)(C) of such Code were applied by substituting '3 percent'
for '4 percent'."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 72, 818, 953, 6050Q,
7702, 7702B of this title.
-End-
-CITE-
26 USC Sec. 102 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 102. Gifts and inheritances
-STATUTE-
(a) General rule
Gross income does not include the value of property acquired by
gift, bequest, devise, or inheritance.
(b) Income
Subsection (a) shall not exclude from gross income -
(1) the income from any property referred to in subsection (a);
or
(2) where the gift, bequest, devise, or inheritance is of
income from property, the amount of such income.
Where, under the terms of the gift, bequest, devise, or
inheritance, the payment, crediting, or distribution thereof is to
be made at intervals, then, to the extent that it is paid or
credited or to be distributed out of income from property, it shall
be treated for purposes of paragraph (2) as a gift, bequest,
devise, or inheritance of income from property. Any amount included
in the gross income of a beneficiary under subchapter J shall be
treated for purposes of paragraph (2) as a gift, bequest, devise,
or inheritance of income from property.
(c) Employee gifts
(1) In general
Subsection (a) shall not exclude from gross income any amount
transferred by or for an employer to, or for the benefit of, an
employee.
(2) Cross references
For provisions excluding certain employee achievement awards
from gross income, see section 74(c).
For provisions excluding certain de minimis fringes from
gross income, see section 132(e).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 28; Pub. L. 99-514, title I,
Sec. 122(b), Oct. 22, 1986, 100 Stat. 2110.)
-MISC1-
AMENDMENTS
1986 - Subsec. (c). Pub. L. 99-514 added subsec. (c).
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to prizes and awards
granted after Dec. 31, 1986, see section 151(c) of Pub. L. 99-514,
set out as a note under section 1 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25A, 135, 274 of this
title.
-End-
-CITE-
26 USC Sec. 103 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 103. Interest on State and local bonds
-STATUTE-
(a) Exclusion
Except as provided in subsection (b), gross income does not
include interest on any State or local bond.
(b) Exceptions
Subsection (a) shall not apply to -
(1) Private activity bond which is not a qualified bond
Any private activity bond which is not a qualified bond (within
the meaning of section 141).
(2) Arbitrage bond
Any arbitrage bond (within the meaning of section 148).
(3) Bond not in registered form, etc.
Any bond unless such bond meets the applicable requirements of
section 149.
(c) Definitions
For purposes of this section and part IV -
(1) State or local bond
The term "State or local bond" means an obligation of a State
or political subdivision thereof.
(2) State
The term "State" includes the District of Columbia and any
possession of the United States.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 29; Pub. L. 90-364, title I,
Sec. 107(a), June 28, 1968, 82 Stat. 266; Pub. L. 90-634, title IV,
Sec. 401(a), Oct. 24, 1968, 82 Stat. 1349; Pub. L. 91-172, title
VI, Sec. 601(a), Dec. 30, 1969, 83 Stat. 656; Pub. L. 92-178, title
III, Sec. 315(a), (b), Dec. 10, 1971, 85 Stat. 529; Pub. L. 94-164,
Sec. 7(a), Dec. 23, 1975, 89 Stat. 976; Pub. L. 94-182, title III,
Sec. 301(a), Dec. 31, 1975, 89 Stat. 1056; Pub. L. 94-455, title
XIX, Secs. 1901(a)(17), (b)(8)(B), 1906(b)(13)(A), title XXI, Secs.
2105(a)-(c), 2137(d), Oct. 4, 1976, 90 Stat. 1765, 1766, 1794,
1834, 1902, 1931; Pub. L. 95-339, title II, Sec. 201(a), Aug. 8,
1978, 92 Stat. 467; Pub. L. 95-600, title III, Secs. 331(a), (b),
332(a), 333(a), 334(a), (b), title VII, Sec. 703(j)(1), (q)(1),
Nov. 6, 1978, 92 Stat. 2839-2841, 2941, 2944; Pub. L. 96-222, title
I, Sec. 107(a)(3)(C), Apr. 1, 1980, 94 Stat. 223; Pub. L. 96-223,
title II, Secs. 241(a), 242(a), 244(a), Apr. 2, 1980, 94 Stat. 281,
283, 286; Pub. L. 96-499, title XI, Sec. 1103, Dec. 5, 1980, 94
Stat. 2669; Pub. L. 97-34, title VIII, Secs. 811(a), (b), 812(a),
Aug. 13, 1981, 95 Stat. 349, 350; Pub. L. 97-248, title II, Secs.
214(a)-(e), 215(a), (b), 217(a)-(d), 219(a), 221(a), (b), (c)(1),
title III, Sec. 310(b)(1), (c)(1), (2), Sept. 3, 1982, 96 Stat.
466-469, 472-474, 477, 478, 596, 599; Pub. L. 97-424, title V, Sec.
547(a), Jan. 6, 1983, 96 Stat. 2199; Pub. L. 97-473, title II, Sec.
202(b)(2), Jan. 14, 1983, 96 Stat. 2609; Pub. L. 98-369, div. A,
title IV, Sec. 474(r)(4), title VI, Secs. 621-624(a), (b)(2), (3),
626(a), 627, 628(a), (c)-(e), (g), 630, July 18, 1984, 98 Stat.
839, 915-922, 924, 926, 928, 931-933; Pub. L. 99-272, title XIII,
Sec. 13209(e), Apr. 7, 1986, 100 Stat. 323; Pub. L. 99-514, title
XIII, Sec. 1301(a), title XVIII, Secs. 1864(a)(1), (b)-(e),
1865(a), 1869(a), (b), 1870, 1871(a)(1), (b), 1899A(2)-(4), Oct.
22, 1986, 100 Stat. 2602, 2885, 2886, 2888, 2890, 2891, 2958; Pub.
L. 100-647, title I, Sec. 1013(a)(34)(A), (c)(12)(A), Nov. 10,
1988, 102 Stat. 3544, 3547.)
-MISC1-
AMENDMENTS
1988 - Subsec. (b)(6)(N). Pub. L. 100-647, Sec. 1013(c)(12)(A),
amended subpar. (N), as in effect on the day before the date of the
enactment of Pub. L. 99-514 [Oct. 22, 1986], by redesignating cls.
(ii) and (iii) as (iii) and (iv), respectively, and by striking out
cl. (i) and inserting in lieu thereof the following new cls.:
"(i) In general. - Except as provided in clause (ii), this
paragraph shall not apply to any obligation issued after December
31, 1986.
"(ii) Certain refundings. - This paragraph shall apply to any
obligation (or series of obligations) issued to refund an
obligation issued on or before December 31, 1986, if -
"(I) the average maturity date of the issue of which the
refunding obligation is a part is not later than the average
maturity date of the obligations to be refunded by such issue,
"(II) the amount of the refunding obligation does not exceed
the outstanding amount of the refunded obligation, and
"(III) the proceeds of the refunding obligation are used to
redeem the refunded obligation not later than 90 days after the
date of the issuance of the refunding obligation.
For purposes of subclause (I), average maturity shall be determined
in accordance with subsection (b)(14)(B)(i)."
Subsec. (c)(7). Pub. L. 100-647, Sec. 1013(a)(34)(A), amended
par. (7), as in effect on the day before the date of the enactment
of Pub. L. 99-514 [Oct. 22, 1986], by substituting "necessary" for
"necessary".
1986 - Pub. L. 99-514, Sec. 1301(a), in amending section
generally, substituted "Interest on State and local bonds" for
"Interest on certain governmental obligations" in section
catchline.
Subsec. (a). Pub. L. 99-514, Sec. 1301(a), substituted
"Exclusion" for "General rule" in heading and amended text
generally. Prior to amendment, text read as follows: "Gross income
does not include interest on -
"(1) the obligations of a State, a Territory, or a possession
of the United States, or any political subdivision of any of the
foregoing, or of the District of Columbia; and
"(2) qualified scholarship funding bonds."
Subsec. (b). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, substituted provision relating to exceptions for
provision relating to industrial development bonds.
Subsec. (b)(11). Pub. L. 99-272 struck out par. (11) relating to
pollution control facilities acquired by regional pollution control
authorities.
Subsec. (b)(13), (14)(A). Pub. L. 99-514, Sec. 1871(b),
substituted "and (6)" for "(6), and (7)".
Subsec. (b)(16)(A). Pub. L. 99-514, Sec. 1870, substituted
"clause (ii)" for "clause (i)".
Subsec. (b)(17)(A). Pub. L. 99-514, Sec. 1871(b), substituted
"and (6)" for "(6), and (7)".
Subsec. (c). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, substituted provision relating to definitions for
provision relating to arbitrage.
Subsecs. (d) to (g). Pub. L. 99-514, Sec. 1301(a), in amending
section generally, struck out subsecs. (d) to (g) which related to
certain irrigation dams, qualified scholarship funding bonds,
certain federally guaranteed obligations, and qualified
steam-generating or alcohol-producing facilities, respectively.
Subsec. (h). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (h) which provided that obligations
must not be guaranteed.
Subsec. (h)(2)(A). Pub. L. 99-514, Sec. 1899A(2), substituted
"guaranteed" for "guaranted".
Subsec. (h)(5)(A). Pub. L. 99-514, Sec. 1865(a), struck out "the
United States," after "program of".
Subsecs. (i) to (k). Pub. L. 99-514, Sec. 1301(a), in amending
section generally, struck out subsecs. (i) to (k) which related to
obligations of certain volunteer fire departments, provided that
obligations must be in registered form to be tax-exempt, and
required public approval for industrial development bonds,
respectively.
Subsec. (l). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (l) which related to information
reporting requirements for certain bonds.
Subsec. (l)(2)(F). Pub. L. 99-514, Sec. 1864(d), added subpar.
(F) which read: "if such obligation is a private activity bond (as
defined in subsection (n)(7)), such information as the Secretary
may require for purposes of determining whether the requirements of
subsection (n) are met with respect to such obligation."
Subsec. (m). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (m) which related to obligations
exempt other than under this title.
Subsec. (m)(1). Pub. L. 99-514, Sec. 1871(a)(1), substituted
"(j), (k), (l), (n), and (o)" for "(k), (l), and (n)".
Subsec. (m)(3)(B). Pub. L. 99-514, Sec. 1899A(3), substituted
"608(a)(6)(A)" for "608(6)(A)".
Subsec. (n). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (n) which related to limitation on
aggregate amount of private activity bonds issued during any
calendar year.
Subsec. (n)(6)(A), (B)(i). Pub. L. 99-514, Sec. 1864(b),
substituted "governmental units or other authorities" for
"governmental units".
Subsec. (n)(7)(C)(i). Pub. L. 99-514, Sec. 1864(c), substituted
"all of the property to be financed by the obligation" for "the
property described in such paragraph".
Subsec. (n)(10)(B). Pub. L. 99-514, Sec. 1864(e), substituted
"identify project" for "specify project" in heading and "identify
(with reasonable specificity) the project" for "specify the
project" in text of subpar. (B)(i).
Subsec. (n)(10)(D). Pub. L. 99-514, Sec. 1864(e)(2), substituted
"any identification or specification" for "any specification".
Subsec. (n)(13). Pub. L. 99-514, Sec. 1864(a)(1), added par.
(13).
Subsec. (o). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (o) relating to consumer loan bonds.
Pub. L. 99-514, Sec. 1869(a), (b)(1), substituted "Private loan
bonds" for "Consumer loan bonds" in subsection and par. (2)
headings, "private loan bond" for "consumer loan bond" in text of
pars. (1), (2)(A) and (B), and "subsection (c)(6)(H)(i)" for
"subsection (c)(6)(G)(i)" in par. (2)(C)(ii).
Pub. L. 99-514, Sec. 1869(b)(2), redesignated subsec. (o),
relating to cross references, as (p).
Subsec. (p). Pub. L. 99-514, Sec. 1301(a), in amending section
generally, struck out subsec. (p) which related to cross
references.
Pub. L. 99-514, Sec. 1869(b)(2), redesignated former subsec. (o),
relating to cross references, as (p).
Subsec. (p)(4). Pub. L. 99-514, Sec. 1899A(4), substituted
"October 27, 1949 (48 U.S.C. 1403)" for "October 27, 1919 (48
U.S.C. 1403)".
1984 - Subsec. (b)(4). Pub. L. 98-369, Sec. 628(e), inserted "For
purposes of subparagraph (A), any property shall not be treated as
failing to be residential rental property merely because part of
the building in which such property is located is used for purposes
other than residential rental purposes."
Subsec. (b)(6)(F)(iv). Pub. L. 98-369, Sec. 474(r)(4),
substituted "section 30(b)(2)(A)" for "section 44F(b)(2)(A)".
Subsec. (b)(6)(N). Pub. L. 98-369, Sec. 630, designated existing
provisions as cl. (i) and added cls. (ii) and (iii).
Subsec. (b)(6)(P). Pub. L. 98-369, Sec. 628(c), added subpar.
(P).
Subsec. (b)(7). Pub. L. 98-369, Sec. 628(g), repealed par. (7)
which related to advance refunding of qualified public facilities.
Subsec. (b)(13). Pub. L. 98-369, Sec. 628(d), inserted "For
purposes of this paragraph - (A) a partnership and each of its
partners (and their spouses and minor children) shall be treated as
related persons, and (B) an S corporation and each of its
shareholders (and their spouses and minor children) shall be
treated as related persons."
Subsec. (b)(15). Pub. L. 98-369, Sec. 623, added par. (15).
Subsec. (b)(16) to (18). Pub. L. 98-369, Sec. 627, added pars.
(16) to (18).
Subsec. (c). Pub. L. 98-369, Sec. 624(b)(2), struck out "bonds"
after "Arbitrage" in heading.
Subsec. (c)(1). Pub. L. 98-369, Sec. 624(b)(3), inserted "to
arbitrage bonds" in heading.
Subsec. (c)(6), (7). Pub. L. 98-369, Sec. 624(a), added par. (6)
and redesignated former par. (6) as (7).
Subsec. (h). Pub. L. 98-369, Sec. 622, amended subsec. (h)
generally, in par. (1) substituting provisions that obligations are
not included in the section if they are federally guaranteed for
provisions which excluded obligations guaranteed, in whole or part,
by the U.S. under a program to conserve energy, or under other
Federal or State programs, in par. (2) substituting provisions
defining "federally guaranteed" for provisions setting forth
obligations to which this subsection applies, and adding pars. (3)
to (5).
Subsec. (m)(1). Pub. L. 98-369, Sec. 628(a)(1), inserted "In the
case of an obligation issued after December 31, 1983, such
obligation shall not be treated as described in this paragraph
unless the appropriate requirements of subsections (b), (c), (h),
(k), (l), and (n) of this section and section 103A are met with
respect to such obligation. For purposes of applying such
requirements, a possession of the United States shall be treated as
a State; except that clause (ii) of subsection (n)(4)(A) shall not
apply."
Subsec. (m)(2)(B). Pub. L. 98-369, Sec. 628(a)(2), substituted
"is exempt from tax under this title without regard to any
provision of law which is not contained in this title and which is
not contained in a revenue Act" for "is exempt from taxation under
any provision of this title".
Subsec. (m)(3). Pub. L. 98-369, Sec. 628(a)(3), added par. (3).
Subsec. (n). Pub. L. 98-369, Sec. 621, added subsec. (n). Former
subsec. (n), relating to cross references, redesignated (o).
Subsec. (o). Pub. L. 98-369, Sec. 626(a), added subsec. (o)
relating to consumer loan bonds.
Pub. L. 98-369, Sec. 621, redesignated subsec. (n), relating to
cross references, as (o).
1983 - Subsec. (m). Pub. L. 97-424, Sec. 547(a), added subsec.
(m). Former subsec. (m) redesignated (n).
Pub. L. 97-473 amended subsec. (m) generally, adding pars. (1)
and (2), redesignating former pars. (1) to (3) as (3) to (5),
respectively, and striking out par. (24) which had provided
reference regarding exempt-interest dividends to section
852(b)(5)(B.) See section 722(b) of Pub. L. 98-369, set out as a
note below.
Subsec. (n). Pub. L. 97-424, Sec. 547(a), redesignated former
subsec. (m), relating to cross references, as (n).
1982 - Subsec. (b)(2). Pub. L. 97-248, Sec. 215(b)(2),
substituted "For purposes of this section" for "For purposes of
this subsection".
Subsec. (b)(4). Pub. L. 97-248, Secs. 217(a)(1), (b), 221(a),
(c)(1), 310(c)(1), in subpar. (A) substituted "if at all times
during the qualified project period" for "if each obligation issued
pursuant to the issue is in registered form and if" after
"residential rental property", and struck out "(within the meaning
of section 167(k)(3)(B))" after "low or moderate income", added
subpar. (J), struck out provision that for purposes of subpar. (A),
"targeted area project" meant a project located in a qualified
census tract (within the meaning of section 103A(k)(2)) or an area
of chronic economic distress (within the meaning of section
103A(k)(3)) and, in last sentence, substituted "electric energy or
gas from" for "electric energy from".
Subsec. (b)(6)(C). Pub. L. 97-248, Sec. 217(a)(3), substituted
"paragraph (13)" for "paragraph (7)".
Subsec. (b)(6)(F)(iv). Pub. L. 97-248, Sec. 214(d), added cl.
(iv).
Subsec. (b)(6)(K) to (O). Pub. L. 97-248, Sec. 214(a)-(c), (e),
added subpars. (K) to (O).
Subsec. (b)(9)(A). Pub. L. 97-248, Sec. 217(c), inserted "ferry,"
after "rail car" in provisions preceding cl. (i), and in cl. (ii),
inserted "(or, in the case of a ferry, mass transportation
services)" after "mass commuting services".
Subsec. (b)(10). Pub. L. 97-248, Sec. 217(a)(2), added par. (10).
Former par. (10) redesignated (13).
Subsec. (b)(11). Pub. L. 97-248, Sec. 217(d), added par. (11).
Subsec. (b)(12). Pub. L. 97-248, Sec. 221(b), added par. (12).
[Provisions of par. (12)(A) were formerly contained, as
undesignated provisions, in par. (4).]
Subsec. (b)(13). Pub. L. 97-248, Sec. 217(a)(2), redesignated
former par. (10) as (13).
Subsec. (b)(14). Pub. L. 97-248, Sec. 219(a), added par. (14).
Subsec. (h). Pub. L. 97-248, Sec. 310(c)(2), substituted "must
not be guaranteed or subsidized" for "must be in registered form
and not guaranteed or subsidized" in heading, and in par. (1)
struck out subpar. (A) reading "such obligation is not issued in
registered form", and redesignated subpars. (B) and (C) as (A) and
(B), respectively.
Subsec. (j). Pub. L. 97-248, Sec. 310(b)(1), added subsec. (j).
Former subsec. (j), relating to cross references, redesignated (m).
Subsec. (k). Pub. L. 97-248, Sec. 215(a), added subsec. (k).
Subsec. (l). Pub. L. 97-248, Sec. 215(b)(1), added subsec. (l).
Subsec. (m). Pub. L. 97-248, Secs. 215(a), (b)(1), 310(b)(1),
redesignated former subsec. (j), relating to cross references, as
(m).
1981 - Subsec. (b)(4)(I). Pub. L. 97-34, Sec. 811(a), added
subpar. (I).
Subsec. (b)(9), (10). Pub. L. 97-34, Sec. 811(b), added par. (9)
and redesignated former par. (9) as (10).
Subsecs. (i), (j). Pub. L. 97-34, Sec. 812(a), added subsec. (i)
and redesignated former subsec. (i) as (j).
1980 - Subsec. (b)(4). Pub. L. 96-499, Sec. 1103(b), inserted
before last sentence provisions defining "targeted area project"
for purposes of subpar. (A).
Subsec. (b)(4)(A). Pub. L. 96-499, Sec. 1103(a), substituted
provisions relating to low or moderate income residential rental
property for provisions relating to residential real property for
family units.
Subsec. (b)(4)(H). Pub. L. 96-223, Sec. 242(a)(1), added subpar.
(H).
Subsec. (b)(6)(J). Pub. L. 96-499, Sec. 1103(c), added subpar.
(J).
Subsec. (b)(8), (9). Pub. L. 96-223, Sec. 242(a)(2), added par.
(8) and redesignated former par. (8) as (9).
Subsec. (c)(5). Pub. L. 96-222, Sec. 107(a)(3)(C), amended the
directory language of Pub. L. 96-500, Sec. 703(q)(1). See 1978
Amendment note below for subsec. (c)(5).
Subsec. (g). Pub. L. 96-223, Sec. 241(a), added subsec. (g).
Former subsec. (g) redesignated (i).
Subsec. (h). Pub. L. 96-223, Sec. 244(a), added subsec. (h).
Subsec. (i). Pub. L. 96-223, Secs. 241(a), 244(a), redesignated
former subsec. (g) as (i).
1978 - Subsec. (b)(1). Pub. L. 95-600, Sec. 703(j)(1)(A),
substituted "subsection (a)(1) or (2)" for "subsection (a)(1)" in
heading.
Subsec. (b)(4). Pub. L. 95-600, Secs. 332(a), 333(a), in subpar.
(G)(i) inserted reference to electric utility, industrial,
agricultural, or commercial users and added subpar. (G)(ii) and
provision following subpar. (G)(ii) relating to the local
furnishing of electric energy.
Subsec. (b)(6)(D). Pub. L. 95-600, Sec. 331(a), substituted in
heading and cl. (i) "$10,000,000" for "$5,000,000".
Subsec. (b)(6)(I). Pub. L. 95-600, Sec. 331(b), added subpar.
(I).
Subsec. (b)(7), (8). Pub. L. 95-600, Sec. 334(a), (b), added par.
(7), redesignated former par. (7) as (8) and, as so redesignated,
substituted "(6), and (7)" for "and (6)".
Subsec. (c)(1). Pub. L. 95-600, Sec. 703(j)(1)(B), substituted in
heading and text "(a)(1) or (2)" for "(a)(1) or (4)".
Subsec. (c)(2)(A). Pub. L. 95-600, Sec. 703(j)(1)(C), substituted
"subsection (a)(1) or (2)" for "subsection (a)(1) or (2) or (4)".
Subsec. (c)(5). Pub. L. 95-600, Sec. 703(j)(1)(D), (q)(1), as
amended by Pub. L. 96-222, Sec. 107(a)(3)(C), substituted "section
438 of the Higher Education Act of 1965" for "section 2 of the
Emergency Insured Student Loan Act of 1969" and "paragraph (2)(A)"
for "subsection (d)(2)(A)".
Subsec. (d). Pub. L. 95-600, Sec. 703(j)(1)(E), substituted
"subsection (b)(4)(G)" for "subsection (c)(4)(G)".
Subsec. (e). Pub. L. 95-339 redesignated second subsec. (e),
relating to cross references, as (g).
Subsec. (f). Pub. L. 95-339 added subsec. (f).
Subsec. (g). Pub. L. 95-339 redesignated second subsec. (e),
relating to cross references, as (g).
1976 - Subsec. (a). Pub. L. 94-455, Secs. 1901(a)(17)(A),
2105(a), added par. (2) relating to qualified scholarship funding
bonds. Former pars. (2) and (3), relating to obligations of the
United States and to the obligations of corporations organized
under an Act of Congress, were struck out.
Subsec. (b). Pub. L. 94-455, Sec. 1901(a)(17)(B), (C),
redesignated subsec. (c) as (b) and in par. (1) of subsec. (b) as
so redesignated substituted "subsection (a)(1) or (2)" for
"subsection (a)(1)". Former subsec. (b), which created an exception
to the rule that gross income did not include interest on
obligations of the United States, by providing that the exception
did not apply to obligations of the United States (with specified
exceptions) unless under the authorizing Acts such interest is
wholly exempt from the taxes imposed by this subtitle, was struck
out.
Subsec. (c). Pub. L. 94-455, Secs. 1901(a)(17)(B), (D),
(b)(8)(B), 1906(b)(13)(A), 2105(c), redesignated subsec. (d) as (c)
and, in subsec. (c) as so redesignated, substituted "(a)(1) or (4)"
for "(a)(1)" in par. (1) and "(a)(1) or (2) or (4)" for "(a)(1)" in
par. (2)(A), substituted "educational organization described in
section 170(b)(1)(A)(ii)" for "educational institution (within the
meaning of section 151(e)(4))" in par. (3)(A), added par. (5),
redesignated former par. (5) as (6), and in par. (6) as so
redesignated substituted "Secretary" for "Secretary or his
delegate". Former subsec. (c) redesignated (b). See Codification
note above.
Subsec. (d). Pub. L. 94-455, Sec. 1901(a)(17)(B), redesignated
subsec. (e) as (d). Former subsec. (d) redesignated (c).
Subsec. (e). Pub. L. 94-455, Secs. 1901(a)(17)(B), (E), 2105(b),
2137(d), added subsec. (e) relating to qualified scholarship
funding bonds, redesignated former subsec. (f) relating to cross
references as a second subsec. (e), reduced the number of cross
references in subsec. (e) as so redesignated from twenty-three
(which made reference to various obligations of the United States
and of corporations organized under Acts of Congress) to three,
relating, respectively, to Puerto Rican bonds, Virgin Islands
insular and municipal bonds, and certain obligations issued under
title I of the Housing Act of 1949, and inserted a fourth cross
reference, designated as par. (24) relating to the treatment of
exempt-interest dividends. Former subsec. (e) redesignated (d).
Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(17)(B), redesignated
subsec. (f), relating to cross references, as (e).
1975 - Subsecs. (e), (f). Pub. L. 94-182 and Pub. L. 94-164 made
identical amendments, adding subsec. (e) and redesignating former
subsec. (e) as (f).
1971 - Subsec. (c)(4)(E). Pub. L. 92-178, Sec. 315(a)(1),
substituted "energy or gas," for "energy, gas, or water or".
Subsec. (c)(4)(F). Pub. L. 92-178, Sec. 315(a)(2), substituted ",
or" for a period.
Subsec. (c)(4)(G). Pub. L. 92-178, Sec. 315(a)(3), added subpar.
(G).
Subsec. (c)(6)(F)(iii). Pub. L. 92-178, Sec. 315(b), substituted
"$1,000,000" for "$250,000".
1969 - Subsecs. (d), (e). Pub. L. 91-172 added subsec. (d) and
redesignated former subsec. (d) as (e).
1968 - Subsec. (c). Pub. L. 90-364 added subsec. (c). Former
subsec. (c) redesignated (d).
Subsec. (c)(6)(D) to (H). Pub. L. 90-634 added subpars. (D) to
(H).
Subsec. (d). Pub. L. 90-364 redesignated former subsec. (c) as
(d).
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1013(a)(34)(B) of Pub. L. 100-647 provided that:
"Subparagraph (A) [amending this section] shall apply to
obligations sold after May 2, 1978, and to which Treasury
regulation section 1.103-13 (1979) was provided to apply."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1301(a) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
Amendment by sections 1864(b)-(e), 1865(a), 1869(a), (b), 1870,
and 1871(b) of Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
Section 1864(a)(2) of Pub. L. 99-514 provided that:
"(A) Except as provided in subparagraph (B), the amendment made
by paragraph (1) [amending this section] shall apply to obligations
issued after the date of the enactment of this Act [Oct. 22, 1986]
in taxable years ending after such date.
"(B) At the election of the issuer (made at such time and in such
manner as the Secretary of the Treasury or his delegate shall
prescribe), the amendment made by paragraph (1) shall apply to any
obligation issued on or before the date of the enactment of this
Act."
Section 1871(a)(2) of Pub. L. 99-514 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to obligations issued after March 28, 1985, in taxable years ending
after such date."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(4) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Section 624(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
title XVIII, Sec. 1867(a), Oct. 22, 1986, 100 Stat. 2888, provided
that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and section 103A of this title] shall apply with respect to
bonds issued after December 31, 1984.
"(2) Exception. - The amendments made by this section shall not
apply to obligations issued for the Essex County New Jersey
Resource Recovery Project authorized by the Port Authority of New
York and New Jersey on November 10, 1983, as part of an agreement
approved by Essex County, New Jersey, on July 7, 1981, and approved
by the State of New Jersey on December 31, 1981. The aggregate face
amount of bonds to which this paragraph applies shall not exceed
$350,000,000."
Section 626(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XIII, Sec. 1317(22), title XVIII, Sec. 1869(c)(5),
Oct. 22, 1986, 100 Stat. 2095, 2698, 2890; Pub. L. 100-647, title
I, Sec. 1013(g)(24), Nov. 10, 1988, 102 Stat. 3554, provided that:
"(1) In general. - Except as otherwise provided in this
subsection the amendment made by subsection (a) [amending this
section] shall apply to obligations issued after the date of
enactment of this Act [July 18, 1984].
"(2) Exceptions for certain student loan programs. -
"(A) In general. - The amendments made by this section
[amending this section] shall not apply to obligations issued by
a program described in the following table to the extent the
aggregate face amount of such obligations does not exceed the
amount of allowable obligations specified in the following table
with respect to such program:
Program Amount of
Allowable
Obligations
--------------------------------------------------------------------
Colorado Student Obligation Bond Authority $60 million
Connecticut Higher Education Supplementary Loan $15.5
Authority million
District of Columbia $50 million
Illinois Higher Education Authority $70 million
State of Iowa $16 million
Louisiana Public Facilities Authority $75 million
Maine Health and Higher Education Facilities $5 million
Authority
Maryland Higher Education Supplemental Loan Progra $24 million
Massachusetts College Student Loan Authority $90 million
Minnesota Higher Education Coordinating Board $60 million
New Hampshire Higher Education and Health $39 million
Facilities Authority
New York Dormitory Authority $120 million
Pennsylvania Higher Education Assistance Agency $300 million
Georgia Private Colleges and University Authority $31 million
Wisconsin State Building Commission $60 million
South Dakota Health and Educational Facilities $6 million
Authority
--------------------------------------------------------------------
"(B) Pennsylvania higher education assistance agency. -
Subparagraph (A) shall apply to obligations issued by the
Pennsylvania Higher Education Assistance Agency only if such
obligations are issued solely for the purpose of refunding
student loan bonds outstanding on March 15, 1984.
"(3) Certain tax-exempt mortgage subsidy bonds. - For purposes of
applying section 103(o) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954], the term 'consumer loan bond' shall not
include any mortgage subsidy bond (within the meaning of section
103A(b) of such Code) to which the amendments made by section 1102
of the Mortgage Subsidy Bond Tax Act of 1980 [enacting section 103A
of this title] do not apply.
"(4) Refunding exception. - The amendments made by this section
[amending this section] shall not apply to any obligation or series
of obligations the proceeds of which are used exclusively to refund
obligations issued before March 15, 1984, except that -
"(A) the amount of the refunding obligations may not exceed 101
percent of the aggregate face amount of the refunded obligations,
and
"(B) the maturity date of any refunding obligation may not be
later than the date which is 17 years after the date on which the
refunded obligation was issued (or, in the case of a series of
refundings, the date on which the original obligation was
issued).
"(5) Exception for certain established programs. - The amendments
made by this section [amending this section] shall not apply to any
obligation substantially all of the proceeds of which are used to
carry out a program established under State law which has been in
effect in substantially the same form during the 30-year period
ending on the date of enactment of this Act [July 18, 1984], but
only if such proceeds are used to make loans or to fund similar
obligations -
"(A) in the same manner in which,
"(B) in the same (or lesser) amount per participant, and
"(C) for the same purposes for which,
such program was operated on March 15, 1984. This subparagraph
shall not apply to obligations issued on or after March 15, 1987.
"(6) Certain bonds for renewable energy property. - The
amendments made by this section [amending this section] shall not
apply to any obligations described in section 243 of the Crude Oil
Windfall Profit Tax Act of 1980 [Pub. L. 96-223, set out as a note
below].
"(7) Exception for certain downtown redevelopment project. - The
amendments made by this section [amending this section] shall not
apply to any obligation which is issued as part of an issue 95
percent or more of the proceeds of which are to be used to provide
a project to acquire and redevelop a downtown area if -
"(A) on August 15, 1985, a downtown redevelopment authority
adopted a resolution to issue obligations for such project,
"(B) before September 26, 1985, the city expended, or entered
into binding contracts to expend, more than $10,000,000 in
connection with such project, and
"(C) the State supreme court issued a ruling regarding the
proposed financing structure for such project on December 11,
1985.
The aggregate face amount of obligations to which this paragraph
applies shall not exceed $85,000,000 and such obligations must be
issued before January 1, 1992."
Section 631 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, title XIII, Secs. 1316(j), 1317(43), title XVIII, Sec.
1872(a)-(c)(1), Oct. 22, 1986, 100 Stat. 2095, 2670, 2708, 2891,
2892; Pub. L. 100-647, title I, Sec. 1013(f)(8), (g)(40), Nov. 10,
1988, 102 Stat. 3549, 3557, provided that:
"(a) Private Activity Bond Cap. -
"(1) In general. - Except as otherwise provided in this
subsection, the amendment made by section 621 [amending this
section] shall apply to obligations issued after December 31,
1983.
"(2) Inducement resolution before june 19, 1984. - The
amendment made by section 621 shall not apply to any issue of
obligations if -
"(A) there was an inducement resolution (or other comparable
preliminary approval) for the issue before June 19, 1984, and
"(B) the issue is issued before January 1, 1985.
"(3) Certain projects preliminarily approved before october 19,
1983, given approval. - If -
"(A) there was an inducement resolution (or other comparable
preliminary approval) for a project before October 19, 1983, by
any issuing authority,
"(B) a substantial user of such project notifies the issuing
authority within 30 days after the date of the enactment of
this Act [July 18, 1984] that it intends to claim its rights
under this paragraph, and
"(C) construction of such project began before October 19,
1983, or the substantial user was under a binding contract on
such date to incur significant expenditures with respect to
such project,
such issuing authority shall allocate its share of the limitation
under section 103(n) of such Code for the calendar year during
which the obligations were to be issued pursuant to such
resolution (or other approval) first to such project. If the
amount of obligations required by all projects which meet the
requirements of the preceding sentence exceeds the issuing
authority's share of the limitation under section 103(n) of such
Code, priority under the preceding sentence shall be provided
first to those projects for which substantial expenditures were
incurred before October 19, 1983. If any issuing authority fails
to meet the requirements of this paragraph, the limitation under
section 103(n) of such Code for the issuing authority for the
calendar year following such failure shall be reduced by the
amount of obligations with respect to which such failure
occurred.
"(3) [(4)] Exception for certain bonds for a convention center
and resource recovery project. - In the case of any city, if -
"(A) the city council of such city authorized a feasibility
study for a convention center on June 10, 1982, and
"(B) on November 4, 1983, a municipal authority acting for
such city accepted a proposal for the construction of a
facility that is capable of generating steam and electricity
through the combustion of municipal waste,
the amendment made by section 621 shall not apply to any issue,
issued during 1984, 1985, 1986, or 1987 and substantially all of
the proceeds of which are to be used to finance the convention
center (or access ramps and parking facilities therefor)
described in subparagraph (A) or the facility described in
subparagraph (B).
"(b) Property Financed With Tax-Exempt Bonds Required To Be
Depreciated on Straight-Line Basis. -
"(1) In general. - Except as otherwise provided in this
section, the amendments made by section 628(b) [amending section
168 of this title] shall apply to property placed in service
after December 31, 1983, to the extent such property is financed
by the proceeds of an obligation (including a refunding
obligation) issued after October 18, 1983.
"(2) Exceptions. -
"(A) Construction or binding agreement. - The amendments made
by section 628(b) shall not apply with respect to facilities -
"(i) the original use of which commences with the taxpayer
and the construction, reconstruction, or rehabilitation of
which began before October 19, 1983, or
"(ii) with respect to which a binding contract to incur
significant expenditures was entered into before October 19,
1983.
"(B) Refunding. -
"(i) In general. - Except as provided in clause (ii), in
the case of property placed in service after December 31,
1983, which is financed by the proceeds of an obligation
which is issued solely to refund another obligation which was
issued before October 19, 1983, the amendments made by
section 628(b) shall apply only with respect to an amount
equal to the basis in such property which has not been
recovered before the date such refunded obligation is issued.
"(ii) Significant expenditures. - In the case of facilities
the original use of which commences with the taxpayer and
with respect to which significant expenditures are made
before January 1, 1984, the amendments made by section 628(b)
shall not apply with respect to such facilities to the extent
such facilities are financed by the proceeds of an obligation
issued solely to refund another obligation which was issued
before October 19, 1983.
"(C) Facilities. - In the case of an inducement resolution or
other comparable preliminary approval adopted by an issuing
authority before October 19, 1983, for purposes of applying
subparagraphs (A)(i) and (B)(ii) with respect to obligations
described in such resolution, the term 'facilities' means the
facilities described in such resolution.
"(c) Other Provisions Relating to Tax-Exempt Bonds. -
"(1) In general. - Except as otherwise provided in this
subtitle, the amendments made by sections 622, 623, 627, and
628(c), (d), and (e) (and the provisions of sections 625(c),
628(f), and 629(b)) [amending this section and enacting
provisions set out as notes under this section] shall apply to
obligations issued after December 31, 1983.
"(2) Obligations invested in federally insured deposits. -
Notwithstanding any other provision of this section, clause (ii)
of section 103(h)(2)(B) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (as amended by this subtitle) shall apply
to obligations issued after April 14, 1983; except that such
clause shall not apply to any obligation issued pursuant to a
binding contract in effect on March 4, 1983.
"(3) Exceptions. -
"(A) Construction or binding agreement. - The amendments (and
provisions) referred to in paragraph (1) shall not apply to
obligations with respect to facilities -
"(i) the original use of which commences with the taxpayer
and the construction, reconstruction, or rehabilitation of
which began before October 19, 1983, and was completed on or
after such date,
"(ii) the original use of which commences with the taxpayer
and with respect to which a binding contract to incur
significant expenditures for construction, reconstruction, or
rehabilitation was entered into before October 19, 1983, and
some of such expenditures are incurred on or after such date,
or
"(iii) acquired after October 19, 1983, pursuant to a
binding contract entered into on or before such date.
"(B) Facilities. - Subparagraph (C) of subsection (b)(2)
shall apply for purposes of subparagraph (A) of this paragraph.
"(C) Exception. - Subparagraph (A) shall not apply with
respect to the amendment made by section 628(e) and the
provisions of sections 628(f) and 629(b) [amending this section
and enacting provisions set out as notes under this section].
"(4) Repeal of advance refunding of qualified public
facilities. - The amendment made by section 628(g) [amending this
section] shall apply to refunding obligations issued after the
date of the enactment of this Act [July 18, 1984]; except that if
substantially all the proceeds of the refunded issue were used to
provide airports or docks, such amendment shall only apply to
refunding obligations issued after December 31, 1984. In the case
of refunding obligations not to exceed $100,000,000 issued after
October 21, 1986, by Dade County, Florida, for the purpose of
advance refunding its Aviation Revenue Bonds (Series J), the
first sentence of this paragraph shall be applied by substituting
'the date which is 1 year after the date of the enactment of the
Technical and Miscellaneous Revenue Act of 1988 [Nov. 10, 1988]'
for 'December 31, 1984' and the amendments made by section 1301
of the Tax Reform Act of 1986 [section 1301 of Pub. L. 99-514,
enacting sections 141 to 150 and 7703 of this title, amending
this section and sections 2, 22, 25, 32, 86, 105, 152, 153, 163,
194, 269A, 414, 879, 1398, 3402, 4701, 4940, 4942, 4988, 6362,
6652, and 7871 of this title, repealing section 103A of this
title, enacting provisions set out as notes under sections 141
and 148 of this title, and amending provisions set out as a note
under section 103A of this title] shall not apply. In the case of
refunding obligations not exceeding $100,000,000 issued by the
Alabama State Docks Department, the first sentence of this
paragraph shall be applied by substituting 'December 31, 1987'
for 'December 31, 1984' and the Internal Revenue Code of 1986
shall be applied without regard to section 149(d)(2)..[sic]
"(5) Special rule for health club facilities. - In the case of
any health club facility, with respect to the amendment made by
section 627(c) [amending this section] -
"(A) paragraph (1) shall be applied by substituting 'April
12, 1984' for 'December 31, 1983', and
"(B) paragraph (3) shall be applied by substituting 'April
13, 1984' for 'October 19, 1983' each place it appears.
"(d) Provisions of This Subtitle Not To Apply to Certain
Property. - The amendments made by this subtitle [sections 621-632
of Pub. L. 98-369, amending this section and sections 103A and 168
of this title and enacting provisions set out as notes under this
section] shall not apply to any property (and shall not apply to
obligations issued to finance such property) if such property is
described in any of the following paragraphs:
"(1) Any property described in paragraph (5), (6), or (7) of
section 31(g) of this Act [set out as an Effective Date of 1984
Amendment note under section 168 of this title].
"(2) Any property described in paragraph (4), (8), or (17) of
section 31(g) of this Act [set out as an Effective Date of 1984
Amendment note under section 168 of this title] but only if the
obligation is issued before January 1, 1985, and only if before
June 19, 1984, the issuer had evidenced an intent to issue
obligations exempt from taxation under the Internal Revenue Code
of 1986 in connection with such property.
"(3) Any property described in paragraph (3) of section 216(b)
of the Tax Equity and Fiscal Responsibility Act of 1982 [set out
as an Effective Date of 1982 Amendment note under section 168 of
this title].
"(4) Any solid waste disposal facility described in section
103(b)(4)(E) of the Internal Revenue Code of 1986 if -
"(A) a State public authority created pursuant to State
legislation which took effect on June 18, 1973, took formal
action before October 19, 1983, to commit development funds for
such facility.
"(B) such authority issues obligations for any such facility
before January 1, 1987, and
"(C) expenditures have been made for the development of any
such facility before October 19, 1983.
"(5) Any solid waste disposal facility described in section
103(b)(4)(E) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] if -
"(A) a city government, by resolutions adopted on April 10,
1980, and December 27, 1982, took formal action to authorize
the submission of a proposal for a feasibility study for such
facility and to authorize the presentation to the Department of
the Army (U.S. Army Missile Command) of a proposed agreement to
jointly pursue construction and operation of such facility,
"(B) such city government (or a public authority on its
behalf) issues obligations for such facility before January 1,
1988, and
"(C) expenditures have been made for the development of such
facility before October 19, 1983. Notwithstanding the foregoing
provisions of this subsection, the amendments made by section
624 [amending sections 103 and 103A of this title and enacting
provisions set out as a note under this section] (relating to
arbitrage) shall apply to obligations issued to finance
property described in paragraph (5).
"(e) Determination of Significant Expenditure. -
"(1) In general. - For purposes of this section, the term
'significant expenditures' means expenditures which equal or
exceed the lesser of -
"(A) $15,000,000, or
"(B) 20 percent of the estimated cost of the facilities.
"(2) Certain grants treated as expenditures. - For purposes of
paragraph (1), the amount of any UDAG grant preliminarily
approved on May 5, 1981, or April 4, 1983, shall be treated as an
expenditure with respect to the facility for which such grant was
so approved.
"(f) Exceptions for Certain Other Amendments. - If -
"(1) there was an inducement resolution (or other comparable
preliminary approval) for an issue before June 19, 1984, by any
issuing authority, and
"(2) such issue is issued before January 1, 1985, the following
amendments shall not apply:
"(A) the amendments made by section 623 [amending this
section],
"(B) the amendments made by subsections (a) and (b) of
section 627 [amending this section] (except to the extent such
amendments relate to farm land),
"(C) in the case of a race track, the amendment made by
section 627(c) [amending this section], and
"(D) the amendments made by section 628(c) [amending this
section]."
[Section 1872(a)(2)(B) of Pub. L. 99-514 provided that the
amendment of section 631(c)(3) of Pub. L. 98-369, set out above,
made by section 1872(a)(2)(B) of Pub. L. 99-514 is effective with
respect to obligations issued after Mar. 28, 1985.]
EFFECTIVE DATE OF 1983 AMENDMENT
For effective date of amendment by Pub. L. 97-473, see section
204(2) of Pub. L. 97-473, set out as an Effective Date note under
section 7871 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 214(f) of Pub. L. 97-248 provided that:
"(1) Composite issues; small issue exemption. - The amendments
made by subsections (a) and (b) [amending this section] shall apply
to obligations issued after the date of the enactment of this Act
[Sept. 3, 1982].
"(2) Termination. - The amendment made by subsection (c)
[amending this section] shall take effect on the date of the
enactment of this Act [Sept. 3, 1982].
"(3) Research expenditures. - The amendment made by subsection
(d) [amending this section] shall apply with respect to
expenditures made after the date of the enactment of this Act
[Sept. 3, 1982].
"(4) Certain facilities. - The amendment made by subsection (e)
[amending this section] shall apply to obligations issued after
December 31, 1982."
Section 215(c) of Pub. L. 97-248 provided that:
"(1) Public approval. - The amendment made by subsection (a)
[amending this section] shall apply to obligations issued after
December 31, 1982, other than obligations issued solely to refund
any obligation which -
"(A) was issued before July 1, 1982, and
"(B) has a maturity which does not exceed 3 years.
"(2) Information reporting. - The amendments made by subsection
(b) [amending this section] shall apply to obligations issued after
December 31, 1982 (including any obligation issued to refund an
obligation issued before such date)."
Section 217(e) of Pub. L. 97-248, as amended by Pub. L. 98-369,
div. A, title VII, Sec. 712(h), July 18, 1984, 98 Stat. 947; Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"The amendments made by this section [amending this section] shall
apply to obligations issued after the date of the enactment of this
Act [Sept. 3, 1982]. For purposes of applying section
168(f)(8)(D)(v) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954], the amendments made by subsection (c) [amending this
section] shall apply to agreements entered into after the date of
the enactment of this Act."
Section 219(b) of Pub. L. 97-248 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
obligations issued after December 31, 1982."
Section 221(d) of Pub. L. 97-248 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
1104 of Pub. L. 96-499, formerly set out as a note under section
103A of this title] shall apply to obligations issued after the
date of the enactment of this Act [Sept. 3, 1982].
"(2) Exception. - The amendments made by this section shall not
apply with respect to any obligation to which the amendments made
by section 1103 of the Mortgage Subsidy Bond Tax Act of 1980
[section 1103 of Pub. L. 96-499, amending this section] do not
apply by reason of section 1104 of such Act [section 1104 of Pub.
L. 96-499, formerly set out as a note under section 103A of this
title]."
Section 310(d) of Pub. L. 97-248, as amended by Pub. L. 97-448,
title III, Sec. 306(b)(2), 96 Stat. 2405; Pub. L. 98-216, Sec.
6(b), Feb. 14, 1984, 98 Stat. 8; Pub. L. 99-514, Sec. 2, Oct. 22,
1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [enacting section
4701 of this title and section 757c-5 of former Title 31, Money and
Finance, and amending this section and sections 103A, 163, 165,
312, and 1232 of this title] shall apply to obligations issued
after December 31, 1982.
"(2) [Repealed. Pub. L. 98-216, Sec. 6(b), Feb. 14, 1984, 98
Stat. 8.]
"(3) Exception for certain warrants, etc. - The amendments made
by subsection (b) [enacting section 4701 of this title and amending
this section and sections 163, 165, 312, and 1232 of this title]
shall not apply to any obligations issued after December 31, 1982,
on the exercise of a warrant or the conversion of a convertible
obligation if such warrant or obligation was offered or sold
outside the United States without registration under the Securities
Act of 1933 [15 U.S.C. 77a et seq.] and was issued before August
10, 1982. A rule similar to the rule of the preceding sentence
shall also apply in the case of any regulations issued under
section 163(f)(2)(C) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as added by this section) except that the date on
which such regulations take effect shall be substituted for 'August
10, 1982'.
"(4) [Repealed. Pub. L. 98-216, Sec. 6(b), Feb. 14, 1984, 98
Stat. 8.]"
EFFECTIVE DATE OF 1981 AMENDMENT
Section 811(c) of Pub. L. 97-34 provided that: "The amendments
made by this section [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Aug. 13, 1981]."
Section 812(b)(1) of Pub. L. 97-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
obligations issued after December 31, 1980."
EFFECTIVE DATE OF 1980 AMENDMENTS
For effective date of amendment by Pub. L. 96-499, see section
1104 of Pub. L. 96-499, set out as an Effective Date note under
section 103A of this title.
Section 241(d) of Pub. L. 96-223 provided that: "The amendments
made by subsection (a) [amending this section] and the provisions
of subsections (b) and (c) [set out as notes under this section]
shall apply with respect to obligations issued after October 18,
1979."
Section 242(c) of Pub. L. 96-223 provided that: "The amendments
made by subsection (a) [amending this section] and the provisions
of subsection (b) [set out as a note under this section] shall
apply with respect to obligations issued after October 18, 1979."
Section 244(b) of Pub. L. 96-223 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
obligations issued on or after October 18, 1979."
EFFECTIVE DATE OF 1978 AMENDMENTS
Section 201(c) of Pub. L. 95-339 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
taxable years ending after the date of the enactment of this Act
[Aug. 8, 1978]."
Section 331(c) of Pub. L. 95-600 provided that:
"(1) The amendments made by subsection (a) [amending this
section] shall apply to -
"(A) obligations issued after December 31, 1978, in taxable
years ending after such date, and
"(B) capital expenditures made after December 31, 1978, with
respect to obligations issued before January 1, 1979.
"(2) The amendment made by subsection (b) [amending this section]
shall apply to -
"(A) obligations issued after September 30, 1979, in taxable
years ending after such date, and
"(B) capital expenditures made after September 30, 1979, with
respect to obligations issued after such date."
Section 332(b) of Pub. L. 95-600 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after April 30, 1968, but only with respect to
obligations issued after such date."
Section 333(b) of Pub. L. 95-600 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Nov. 6, 1978] in taxable years ending after such date."
Section 334(c) of Pub. L. 95-600 provided that: "The amendments
made by this section [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Nov. 6, 1978]."
Section 703(q)(2) of Pub. L. 95-600 provided that: "The
amendments made by paragraph (1) [amending this section] shall
apply with respect to payments made by the Commissioner of
Education after December 31, 1976."
Amendment by section 703(j)(1) of Pub. L. 95-600 effective on
Oct. 4, 1976, see section 703(r) of Pub. L. 95-600, set out as a
note under section 46 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(17), (b)(8)(B) of Pub. L. 94-455
applicable with respect to taxable years ending after Oct. 4, 1976,
see section 1901(d) of Pub. L. 94-455, set out as a note under
section 2 of this title.
Amendment by section 1906(b)(13)(A) of Pub. L. 94-455 effective
Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94-455, set out as
a note under section 6013 of this title.
Section 2105(d) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section] apply to obligations
issued on or after the date of the enactment of this Act [Oct. 4,
1976]."
Amendment by section 2137(d) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1975, see section 2137(e) of
Pub. L. 94-455, set out as a note under section 852 of this title.
EFFECTIVE DATE OF 1975 AMENDMENTS
Section 301(b) of Pub. L. 94-182 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Dec. 31, 1975]."
Section 7(b) of Pub. L. 94-164 provided that: "The amendments
made by this section [amending this section] shall apply to
obligations issued after the date of enactment of this Act [Dec.
23, 1975]."
EFFECTIVE DATE OF 1971 AMENDMENT
Section 315(c) of Pub. L. 92-178 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to obligations issued after January 1, 1969. The amendment
made by subsection (b) [amending this section] shall apply with
respect to expenditures incurred after the date of the enactment of
this Act [Dec. 10, 1971]."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 601(b) of Pub. L. 91-172 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to obligations issued after October 9, 1969."
EFFECTIVE DATE OF 1968 AMENDMENT
Section 401(b) of Pub. L. 90-634 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to obligations issued after the date of the enactment of
this Act [Oct. 24, 1968]."
Section 107(b)(1) of Pub. L. 90-364 provided that: "Except as
provided by paragraph (2) [set out as a note below], the amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after April 30, 1968, but only with respect to
obligations issued after such date."
-TRANS-
TRANSFER OF FUNCTIONS
Functions of Commissioner of Education transferred to Secretary
of Education by section 3441(a)(1) of Title 20, Education.
-MISC2-
COORDINATION OF CERTAIN AMENDMENTS MADE BY PUB. L. 97-424 AND PUB.
L. 97-473
Section 722(b) of Pub. L. 98-369 provided that: "For purposes of
applying the amendments made by section 547 of the Highway Revenue
Act of 1982 [Pub. L. 97-424, amending this section] and the
amendment made by section 202(b)(2) of Public Law 97-473 [amending
this section], Public Law 97-473 shall be deemed to have been
enacted immediately before the Highway Revenue Act of 1982."
VALIDATION OF SINKING FUND REGULATIONS
Section 1013(a)(35) of Pub. L. 100-647 provided that:
"(A) Treasury Regulation section 1.103-13(g) (1979) is hereby
enacted into positive law.
"(B)(i) Except as provided in clause (ii), subparagraph (A) shall
apply to obligations sold after May 2, 1978, and to which such
regulation was provided to apply.
"(ii) Treasury Regulation section 1.103-13(g) (1979) as enacted
into positive law by subparagraph (A) shall cease to apply to the
extent hereafter modified by the Secretary of the Treasury or his
delegate by regulations."
BONDS ISSUED TO REFUND SUBSECTION (O)(3) OBLIGATIONS
Section 1013(c)(15) of Pub. L. 100-647 provided that: "A bond
issued to refund an obligation described in section 103(o)(3) of
the Internal Revenue Code of 1954 (as in effect on the day before
the date of the enactment of the Tax Reform Act of 1986 [Oct. 22,
1986]) shall not be treated as described in section 144(b) of the
1986 Code unless it is described in section 144(b)(1)(A) of the
1986 Code."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TREATMENT OF CERTAIN GUARANTEES BY FARMERS HOME ADMINISTRATION
Section 1865(b) of Pub. L. 99-514 provided that: "An obligation
shall not be treated as federally guaranteed for purposes of
section 103(h) of the Internal Revenue Code of 1954 [now 1986] by
reason of a guarantee by the Farmers Home Administration if -
"(1) such guarantee is pursuant to a commitment made by the
Farmers Home Administration before July 1, 1984, and
"(2) such obligation is issued to finance a convention center
project in Carbondale, Illinois."
TREATMENT OF CERTAIN OBLIGATIONS USED TO FINANCE SOLID WASTE
DISPOSAL FACILITY
Section 1865(c) of Pub. L. 99-514 provided that:
"(1) In general. - Any obligation which is part of an issue a
substantial portion of the proceeds of which is to be used to
finance a solid waste disposal facility described in paragraph (2)
shall not, for purposes of section 103(h) of the Internal Revenue
Code of 1954 [now 1986], be treated as an obligation which is
federally guaranteed by reason of the sale of fuel, steam,
electricity, or other forms of usable energy to the Federal
Government or any agency or instrumentality thereof.
"(2) Solid waste disposal facility. - A solid waste disposal
facility is described in this paragraph if such facility is
described in section 103(b)(4)(E) of such Code and -
"(A) if -
"(i) a public State authority created pursuant to State
legislation which took effect on July 1, 1980, took formal
action before October 19, 1983, to commit development funds for
such facility,
"(ii) such authority issues obligations for such facility
before January 1, 1988, and
"(iii) expenditures have been made for the development of
such facility before October 19, 1983,
"(B) if -
"(i) such facility is operated by the South Eastern Public
Service Authority of Virginia, and
"(ii) on December 20, 1984, the Internal Revenue Service
issued a ruling concluding that a portion of the obligations
with respect to such facility would not be treated as federally
guaranteed under section 103(h) of such Code by reason of the
transitional rule contained in section 631(c)(3)(A)(i) of the
Tax Reform Act of 1984 [section 631(c)(3)(A)(i) of Pub. L.
98-369, set out as a note above],
"(C) if -
"(i) a political subdivision of a State took formal action on
April 1, 1980, to commit development funds for such facility,
"(ii) such facility has a contract to sell steam to a naval
base,
"(iii) such political subdivision issues obligations for such
facility before January 1, 1988, and
"(iv) expenditures have been made for the development of such
facility before October 19, 1983, or
"(D) if -
"(i) such facility is a thermal transfer facility,
"(ii) is to be built and operated by the Elk Regional
Resource Authority, and
"(iii) is to be on land leased from the United States Air
Force at Arnold Engineering Development Center near Tullahoma,
Tennessee.
"(3) Limitations. -
"(A) In the case of a solid waste disposal facility described
in paragraph (2)(A), the aggregate face amount of obligations to
which paragraph (1) applies shall not exceed $65,000,000.
"(B) In the case of a solid waste disposal facility described
in paragraph (2)(B), the aggregate face amount of obligations to
which paragraph (1) applies shall not exceed $20,000,000. Such
amount shall be in addition to the amount permitted under the
Internal Revenue Service ruling referred to in paragraph
(2)(B)(ii).
"(C) In the case of a solid waste disposal facility described
in paragraph (2)(C), the aggregate face amount of obligations to
which paragraph (1) applies shall not exceed $75,000,000.
"(D) In the case of a solid waste disposal facility described
in paragraph (2)(D), the aggregate face amount of obligations to
which paragraph (1) applies shall not exceed $25,000,000."
TRANSITIONAL RULE FOR LIMIT ON SMALL ISSUE EXCEPTION
Section 1866 of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1018(m)(1)-(4), Nov. 10, 1988, 102 Stat. 3584,
provided that: "The amendment made by section 623 of the Tax Reform
Act of 1984 [section 623 of Pub. L. 98-369, amending this section]
shall not apply to any obligation (or series of obligations) issued
to refund another tax-exempt IDB to which the amendment made by
such section 623 did not apply if -
"(1) the average maturity of the issue of which the refunding
obligation is a part does not exceed the average maturity of the
obligations to be refunded by such issue,
"(2) the amount of the refunding obligation does not exceed the
amount of the refunded obligation, and
"(3) the proceeds of the refunding obligation are used to
redeem the refunded obligation not later than 90 days after the
date of the issuance of the refunding obligation.
For purposes of the preceding sentence, the term 'tax-exempt IDB'
means any industrial development bond (as defined in section 103(b)
of the Internal Revenue Code of 1954 [now 1986]) the interest on
which is exempt from tax under section 103(a) of such Code. For
purposes of paragraph (1), average maturity shall be determined in
accordance with subsection (b)(14)(B)(i) of such Code."
[Section 1018(m)(5) of Pub. L. 100-647 provided that: "A
refunding obligation issued before July 1, 1987, shall be treated
as meeting the requirement of paragraph (1) of section 1866 of the
Reform Act [Pub. L. 99-514, set out above] if such obligation met
the requirement of such paragraph as enacted by the Reform Act
[Pub. L. 99-514]."]
EXCEPTION FROM 1984 AMENDMENT FOR DOWNTOWN MUSKOGEE REVITALIZATION
PROJECT
Section 1867(b) of Pub. L. 99-514 provided that: "The amendment
made by section 624 of the Tax Reform Act of 1984 [amending
sections 103 and 103A of this title and enacting provisions set out
as a note under this section] shall not apply to obligations issued
with respect to the Downtown Muskogee Revitalization Project for
which a UDAG grant was preliminarily approved on May 5, 1981, if -
"(1) such obligation is issued before January 1, 1986, or
"(2) such obligation is issued after such date to provide
additional financing for such project except that the aggregate
amount of obligations to which this subsection applies shall not
exceed $10,000,000."
TRANSITIONAL RULES
Section 1869(c)(1)-(4) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(n), Nov. 10, 1988, 102 Stat. 3584,
provided that:
"(1) Treatment of certain obligations issued by the city of
baltimore. - Obligations issued by the city of Baltimore, Maryland,
after June 30, 1985, shall not be treated as private loan bonds for
purposes of section 103(o) of the Internal Revenue Code of 1954
[now 1986] (or as private activity bonds for purposes of section
103 and part IV of subchapter A of chapter 1 of the Internal
Revenue Code of 1986, as amended by title XIII of this Act
[sections 1301 to 1318 of Pub. L. 99-514]) by reason of the use of
a portion of the proceeds of such obligations to finance or
refinance temporary advances made by the city of Baltimore in
connection with loans to persons who are not exempt persons (within
the meaning of section 103(b)(3) of such Code) if -
"(A) such obligations are not industrial development bonds
(within the meaning of section 103(b)(2) of the Internal Revenue
Code of 1954 [now 1986]),
"(B) the portion of the proceeds of such obligations so used is
attributable to debt approved by voter referendum on or before
November 2, 1982,
"(C) the loans to such nonexempt persons were approved by the
Board of Estimates of the city of Baltimore on or before October
19, 1983, and
"(D) the aggregate amount of such temporary advances financed
or refinanced by such obligations does not exceed $27,000,000.
"(2) White pine power project. - The amendment made by section
626(a) of the Tax Reform Act of 1984 [section 626(a) of Pub. L.
98-369, amending this section] shall not apply to any obligation
issued during 1984 to provide financing for the White Pine Power
Project in Nevada.
"(3) Tax increment bonds. - The amendment made by section 626(a)
of the Tax Reform Act of 1984 shall not apply to any tax increment
financing obligation issued before August 16, 1986, if -
"(A) substantially all of the proceeds of the issue are to be
used to finance -
"(i) sewer, street, lighting, or other governmental
improvements to real property,
"(ii) the acquisition of any interest in real property (by a
governmental unit having the power to exercise eminent domain),
the preparation of such property for new use, or the transfer
of such interest to a private developer, or
"(iii) payments of reasonable relocation costs of prior users
of such real property,
"(B) all of the activities described in subparagraph (A) are
pursuant to a redevelopment plan adopted by the issuing authority
before the issuance of such issue,
"(C) repayment of such issue is secured exclusively by pledges
of that portion of any increase in real property tax revenues (or
their equivalent) attributable to the redevelopment resulting
from the issue (or similar issues), and
"(D) none of the property described in subparagraph (A) is
subject to a real property or other tax based on a rate or
valuation method which differs from the rate and valuation method
applicable to any other similar property located within the
jurisdiction of the issuing authority.
"(4) Eastern maine electric cooperative. - The amendment made by
section 626(a) of the Tax Reform Act of 1984 shall not apply to
obligations issued by Massachusetts Municipal Wholesale Electric
Company Project No. 6 if -
"(A) such obligation is issued before January 1, 1986,
"(B) such obligation is issued after such date to refund a
prior obligation for such project, except that the aggregate
amount of obligations to which this subparagraph applies shall
not exceed $100,000,000, or
"(C) such obligation is issued after such date to provide
additional financing for such project except that the aggregate
amount of obligations to which this subparagraph applies shall
not exceed $45,000,000.
Subparagraph (B) shall not apply to any obligation issued for the
advance refunding of any obligation."
TREATMENT OF OBLIGATIONS TO FINANCE ST. JOHNS RIVER POWER PARK
Section 1869(c)(6) of Pub. L. 99-514 provided that:
"(A) In general. - The amendment made by section 626(a) of the
Tax Reform Act of 1984 [section 626(a) of Pub. L. 98-369, amending
this section] shall not apply to any obligation issued to finance
the project described in subparagraph (B) if -
"(i) such obligation is issued before September 27, 1985,
"(ii) such obligation is issued after such date to refund a
prior tax exemption obligation for such project, the amount of
such obligation does not exceed the outstanding amount of the
refunded obligation, and such prior tax exempt obligation is
retired not later than the date 30 days after the issuance of the
refunding obligation, or
"(iii) such obligation is issued after such date to provide
additional financing for such project except that the aggregate
amount of obligations to which this clause applies shall not
exceed $150,000,000.
Clause (ii) shall not apply to any obligation issued for the
advance refunding of any obligation.
"(B) Description of project. - The project described in this
subparagraph in the St. Johns River Power Park system in Florida
which was authorized by legislation enacted by the Florida
Legislature in February of 1982."
CERTAIN PUBLIC UTILITIES TREATED AS EXEMPTED PERSONS UNDER SECTION
103(B); SPECIAL RULES FOR CERTAIN RAILROADS
Section 629 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, title XIII, Sec. 1316(g)(8)(B), Oct. 22, 1986, 100 Stat. 2095,
2670, provided that:
"(a) Certain Public Utilities. - For purposes of applying section
103(b)(3) of the Internal Revenue Code [of 1986] with respect to -
"(1) any obligations issued after the date of enactment of this
Act [July 18, 1984], and
"(2) any obligations issued after December 31, 1969, which were
treated as obligations described in section 103(a) of such Code
on the day on which such obligations were issued,
the term 'exempt person' shall include a regulated public utility
having any customer service area within a State served by a public
power authority which was required as a condition of a Federal
Power Commission license specified by an Act of Congress enacted
prior to the enactment of section 107 of the Revenue and
Expenditure Control Act of 1968 (Public Law 90-364) [June 28, 1968]
to contract to sell power to one such utility and which is
authorized by State law to sell power to other such utilities, but
only with respect to the purchase by any such utility and resale to
its customers of any output of any electrical generation facility
or any portion thereof or any use of any electrical transmission
facility or any portion thereof financed by such power authority
and owned by it or by such State, and provided that by agreement
between such power authority and any such utility there shall be no
markup in the resale price charged by such utility of that
component of the resale price which represents the price paid by
such utility for such output or use. The preceding sentence shall
be applied by inserting 'and a rural electric cooperative utility'
after 'regulated public utility' but only if not more than 1
percent of the load of the public power authority is sold to such
rural electric cooperative utility.
"(b) Certain Railroads. - Section 103(b)(1) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] shall not apply to any
obligation which is described in section 103(b)(6)(A) of such Code
if -
"(1) substantially all of the proceeds of such obligation are
used to acquire railroad track and right-of-way from a railroad
involved in a title 11 or similar proceeding (within the meaning
of section 368(a)(3)(A) of such Code), and
"(2) the Federal Railroad Administration provides joint
financing for such acquisitions.
"(c) Special Rules for Subsection (a). -
"(1) Obligations subject to cap. - Any obligation described in
subsection (a) shall be treated as a private activity bond for
purposes of section 103(n) of the Internal Revenue Code of 1986.
"(2) Limitation on amount of obligations to which subsection
(a)(1) applies - The aggregate amount of obligations to which
subsection (a)(1) applies shall not exceed $911,000,000.
"(3) Limitation on purposes. - Subsection (a)(1) shall only
apply to obligations issued as part of an issue substantially all
the proceeds of which are used to provide 1 or more of the
following:
"(A) Cable facilities.
"(B) Small hydroelectric facilities.
"(C) The acquisition of an interest in an electrical
generating facility.
"(D) Improvements to existing generating facilities.
"(E) Transmission lines.
"(F) Electric generating facilities."
TREATMENT OF CERTAIN RESIDENTIAL REAL PROPERTY AS RESIDENTIAL
RENTAL PROPERTY
Treatment of Pub. L. 98-369, Sec. 631(d)(3), residential real
property as residential rental property, see section 1809(a)(4)(C)
of Pub. L. 99-514, set out as a note under section 168 of this
title.
PUBLIC APPROVAL REQUIREMENT IN THE CASE OF PUBLIC AIRPORT
Section 628(f) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If -
"(1) the proceeds of any issue are to be used to finance a
facility or facilities located on a public airport, and
"(2) the governmental unit issuing such obligations is the
owner or operator of such airport,
such governmental unit shall be deemed to be the only governmental
unit having jurisdiction over such airport for purposes of
subsection (k) of section 103 of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (relating to public approval for industrial
development bonds)."
SMALL ISSUE LIMIT IN CASE OF CERTAIN URBAN DEVELOPMENT ACTION
GRANTS
Section 628(h) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the case
of any obligation issued on December 11, 1981, section 103(b)(6)(I)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall
be applied by substituting '$15,000,000' for '$10,000,000' if -
"(1) such obligation is part of an issue,
"(2) substantially all of the proceeds of such issue are used
to provide facilities with respect to which an urban development
action grant under section 119 of the Housing and Community
Development Act of 1974 [42 U.S.C. 5318] was preliminarily
approved by the Secretary of Housing and Urban Development on
January 10, 1980, and
"(3) the Secretary of Housing and Urban Development determines,
at the time such grant is approved, that the amount of such grant
will equal or exceed 5 percent of the total capital expenditures
incurred with respect to such facilities."
STUDENT LOAN BONDS
Section 625 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, title XVIII, Sec. 1868, Oct. 22, 1986, 100 Stat. 2095, 2888,
provided that:
"(a) Arbitrage Regulations. -
"(1) In general. - The Secretary shall prescribe regulations
which specify the circumstances under which a qualified student
loan bond shall be treated as an arbitrage bond for purposes of
section 103 of the Internal Revenue Code of 1986 [formerly I.R.C.
1954]. Such regulations may provide that -
"(A) paragraphs (4) and (5) of section 103(c) of such Code
shall not apply, and
"(B) rules similar to section 103(c)(6) shall apply,
to qualified student loan bonds.
"(2) Definitions. - For purposes of this subsection -
"(A) Qualified student loan bond. - The term 'qualified
student loan bond' has the meaning given to such term by
section 103(o)(3) of the Internal Revenue Code of 1986 (as
amended by this Act).
"(B) Arbitrage bond. - The term 'arbitrage bond' has the
meaning given to such term by section 103(c)(2).
"(3) Effective date. -
"(A) In general. - Except as otherwise provided in this
paragraph, any regulations prescribed by the Secretary under
paragraph (1) shall apply to obligations issued after the
qualified date.
"(B) Qualified date. -
"(i) In general. - For purposes of this paragraph, the term
'qualified date' means the earlier of -
"(I) the date on which the Higher Education Act of 1965 [20
U.S.C. 1001 et seq.] expires, or
"(II) the date, after the date of enactment of this Act [July
18, 1984], on which the Higher Education Act of 1965 is
reauthorized.
"(ii) Publication of regulations. - Notwithstanding clause
(i), the qualified date shall not be a date which is prior to
the date that is 6 months after the date on which the
regulations prescribed under paragraph (1) are published in
the Federal Register.
"(C) Refunding obligations. - Regulations prescribed by the
Secretary under paragraph (1) shall not apply to any obligation
(or series of refunding obligations) issued exclusively to
refund any qualified student loan bond which was issued before
the qualified date, except that the requirements of
subparagraphs (A) and (B) of section 626(b)(4) of this Act [set
out in Effective Date of 1984 Amendment note above] must be met
with respect to such refunding.
"(D) Fulfillment of commitments. - Regulations prescribed by
the Secretary under paragraph (1) shall not apply to any
obligations which are needed to fulfill written commitments to
acquire or finance student loans which are originated after
June 30, 1984, and before the qualified date, but only if -
"(i) such commitments are binding on the qualified date,
and
"(ii) the amount of such commitments is consistent with
practices of the issuer which were in effect on March 15,
1984, with respect to establishing secondary markets for
student loans.
"(b) Arbitrage Limitation on Student Loan Bonds Which Are Not
Qualified Student Loan Bonds. - Under regulations prescribed by the
Secretary of the Treasury or his delegate, any student loan bond
(other than a qualified student loan bond) issued after December
31, 1985, shall be treated as an obligation not described in
subsection (a)(1) or (2) of section 103 of the Internal Revenue
Code of 1986 unless the issue of which such obligation is a part
meets requirements similar to those of sections 103(c)(6) and
103A(i) of such Code.
"(c) Issuance of Student Loan Bonds Which Are Not Tax-Exempt. -
Any issuer who may issue obligations described in section 103(a) of
the Internal Revenue Code of 1986 may elect to issue student loan
bonds which are not described in such section 103(a) of such Code
without prejudice to -
"(1) the status of any other obligations issued, or to be
issued, by such issuer as obligations described in section 103(a)
of such Code, or
"(2) the status of the issuer as an organization exempt from
taxation under such Code.
"(d) Federal Executive Branch Jurisdiction Over Tax-Exempt
Status. - For purposes of Federal law, any determination by the
executive branch of the Federal Government of whether interest on
any obligation is exempt from taxation under the Internal Revenue
Code of 1986 shall be exclusively within the jurisdiction of the
Department of the Treasury.
"(e) Study on Tax-Exempt Student Loan Bonds. -
"(1) In general. - The Comptroller General of the United States
and the Director of the Congressional Budget Office, shall
conduct studies of -
"(A) the appropriate role of tax-exempt bonds which are
issued in connection with the guaranteed student loan program
and the PLUS program established under the Higher Education Act
of 1965 [20 U.S.C. 1001 et seq.], and
"(B) the appropriate arbitrage rules for such bonds.
"(2) Report. - The Comptroller General of the United States and
the Director of the Congressional Budget Office, shall submit to
the Committee on Finance and the Committee on Labor and Human
Resources of the Senate and the Committee on Ways and Means and
the Committee on Education and Labor of the House of
Representatives reports on the studies conducted under paragraph
(1) by no later than 9 months after the date of enactment of this
Act [July 18, 1984]."
OBLIGATIONS ISSUED TO PROVIDE SOLID WASTE-ENERGY PRODUCING
FACILITIES
Section 241(b) of Pub. L. 96-223, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) General rule. - For purposes of section 103 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954], any obligation issued
by an authority for 2 or more political subdivisions of a State
which is part of an issue substantially all of the proceeds of
which are to be used to provide solid waste-energy producing
facilities shall be treated as an obligation of a political
subdivision of a State which meets the requirements of section
103(b)(4)(E) of such Code (relating to solid waste disposal, etc.,
facilities). Nothing in the preceding sentence shall be construed
to override the limitations of section 103(c) of such Code
(relating to arbitrage bonds).
"(2) Solid waste-energy producing facilities. - For purposes of
paragraph (1), the term 'solid waste-energy producing facilities'
means any solid waste disposal facility and any facility for the
production of steam and electrical energy if -
"(A) substantially all of the fuel for the facility producing
steam and electrical energy is derived from solid waste from such
solid waste disposal facility,
"(B) both such solid waste disposal facility and the facility
producing steam and electrical energy are owned and operated by
the authority referred to in paragraph (1), and
"(C) all of the electrical energy and steam produced by the
facility for producing steam and electricity which is not used by
such facility is sold, for purposes other than resale, to an
agency or instrumentality of the United States.
"(3) Solid waste disposal facility. - For purposes of paragraph
(2), the term 'solid waste disposal facility' means any solid waste
disposal facility within the meaning of section 103(b)(4)(E) of the
Internal Revenue Code of 1986 (determined without regard to section
103(g) of such Code).
"(4) Obligations must be in registered form. - This subsection
shall not apply to any obligation which is not issued in registered
form."
ALCOHOL-PRODUCING FACILITIES
Section 241(c) of Pub. L. 96-223, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Subparagraph (C) of section 103(g)(3) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by
subsection (a)) shall not apply to any facility for the production
of alcohol from solid waste if -
"(A) substantially all of the solid waste derived feedstock for
such facility is produced at a facility which -
"(i) went into full production in 1977,
"(ii) is located within the limits of a city, and
"(iii) is located in the same metropolitan area as the
alcohol-producing facility, and
"(B) before March 1, 1980, there were negotiations between a
governmental body and an organization described in section
501(c)(3) of the Internal Revenue Code of 1986 with respect to
the utilization of a special process for the production of
alcohol at such alcohol-producing facility.
"(2) Limitation. - The aggregate amount of obligations which may
be issued by reason of paragraph (1) with respect to any project
shall not exceed $30,000,000.
"(3) Termination. - This subsection shall not apply to
obligations issued after December 31, 1985."
HYDROELECTRIC GENERATING FACILITIES
Section 242(b) of Pub. L. 96-223, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - For purposes of section 103(b)(4)(H) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
qualified hydroelectric generating facilities), in the case of a
hydroelectric generating facility described in paragraph (2) -
"(A) the facility shall be treated as a qualified hydroelectric
generating facility (as defined in section 103(b)(8)(A) of such
Code) without regard to clause (ii) of section 48(l)(13)(B) of
such Code (relating to maximum generating capacity), and
"(B) the fraction referred to in subparagraph (C) of section
103(b)(8) of such Code shall be deemed to be 1.
"(2) Facilities to which paragraph (1) applies. - A facility is
described in this paragraph if -
"(A) it would be a qualified hydroelectric generating facility
(as defined in section 103(b)(8)(A) of such Code) if clause (ii)
of section 48(l)(13)(B) did not apply,
"(B) it constitutes an expansion of generating capacity at an
existing hydroelectric generating facility,
"(C) such facility is located at 1 of 2 dams located in the
same county where -
"(i) the rated capacity of the hydroelectric generating
facilities at each such dam on October 18, 1979, was more than
750 megawatts,
"(ii) the construction of the first such dam began in 1956,
power at such first dam was first generated in 1959, and full
power production at such first dam began in 1961, and
"(iii) the construction of the second such dam began in 1959,
power at such second dam was first generated in 1963, and full
power production at such second dam began in 1964,
"(D) acquisition or construction of the existing facility
referred to in subparagraph (B) was financed with the proceeds of
an obligation described in section 103(a)(1) of such Code,
"(E) the existing facility is owned and operated by a State,
political subdivision of a State, or agency or instrumentality of
any of the foregoing,
"(F) no more than 60 percent of the electric power and energy
produced by such existing facility and of the qualified
hydroelectric generating facility is to be sold to anyone other
than an exempt person (within the meaning of section 103(b)(3) of
such Code), and
"(G) the agency of the State in which the facility is located
which has jurisdiction over water rights had granted, before
October 18, 1979, a water right under which expanded power and
energy generating capacity for the facility was contemplated."
STATE OBLIGATIONS FOR RENEWABLE ENERGY PROPERTY
Section 243 of Pub. L. 96-223, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) Certain State Obligations for Renewable Energy Property. -
"(1) In general. - Paragraph (1) of subsection (b) of section
103 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
shall not apply to any obligation issued as part of an issue
substantially all of the proceeds of which are to be used to
provide renewable energy property, if -
"(A) the obligations are general obligations of a State,
"(B) the authority for the issuance of the obligations
requires that taxes be levied in sufficient amount to provide
for the payment of principal and interest on such obligations,
"(C) the amount of such obligations, when added to the sum of
the amounts of all such obligations previously issued by the
State which are outstanding, does not exceed the smaller of -
"(i) $500,000,000 or
"(ii) one-half of 1 percent of the value of all property in
the State,
"(D) such obligations are issued pursuant to a program to
provide financing for small scale energy projects which was
established by a State the legislature of which, before October
18, 1979, approved a constitutional amendment to provide for
such a program, and
"(E) such obligations meet the requirements of paragraph (1)
of section 103(h) of the Internal Revenue Code of 1986.
"(2) Renewable energy property. - For purposes of this
subsection, the term 'renewable energy property' means property
used to produce energy (including heat, electricity, and
substitute fuels) from renewable energy sources (including wind,
solar, and geothermal energy, waste heat, biomass, and water).
"(b) Effective Date. - Subsection (a) shall apply with respect to
obligations issued after the date of enactment of this Act [Apr. 2,
1980]."
DISPOSITION OF AMOUNTS GENERATED BY ADVANCE REFUNDING OF CERTAIN
GOVERNMENTAL OBLIGATIONS
Section 337 of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 103(a)(8), Apr. 1, 1980, 94 Stat. 212; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) General Rule. - The payment to a charitable organization of
a refund profit held in a trust fund or escrow arrangement, or held
by an underwriter or other person under a qualified agreement in
accordance with that agreement -
"(1) shall not cause the refunding obligations out of which the
refund profit arose to be treated as arbitrage bonds (within the
meaning of section 103(c) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) and
"(2) may be paid without penalty imposed on the issuer of such
obligations.
"(b) Rule for Governments Which Have Already Paid Arbitrage
Profits to the United States. - In the case of a State or local
government which, before January 1, 1977 -
"(1) requested in writing a rule by the Internal Revenue
Service with respect to the tax consequences of paying refund
profit to charitable organizations,
"(2) failed to receive a favorable ruling and did not pay the
refund profit to a charitable organization, and
which accounted to the United States for refund profit by direct
payment to the United States, or by the purchase of low-interest
United States obligations, the Secretary of the Treasury shall pay,
out of any amounts in the Treasury not otherwise appropriated, an
amount equal to the refund profit for which the State or local
government has accounted to the United States. Amounts paid to a
State or local government under this subsection shall be
distributed to such charitable organizations within 90 days after
the date on which the payment is received by the State or local
government in the same manner as if the refund profit had not been
paid to the United States and met the requirements of subsection
(a).
"(c) Definitions. - For purposes of this section -
"(1) Refund profit. - The term 'Refund profit' means interest,
profit, or other amounts generated by, or arising out of, the
advance refunding, before September 24, 1976, of an obligation of
a State or local government described in section 103 of such
Code.
"(2) Charitable organization. - The term 'charitable
organization' means an organization described in section
501(c)(3) of such Code and exempt from taxation under section
501(a) of such Code other than an organization described in
section 509(a) of such Code.
"(3) Qualified agreement. - The term 'qualified agreement'
means an agreement (whether or not enforceable) which provides
for, or contemplates, the payment of refund profit to one or more
charitable organizations.
"(4) Low-interest united states obligations. - The term
'low-interest United States obligations' means United States
obligations which bear an interest rate lower than the highest
rate of interest borne by public debt securities generally
available for purchase at the time such obligations were
purchased."
TRANSITIONAL PROVISIONS FOR INDUSTRIAL DEVELOPMENT BONDS ISSUED
BEFORE JANUARY 1, 1969
Section 107(b)(2) of Pub. L. 90-364, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Section 103(c)(1) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954], as amended by subsection (a) [subsec. (b)(1),
formerly subsec. (c)(1) of this section], shall not apply with
respect to any obligation issued before January 1, 1969, if before
May 1, 1968 -
"(A) the issuance of the obligation (or the project in
connection with which the proceeds of the obligations are to be
used) was authorized or approved by the governing body of the
governmental unit issuing the obligation or by the voters of such
governmental unit;
"(B) in connection with the issuance of such obligation or with
the use of the proceeds to be derived from the sale of such
obligation or the property to be acquired or improved with such
proceeds, a governmental unit has made a significant financial
commitment;
"(C) any person (other than a governmental unit) who will use
the proceeds to be derived from the sale of such obligation or
the property to be acquired or improved with such proceeds has
expended (or has entered into a binding contract to expend) for
purposes which are related to the use of such proceeds or
property, an amount equal to or in excess of 20 percent of such
proceeds; or
"(D) in the case of an obligation issued in conjunction with a
project where financial assistance will be provided by a
governmental agency concerned with economic development, such
agency has approved the project or an application for financial
assistance is pending."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 29, 42, 45, 45D, 48, 57,
142, 143, 144, 145, 148, 149, 150, 168, 265, 465, 593, 643, 646,
667, 772, 811, 832, 834, 842, 851, 871, 1275, 1276, 1278, 1400L,
4940, 4942, 6049, 7478, 7518, 7701, 7871 of this title; title 7
section 608c; title 12 sections 1441a, 1831q; title 15 sections
77c, 78c; title 16 sections 839f, 2708; title 19 section 2345;
title 45 section 1207; title 46 App. section 1177; title 48
sections 1574, 1670.
-End-
-CITE-
26 USC Sec. 103A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 103A. Repealed. Pub. L. 99-514, title XIII, Sec. 1301(j)(1),
Oct. 22, 1986, 100 Stat. 2657]
-MISC1-
Section, added Pub. L. 96-499, title XI, Sec. 1102(a), Dec. 5,
1980, 94 Stat. 2660; amended Pub. L. 96-595, Sec. 5(a), (b), Dec.
24, 1980, 94 Stat. 3467; Pub. L. 97-248, title II, Sec. 220(a)-(e),
title III, Sec. 310(c)(3), (4), Sept. 3, 1982, 96 Stat. 475, 476,
599; Pub. L. 98-369, div. A, title I, Sec. 42(a)(2), title VI,
Secs. 611(a)-(c), 612(b), 624(b)(1), July 18, 1984, 98 Stat. 556,
901-903, 911, 924; Pub. L. 99-514, title XVIII, Sec. 1861, Oct. 22,
1986, 100 Stat. 2883, related to mortgage subsidy bonds. See
section 143 of this title.
EFFECTIVE DATE OF REPEAL
Repeal applicable to bonds issued after Aug. 15, 1986, except as
otherwise provided, see sections 1311 to 1318 of Pub. L. 99-514,
set out as an Effective Date; Transitional Rules note under section
141 of this title.
-End-
-CITE-
26 USC Sec. 104 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 104. Compensation for injuries or sickness
-STATUTE-
(a) In general
Except in the case of amounts attributable to (and not in excess
of) deductions allowed under section 213 (relating to medical,
etc., expenses) for any prior taxable year, gross income does not
include -
(1) amounts received under workmen's compensation acts as
compensation for personal injuries or sickness;
(2) the amount of any damages (other than punitive damages)
received (whether by suit or agreement and whether as lump sums
or as periodic payments) on account of personal physical injuries
or physical sickness;
(3) amounts received through accident or health insurance (or
through an arrangement having the effect of accident or health
insurance) for personal injuries or sickness (other than amounts
received by an employee, to the extent such amounts (A) are
attributable to contributions by the employer which were not
includible in the gross income of the employee, or (B) are paid
by the employer);
(4) amounts received as a pension, annuity, or similar
allowance for personal injuries or sickness resulting from active
service in the armed forces of any country or in the Coast and
Geodetic Survey or the Public Health Service, or as a disability
annuity payable under the provisions of section 808 of the
Foreign Service Act of 1980; and
(5) amounts received by an individual as disability income
attributable to injuries incurred as a direct result of a
terroristic or military action (as defined in section 692(c)(2)).
For purposes of paragraph (3), in the case of an individual who is,
or has been, an employee within the meaning of section 401(c)(1)
(relating to self-employed individuals), contributions made on
behalf of such individual while he was such an employee to a trust
described in section 401(a) which is exempt from tax under section
501(a), or under a plan described in section 403(a), shall, to the
extent allowed as deductions under section 404, be treated as
contributions by the employer which were not includible in the
gross income of the employee. For purposes of paragraph (2),
emotional distress shall not be treated as a physical injury or
physical sickness. The preceding sentence shall not apply to an
amount of damages not in excess of the amount paid for medical care
(described in subparagraph (A) or (B) of section 213(d)(1))
attributable to emotional distress.
(b) Termination of application of subsection (a)(4) in certain
cases
(1) In general
Subsection (a)(4) shall not apply in the case of any individual
who is not described in paragraph (2).
(2) Individuals to whom subsection (a)(4) continues to apply
An individual is described in this paragraph if -
(A) on or before September 24, 1975, he was entitled to
receive any amount described in subsection (a)(4),
(B) on September 24, 1975, he was a member of any
organization (or reserve component thereof) referred to in
subsection (a)(4) or under a binding written commitment to
become such a member,
(C) he receives an amount described in subsection (a)(4) by
reason of a combat-related injury, or
(D) on application therefor, he would be entitled to receive
disability compensation from the Veterans' Administration.
(3) Special rules for combat-related injuries
For purposes of this subsection, the term "combat-related
injury" means personal injury or sickness -
(A) which is incurred -
(i) as a direct result of armed conflict,
(ii) while engaged in extrahazardous service, or
(iii) under conditions simulating war; or
(B) which is caused by an instrumentality of war.
In the case of an individual who is not described in subparagraph
(A) or (B) of paragraph (2), except as provided in paragraph (4),
the only amounts taken into account under subsection (a)(4) shall
be the amounts which he receives by reason of a combat-related
injury.
(4) Amount excluded to be not less than veterans' disability
compensation
In the case of any individual described in paragraph (2), the
amounts excludable under subsection (a)(4) for any period with
respect to any individual shall not be less than the maximum
amount which such individual, on application therefor, would be
entitled to receive as disability compensation from the Veterans'
Administration.
(c) Application of prior law in certain cases
The phrase "(other than punitive damages)" shall not apply to
punitive damages awarded in a civil action -
(1) which is a wrongful death action, and
(2) with respect to which applicable State law (as in effect on
September 13, 1995 and without regard to any modification after
such date) provides, or has been construed to provide by a court
of competent jurisdiction pursuant to a decision issued on or
before September 13, 1995, that only punitive damages may be
awarded in such an action.
This subsection shall cease to apply to any civil action filed on
or after the first date on which the applicable State law ceases to
provide (or is no longer construed to provide) the treatment
described in paragraph (2).
(d) Cross references
(1) For exclusion from employee's gross income of employer
contributions to accident and health plans, see section 106.
(2) For exclusion of part of disability retirement pay from
the application of subsection (a)(4) of this section, see
section 1403 of title 10, United States Code (relating to
career compensation laws).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 30; Pub. L. 86-723, Sec. 51,
Sept. 8, 1960, 74 Stat. 847; Pub. L. 87-792, Sec. 7(d), Oct. 10,
1962, 76 Stat. 829; Pub. L. 94-455, title V, Sec. 505(b), (e)(1),
title XIX, Sec. 1901(a)(18), Oct. 4, 1976, 90 Stat. 1567, 1568,
1766; Pub. L. 96-465, title II, Sec. 2206(e)(1), Oct. 17, 1980, 94
Stat. 2162; Pub. L. 97-473, title I, Sec. 101(a), Jan. 14, 1983, 96
Stat. 2605; Pub. L. 101-239, title VII, Sec. 7641(a), Dec. 19,
1989, 103 Stat. 2379; Pub. L. 104-188, title I, Sec. 1605(a)-(c),
Aug. 20, 1996, 110 Stat. 1838; Pub. L. 104-191, title III, Sec.
311(b), Aug. 21, 1996, 110 Stat. 2053; Pub. L. 107-134, title I,
Sec. 113(a), Jan. 23, 2002, 115 Stat. 2435.)
-REFTEXT-
REFERENCES IN TEXT
Section 808 of the Foreign Service Act of 1980, referred to in
subsec. (a)(4), is Pub. L. 96-465, title I, Sec. 808, Oct. 17,
1980, 94 Stat. 2110, which is classified to section 4048 of Title
22, Foreign Relations and Intercourse.
-MISC1-
AMENDMENTS
2002 - Subsec. (a)(5). Pub. L. 107-134 substituted "a terroristic
or military action (as defined in section 692(c)(2))." for "a
violent attack which the Secretary of State determines to be a
terrorist attack and which occurred while such individual was an
employee of the United States engaged in the performance of his
official duties outside the United States."
1996 - Subsec. (a). Pub. L. 104-188, Sec. 1605(b), in closing
provisions, substituted "For purposes of paragraph (2), emotional
distress shall not be treated as a physical injury or physical
sickness. The preceding sentence shall not apply to an amount of
damages not in excess of the amount paid for medical care
(described in subparagraph (A) or (B) of section 213(d)(1))
attributable to emotional distress." for "Paragraph (2) shall not
apply to any punitive damages in connection with a case not
involving physical injury or physical sickness."
Subsec. (a)(2). Pub. L. 104-188, Sec. 1605(a), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "the
amount of any damages received (whether by suit or agreement and
whether as lump sums or as periodic payments) on account of
personal injuries or sickness;".
Subsec. (a)(3). Pub. L. 104-191 inserted "(or through an
arrangement having the effect of accident or health insurance)"
after "accident or health insurance".
Subsecs. (c), (d). Pub. L. 104-188, Sec. 1605(c), added subsec.
(c) and redesignated former subsec. (c) as (d).
1989 - Subsec. (a). Pub. L. 101-239 inserted at end "Paragraph
(2) shall not apply to any punitive damages in connection with a
case not involving physical injury or physical sickness."
1983 - Subsec. (a)(2). Pub. L. 97-473 substituted "whether by
suit or agreement and whether as lump sums or as periodic payments"
for "whether by suit or agreement".
1980 - Subsec. (a)(4). Pub. L. 96-465 substituted reference to
section 808 of the Foreign Service Act of 1980 for reference to
section 831 of the Foreign Service Act of 1946.
1976 - Subsec. (a)(4). Pub. L. 94-455, Sec. 1901(a)(18)(A),
struck out "; 60 Stat. 1021" after "(22 U.S.C. 1081".
Subsec. (a)(5). Pub. L. 94-455, Sec. 505(e)(1), added par. (5).
Subsecs. (b), (c). Pub. L. 94-455, Sec. 505(b), added subsec.
(b), redesignated former subsec. (b) as (c) and, as so
redesignated, Sec. 1901(a)(18)(B), substituted "1403 of title 10,
United States Code (relating to career compensation laws)" for
"402(h) of the Career Compensation Act of 1949 (37 U.S.C. 272(h))".
1962 - Subsec. (a). Pub. L. 87-792 inserted sentence requiring
contributions made on behalf of an individual who is, or has been,
an employee within the meaning of section 401(c)(1), while he was
such an employee to a trust which is exempt from tax, or under a
plan described in section 403(a), to be treated as contributions by
the employer which were not includible in the gross income of the
employee.
1960 - Subsec. (a)(4). Pub. L. 86-723 provided for exclusion from
gross income of amounts received as a disability annuity payable
under the provisions of section 831 of the Foreign Service Act of
1946, as amended.
-CHANGE-
CHANGE OF NAME
Reference to Veterans' Administration deemed to refer to
Department of Veterans Affairs pursuant to section 10 of Pub. L.
100-527, set out as a Department of Veterans Affairs Act note under
section 301 of Title 38, Veterans' Benefits.
Coast and Geodetic Survey consolidated with National Weather
Bureau in 1965 to form Environmental Science Services
Administration by Reorg. Plan No. 2 of 1965, eff. July 13, 1965, 30
FR 8819, 79 Stat. 1318. Environmental Science Services
Administration abolished in 1970 and its personnel, property,
records, etc., transferred to National Oceanic and Atmospheric
Administration by Reorg. Plan No. 4 of 1970, eff. Oct. 3, 1970, 35
FR 15627, 84 Stat. 2090. By order of Acting Associate Administrator
of National Oceanic and Atmospheric Administration, 35 FR 19249,
Dec. 19, 1970, Coast and Geodetic Survey redesignated National
Ocean Survey. See notes under section 311 of Title 15, Commerce and
Trade.
-MISC2-
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-134, title I, Sec. 113(c), Jan. 23, 2002, 115 Stat.
2435, provided that: "The amendments made by this section [amending
this section and section 692 of this title] shall apply to taxable
years ending on or after September 11, 2001."
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 311(c) of Pub. L. 104-191 provided that: "The amendments
made by this section [amending this section and section 162 of this
title] shall apply to taxable years beginning after December 31,
1996."
Section 1605(d) of Pub. L. 104-188 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to amounts received after the date of the enactment of this Act
[Aug. 20, 1996], in taxable years ending after such date.
"(2) Exception. - The amendments made by this section shall not
apply to any amount received under a written binding agreement,
court decree, or mediation award in effect on (or issued on or
before) September 13, 1995."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7641(b) of Pub. L. 101-239 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by subsection (a) [amending this section] shall
apply to amounts received after July 10, 1989, in taxable years
ending after such date.
"(2) Exception. - The amendment made by subsection (a) shall not
apply to any amount received -
"(A) under any written binding agreement, court decree, or
mediation award in effect on (or issued on or before) July 10,
1989, or
"(B) pursuant to any suit filed on or before July 10, 1989."
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-465 effective Feb. 15, 1981, except as
otherwise provided, see section 2403 of Pub. L. 96-465, set out as
an Effective Date note under section 3901 of Title 22, Foreign
Relations and Intercourse.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 505(b) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1975, see section 508 of
Pub. L. 94-455, set out as a note under section 3 of this title.
Section 505(e)(2) of Pub. L. 94-455 provided that: "The
amendments made by this subsection [amending this section] shall
apply to taxable years beginning after December 31, 1976."
Amendment by section 1901(a)(18)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Section 56(e) of Pub. L. 86-723 provided that: "The amendment
made by section 51 of this Act [amending this section] shall be
effective with respect to taxable years ending after the date of
enactment of this Act [Sept. 8, 1960]."
-TRANS-
TRANSFER OF FUNCTIONS
Secretary of Health, Education, and Welfare redesignated
Secretary of Health and Human Services by section 3508 of Title 20,
Education.
Functions of Public Health Service, Surgeon General of Public
Health Service, and all other officers and employees of Public
Health Service, and functions of all agencies of or in Public
Health Service transferred to Secretary of Health, Education, and
Welfare by 1966 Reorg. Plan No. 3, 31 F.R. 8855, 80 Stat. 1610,
effective June 25, 1966, set out in the Appendix to Title 5,
Government Organization and Employees.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 22, 105, 130, 5891, 6051,
7701 of this title; title 10 section 1403.
-End-
-CITE-
26 USC Sec. 105 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 105. Amounts received under accident and health plans
-STATUTE-
(a) Amounts attributable to employer contributions
Except as otherwise provided in this section, amounts received by
an employee through accident or health insurance for personal
injuries or sickness shall be included in gross income to the
extent such amounts (1) are attributable to contributions by the
employer which were not includible in the gross income of the
employee, or (2) are paid by the employer.
(b) Amounts expended for medical care
Except in the case of amounts attributable to (and not in excess
of) deductions allowed under section 213 (relating to medical,
etc., expenses) for any prior taxable year, gross income does not
include amounts referred to in subsection (a) if such amounts are
paid, directly or indirectly, to the taxpayer to reimburse the
taxpayer for expenses incurred by him for the medical care (as
defined in section 213(d)) of the taxpayer, his spouse, and his
dependents (as defined in section 152). Any child to whom section
152(e) applies shall be treated as a dependent of both parents for
purposes of this subsection.
(c) Payments unrelated to absence from work
Gross income does not include amounts referred to in subsection
(a) to the extent such amounts -
(1) constitute payment for the permanent loss or loss of use of
a member or function of the body, or the permanent disfigurement,
of the taxpayer, his spouse, or a dependent (as defined in
section 152), and
(2) are computed with reference to the nature of the injury
without regard to the period the employee is absent from work.
[(d) Repealed. Pub. L. 98-21, title I, Sec. 122(b), Apr. 20, 1983,
97 Stat. 87]
(e) Accident and health plans
For purposes of this section and section 104 -
(1) amounts received under an accident or health plan for
employees, and
(2) amounts received from a sickness and disability fund for
employees maintained under the law of a State or the District of
Columbia,
shall be treated as amounts received through accident or health
insurance.
(f) Rules for application of section 213
For purposes of section 213(a) (relating to medical, dental,
etc., expenses) amounts excluded from gross income under subsection
(c) or (d) shall not be considered as compensation (by insurance or
otherwise) for expenses paid for medical care.
(g) Self-employed individual not considered an employee
For purposes of this section, the term "employee" does not
include an individual who is an employee within the meaning of
section 401(c)(1) (relating to self-employed individuals).
(h) Amount paid to highly compensated individuals under a
discriminatory self-insured medical expense reimbursement plan
(1) In general
In the case of amounts paid to a highly compensated individual
under a self-insured medical reimbursement plan which does not
satisfy the requirements of paragraph (2) for a plan year,
subsection (b) shall not apply to such amounts to the extent they
constitute an excess reimbursement of such highly compensated
individual.
(2) Prohibition of discrimination
A self-insured medical reimbursement plan satisfies the
requirements of this paragraph only if -
(A) the plan does not discriminate in favor of highly
compensated individuals as to eligibility to participate; and
(B) the benefits provided under the plan do not discriminate
in favor of participants who are highly compensated
individuals.
(3) Nondiscriminatory eligibility classifications
(A) In general
A self-insured medical reimbursement plan does not satisfy
the requirements of subparagraph (A) of paragraph (2) unless
such plan benefits -
(i) 70 percent or more of all employees, or 80 percent or
more of all the employees who are eligible to benefit under
the plan if 70 percent or more of all employees are eligible
to benefit under the plan; or
(ii) such employees as qualify under a classification set
up by the employer and found by the Secretary not to be
discriminatory in favor of highly compensated individuals.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from
consideration -
(i) employees who have not completed 3 years of service;
(ii) employees who have not attained age 25;
(iii) part-time or seasonal employees;
(iv) employees not included in the plan who are included in
a unit of employees covered by an agreement between employee
representatives and one or more employers which the Secretary
finds to be a collective bargaining agreement, if accident
and health benefits were the subject of good faith bargaining
between such employee representatives and such employer or
employers; and
(v) employees who are nonresident aliens and who receive no
earned income (within the meaning of section 911(d)(2)) from
the employer which constitutes income from sources within the
United States (within the meaning of section 861(a)(3)).
(4) Nondiscriminatory benefits
A self-insured medical reimbursement plan does not meet the
requirements of subparagraph (B) of paragraph (2) unless all
benefits provided for participants who are highly compensated
individuals are provided for all other participants.
(5) Highly compensated individual defined
For purposes of this subsection, the term "highly compensated
individual" means an individual who is -
(A) one of the 5 highest paid officers,
(B) a shareholder who owns (with the application of section
318) more than 10 percent in value of the stock of the
employer, or
(C) among the highest paid 25 percent of all employees (other
than employees described in paragraph (3)(B) who are not
participants).
(6) Self-insured medical reimbursement plan
The term "self-insured medical reimbursement plan" means a plan
of an employer to reimburse employees for expenses referred to in
subsection (b) for which reimbursement is not provided under a
policy of accident and health insurance.
(7) Excess reimbursement of highly compensated individual
For purposes of this section, the excess reimbursement of a
highly compensated individual which is attributable to a
self-insured medical reimbursement plan is -
(A) in the case of a benefit available to highly compensated
individuals but not to all other participants (or which
otherwise fails to satisfy the requirements of paragraph
(2)(B)), the amount reimbursed under the plan to the employee
with respect to such benefit, and
(B) in the case of benefits (other than benefits described in
subparagraph (A) (!1) paid to a highly compensated individual
by a plan which fails to satisfy the requirements of paragraph
(2), the total amount reimbursed to the highly compensated
individual for the plan year multiplied by a fraction -
(i) the numerator of which is the total amount reimbursed
to all participants who are highly compensated individuals
under the plan for the plan year, and
(ii) the denominator of which is the total amount
reimbursed to all employees under the plan for such plan
year.
In determining the fraction under subparagraph (B), there shall
not be taken into account any reimbursement which is attributable
to a benefit described in subparagraph (A).
(8) Certain controlled groups, etc.
All employees who are treated as employed by a single employer
under subsection (b), (c), or (m) of section 414 shall be treated
as employed by a single employer for purposes of this section.
(9) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the provisions of this section.
(10) Time of inclusion
Any amount paid for a plan year that is included in income by
reason of this subsection shall be treated as received or accrued
in the taxable year of the participant in which the plan year
ends.
(i) Sick pay under Railroad Unemployment Insurance Act
Notwithstanding any other provision of law, gross income includes
benefits paid under section 2(a) of the Railroad Unemployment
Insurance Act for days of sickness; except to the extent such
sickness (as determined in accordance with standards prescribed by
the Railroad Retirement Board) is the result of on-the-job injury.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 30; Pub. L. 87-792, Sec. 7(e),
Oct. 10, 1962, 76 Stat. 829; Pub. L. 88-272, title II, Sec. 205(a),
Feb. 26, 1964, 78 Stat. 38; Pub. L. 94-455, title V, Sec. 505(a),
title XIX, Sec. 1901(c)(2), Oct. 4, 1976, 90 Stat. 1566, 1803; Pub.
L. 95-600, title III, Sec. 366(a), title VII, Sec. 701(c)(1), Nov.
6, 1978, 92 Stat. 2855, 2899; Pub. L. 96-222, title I, Sec.
103(a)(13)(B), (C), Apr. 1, 1980, 94 Stat. 213; Pub. L. 96-605,
title II, Sec. 201(b)(1), Dec. 28, 1980, 94 Stat. 3527; Pub. L.
96-613, Sec. 5(b)(1), Dec. 28, 1980, 94 Stat. 3581; Pub. L. 97-34,
title I, Secs. 103(c)(2), 111(b)(4), Aug. 13, 1981, 95 Stat. 188,
194; Pub. L. 97-248, title II, Sec. 202(b)(3)(C), Sept. 3, 1982, 96
Stat. 421; Pub. L. 98-21, title I, Sec. 122(b), Apr. 20, 1983, 97
Stat. 87; Pub. L. 98-76, title II, Sec. 241(a), Aug. 12, 1983, 97
Stat. 430; Pub. L. 98-369, div. A, title IV, Sec. 423(b)(2), July
18, 1984, 98 Stat. 800; Pub. L. 99-514, title XI, Sec. 1151(c)(2),
title XIII, Sec. 1301(j)(9), Oct. 22, 1986, 100 Stat. 2503, 2658;
Pub. L. 101-140, title II, Sec. 203(a)(1), Nov. 8, 1989, 103 Stat.
830.)
-REFTEXT-
REFERENCES IN TEXT
Section 2(a) of the Railroad Unemployment Insurance Act, referred
to in subsec. (i), is classified to section 352(a) of Title 45,
Railroads.
-MISC1-
AMENDMENTS
1989 - Subsecs. (h), (i). Pub. L. 101-140 amended subsecs. (h)
and (i) to read as if amendments by Pub. L. 99-514, Sec.
1151(c)(2), had not been enacted, see 1986 Amendment note below.
1986 - Subsec. (d)(5)(C). Pub. L. 99-514, Sec. 1301(j)(9), which
directed that subpar. (C) be amended by substituting "section
7703(a)" for "section 143(a)", could not be executed because
subsec. (d) was previously repealed by Pub. L. 98-21. See 1983
Amendment note below.
Subsecs. (h), (i). Pub. L. 99-514, Sec. 1151(c)(2), redesignated
subsec. (i) as (h) and struck out former subsec. (h) which related
to amount paid to highly compensated individuals under a
discriminatory self-insured medical expense reimbursement plan.
1984 - Subsec. (b). Pub. L. 98-369 inserted "Any child to whom
section 152(e) applies shall be treated as a dependent of both
parents for purposes of this subsection."
1983 - Subsec. (d). Pub. L. 98-21 struck out subsec. (d) which
provided that no deduction or credit would be allowed with respect
to any expenditure which is properly associated with any amount
excluded from gross income under subsec. (a).
Subsec. (i). Pub. L. 98-76 added subsec. (i).
1982 - Subsec. (b). Pub. L. 97-248 substituted "section 213(d)"
for "section 213(e)".
1981 - Subsec. (d)(3). Pub. L. 97-34, Sec. 103(c)(2), substituted
"this subsection and section 221" for "this subsection" in
parenthetical provision.
Subsec. (h)(3)(B)(v). Pub. L. 97-34, Sec. 111(b)(4), substituted
"section 911(d)(2)" for "section 911(b)".
1980 - Subsec. (h)(3)(A). Pub. L. 96-222, Sec. 103(a)(13)(B),
substituted "highly compensated individuals" for "highly
compensated participants".
Subsec. (h)(7)(A). Pub. L. 96-222, Sec. 103(a)(13)(C),
substituted "highly compensated individuals but not to all other
participants (or which otherwise fails to satisfy the requirements
of paragraph (2)(B))" for "a highly compensated individual but not
to a broad cross-section of employees".
Subsec. (h)(8). Pub. L. 96-613 and Pub. L. 96-605 made identical
amendments by substituting in heading "controlled groups, etc." for
"controlled groups", and by substituting in text "subsection (b),
(c), or (m) of section 414" for "subsection (b) or (c) of section
414".
1978 - Subsec. (d)(4). Pub. L. 95-600, Sec. 701 (c)(1),
redesignated par. (5) as (4). Former par. (4) redesignated (5)(A)
and (C).
Subsec. (d)(5). Pub. L. 95-600, Sec. 701(c)(1), added heading and
subpar. (B), redesignated former par. (4) as subpars. (A) and (C),
adding subpar. (C) heading and substituting "section 143(a)" for
"section 143"; and redesignated former par. (6) as subpar. (D),
inserting "defined" in heading.
Subsec. (d)(6), (7). Pub. L. 95-600, Sec. 701(c)(1), redesignated
par. (7) as (6). Former par. (6) redesignated (5)(D).
Subsec. (h). Pub. L. 95-600, Sec. 366(a), added subsec. (h).
1976 - Subsec. (d). Pub. L. 94-455, Sec. 505(a), substituted
provisions relating to an exclusion of up to $5,200 a year for
taxpayers retiring on disability prior to age 65; dollar-for-dollar
phase out of exclusion for adjusted annual gross income (including
disability income) in excess of $15,000; requirement that married
couple must file joint return; defined "permanent and total
disability" and "joint return"; and inserted special rule for
coordination with section 72 of this title for provisions relating
to wage continuation plans.
Subsec. (e)(2). Pub. L. 94-455, Sec. 1901(c)(2), struck out "a
territory" after "of a State".
1964 - Subsec. (d). Pub. L. 88-272 substituted provisions stating
that "The preceding sentence shall not apply to amounts
attributable to the first 30" days if the amounts exceed 75 percent
of regular weekly wages, and if they do not exceed said 75 percent,
the first sentence of this subsection shall not apply to the extent
the amounts exceed $75 weekly and shall not apply to amounts
attributable to the first 7 calendar days unless the employee is
hospitalized for injury or sickness for at least 1 day in such
period, for provisions stating that said "preceding sentence" did
not apply in cases of sickness, to amounts attributable to the
first 7 days unless the employee was hospitalized for sickness for
at least 1 day during such period.
1962 - Subsec. (g). Pub. L. 87-792 added subsec. (g).
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1151(c)(2) of Pub. L. 99-514 applicable,
with certain qualifications and exceptions, to years beginning
after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as
amended, set out as a note under section 79 of this title.
Amendment by section 1301(j)(9) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1984, see section 423(d) of Pub. L. 98-369, set out
as a note under section 2 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Section 241(b) of Pub. L. 98-76 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts received after December 31, 1983, in taxable years ending
after such date."
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1983, except that if an individual's annuity
starting date was deferred under subsec. (d)(6) as in effect the
day before Apr. 20, 1983, such deferral shall end on the first day
of such individual's first taxable year beginning after Dec. 31,
1983, see section 122(d) of Pub. L. 98-21 set out as a note under
section 22 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-248 applicable to taxable years beginning
after Dec. 31, 1983, see section 202(c) of Pub. L. 97-248, set out
as a note under section 213 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see sections 103(d) and 115 of Pub. L. 97-34,
set out as notes under sections 62 and 911, respectively, of this
title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendments by Pub. L. 96-605 and 96-613 applicable to years
ending after Nov. 30, 1980, except in the case of a plan in
existence on Nov. 30, 1980, where amendments applicable to plan
years beginning after Nov. 30, 1980, see section 201(c) of Pub. L.
96-605 and section 5(c) of Pub. L. 96-613, set out as a note under
section 414 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 366(b) of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 103(a)(13)(D), Apr. 1, 1980, 94 Stat. 213, provided
that: "The amendment made by this section [amending this section]
shall apply to amounts reimbursed after December 31, 1979. For
purposes of applying such amendment, there shall not be taken into
account any amount reimbursed before January 1, 1980."
Section 701(c)(3) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(A) The amendments made by paragraphs (1) and (2)(A) [amending
this section and provisions set out as a note under this section]
shall take effect as if included in section 105(d) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] as such section was
amended by section 505(a) of the Tax Reform Act of 1976.
"(B) The amendments made by paragraph (2)(B) [amending provisions
set out as notes under this section] shall take effect as if
included in section 301 of the Tax Reduction and Simplification Act
of 1977 [Pub. L. 95-30, title III, Sec. 301, May 23, 1977, 91 Stat.
152]."
EFFECTIVE DATE OF 1976 AMENDMENT
Section 505(f) of Pub. L. 94-455, as added by Pub. L. 95-30,
title III, Sec. 301(a), May 23, 1977, 91 Stat. 151, provided that:
"The amendment made by subsection (a) [amending this section] shall
apply to taxable years beginning after December 31, 1976."
Amendment by section 1901(c)(2) of Pub. L. 94-455 applicable with
respect to taxable years beginning after Dec. 31, 1976, see section
1901(d) of Pub. L. 94-455, set out as a note under section 2 of
this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 205(b) of Pub. L. 88-272 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts attributable to periods of absence commencing after
December 31, 1963."
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
REVOCATION OF ELECTION
Pub. L. 95-30, title III, Sec. 301(c), May 23, 1977, 91 Stat.
151, as amended by Pub. L. 95-600, title VII, Sec. 701(c)(2)(B),
Nov. 6, 1978, 92 Stat. 2900; Pub. L. 99-514, Sec. 2, Oct. 22, 1986,
100 Stat. 2095, provided that: "Any election made under section
105(d)(6) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] or under section 505(d) of the Tax Reform Act of 1976 [set
out below] for a taxable year beginning in 1976 may be revoked (in
such manner as may be prescribed by regulations) at any time before
the expiration of the period for assessing a deficiency with
respect to such taxable year (determined without regard to
subsection (d) of this section) [set out below]."
PERIOD FOR ASSESSING DEFICIENCY
Pub. L. 95-30, title III, Sec. 301(d), May 23, 1977, 91 Stat.
152, provided that: "In the case of any revocation made under
subsection (c) [set out above], the period for assessing a
deficiency with respect to any taxable year affected by the
revocation shall not expire before the date which is 1 year after
the date of the making of the revocation, and, notwithstanding any
law or rule of law, such deficiency, to the extent attributable to
such revocation, may be assessed at any time during such 1-year
period."
EFFECTIVE DATE OF CHANGES IN EXCLUSION FOR SICK PAY
Pub. L. 95-30, title III, Sec. 301(e), May 23, 1977, 91 Stat.
152, as amended by Pub. L. 95-600, title VII, Sec. 701(c)(2)(B),
Nov. 6, 1978, 92 Stat. 2900; Pub. L. 99-514, Sec. 2, Oct. 22, 1986,
100 Stat. 2095, provided that: "The amendments made by this section
[enacting and amending provisions set out as notes under this
section] shall take effect on October 4, 1976, but shall not apply
-
"(1) with respect to any taxpayer who makes or has made an
election under section 105(d)(6) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] or under section 505(d) of the Tax
Reform Act of 1976 [set out below] (as such sections were in
effect before the enactment of this Act [May 23, 1977]) for a
taxable year beginning in 1976, if such election is not revoked
under subsection (c) of this section [set out above], and
"(2) with respect to any taxpayer (other than a taxpayer
described in paragraph (1)) who has an annuity starting date at
the beginning of a taxable year beginning in 1976 by reason of
the amendments made by section 505 of the Tax Reform Act of 1976
[amending this section and section 104 of this title and enacting
provisions set out as notes under this section] (as in effect
before the enactment of this Act [May 23, 1977]), unless such
person elects (in such manner as the Secretary of the Treasury or
his delegate may by regulations prescribe) to have such
amendments apply."
SPECIAL RULE FOR EXISTING PERMANENT AND TOTAL DISABILITY CASES
Section 505(c) of Pub. L. 94-455, as amended by Pub. L. 95-30,
title III, Sec. 301(b)(1), (2), May 23, 1977, 91 Stat. 151; Pub. L.
95-600, title VII, Sec. 701(c)(2)(A), Nov. 6, 1978, 92 Stat. 2900;
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that: "In the case of any individual who -
"(1) retired before January 1, 1977,
"(2) either retired on disability or was entitled to retire on
disability, and
"(3) on January 1, 1976, or January 1, 1977, was permanently
and totally disabled (within the meaning of section 105(d)(4) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]),
such individual shall be deemed to have met the requirements of
section 105(d)(1)(B) of such Code (as amended by subsection (a) of
this section)."
SPECIAL RULE FOR COORDINATION WITH SECTION 72 OF THIS TITLE
Section 505(d) of Pub. L. 94-455, as amended by Pub. L. 95-30,
title III, Sec. 301(b)(3)-(5), May 23, 1977, 91 Stat. 151; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of an individual who -
"(1) retired on disability before January 1, 1977, and
"(2) on December 31, 1975, or December 31, 1976, was entitled
to exclude any amount with respect to such retirement disability
from gross income under section 105(d) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954],
for purposes of section 72 the annuity starting date shall not be
deemed to occur before the beginning of the taxable year in which
the taxpayer attains age 65, or before the beginning of an earlier
taxable year for which the taxpayer makes an irrevocable election
not to seek the benefits of such section 105(d) for such year and
all subsequent years."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 22, 51A, 213, 3401,
6039D, 7701, 7871 of this title.
-FOOTNOTE-
(!1) So in original. Probably should be followed by a closing
parenthesis.
-End-
-CITE-
26 USC Sec. 106 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 106. Contributions by employer to accident and health plans
-STATUTE-
(a) General rule
Except as otherwise provided in this section, gross income of an
employee does not include employer-provided coverage under an
accident or health plan.
(b) Contributions to Archer MSAs
(1) In general
In the case of an employee who is an eligible individual,
amounts contributed by such employee's employer to any Archer MSA
of such employee shall be treated as employer-provided coverage
for medical expenses under an accident or health plan to the
extent such amounts do not exceed the limitation under section
220(b)(1) (determined without regard to this subsection) which is
applicable to such employee for such taxable year.
(2) No constructive receipt
No amount shall be included in the gross income of any employee
solely because the employee may choose between the contributions
referred to in paragraph (1) and employer contributions to
another health plan of the employer.
(3) Special rule for deduction of employer contributions
Any employer contribution to an Archer MSA, if otherwise
allowable as a deduction under this chapter, shall be allowed
only for the taxable year in which paid.
(4) Employer MSA contributions required to be shown on return
Every individual required to file a return under section 6012
for the taxable year shall include on such return the aggregate
amount contributed by employers to the Archer MSAs of such
individual or such individual's spouse for such taxable year.
(5) MSA contributions not part of COBRA coverage
Paragraph (1) shall not apply for purposes of section 4980B.
(6) Definitions
For purposes of this subsection, the terms "eligible
individual" and "Archer MSA" have the respective meanings given
to such terms by section 220.
(7) Cross reference
For penalty on failure by employer to make comparable
contributions to the Archer MSAs of comparable employees, see
section 4980E.
(c) Inclusion of long-term care benefits provided through flexible
spending arrangements
(1) In general
Effective on and after January 1, 1997, gross income of an
employee shall include employer-provided coverage for qualified
long-term care services (as defined in section 7702B(c)) to the
extent that such coverage is provided through a flexible spending
or similar arrangement.
(2) Flexible spending arrangement
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides employees with
coverage under which -
(A) specified incurred expenses may be reimbursed (subject to
reimbursement maximums and other reasonable conditions), and
(B) the maximum amount of reimbursement which is reasonably
available to a participant for such coverage is less than 500
percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably
available shall be determined on the basis of the underlying
coverage.
(d) Contributions to health savings accounts
(1) In general
In the case of an employee who is an eligible individual (as
defined in section 223(c)(1)), amounts contributed by such
employee's employer to any health savings account (as defined in
section 223(d)) of such employee shall be treated as
employer-provided coverage for medical expenses under an accident
or health plan to the extent such amounts do not exceed the
limitation under section 223(b) (determined without regard to
this subsection) which is applicable to such employee for such
taxable year.
(2) Special rules
Rules similar to the rules of paragraphs (2), (3), (4), and (5)
of subsection (b) shall apply for purposes of this subsection.
(3) Cross reference
For penalty on failure by employer to make comparable
contributions to the health savings accounts of comparable
employees, see section 4980G.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 32; Pub. L. 99-272, title X,
Sec. 10001(b), Apr. 7, 1986, 100 Stat. 223; Pub. L. 99-514, title
XI, Secs. 1114(b)(1), 1151(j)(2), Oct. 22, 1986, 100 Stat. 2450,
2508; Pub. L. 100-647, title I, Sec. 1018(t)(7)(A), title III, Sec.
3011(b)(1), Nov. 10, 1988, 102 Stat. 3589, 3624; Pub. L. 101-239,
title VII, Sec. 7862(c)(1)(A), Dec. 19, 1989, 103 Stat. 2432; Pub.
L. 104-191, title III, Secs. 301(c)(1), 321(c)(2), Aug. 21, 1996,
110 Stat. 2048, 2058; Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(2), (b)(2)(A), (6), (10)], Dec. 21, 2000, 114 Stat. 2763,
2763A-628, 2763A-629; Pub. L. 108-173, title XII, Sec. 1201(d)(1),
Dec. 8, 2003, 117 Stat. 2476.)
-REFTEXT-
REFERENCES IN TEXT
COBRA, referred to in the heading for subsec. (b)(5), probably
means the Consolidated Omnibus Budget Reconciliation Act of 1985,
Pub. L. 99-272, Apr. 7, 1986, 100 Stat. 82, as amended. For
complete classification of this Act to the Code, see Tables.
-MISC1-
AMENDMENTS
2003 - Subsec. (d). Pub. L. 108-173 added subsec. (d).
2000 - Subsec. (b). Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec.
202(b)(6)], substituted "Archer MSAs" for "medical savings
accounts" in heading.
Subsec. (b)(1). Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec.
202(a)(2)], substituted "Archer MSA" for "medical savings account".
Subsec. (b)(3). Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec.
202(b)(10)], substituted "an Archer MSA" for "a Archer MSA".
Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec. 202(a)(2)],
substituted "Archer MSA" for "medical savings account".
Subsec. (b)(4). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(2)(A)], substituted "Archer MSAs" for "medical savings
accounts".
Subsec. (b)(6). Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec.
202(a)(2)], substituted "Archer MSA" for "medical savings account".
Subsec. (b)(7). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(2)(A)], substituted "Archer MSAs" for "medical savings
accounts".
1996 - Pub. L. 104-191, Sec. 301(c)(1), amended text generally.
Prior to amendment, text read as follows: "Gross income of an
employee does not include employer-provided coverage under an
accident or health plan."
Subsec. (c). Pub. L. 104-191, Sec. 321(c)(2), added subsec. (c).
1989 - Subsec. (b)(2). Pub. L. 101-239 amended subsec. (b)(2) as
it existed prior to general amendment by Pub. L. 100-647 by
striking out the last sentence which read as follows: "Under
regulations, rules similar to the rules of subsections (a) and (b)
of section 52 (relating to employers under common control) shall
apply for purposes of subparagraph (A)." See Effective Date of 1989
Amendment note below.
1988 - Pub. L. 100-647, Sec. 3011(b)(1), amended section
generally, substituting a single undesignated par. for former
subsec. (a) providing that gross income does not include
employer-provided coverage under an accident or health plan and
subsec. (b) providing for an exception for highly compensated
individuals where a plan fails to provide certain continuation
coverage.
Subsec. (b)(1). Pub. L. 100-647, Sec. 1018(t)(7)(A), substituted
"any employer-provided coverage" for "any amount contributed by an
employer" and "under a group" for "to a group".
1986 - Pub. L. 99-272 designated existing provisions as subsec.
(a) and added subsec. (a) heading and subsec. (b).
Subsec. (a). Pub. L. 99-514, Sec. 1151(j)(2), amended subsec. (a)
generally. Prior to amendment, subsec. (a) read as follows: "Gross
income does not include contributions by the employer to accident
or health plans for compensation (through insurance or otherwise)
to his employees for personal injuries or sickness."
Subsec. (b)(1). Pub. L. 99-514, Sec. 1114(b)(1), substituted
"highly compensated employee (within the meaning of section
414(q))" for "highly compensated individual (within the meaning of
section 105(h)(5))".
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-173 applicable to taxable years
beginning after Dec. 31, 2003, see section 1201(k) of Pub. L.
108-173, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 301(c)(1) of Pub. L. 104-191 applicable to
taxable years beginning after Dec. 31, 1996, see section 301(j) of
Pub. L. 104-191, set out as a note under section 62 of this title.
Amendment by section 321(c)(2) of Pub. L. 104-191 applicable to
contracts issued after Dec. 31, 1996, see section 321(f) of Pub. L.
104-191, set out as an Effective Date note under section 7702B of
this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7862(c)(1)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1161 of Title 29, Labor] shall apply to years beginning
after December 31, 1986."
Section 7863 of Pub. L. 101-239 provided that: "Except as
otherwise provided in this subpart any amendment made by this
subpart [subpart A (Secs. 7861-7863) of part V of title VII of Pub.
L. 101-239, amending this section and sections 162, 411, 417, and
4980B of this title and sections 1052 to 1055, 1161, 1162, 1167,
1398, and 1461 of Title 29, Labor, enacting provisions set out as
notes under this section and sections 162, 417, 1167, 4980, and
4980B of this title, and amending provisions set out as notes under
sections 401 and 411 of this title and sections 1001 and 1054 of
Title 29], shall take effect as if included in the provision of the
Reform Act [Pub. L. 99-514] to which such amendment relates."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1018(t)(7)(A) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Amendment by section 3011(b)(1) of Pub. L. 100-647 applicable to
taxable years beginning after Dec. 31, 1988, but not applicable to
any plan for any plan year to which section 162(k) of this title
(as in effect on the day before Nov. 10, 1988) did not apply by
reason of section 10001(e)(2) of Pub. L. 99-272, see section
3011(d) of Pub. L. 100-647, set out as a note under section 162 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1114(b)(1) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1114(c)(1) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(j)(2) of Pub. L. 99-514 applicable,
with certain qualifications and exceptions, to years beginning
after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as
amended, set out as a note under section 79 of this title.
Section 10001(e) of Pub. L. 99-272 provided that:
"(1) General rule. - The amendments made by this section
[amending this section and section 162 of this title] shall apply
to plan years beginning on or after July 1, 1986.
"(2) Special rule for collective bargaining agreements. - In the
case of a group health plan maintained pursuant to one or more
collective bargaining agreements between employee representatives
and one or more employers ratified before the date of the enactment
of this Act [Apr. 7, 1986], the amendments made by this section
shall not apply to plan years beginning before the later of -
"(A) the date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of the
enactment of this Act), or
"(B) January 1, 1987.
For purposes of subparagraph (A), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan which
amends the plan solely to conform to any requirement added by this
section shall not be treated as a termination of such collective
bargaining agreement."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 223, 51A, 104, 125, 220,
414, 3231, 3306, 3401, 4973, 6039D, 6041, 7701 of this title; title
29 section 1167.
-End-
-CITE-
26 USC Sec. 107 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 107. Rental value of parsonages
-STATUTE-
In the case of a minister of the gospel, gross income does not
include -
(1) the rental value of a home furnished to him as part of his
compensation; or
(2) the rental allowance paid to him as part of his
compensation, to the extent used by him to rent or provide a home
and to the extent such allowance does not exceed the fair rental
value of the home, including furnishings and appurtenances such
as a garage, plus the cost of utilities.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 32; Pub. L. 107-181, Sec. 2(a),
May 20, 2002, 116 Stat. 583.)
-MISC1-
AMENDMENTS
2002 - Par. (2). Pub. L. 107-181 inserted "and to the extent such
allowance does not exceed the fair rental value of the home,
including furnishings and appurtenances such as a garage, plus the
cost of utilities" before period at end.
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-181, Sec. 2(b), May 20, 2002, 116 Stat. 583, provided
that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2001.
"(2) Returns positions. - The amendment made by this section also
shall apply to any taxable year beginning before January 1, 2002,
for which the taxpayer -
"(A) on a return filed before April 17, 2002, limited the
exclusion under section 107 of the Internal Revenue Code of 1986
as provided in such amendment, or
"(B) filed a return after April 16, 2002.
"(3) Other years before 2002. - Except as provided in paragraph
(2), notwithstanding any prior regulation, revenue ruling, or other
guidance issued by the Internal Revenue Service, no person shall be
subject to the limitations added to section 107 of such Code by
this Act for any taxable year beginning before January 1, 2002."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 265, 1402 of this title;
title 42 section 411.
-End-
-CITE-
26 USC Sec. 108 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 108. Income from discharge of indebtedness
-STATUTE-
(a) Exclusion from gross income
(1) In general
Gross income does not include any amount which (but for this
subsection) would be includible in gross income by reason of the
discharge (in whole or in part) of indebtedness of the taxpayer
if -
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm
indebtedness, or
(D) in the case of a taxpayer other than a C corporation, the
indebtedness discharged is qualified real property business
indebtedness.
(2) Coordination of exclusions
(A) Title 11 exclusion takes precedence
Subparagraphs (B), (C), and (D) of paragraph (1) shall not
apply to a discharge which occurs in a title 11 case.
(B) Insolvency exclusion takes precedence over qualified farm
exclusion and qualified real property business exclusion
Subparagraphs (C) and (D) of paragraph (1) shall not apply to
a discharge to the extent the taxpayer is insolvent.
(3) Insolvency exclusion limited to amount of insolvency
In the case of a discharge to which paragraph (1)(B) applies,
the amount excluded under paragraph (1)(B) shall not exceed the
amount by which the taxpayer is insolvent.
(b) Reduction of tax attributes
(1) In general
The amount excluded from gross income under subparagraph (A),
(B), or (C) of subsection (a)(1) shall be applied to reduce the
tax attributes of the taxpayer as provided in paragraph (2).
(2) Tax attributes affected; order of reduction
Except as provided in paragraph (5), the reduction referred to
in paragraph (1) shall be made in the following tax attributes in
the following order:
(A) NOL
Any net operating loss for the taxable year of the discharge,
and any net operating loss carryover to such taxable year.
(B) General business credit
Any carryover to or from the taxable year of a discharge of
an amount for purposes for determining the amount allowable as
a credit under section 38 (relating to general business
credit).
(C) Minimum tax credit
The amount of the minimum tax credit available under section
53(b) as of the beginning of the taxable year immediately
following the taxable year of the discharge.
(D) Capital loss carryovers
Any net capital loss for the taxable year of the discharge,
and any capital loss carryover to such taxable year under
section 1212.
(E) Basis reduction
(i) In general
The basis of the property of the taxpayer.
(ii) Cross reference
For provisions for making the reduction described in clause
(i), see section 1017.
(F) Passive activity loss and credit carryovers
Any passive activity loss or credit carryover of the taxpayer
under section 469(b) from the taxable year of the discharge.
(G) Foreign tax credit carryovers
Any carryover to or from the taxable year of the discharge
for purposes of determining the amount of the credit allowable
under section 27.
(3) Amount of reduction
(A) In general
Except as provided in subparagraph (B), the reductions
described in paragraph (2) shall be one dollar for each dollar
excluded by subsection (a).
(B) Credit carryover reduction
The reductions described in subparagraphs (B), (C), and (G)
shall be 33 1/3 cents for each dollar excluded by subsection
(a). The reduction described in subparagraph (F) in any passive
activity credit carryover shall be 33 1/3 cents for each
dollar excluded by subsection (a).
(4) Ordering rules
(A) Reductions made after determination of tax for year
The reductions described in paragraph (2) shall be made after
the determination of the tax imposed by this chapter for the
taxable year of the discharge.
(B) Reductions under subparagraph (A) or (D) of paragraph (2)
The reductions described in subparagraph (A) or (D) of
paragraph (2) (as the case may be) shall be made first in the
loss for the taxable year of the discharge and then in the
carryovers to such taxable year in the order of the taxable
years from which each such carryover arose.
(C) Reductions under subparagraphs (B) and (G) of paragraph (2)
The reductions described in subparagraphs (B) and (G) of
paragraph (2) shall be made in the order in which carryovers
are taken into account under this chapter for the taxable year
of the discharge.
(5) Election to apply reduction first against depreciable
property
(A) In general
The taxpayer may elect to apply any portion of the reduction
referred to in paragraph (1) to the reduction under section
1017 of the basis of the depreciable property of the taxpayer.
(B) Limitation
The amount to which an election under subparagraph (A)
applies shall not exceed the aggregate adjusted bases of the
depreciable property held by the taxpayer as of the beginning
of the taxable year following the taxable year in which the
discharge occurs.
(C) Other tax attributes not reduced
Paragraph (2) shall not apply to any amount to which an
election under this paragraph applies.
(c) Treatment of discharge of qualified real property business
indebtedness
(1) Basis reduction
(A) In general
The amount excluded from gross income under subparagraph (D)
of subsection (a)(1) shall be applied to reduce the basis of
the depreciable real property of the taxpayer.
(B) Cross reference
For provisions making the reduction described in subparagraph
(A), see section 1017.
(2) Limitations
(A) Indebtedness in excess of value
The amount excluded under subparagraph (D) of subsection
(a)(1) with respect to any qualified real property business
indebtedness shall not exceed the excess (if any) of -
(i) the outstanding principal amount of such indebtedness
(immediately before the discharge), over
(ii) the fair market value of the real property described
in paragraph (3)(A) (as of such time), reduced by the
outstanding principal amount of any other qualified real
property business indebtedness secured by such property (as
of such time).
(B) Overall limitation
The amount excluded under subparagraph (D) of subsection
(a)(1) shall not exceed the aggregate adjusted bases of
depreciable real property (determined after any reductions
under subsections (b) and (g)) held by the taxpayer immediately
before the discharge (other than depreciable real property
acquired in contemplation of such discharge).
(3) Qualified real property business indebtedness
The term "qualified real property business indebtedness" means
indebtedness which -
(A) was incurred or assumed by the taxpayer in connection
with real property used in a trade or business and is secured
by such real property,
(B) was incurred or assumed before January 1, 1993, or if
incurred or assumed on or after such date, is qualified
acquisition indebtedness, and
(C) with respect to which such taxpayer makes an election to
have this paragraph apply.
Such term shall not include qualified farm indebtedness.
Indebtedness under subparagraph (B) shall include indebtedness
resulting from the refinancing of indebtedness under subparagraph
(B) (or this sentence), but only to the extent it does not exceed
the amount of the indebtedness being refinanced.
(4) Qualified acquisition indebtedness
For purposes of paragraph (3)(B), the term "qualified
acquisition indebtedness" means, with respect to any real
property described in paragraph (3)(A), indebtedness incurred or
assumed to acquire, construct, reconstruct, or substantially
improve such property.
(5) Regulations
The Secretary shall issue such regulations as are necessary to
carry out this subsection, including regulations preventing the
abuse of this subsection through cross-collateralization or other
means.
(d) Meaning of terms; special rules relating to certain provisions
(1) Indebtedness of taxpayer
For purposes of this section, the term "indebtedness of the
taxpayer" means any indebtedness -
(A) for which the taxpayer is liable, or
(B) subject to which the taxpayer holds property.
(2) Title 11 case
For purposes of this section, the term "title 11 case" means a
case under title 11 of the United States Code (relating to
bankruptcy), but only if the taxpayer is under the jurisdiction
of the court in such case and the discharge of indebtedness is
granted by the court or is pursuant to a plan approved by the
court.
(3) Insolvent
For purposes of this section, the term "insolvent" means the
excess of liabilities over the fair market value of assets. With
respect to any discharge, whether or not the taxpayer is
insolvent, and the amount by which the taxpayer is insolvent,
shall be determined on the basis of the taxpayer's assets and
liabilities immediately before the discharge.
[(4) Repealed. Pub. L. 99-514, title VIII, Sec. 822(b)(3)(A),
Oct. 22, 1986, 100 Stat. 2373]
(5) Depreciable property
The term "depreciable property" has the same meaning as when
used in section 1017.
(6) Certain provisions to be applied at partner level
In the case of a partnership, subsections (a), (b), (c), and
(g) shall be applied at the partner level.
(7) Special rules for S corporation
(A) Certain provisions to be applied at corporate level
In the case of an S corporation, subsections (a), (b), (c),
and (g) shall be applied at the corporate level, including by
not taking into account under section 1366(a) any amount
excluded under subsection (a) of this section.
(B) Reduction in carryover of disallowed losses and deductions
In the case of an S corporation, for purposes of subparagraph
(A) of subsection (b)(2), any loss or deduction which is
disallowed for the taxable year of the discharge under section
1366(d)(1) shall be treated as a net operating loss for such
taxable year. The preceding sentence shall not apply to any
discharge to the extent that subsection (a)(1)(D) applies to
such discharge.
(C) Coordination with basis adjustments under section
1367(b)(2)
For purposes of subsection (e)(6), a shareholder's adjusted
basis in indebtedness of an S corporation shall be determined
without regard to any adjustments made under section
1367(b)(2).
(8) Reductions of tax attributes in title 11 cases of individuals
to be made by estate
In any case under chapter 7 or 11 of title 11 of the United
States Code to which section 1398 applies, for purposes of
paragraphs (1) and (5) of subsection (b) the estate (and not the
individual) shall be treated as the taxpayer. The preceding
sentence shall not apply for purposes of applying section 1017 to
property transferred by the estate to the individual.
(9) Time for making election, etc.
(A) Time
An election under paragraph (5) of subsection (b) or under
paragraph (3)(C) of subsection (c) shall be made on the
taxpayer's return for the taxable year in which the discharge
occurs or at such other time as may be permitted in regulations
prescribed by the Secretary.
(B) Revocation only with consent
An election referred to in subparagraph (A), once made, may
be revoked only with the consent of the Secretary.
(C) Manner
An election referred to in subparagraph (A) shall be made in
such manner as the Secretary may by regulations prescribe.
(10) Cross reference
For provision that no reduction is to be made in the basis of
exempt property of an individual debtor, see section
1017(c)(1).
(e) General rules for discharge of indebtedness (including
discharges not in title 11 cases or insolvency)
For purposes of this title -
(1) No other insolvency exception
Except as otherwise provided in this section, there shall be no
insolvency exception from the general rule that gross income
includes income from the discharge of indebtedness.
(2) Income not realized to extent of lost deductions
No income shall be realized from the discharge of indebtedness
to the extent that payment of the liability would have given rise
to a deduction.
(3) Adjustments for unamortized premium and discount
The amount taken into account with respect to any discharge
shall be properly adjusted for unamortized premium and
unamortized discount with respect to the indebtedness discharged.
(4) Acquisition of indebtedness by person related to debtor
(A) Treated as acquisition by debtor
For purposes of determining income of the debtor from
discharge of indebtedness, to the extent provided in
regulations prescribed by the Secretary, the acquisition of
outstanding indebtedness by a person bearing a relationship to
the debtor specified in section 267(b) or 707(b)(1) from a
person who does not bear such a relationship to the debtor
shall be treated as the acquisition of such indebtedness by the
debtor. Such regulations shall provide for such adjustments in
the treatment of any subsequent transactions involving the
indebtedness as may be appropriate by reason of the application
of the preceding sentence.
(B) Members of family
For purposes of this paragraph, sections 267(b) and 707(b)(1)
shall be applied as if section 267(c)(4) provided that the
family of an individual consists of the individual's spouse,
the individual's children, grandchildren, and parents, and any
spouse of the individual's children or grandchildren.
(C) Entities under common control treated as related
For purposes of this paragraph, two entities which are
treated as a single employer under subsection (b) or (c) of
section 414 shall be treated as bearing a relationship to each
other which is described in section 267(b).
(5) Purchase-money debt reduction for solvent debtor treated as
price reduction
If -
(A) the debt of a purchaser of property to the seller of such
property which arose out of the purchase of such property is
reduced,
(B) such reduction does not occur -
(i) in a title 11 case, or
(ii) when the purchaser is insolvent, and
(C) but for this paragraph, such reduction would be treated
as income to the purchaser from the discharge of indebtedness,
then such reduction shall be treated as a purchase price
adjustment.
(6) Indebtedness contributed to capital
Except as provided in regulations, for purposes of determining
income of the debtor from discharge of indebtedness, if a debtor
corporation acquires its indebtedness from a shareholder as a
contribution to capital -
(A) section 118 shall not apply, but
(B) such corporation shall be treated as having satisfied the
indebtedness with an amount of money equal to the shareholder's
adjusted basis in the indebtedness.
(7) Recapture of gain on subsequent sale of stock
(A) In general
If a creditor acquires stock of a debtor corporation in
satisfaction of such corporation's indebtedness, for purposes
of section 1245 -
(i) such stock (and any other property the basis of which
is determined in whole or in part by reference to the
adjusted basis of such stock) shall be treated as section
1245 property,
(ii) the aggregate amount allowed to the creditor -
(I) as deductions under subsection (a) or (b) of section
166 (by reason of the worthlessness or partial
worthlessness of the indebtedness), or
(II) as an ordinary loss on the exchange,
shall be treated as an amount allowed as a deduction for
depreciation, and
(iii) an exchange of such stock qualifying under section
354(a), 355(a), or 356(a) shall be treated as an exchange to
which section 1245(b)(3) applies.
The amount determined under clause (ii) shall be reduced by the
amount (if any) included in the creditor's gross income on the
exchange.
(B) Special rule for cash basis taxpayers
In the case of any creditor who computes his taxable income
under the cash receipts and disbursements method, proper
adjustment shall be made in the amount taken into account under
clause (ii) of subparagraph (A) for any amount which was not
included in the creditor's gross income but which would have
been included in such gross income if such indebtedness had
been satisfied in full.
(C) Stock of parent corporation
For purposes of this paragraph, stock of a corporation in
control (within the meaning of section 368(c)) of the debtor
corporation shall be treated as stock of the debtor
corporation.
(D) Treatment of successor corporation
For purposes of this paragraph, the term "debtor corporation"
includes a successor corporation.
(E) Partnership rule
Under regulations prescribed by the Secretary, rules similar
to the rules of the foregoing subparagraphs of this paragraph
shall apply with respect to the indebtedness of a partnership.
(8) Indebtedness satisfied by corporation's stock
For purposes of determining income of a debtor from discharge
of indebtedness, if a debtor corporation transfers stock to a
creditor in satisfaction of its indebtedness, such corporation
shall be treated as having satisfied the indebtedness with an
amount of money equal to the fair market value of the stock.
(9) Discharge of indebtedness income not taken into account in
determining whether entity meets REIT qualifications
Any amount included in gross income by reason of the discharge
of indebtedness shall not be taken into account for purposes of
paragraphs (2) and (3) of section 856(c).
(10) Indebtedness satisfied by issuance of debt instrument
(A) In general
For purposes of determining income of a debtor from discharge
of indebtedness, if a debtor issues a debt instrument in
satisfaction of indebtedness, such debtor shall be treated as
having satisfied the indebtedness with an amount of money equal
to the issue price of such debt instrument.
(B) Issue price
For purposes of subparagraph (A), the issue price of any debt
instrument shall be determined under sections 1273 and 1274.
For purposes of the preceding sentence, section 1273(b)(4)
shall be applied by reducing the stated redemption price of any
instrument by the portion of such stated redemption price which
is treated as interest for purposes of this chapter.
(f) Student loans
(1) In general
In the case of an individual, gross income does not include any
amount which (but for this subsection) would be includible in
gross income by reason of the discharge (in whole or in part) of
any student loan if such discharge was pursuant to a provision of
such loan under which all or part of the indebtedness of the
individual would be discharged if the individual worked for a
certain period of time in certain professions for any of a broad
class of employers.
(2) Student loan
For purposes of this subsection, the term "student loan" means
any loan to an individual to assist the individual in attending
an educational organization described in section 170(b)(1)(A)(ii)
made by -
(A) the United States, or an instrumentality or agency
thereof,
(B) a State, territory, or possession of the United States,
or the District of Columbia, or any political subdivision
thereof,
(C) a public benefit corporation -
(i) which is exempt from taxation under section 501(c)(3),
(ii) which has assumed control over a State, county, or
municipal hospital, and
(iii) whose employees have been deemed to be public
employees under State law, or
(D) any educational organization described in section
170(b)(1)(A)(ii) if such loan is made -
(i) pursuant to an agreement with any entity described in
subparagraph (A), (B), or (C) under which the funds from
which the loan was made were provided to such educational
organization, or
(ii) pursuant to a program of such educational organization
which is designed to encourage its students to serve in
occupations with unmet needs or in areas with unmet needs and
under which the services provided by the students (or former
students) are for or under the direction of a governmental
unit or an organization described in section 501(c)(3) and
exempt from tax under section 501(a).
The term "student loan" includes any loan made by an educational
organization described in section 170(b)(1)(A)(ii) or by an
organization exempt from tax under section 501(a) to refinance a
loan to an individual to assist the individual in attending any
such educational organization but only if the refinancing loan is
pursuant to a program of the refinancing organization which is
designed as described in subparagraph (D)(ii).
(3) Exception for discharges on account of services performed for
certain lenders
Paragraph (1) shall not apply to the discharge of a loan made
by an organization described in paragraph (2)(D) if the discharge
is on account of services performed for either such organization.
(g) Special rules for discharge of qualified farm indebtedness
(1) Discharge must be by qualified person
(A) In general
Subparagraph (C) of subsection (a)(1) shall apply only if the
discharge is by a qualified person.
(B) Qualified person
For purposes of subparagraph (A), the term "qualified person"
has the meaning given to such term by section 49(a)(1)(D)(iv);
except that such term shall include any Federal, State, or
local government or agency or instrumentality thereof.
(2) Qualified farm indebtedness
For purposes of this section, indebtedness of a taxpayer shall
be treated as qualified farm indebtedness if -
(A) such indebtedness was incurred directly in connection
with the operation by the taxpayer of the trade or business of
farming, and
(B) 50 percent or more of the aggregate gross receipts of the
taxpayer for the 3 taxable years preceding the taxable year in
which the discharge of such indebtedness occurs is attributable
to the trade or business of farming.
(3) Amount excluded cannot exceed sum of tax attributes and
business and investment assets
(A) In general
The amount excluded under subparagraph (C) of subsection
(a)(1) shall not exceed the sum of -
(i) the adjusted tax attributes of the taxpayer, and
(ii) the aggregate adjusted bases of qualified property
held by the taxpayer as of the beginning of the taxable year
following the taxable year in which the discharge occurs.
(B) Adjusted tax attributes
For purposes of subparagraph (A), the term "adjusted tax
attributes" means the sum of the tax attributes described in
subparagraphs (A), (B), (C), (D), (F), and (G) of subsection
(b)(2) determined by taking into account $3 for each $1 of the
attributes described in subparagraphs (B), (C), and (G) of
subsection (b)(2) and the attribute described in subparagraph
(F) of subsection (b)(2) to the extent attributable to any
passive activity credit carryover.
(C) Qualified property
For purposes of this paragraph, the term "qualified property"
means any property which is used or is held for use in a trade
or business or for the production of income.
(D) Coordination with insolvency exclusion
For purposes of this paragraph, the adjusted basis of any
qualified property and the amount of the adjusted tax
attributes shall be determined after any reduction under
subsection (b) by reason of amounts excluded from gross income
under subsection (a)(1)(B).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 32; June 29, 1956, ch. 463, Sec.
5, 70 Stat. 403; Pub. L. 88-496, Sec. 1(a), June 8, 1960, 74 Stat.
164; Pub. L. 94-455, title XIX, Secs. 1906(b)(13)(A),
1951(b)(2)(A), Oct. 4, 1976, 90 Stat. 1834, 1836; Pub. L. 96-589,
Sec. 2(a), Dec. 24, 1980, 94 Stat. 3389; Pub. L. 97-354, Sec. 3(e),
Oct. 19, 1982, 96 Stat. 1689; Pub. L. 97-448, title I, Sec.
102(h)(1), title III, Sec. 304(d), Jan. 12, 1983, 96 Stat. 2372,
2398; Pub. L. 98-369, div. A, title I, Sec. 59(a), (b)(1), title
IV, Sec. 474(r)(5), title VII, Sec. 721(b)(2), title X, Sec.
1076(a), July 18, 1984, 98 Stat. 576, 839, 966, 1053; Pub. L.
99-514, title I, Sec. 104(b)(2), title II, Sec. 231(d)(3)(D), title
IV, Sec. 405(a), title VI, Sec. 621(e)(1), title VIII, Secs.
805(c)(2)-(4), 822(a), (b)(1)-(3), title XI, Sec. 1171(b)(4), title
XVIII, Sec. 1847(b)(7), Oct. 22, 1986, 100 Stat. 2105, 2179, 2224,
2266, 2362, 2373, 2513, 2856; Pub. L. 100-647, title I, Sec.
1004(a)(1)-(4), (6), Nov. 10, 1988, 102 Stat. 3385, 3387; Pub. L.
101-508, title XI, Secs. 11325(a)(1), (b), 11813(b)(6), Nov. 5,
1990, 104 Stat. 1388-466, 1388-551; Pub. L. 103-66, title XIII,
Secs. 13150(a)-(c)(5), 13226(a)(1), (2)(B), (b)(1)-(3), Aug. 10,
1993, 107 Stat. 446-448, 487, 488; Pub. L. 104-188, title I, Sec.
1703(n)(2), Aug. 20, 1996, 110 Stat. 1877; Pub. L. 105-34, title
II, Sec. 225(a), Aug. 5, 1997, 111 Stat. 820; Pub. L. 105-206,
title VI, Sec. 6004(f), July 22, 1998, 112 Stat. 795; Pub. L.
107-147, title IV, Sec. 402(a), Mar. 9, 2002, 116 Stat. 40.)
-MISC1-
AMENDMENTS
2002 - Subsec. (d)(7)(A). Pub. L. 107-147 inserted ", including
by not taking into account under section 1366(a) any amount
excluded under subsection (a) of this section" before period at
end.
1998 - Subsec. (f)(2). Pub. L. 105-206, Sec. 6004(f)(1), amended
concluding provisions generally. Prior to amendment, concluding
provisions read as follows: "The term 'student loan' includes any
loan made by an educational organization so described or by an
organization exempt from tax under section 501(a) to refinance a
loan meeting the requirements of the preceding sentence."
Subsec. (f)(3). Pub. L. 105-206, Sec. 6004(f)(2), struck out "(or
by an organization described in paragraph (2)(E) from funds
provided by an organization described in paragraph (2)(D))" after
"paragraph (2)(D)".
1997 - Subsec. (f)(2). Pub. L. 105-34, Sec. 225(a)(1), added
subpar. (D) and concluding provisions and struck out former subpar.
(D) which read as follows: "any educational organization so
described pursuant to an agreement with any entity described in
subparagraph (A), (B), or (C) under which the funds from which the
loan was made were provided to such educational organization."
Subsec. (f)(2)(B). Pub. L. 105-34, Sec. 225(a)(1), struck out
"or" at end.
Subsec. (f)(3). Pub. L. 105-34, Sec. 225(a)(2), added par. (3).
1996 - Subsec. (d)(9)(A). Pub. L. 104-188 substituted "paragraph
(3)(C)" for "paragraph (3)(B)".
1993 - Subsec. (a)(1)(D). Pub. L. 103-66, Sec. 13150(a), added
subpar. (D).
Subsec. (a)(2)(A). Pub. L. 103-66, Sec. 13150(c)(1), substituted
", (C), and (D)" for "and (C)".
Subsec. (a)(2)(B). Pub. L. 103-66, Sec. 13150(c)(2), amended
heading and text of subpar. (B) generally. Prior to amendment, text
read as follows: "Subparagraph (C) of paragraph (1) shall not apply
to a discharge to the extent the taxpayer is insolvent."
Subsec. (b)(2)(C) to (E). Pub. L. 103-66, Sec. 13226(b)(1), added
subpar. (C) and redesignated former subpars. (C) and (D) as (D) and
(E), respectively. Former subpar. (E) redesignated (F).
Subsec. (b)(2)(F). Pub. L. 103-66, Sec. 13226(b)(2), added
subpar. (F). Former subpar. (F) redesignated (G).
Pub. L. 103-66, Sec. 13226(b)(1), redesignated subpar. (E) as
(F).
Subsec. (b)(2)(G). Pub. L. 103-66, Sec. 13226(b)(2), redesignated
subpar. (F) as (G).
Subsec. (b)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(A), amended
heading and text of subpar. (B) generally. Prior to amendment, text
read as follows: "The reductions described in subparagraphs (B) and
(E) of paragraph (2) shall be 33 1/3 cents for each dollar
excluded by subsection (a)."
Subsec. (b)(4)(B). Pub. L. 103-66, Sec. 13226(b)(3)(B),
substituted "(D)" for "(C)" in heading and text.
Subsec. (b)(4)(C). Pub. L. 103-66, Sec. 13226(b)(3)(C),
substituted "(G)" for "(E)" in heading and text.
Subsec. (c). Pub. L. 103-66, Sec. 13150(b), added subsec. (c).
Subsec. (d). Pub. L. 103-66, Sec. 13150(c)(3)(B), substituted
"certain provisions" for "subsections (a), (b) and (g)" in heading.
Subsec. (d)(6), (7)(A). Pub. L. 103-66, Sec. 13150(c)(3)(A), (C),
substituted "Certain provisions" for "Subsections (a), (b) and (g)"
in heading and "subsections (a), (b), (c), and (g)" for
"subsections (a), (b), and (g)" in text.
Subsec. (d)(7)(B). Pub. L. 103-66, Sec. 13150(c)(4), inserted at
end "The preceding sentence shall not apply to any discharge to the
extent that subsection (a)(1)(D) applies to such discharge."
Subsec. (d)(9)(A). Pub. L. 103-66, Sec. 13150(c)(5), inserted "or
under paragraph (3)(B) of subsection (c)" after "subsection (b)".
Subsec. (e)(6). Pub. L. 103-66, Sec. 13226(a)(2)(B), substituted
"Except as provided in regulations, for" for "For".
Subsec. (e)(8). Pub. L. 103-66, Sec. 13226(a)(1)(B), amended
heading and text of par. (8) generally. Prior to amendment, text
read as follows: "For purposes of determining income of the debtor
from discharge of indebtedness, the stock for debt exception shall
not apply -
"(A) to the issuance of nominal or token shares, or
"(B) with respect to an unsecured creditor, where the ratio of
the value of the stock received by such unsecured creditor to the
amount of his indebtedness cancelled or exchanged for stock in
the workout is less than 50 percent of a similar ratio computed
for all unsecured creditors participating in the workout.
Any stock which is disqualified stock (as defined in paragraph
(10)(B)(ii)) shall not be treated as stock for purposes of this
paragraph."
Subsec. (e)(10), (11). Pub. L. 103-66, Sec. 13226(a)(1)(A),
redesignated par. (11) as (10) and struck out former par. (10)
which related to satisfaction of indebtedness by transfer of
corporation's stock.
Subsec. (g)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(D),
substituted "subparagraphs (A), (B), (C), (D), (F), and (G)" for
"subparagraphs (A), (B), (C), and (E)" and "subparagraphs (B), (C),
and (G)" for "subparagraphs (B) and (E)" and inserted before period
at end "and the attribute described in subparagraph (F) of
subsection (b)(2) to the extent attributable to any passive
activity credit carryover".
1990 - Subsec. (e)(8). Pub. L. 101-508, Sec. 11325(b)(2),
inserted provision at end that any stock which is a disqualified
stock, as so defined, not be treated as stock for purposes of this
paragraph.
Subsec. (e)(10)(B). Pub. L. 101-508, Sec. 11325(b)(1),
substituted heading for one which read: "Exception for title 11
cases and insolvent debtors" and amended text generally. Prior to
amendment, text read as follows: "Subparagraph (A) shall not apply
in the case of a debtor in a title 11 case or to the extent the
debtor is insolvent."
Subsec. (e)(11). Pub. L. 101-508, Sec. 11325(a)(1), added par.
(11).
Subsec. (g)(1)(B). Pub. L. 101-508, Sec. 11813(b)(6), substituted
"section 49(a)(1)(D)(iv)" for "section 46(c)(8)(D)(iv)".
1988 - Subsec. (a)(1)(C). Pub. L. 100-647, Sec. 1004(a)(1), added
subpar. (C).
Subsec. (a)(2). Pub. L. 100-647, Sec. 1004(a)(2), amended par.
(2) generally. Prior to amendment, par. (2) read as follows:
"Subparagraph (B) of paragraph (1) shall not apply to a discharge
which occurs in a title 11 case."
Subsec. (b). Pub. L. 100-647, Sec. 1004(a)(3), struck out "in
title 11 case or insolvency" after "Reduction of tax attributes" in
heading and substituted "subparagraph (A), (B), or (C)" for
"subparagraph (A) or (B)" in text of par. (1).
Subsec. (d). Pub. L. 100-647, Sec. 1004(a)(6)(B), which directed
amendment of subsec. (d) heading by substituting "subsections (a),
(b), and (g)" for "subsections (a), and (b)", was executed by
making the substitution for "subsections (a) and (b)" as the
probable intent of Congress.
Subsec. (d)(6). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
substituted "Subsections (a), (b), and (g)" for "Subsections (a)
and (b)" in heading and "subsections (a), (b), and (g)" for
"subsections (a) and (b)" in text.
Subsec. (d)(7)(A). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
substituted "Subsections (a), (b), and (g)" for "Subsections (a)
and (b)" in heading and "subsections (a), (b), and (g)" for
"subsections (a) and (b)" in text.
Subsec. (g). Pub. L. 100-647, Sec. 1004(a)(4), substituted
"indebtedness" for "indebtedness of solvent farmers" in heading and
amended text generally. Prior to amendment, text read as follows:
"(1) In general. - For purposes of this section and section 1017,
the discharge by a qualified person of qualified farm indebtedness
of a taxpayer who is not insolvent at the time of the discharge
shall be treated in the same manner as if the discharge had
occurred when the taxpayer was insolvent.
"(2) Qualified farm indebtedness. - For purposes of this
subsection, indebtedness of a taxpayer shall be treated as
qualified farm indebtedness if -
"(A) such indebtedness was incurred directly in connection with
the operation by the taxpayer of the trade or business of
farming, and
"(B) 50 percent or more of the average annual gross receipts of
the taxpayer for the 3 taxable years preceding the taxable year
in which the discharge of such indebtedness occurs is
attributable to the trade or business of farming.
"(3) Qualified person. - For purposes of this subsection, the
term 'qualified person' means a person described in section
46(c)(8)(D)(iv)."
1986 - Subsec. (a)(1)(C). Pub. L. 99-514, Sec. 822(a), struck out
subpar. (C) relating to exclusion from gross income if the
indebtedness discharged is qualified business indebtedness.
Subsec. (a)(2). Pub. L. 99-514, Sec. 822(b)(1), substituted
"Subparagraph (B) of paragraph (1)" for "Subparagraphs (B) and (C)
of paragraph (1)" in subpar. (A), struck out subpar. (A)
designation and heading, and struck out subpar. (B) providing that
insolvency exclusion takes precedence over qualified business
exclusion.
Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 231(d)(3)(D), substituted
"General business credit" for "Research credit and general business
credit" in heading and amended text, as amended by this Act (Pub.
L. 99-514, Sec. 1171(b)(4) (see below)), generally. Prior to
amendment, text read as follows: "Any carryover to or from the
taxable year of a discharge of an amount for purposes of
determining the amount allowable as a credit under -
"(i) section 30 (relating to credit for increasing research
activities), or
"(ii) section 38 (relating to general business credit).
For purposes of this subparagraph, there shall not be taken into
account any portion of a carryover which is attributable to the
employee stock ownership credit determined under section 41."
Pub. L. 99-514, Sec. 1171(b)(4), struck out last sentence which
had been eliminated by the general amendment of subpar. (B) by Pub.
L. 99-514, Sec. 231(d)(3)(D). See above.
Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 1847(b)(7), substituted
"section 27" for "section 33".
Subsec. (b)(3). Pub. L. 99-514, Sec. 104(b)(2), substituted "33
1/3 cents" for "50 cents".
Subsec. (c). Pub. L. 99-514, Sec. 822(b)(2), struck out subsec.
(c) relating to tax treatment of discharge of qualified business
indebtedness.
Subsec. (d). Pub. L. 99-514, Sec. 822(b)(3)(B), struck out
reference to subsec. (c) in heading.
Subsec. (d)(4). Pub. L. 99-514, Sec. 822(b)(3)(A), struck out
par. (4) relating to treatment of indebtedness as qualified
business indebtedness.
Subsec. (d)(6), (7)(A). Pub. L. 99-514, Sec. 822(b)(3)(B), struck
out reference to subsec. (c) in heading and text.
Subsec. (d)(7)(B). Pub. L. 99-514, Sec. 822(b)(3)(C), struck out
"The preceding sentence shall not apply to any discharge to the
extent that subsection (a)(1)(C) applies to such discharge."
Subsec. (d)(9)(A). Pub. L. 99-514, Sec. 822(b)(3)(D), struck out
"under paragraph (4) of this subsection or" after "An election".
Subsec. (e)(7)(A)(ii)(I). Pub. L. 99-514, Sec. 805(c)(2),
substituted "subsection (a) or (b) of section 166" for "subsection
(a), (b), or (c) of section 166".
Subsec. (e)(7)(B) to (D). Pub. L. 99-514, Sec. 805(c)(3),
redesignated subpars. (C) to (E) as (B) to (D), respectively, and
struck out former subpar. (B) which related to taxpayers on reserve
method.
Subsec. (e)(7)(E), (F). Pub. L. 99-514, Sec. 805(c)(3), (4),
redesignated subpar. (F) as (E) and substituted "the foregoing
subparagraphs" for "subparagraphs (A), (B), (C), (D), and (E)".
Former subpar. (E) redesignated (D).
Subsec. (e)(10)(C). Pub. L. 99-514, Sec. 621(e), repealed the
amendment by Pub. L. 98-369, Sec. 59(b)(1), which had added subpar.
(C) creating an exception for transfers in certain workouts of the
satisfaction of indebtedness by corporation's stock. See 1984
Amendment note below.
Subsec. (g). Pub. L. 99-514, Sec. 405(a), added subsec. (g).
1984 - Subsec. (b)(2)(B). Pub. L. 98-369, Sec. 474(r)(5),
substituted provisions relating to research credits and general
business credits covering carryovers to or from the taxable year of
a discharge of an amount for purposes of determining the amount
allowable as a credit under section 30 (relating to credit for
increasing research activities), or section 38 (relating to general
business credit), and directing that there shall not be taken into
account any portion of a carryover which is attributable to the
employee stock ownership credit determined under section 41 for
former provisions covering carryovers to or from the taxable year
of the discharge of an amount for purposes of determining the
amount of a credit allowable under section 38 (relating to
investment in certain depreciable property), section 40 (relating
to expenses of work incentive programs), section 44B (relating to
credit for employment of certain new employees), section 44E
(relating to alcohol used as a fuel), or section 44F (relating to
credit for increasing research activities), and directing that, for
purposes of clause (i), there could not be taken into account any
portion of a carryover which was attributable to the employee plan
credit (within the meaning of section 48(o)(3)).
Subsec. (d)(6). Pub. L. 98-369, Sec. 721(b)(2), struck out "or S
corporation shareholder level" in heading and second sentence which
provided that "In the case of an S corporation, subsections (a),
(b), and (c) shall apply at the shareholder level.". See par.
(7)(A).
Subsec. (d)(7) to (10). Pub. L. 98-369, Sec. 721(b)(2), added
par. (7) and redesignated former pars. (7) to (9) as (8) to (10),
respectively.
Subsec. (e)(10). Pub. L. 98-369, Sec. 59(a), added par. (10).
Subsec. (e)(10)(C). Pub. L. 98-369, Sec. 59(b)(1), which added
subpar. (C), effective as if included in the amendments made by
section 806(e) and (f) of Pub. L. 94-455, was repealed by Pub. L.
99-514, Sec. 621(e), (f)(2), eff. Jan. 1, 1986, with certain
exceptions, see Effective Date of 1986 Amendment note below.
Subsec. (f). Pub. L. 98-369, Sec. 1076(a), added subsec. (f).
1983 - Subsec. (b)(2)(B)(v). Pub. L. 97-448, Sec. 102(h)(1),
added cl. (v).
Subsec. (e)(7)(A)(iii). Pub. L. 97-448, Sec. 304(d), added cl.
(iii).
1982 - Subsec. (d)(6). Pub. L. 97-354 inserted "or S corporation
shareholder level" in heading and inserted "In the case of an S
corporation, subsections (a), (b), and (c) shall be applied at the
shareholder level."
1980 - Pub. L. 96-589 completely revised and expanded provisions
by specifying the types of indebtedness and by setting out
priorities among the exclusions, to reflect the revision of Title
11, Bankruptcy, in 1978.
1976 - Pub. L. 94-455, Sec. 1951(b)(2)(A), struck out "(a)
Special rule of exclusion. - " after "Income from discharge of
indebtedness" and struck out subsec. (b) which related to
discharge, cancellation, or modification of indebtedness of certain
railroad corporations.
Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or his delegate"
after "Secretary".
1960 - Subsec. (b). Pub. L. 86-496 provided that if the
discharge, cancellation, or modification of any indebtedness is
effected pursuant to a court order in a receivership proceeding or
in a proceeding under section 77 of the Bankruptcy Act, commenced
before Jan. 1, 1960, then no amount is to be included in gross
income with respect to it, and struck out provisions which made
subsection inapplicable to discharges occurring in a taxable year
beginning after Dec. 31, 1957.
1956 - Subsec. (b). Act June 29, 1956, substituted "December 31,
1957" for "December 31, 1955".
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-147, title IV, Sec. 402(b), Mar. 9, 2002, 116 Stat.
40, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by this section [amending this section] shall apply
to discharges of indebtedness after October 11, 2001, in taxable
years ending after such date.
"(2) Exception. - The amendment made by this section shall not
apply to any discharge of indebtedness before March 1, 2002,
pursuant to a plan of reorganization filed with a bankruptcy court
on or before October 11, 2001."
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 225(b) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to
discharges of indebtedness after the date of the enactment of this
Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13150(d) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section and sections 703 and
1017 of this title] shall apply to discharges after December 31,
1992, in taxable years ending after such date."
Section 13226(a)(3) of Pub. L. 103-66 provided that:
"(A) In general. - Except as otherwise provided in this
paragraph, the amendments made by this subsection [amending this
section and section 382 of this title] shall apply to stock
transferred after December 31, 1994, in satisfaction of any
indebtedness.
"(B) Exception for title 11 cases. - The amendments made by this
subsection shall not apply to stock transferred in satisfaction of
any indebtedness if such transfer is in a title 11 or similar case
(as defined in section 368(a)(3)(A) of the Internal Revenue Code of
1986) which was filed on or before December 31, 1993."
Section 13226(b)(4) of Pub. L. 103-66 provided that: "The
amendments made by this subsection [amending this section] shall
apply to discharges of indebtedness in taxable years beginning
after December 31, 1993."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11325(c) of Pub. L. 101-508 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
1275 of this title] shall apply to debt instruments issued, and
stock transferred, after October 9, 1990, in satisfaction of any
indebtedness.
"(2) Exceptions. - The amendments made by this section shall not
apply to any debt instrument issued, or stock transferred, in
satisfaction of any indebtedness if such issuance or transfer (as
the case may be) -
"(A) is in a title 11 or similar case (as defined in section
368(a)(3)(A) of the Internal Revenue Code of 1986) which was
filed on or before October 9, 1990,
"(B) is pursuant to a written binding contract in effect on
October 9, 1990, and at all times thereafter before such issuance
or transfer,
"(C) is pursuant to a transaction which was described in
documents filed with the Securities and Exchange Commission on or
before October 9, 1990, or
"(D) is pursuant to a transaction -
"(i) the material terms of which were described in a written
public announcement on or before October 9, 1990,
"(ii) which was the subject of a prior filing with the
Securities and Exchange Commission, and
"(iii) which is the subject of a subsequent filing with the
Securities and Exchange Commission before January 1, 1991."
Amendment by section 11813(b)(6) of Pub. L. 101-508 applicable to
property placed in service after Dec. 31, 1990, but not applicable
to any transition property (as defined in section 49(e) of this
title), any property with respect to which qualified progress
expenditures were previously taken into account under section 46(d)
of this title, and any property described in section 46(b)(2)(C) of
this title, as such sections were in effect on Nov. 4, 1990, see
section 11813(c) of Pub. L. 101-508, set out as a note under
section 29 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 104(b)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 231(d)(3)(D) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1985, see section 231(g) of
Pub. L. 99-514, set out as a note under section 41 of this title.
Section 405(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and section 1017 of
this title] shall apply to discharges of indebtedness occurring
after April 9, 1986, in taxable years ending after such date."
Repeal by section 621(e)(1) of Pub. L. 99-514 of amendment by
section 59(b)(1) of Pub. L. 99-369, which was effective as if
included in the amendments made by section 806(e) and (f) of Pub.
L. 94-455, effective Jan. 1, 1986, with certain exceptions, see
section 621(f)(2) of Pub. L. 99-514, set out as a note under
section 382 of this title.
Amendment by section 805(c)(2), (4) of Pub. L. 99-514 applicable
to taxable years beginning after Dec. 31, 1986, with certain
changes required in method of accounting, see section 805(d) of
Pub. L. 99-514, set out as a note under section 166 of this title.
Section 822(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and section 1017 of
this title] shall apply to discharges after December 31, 1986."
Amendment by section 1171(b)(4) of Pub. L. 99-514 applicable to
compensation paid or accrued after Dec. 31, 1986, in taxable years
ending after such date, except as otherwise provided, see section
1171(c) of Pub. L. 99-514, set out as a note under section 38 of
this title.
Amendment by section 1847(b)(7) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 59(b)(2) of Pub. L. 98-369 provided that: "The amendment
made by paragraph (1) [amending this section] shall take effect as
if it had been included in the amendments made by subsections (e)
and (f) of section 806 of the Tax Reform Act of 1976 [Pub. L.
94-455]." See Effective Date of 1976 Amendment note set out under
section 382 of this title.
Section 59(b)[(c)] of Pub. L. 98-369 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendment made by subsection (a) [amending this
section] shall apply to transfers after the date of the enactment
of this Act [July 18, 1984] in taxable years ending after such
date.
"(2) Transitional rule. - The amendment made by subsection (a)
shall not apply to the transfer by a corporation of its stock in
exchange for debt of the corporation after the date of the
enactment of this Act if such transfer is -
"(A) pursuant to a written contract requiring such transfer
which was binding on the corporation at all times on June 7,
1984, and at all times after such date but only if the transfer
takes place before January 1, 1985, and only if the transferee
held the debt at all times on June 7, 1984, or
"(B) pursuant to the exercise of an option to exchange debt for
stock but only if such option was in effect at all times on June
7, 1984, and at all times after such date and only if at all
times on June 7, 1984, the option and the debt were held by the
same person.
"(3) Certain transfers to controlling shareholder. - The
amendment made by subsection (a) shall not apply to any transfer
before January 1, 1985, by a corporation of its stock in exchange
for debt of such corporation if -
"(A) such transfer is to another corporation which at all times
on June 7, 1984, owned 75 percent or more of the total value of
the stock of the corporation making such transfer, and
"(B) immediately after such transfer, the transferee
corporation owns 80 percent or more of the total value of the
stock of the transferor corporation.
"(4) Certain transfers pursuant to debt restructure agreement. -
The amendment made by subsection (a) shall not apply to the
transfer by a corporation of its stock in exchange for debt of the
corporation after the date of the enactment of this Act and before
January 1, 1985, if -
"(A) such transfer is covered by a debt restructure agreement
entered into by the corporation during November 1983, and
"(B) such agreement was specified in a registration statement
filed with the Securities and Exchange Commission by the
corporation on March 7, 1984."
Amendment by section 474(r)(5) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 721(b) of Pub. L. 98-369 applicable to
contributions to capital after Dec. 31, 1980, in taxable years
ending after such date, see section 721(y)(2) of Pub. L. 98-369,
set out as a note under section 1361 of this title.
Section 1076(b) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section] shall apply to
discharges of indebtedness made on or after January 1, 1983."
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by title I of Pub. L. 97-448 effective, except as
otherwise provided, as if it had been included in the provision of
the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 7 of Pub. L. 96-589, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) For Section 2 (Relating to Tax Treatment of Discharge of
Indebtedness). -
"(1) In general. - Except as provided in paragraph (2), the
amendments made by section 2 [amending this section and sections
111, 118, 382, 703 and 1017 of this title] shall apply to any
transaction which occurs after December 31, 1980, other than a
transaction which occurs in a proceeding in a bankruptcy case or
similar judicial proceeding (or in a proceeding under the
Bankruptcy Act) [Title 11, Bankruptcy] commencing on or before
December 31, 1980.
"(2) Transitional rule. - In the case of any discharge of
indebtedness to which subparagraph (A) or (B) of section
108(a)(1) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] (relating to exclusion from gross income), as amended by
section 2, applies and which occurs before January 1, 1982, or
which occurs in a proceeding in a bankruptcy case or similar
judicial proceedings commencing before January 1, 1982, then -
"(A) section 108(b)(2) of the such Code (relating to
reduction of tax attributes), as so amended, shall be applied
without regard to subparagraphs (A), (B), (C), and (E) thereof,
and
"(B) the basis of any property shall not be reduced under
section 1017 of such Code (relating to reduction in basis in
connection with discharges of indebtedness), as so amended,
below the fair market value of such property on the date the
debt is discharged.
"(b) For Section 3 (Relating to Rules Relating to Title 11 Cases
for Individuals). - The amendments made by section 3 [enacting
sections 1398 and 1399 of this title and amending sections 443,
6012 and 6103 of this title] shall apply to any bankruptcy case
commencing more than 90 days after the date of the enactment of
this Act [Dec. 24, 1980].
"(c) For Section 4 (Relating to Corporate Reorganization
Provisions). -
"(1) In general. - The amendments made by section 4 [enacting
section 370 of this title and amending sections 354, 355, 357,
368 and 381 of this title] shall apply to any bankruptcy case or
similar judicial proceeding commencing after December 31, 1980.
"(2) Exchanges of property for accrued interest. - The
amendments made by subsection (e) of section 4 [amending sections
354 and 355 of this title] (relating to treatment of property
attributable to accrued interest) shall also apply to any
exchange -
"(A) which occurs after December 31, 1980, and
"(B) which does not occur in a bankruptcy case or similar
judicial proceeding (or in a proceeding under the Bankruptcy
Act) commenced on or before December 31, 1980.
"(d) For Section 5 (Relating to Miscellaneous Corporate
Amendments). -
"(1) For subsection (a) (relating to exemption from personal
holding company tax). - The amendments made by subsection (a) of
section 5 [amending section 542 of this title] shall apply to any
bankruptcy case or similar judicial proceeding commenced after
December 31, 1980.
"(2) For subsection (b) (relating to repeal of special
treatment for certain railroad redemptions). - The amendments
made by subsection (b) of section 5 [amending section 302 of this
title] shall apply to stock which is issued after December 31,
1980 (other than stock issued pursuant to a plan of
reorganization approved on or before that date).
"(3) For subsection (c) (relating to application of 12-month
liquidation rule). - The amendment made by subsection (c) of
section 5 [amending section 337 of this title] shall apply to any
bankruptcy case or similar judicial proceeding commenced after
December 31, 1980.
"(4) For subsection (d) (relating to permitting bankruptcy
estate to be subchapter s shareholder). - The amendment made by
subsection (d) of section 5 [amending section 1371 of this title]
shall apply to any bankruptcy case commenced on or after October
1, 1979.
"(5) For subsection (e) (relating to certain transfers to
controlled corporations). - The amendments made by subsection (e)
of section 5 [amending section 351 of this title] shall apply as
provided in subsection (a) of this section.
"(6) For subsection (f) (relating to effect of debt discharge
on earnings and profits). - The amendment made by subsection (f)
of section 5 [amending section 312 of this title] shall apply as
provided in subsection (a) of this section.
"(e) For Section 6 (Relating to Changes in Tax Procedures). - The
amendments made by section 6 [enacting sections 6658 and 7464 of
this title, amending sections 128, 354, 422, 1023, 3302, 6012,
6036, 6155, 6161, 6212, 6213, 6216, 6326 [now 6327], 6404, 6503,
6512, 6532, 6871, 6872, 6873, 7430, and 7508 of this title,
repealing section 1018 of this title, and redesignating former
section 7464 of this title as 7465] shall take effect on October 1,
1979, but shall not apply to any proceeding under the Bankruptcy
Act [Title 11] commenced before October 1, 1979.
"(f) Election To Substitute September 30, 1979, for December 31,
1980. -
"(1) In general. - The debtor (or debtors) in a bankruptcy case
or similar judicial proceeding may (with the approval of the
court) elect to apply subsections (a), (c), and (d) by
substituting 'September 30, 1979' for 'December 31, 1980' each
place it appears in such subsections.
"(2) Effect of election. - Any election made under paragraph
(1) with respect to any proceeding shall apply to all parties to
the proceeding.
"(3) Revocation only with consent. - Any election under this
subsection may be revoked only with the consent of the Secretary
of the Treasury or his delegate.
"(4) Time and manner of election. - Any election under this
subsection shall be made at such time, and in such manner, as the
Secretary of the Treasury or his delegate may by regulations
prescribe.
"(g) Definitions. - For purposes of this section -
"(1) Bankruptcy case. - The term 'bankruptcy case' means any
case under title 11 of the United States Code (as recodified by
Public Law 95-598).
"(2) Similar judicial proceeding. - The term 'similar judicial
proceeding' means a receivership, foreclosure, or similar
proceeding in a Federal or State court (as modified by section
368(a)(3)(D) of the Internal Revenue Code of 1986)."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1951(b)(2)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1951(d) of Pub. L. 94-455, set out as a note under section
72 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Section 1(b) of Pub. L. 86-496 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years ending after December 31, 1959, but only with respect to
discharges occurring after such date."
SAVINGS PROVISION
For provisions that nothing in amendment by section 11813 of Pub.
L. 101-508 be construed to affect treatment of certain transactions
occurring, property acquired, or items of income, loss, deduction,
or credit taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Section 1951(b)(2)(B) of Pub. L. 94-455 provided that: "If any
discharge, cancellation, or modification of indebtedness of a
railroad corporation occurs in a taxable year beginning after
December 31, 1976, pursuant to an order of a court in a proceeding
referred to in section 108(b)(A) or (B) which commenced before
January 1, 1960, then, notwithstanding the amendments made by
subparagraph (A) [amending this section] the provisions of
subsection (b) of section 108 shall be considered as not repealed
with respect to such discharge, cancellation, or modification of
indebtedness."
EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS
Pub. L. 107-134, title I, Sec. 105, Jan. 23, 2002, 115 Stat.
2432, provided that:
"(a) In General. - For purposes of the Internal Revenue Code of
1986 -
"(1) gross income shall not include any amount which (but for
this section) would be includible in gross income by reason of
the discharge (in whole or in part) of indebtedness of any
taxpayer if the discharge is by reason of the death of an
individual incurred as the result of the terrorist attacks
against the United States on September 11, 2001, or as the result
of illness incurred as a result of an attack involving anthrax
occurring on or after September 11, 2001, and before January 1,
2002; and
"(2) return requirements under section 6050P of such Code shall
not apply to any discharge described in paragraph (1).
"(b) Effective Date. - This section shall apply to discharges
made on or after September 11, 2001, and before January 1, 2002."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 118, 147, 382, 703, 773,
774, 1017, 1503 of this title.
-End-
-CITE-
26 USC Sec. 109 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 109. Improvements by lessee on lessor's property
-STATUTE-
Gross income does not include income (other than rent) derived by
a lessor of real property on the termination of a lease,
representing the value of such property attributable to buildings
erected or other improvements made by the lessee.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 33.)
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1019 of this title.
-End-
-CITE-
26 USC Sec. 110 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 110. Qualified lessee construction allowances for short-term
leases
-STATUTE-
(a) In general
Gross income of a lessee does not include any amount received in
cash (or treated as a rent reduction) by a lessee from a lessor -
(1) under a short-term lease of retail space, and
(2) for the purpose of such lessee's constructing or improving
qualified long-term real property for use in such lessee's trade
or business at such retail space,
but only to the extent that such amount does not exceed the amount
expended by the lessee for such construction or improvement.
(b) Consistent treatment by lessor
Qualified long-term real property constructed or improved in
connection with any amount excluded from a lessee's income by
reason of subsection (a) shall be treated as nonresidential real
property of the lessor (including for purposes of section
168(i)(8)(B)).
(c) Definitions
For purposes of this section -
(1) Qualified long-term real property
The term "qualified long-term real property" means
nonresidential real property which is part of, or otherwise
present at, the retail space referred to in subsection (a) and
which reverts to the lessor at the termination of the lease.
(2) Short-term lease
The term "short-term lease" means a lease (or other agreement
for occupancy or use) of retail space for 15 years or less (as
determined under the rules of section 168(i)(3)).
(3) Retail space
The term "retail space" means real property leased, occupied,
or otherwise used by a lessee in its trade or business of selling
tangible personal property or services to the general public.
(d) Information required to be furnished to Secretary
Under regulations, the lessee and lessor described in subsection
(a) shall, at such times and in such manner as may be provided in
such regulations, furnish to the Secretary -
(1) information concerning the amounts received (or treated as
a rent reduction) and expended as described in subsection (a),
and
(2) any other information which the Secretary deems necessary
to carry out the provisions of this section.
-SOURCE-
(Added Pub. L. 105-34, title XII, Sec. 1213(a), Aug. 5, 1997, 111
Stat. 1000.)
-MISC1-
PRIOR PROVISIONS
A prior section 110, act Aug. 16, 1954, ch. 736, 68A Stat. 33,
related to income taxes paid by lessee corporations, prior to
repeal by Pub. L. 101-508, title XI, Sec. 11801(a)(6), Nov. 5,
1990, 104 Stat. 1388-520.
EFFECTIVE DATE
Section 1213(e) of Pub. L. 105-34 provided that: "The amendments
made by this section [enacting this section and amending sections
168 and 6724 of this title] shall apply to leases entered into
after the date of the enactment of this Act [Aug. 5, 1997]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 168, 6724 of this title.
-End-
-CITE-
26 USC Sec. 111 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 111. Recovery of tax benefit items
-STATUTE-
(a) Deductions
Gross income does not include income attributable to the recovery
during the taxable year of any amount deducted in any prior taxable
year to the extent such amount did not reduce the amount of tax
imposed by this chapter.
(b) Credits
(1) In general
If -
(A) a credit was allowable with respect to any amount for any
prior taxable year, and
(B) during the taxable year there is a downward price
adjustment or similar adjustment,
the tax imposed by this chapter for the taxable year shall be
increased by the amount of the credit attributable to the
adjustment.
(2) Exception where credit did not reduce tax
Paragraph (1) shall not apply to the extent that the credit
allowable for the recovered amount did not reduce the amount of
tax imposed by this chapter.
(3) Exception for investment tax credit and foreign tax credit
This subsection shall not apply with respect to the credit
determined under section 46 and the foreign tax credit.
(c) Treatment of carryovers
For purposes of this section, an increase in a carryover which
has not expired before the beginning of the taxable year in which
the recovery or adjustment takes place shall be treated as reducing
tax imposed by this chapter.
(d) Special rules for accumulated earnings tax and for personal
holding company tax
In applying subsection (a) for the purpose of determining the
accumulated earnings tax under section 531 or the tax under section
541 (relating to personal holding companies) -
(1) any excluded amount under subsection (a) allowed for the
purposes of this subtitle (other than section 531 or section 541)
shall be allowed whether or not such amount resulted in a
reduction of the tax under section 531 or the tax under section
541 for the prior taxable year; and
(2) where any excluded amount under subsection (a) was not
allowable as a deduction for the prior taxable year for purposes
of this subtitle other than of section 531 or section 541 but was
allowable for the same taxable year under section 531 or section
541, then such excluded amount shall be allowable if it did not
result in a reduction of the tax under section 531 or the tax
under section 541.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 33; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96-589,
Sec. 2(c), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 98-369, div. A,
title I, Sec. 171(a), July 18, 1984, 98 Stat. 698; Pub. L. 99-514,
title XVIII, Sec. 1812(a)(1), (2), Oct. 22, 1986, 100 Stat. 2833.)
-MISC1-
AMENDMENTS
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1812(a)(1), substituted
"did not reduce the amount of tax imposed by this chapter" for "did
not reduce income subject to tax".
Subsec. (c). Pub. L. 99-514, Sec. 1812(a)(2), substituted
"reducing tax imposed by this chapter" for "reducing income subject
to tax or reducing tax imposed by this chapter, as the case may
be".
1984 - Pub. L. 98-369 amended section generally, substituting
provisions relating to recovery of tax benefit items for provisions
relating to recovery of bad debts, prior taxes, and delinquency
amounts.
1980 - Subsec. (d). Pub. L. 96-589 added subsec. (d).
1976 - Subsec. (b)(4). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 171(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section] shall apply to amounts
recovered after December 31, 1983, in taxable years ending after
such date."
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-589 applicable to transactions which
occur after Dec. 31, 1980, other than transactions which occur in a
proceeding in a bankruptcy case or similar judicial proceeding or
in a proceeding under Title 11 commencing on or after Dec. 31,
1980, with an exception permitting the debtor to make the amendment
applicable to transactions occurring after Sept. 30, 1979, in a
specified manner, see section 7(a)(1), (f) of Pub. L. 96-589, set
out as a note under section 108 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 381, 1351, 1398 of this
title.
-End-
-CITE-
26 USC Sec. 112 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 112. Certain combat zone compensation of members of the Armed
Forces
-STATUTE-
(a) Enlisted personnel
Gross income does not include compensation received for active
service as a member below the grade of commissioned officer in the
Armed Forces of the United States for any month during any part of
which such member -
(1) served in a combat zone, or
(2) was hospitalized as a result of wounds, disease, or injury
incurred while serving in a combat zone; but this paragraph shall
not apply for any month beginning more than 2 years after the
date of the termination of combatant activities in such zone.
With respect to service in the combat zone designated for purposes
of the Vietnam conflict, paragraph (2) shall not apply to any month
after January 1978.
(b) Commissioned officers
Gross income does not include so much of the compensation as does
not exceed the maximum enlisted amount received for active service
as a commissioned officer in the Armed Forces of the United States
for any month during any part of which such officer -
(1) served in a combat zone, or
(2) was hospitalized as a result of wounds, disease, or injury
incurred while serving in a combat zone; but this paragraph shall
not apply for any month beginning more than 2 years after the
date of the termination of combatant activities in such zone.
With respect to service in the combat zone designated for purposes
of the Vietnam conflict, paragraph (2) shall not apply to any month
after January 1978.
(c) Definitions
For purposes of this section -
(1) The term "commissioned officer" does not include a
commissioned warrant officer.
(2) The term "combat zone" means any area which the President
of the United States by Executive Order designates, for purposes
of this section or corresponding provisions of prior income tax
laws, as an area in which Armed Forces of the United States are
or have (after June 24, 1950) engaged in combat.
(3) Service is performed in a combat zone only if performed on
or after the date designated by the President by Executive Order
as the date of the commencing of combatant activities in such
zone, and on or before the date designated by the President by
Executive Order as the date of the termination of combatant
activities in such zone; except that June 25, 1950, shall be
considered the date of the commencing of combatant activities in
the combat zone designated in Executive Order 10195.
(4) The term "compensation" does not include pensions and
retirement pay.
(5) The term "maximum enlisted amount" means, for any month,
the sum of -
(A) the highest rate of basic pay payable for such month to
any enlisted member of the Armed Forces of the United States at
the highest pay grade applicable to enlisted members, and
(B) in the case of an officer entitled to special pay under
section 310 of title 37, United States Code, for such month,
the amount of such special pay payable to such officer for such
month.
(d) Prisoners of war, etc.
(1) Members of the Armed Forces
Gross income does not include compensation received for active
service as a member of the Armed Forces of the United States for
any month during any part of which such member is in a missing
status (as defined in section 551(2) of title 37, United States
Code) during the Vietnam conflict as a result of such conflict,
other than a period with respect to which it is officially
determined under section 552(c) of such title 37 that he is
officially absent from his post of duty without authority.
(2) Civilian employees
Gross income does not include compensation received for active
service as an employee for any month during any part of which
such employee is in a missing status during the Vietnam conflict
as a result of such conflict. For purposes of this paragraph, the
terms "active service", "employee", and "missing status" have the
respective meanings given to such terms by section 5561 of title
5 of the United States Code.
(3) Period of conflict
For purposes of this subsection, the Vietnam conflict began
February 28, 1961, and ends on the date designated by the
President by Executive order as the date of the termination of
combatant activities in Vietnam. For purposes of this subsection,
an individual is in a missing status as a result of the Vietnam
conflict if immediately before such status began he was
performing service in Vietnam or was performing service in
Southeast Asia in direct support of military operations in
Vietnam.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 34; Pub. L. 89-739, Sec. 1, Nov.
2, 1966, 80 Stat. 1165; Pub. L. 92-279, Sec. 1, Apr. 26, 1972, 86
Stat. 124; Pub. L. 93-597, Sec. 2(a), (b), Jan. 2, 1975, 88 Stat.
1950; Pub. L. 94-569, Sec. 3(b), Oct. 20, 1976, 90 Stat. 2699; Pub.
L. 104-117, Sec. 1(d), Mar. 20, 1996, 110 Stat. 828; Pub. L.
104-188, title I, Sec. 1704(t)(4)(A), Aug. 20, 1996, 110 Stat.
1887.)
-MISC1-
AMENDMENTS
1996 - Pub. L. 104-188 substituted "combat zone compensation" for
"combat pay" in section catchline.
Subsec. (b). Pub. L. 104-117, Sec. 1(d)(1), substituted "the
maximum enlisted amount" for "$500" in introductory provisions.
Subsec. (c)(5). Pub. L. 104-117, Sec. 1(d)(2), added par. (5).
1976 - Subsec. (a). Pub. L. 94-569 substituted "after January
1978" for "beginning more than 2 years after the date of the
enactment of this sentence" after "With respect to service in the
combat zone designated for purposes of the Vietnam conflict,
paragraph (2) shall not apply to any month".
Subsec. (b). Pub. L. 94-569 substituted "after January 1978" for
"beginning more than 2 years after the date of enactment of this
sentence" after "With respect to service in the combat zone
designated for purposes of the Vietnam conflict, paragraph (2)
shall not apply to any month".
1975 - Subsec. (a). Pub. L. 93-597, Sec. 2(a)(3), inserted
provision relating to the applicability of par. (2) with respect to
service in the combat zone designated for purposes of the Vietnam
conflict.
Subsec. (a)(1). Pub. L. 93-597, Sec. 2(a)(1), struck out "during
an induction period" after "served in a combat zone".
Subsec. (a)(2). Pub. L. 93-597, Sec. 2(a)(2), substituted "; but
this paragraph shall not apply for any month beginning more than 2
years after the date of the termination of combatant activities in
such zone" for "during an induction period; but this paragraph
shall not apply for any month during any part of which there are no
combatant activities in any combat zone as determined under
subsection (c)(3) of this section".
Subsec. (b). Pub. L. 93-597, Sec. 2(a)(3), inserted provision
relating to applicability of par. (2) with respect to service in
the combat zone designated for purposes of the Vietnam conflict.
Subsec. (b)(1). Pub. L. 93-597, Sec. 2(a)(1), struck out "during
an induction period" after "served in a combat zone".
Subsec. (b)(2). Pub. L. 93-597, Sec. 2(a)(2), substituted "; but
this paragraph shall not apply for any month beginning more than 2
years after the date of the termination of combatant activities in
such zone" for "during an induction period; but this paragraph
shall not apply for any month during any part of which there are no
combatant activities in any combat zone as determined under
subsection (c)(3) of this section".
Subsec. (c)(5). Pub. L. 93-597, Sec. 2(b), struck out par. (5)
which defined "induction period".
1972 - Subsec. (d). Pub. L. 92-279 added subsec. (d).
1966 - Subsec. (b). Pub. L. 89-739 substituted "$500" for "$200".
EFFECTIVE DATE OF 1975 AMENDMENT
Section 2(c) of Pub. L. 93-597 provided that: "The amendments
made by this section [amending this section] shall take effect on
July 1, 1973."
EFFECTIVE DATE OF 1972 AMENDMENT
Section 3(a)(1) of Pub. L. 92-279 provided that: "The amendment
made by the first section of this Act [amending this section] shall
apply to taxable years ending on or after February 28, 1961."
EFFECTIVE DATE OF 1966 AMENDMENT
Section 2 of Pub. L. 89-739 provided that: "The amendment made by
the first section of this Act [amending this section] shall apply
with respect to compensation received in taxable years ending after
December 31, 1965, for periods of active service after such date."
SENSE OF CONGRESS REGARDING TAX TREATMENT OF MEMBERS RECEIVING
SPECIAL PAY FOR DUTY SUBJECT TO HOSTILE FIRE OR IMMINENT DANGER
Pub. L. 106-398, Sec. 1 [[div. A], title X, Sec. 1089], Oct. 30,
2000, 114 Stat. 1654, 1654A-294, provided that: "It is the sense of
Congress that members of the Armed Forces who receive special pay
under section 310 of title 37, United States Code, for duty subject
to hostile fire or imminent danger should receive the same
treatment under Federal income tax laws as members serving in
combat zones."
SENSE OF CONGRESS REGARDING TREATMENT UNDER INTERNAL REVENUE CODE
OF MEMBERS RECEIVING HOSTILE FIRE OR IMMINENT DANGER SPECIAL PAY
DURING CONTINGENCY OPERATIONS
Pub. L. 106-65, div. A, title VI, Sec. 677, Oct. 5, 1999, 113
Stat. 676, provided that: "It is the sense of Congress that a
member of the Armed Forces who is receiving special pay under
section 310 of title 37, United States Code, while assigned to duty
in support of a contingency operation should be treated under the
Internal Revenue Code of 1986 in the same manner as a member of the
Armed Forces serving in a combat zone (as defined in section 112 of
the Internal Revenue Code of 1986)."
AVAILABILITY OF CERTAIN TAX BENEFITS FOR SERVICES AS PART OF
OPERATION ALLIED FORCE
Pub. L. 106-21, Sec. 1, Apr. 19, 1999, 113 Stat. 34, provided
that:
"(a) General Rule. - For purposes of the following provisions of
the Internal Revenue Code of 1986, a qualified hazardous duty area
shall be treated in the same manner as if it were a combat zone (as
determined under section 112 of such Code):
"(1) Section 2(a)(3) (relating to special rule where deceased
spouse was in missing status).
"(2) Section 112 (relating to the exclusion of certain combat
pay of members of the Armed Forces).
"(3) Section 692 (relating to income taxes of members of Armed
Forces on death).
"(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred wounds,
etc.).
"(5) Section 3401(a)(1) (defining wages relating to combat pay
for members of the Armed Forces).
"(6) Section 4253(d) (relating to the taxation of phone service
originating from a combat zone from members of the Armed Forces).
"(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
"(8) Section 7508 (relating to time for performing certain acts
postponed by reason of service in combat zone).
"(b) Qualified Hazardous Duty Area. - For purposes of this
section, the term 'qualified hazardous duty area' means any area of
the Federal Republic of Yugoslavia (Serbia/Montenegro), Albania,
the Adriatic Sea, and the northern Ionian Sea (above the 39th
parallel) during the period (which includes the date of the
enactment of this Act [Apr. 19, 1999]) that any member of the Armed
Forces of the United States is entitled to special pay under
section 310 of title 37, United States Code (relating to special
pay: duty subject to hostile fire or imminent danger) for services
performed in such area.
"(c) Special Rule for Section 7508. - Solely for purposes of
applying section 7508 of the Internal Revenue Code of 1986, in the
case of an individual who is performing services as part of
Operation Allied Force outside the United States while deployed
away from such individual's permanent duty station, the term
'qualified hazardous duty area' includes, during the period for
which the entitlement referred to in subsection (b) is in effect,
any area in which such services are performed.
"(d) Effective Dates. -
"(1) In general. - Except as provided in paragraph (2), this
section shall take effect on March 24, 1999.
"(2) Withholding. - Subsection (a)(5) shall apply to
remuneration paid after the date of the enactment of this Act
[Apr. 19, 1999]."
TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN CERTAIN
HAZARDOUS DUTY AREAS; EFFECTIVE DATE
Section 1 of Pub. L. 104-117 provided that:
"(a) General Rule. - For purposes of the following provisions of
the Internal Revenue Code of 1986, a qualified hazardous duty area
shall be treated in the same manner as if it were a combat zone (as
determined under section 112 of such Code):
"(1) Section 2(a)(3) (relating to special rule where deceased
spouse was in missing status).
"(2) Section 112 (relating to the exclusion of certain combat
pay of members of the Armed Forces).
"(3) Section 692 (relating to income taxes of members of Armed
Forces on death).
"(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred wounds,
etc.).
"(5) Section 3401(a)(1) (defining wages relating to combat pay
for members of the Armed Forces).
"(6) Section 4253(d) (relating to the taxation of phone service
originating from a combat zone from members of the Armed Forces).
"(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
"(8) Section 7508 (relating to time for performing certain acts
postponed by reason of service in combat zone).
"(b) Qualified Hazardous Duty Area. - For purposes of this
section, the term 'qualified hazardous duty area' means Bosnia and
Herzegovina, Croatia, or Macedonia, if as of the date of the
enactment of this section [Mar. 20, 1996] any member of the Armed
Forces of the United States is entitled to special pay under
section 310 of title 37, United States Code (relating to special
pay; duty subject to hostile fire or imminent danger) for services
performed in such country. Such term includes any such country only
during the period such entitlement is in effect. Solely for
purposes of applying section 7508 of the Internal Revenue Code of
1986, in the case of an individual who is performing services as
part of Operation Joint Endeavor outside the United States while
deployed away from such individual's permanent duty station, the
term 'qualified hazardous duty area' includes, during the period
for which such entitlement is in effect, any area in which such
services are performed.
"(c) Exclusion of Combat Pay From Withholding Limited to Amount
Excludable From Gross Income. - [Amended section 3401 of this
title.]
"(d) Increase in Combat Pay Exclusion for Officers to Highest
Amount Applicable to Enlisted Personnel. -
"(1) In general. - [Amended this section.]
"(2) Maximum enlisted amount. - [Amended this section.]
"(e) Effective Date. -
"(1) In general. - Except as provided in paragraph (2), the
provisions of and amendments made by this section shall take
effect on November 21, 1995.
"(2) Withholding. - Subsection (a)(5) and the amendment made by
subsection (c) shall apply to remuneration paid after the date of
the enactment of this Act [Mar. 20, 1996]."
REFUND OR CREDIT OF OVERPAYMENT; APPLICABLE PERIOD
Section 3(a)(2), (3) of Pub. L. 92-279, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(2) If refund or credit of any overpayment for any taxable year
resulting from the application of the amendment made by the first
section of this Act [amending this section] (including interest,
additions to the tax, and additional amounts) is prevented at any
time before the expiration of the applicable period specified in
paragraph (3) by the operation of any law or rule of law, such
refund or credit of such overpayment may, nevertheless, be made or
allowed if claim therefor is filed before the expiration of such
applicable period.
"(3) For purposes of paragraph (2), the applicable period for any
individual with respect to any compensation is the period ending on
whichever of the following days is the later:
"(A) the day which is one year after the date of the enactment
of this Act [Apr. 26, 1972], or
"(B) the day which is 2 years after the date on which it is
determined that the individual's missing status (within the
meaning of section 112(d) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) has terminated for purposes of such
section 112."
-EXEC-
EX. ORD. NO. 10585. TERMINATION OF COMBATANT ACTIVITIES IN KOREA
Ex. Ord. No. 10585, Jan. 1, 1955, 20 F.R. 17, provided:
By virtue of the authority vested in me by section 112(c)(3) of
the Internal Revenue Code of 1954 [now I.R.C. 1986], January 31,
1955, as of midnight thereof, is hereby designated as the date of
termination of combatant activities in the zone comprised of the
area described in Executive Order No. 10195 of December 20, 1950
(15 F.R. 9177).
Dwight D. Eisenhower.
EX. ORD. NO. 11216. DESIGNATION OF VIETNAM AND ADJACENT WATERS AS
COMBAT ZONE
Ex. Ord. No. 11216, Apr. 24, 1965, 30 F.R. 5817, provided:
Pursuant to the authority vested in me by section 112 of the
Internal Revenue Code of 1954 [now I.R.C. 1986], I hereby
designate, for the purposes of that section, as an area in which
Armed Forces of the United States are and have been engaged in
combat:
Vietnam, including the waters adjacent thereto within the
following-described limits: From a point on the East Coast of
Vietnam at the juncture of Vietnam with China southeastward to
21º N Lat., 108º15 E
Long.; thence southward to 18º N Lat.,
108º15 E Long.; thence southeastward to
17º30 N Lat., 111º E
Long.; thence southward to 11º N Lat.,
111º E Long.; thence southwestward to
7º N Lat., 105º E Long.;
thence westward to 7º N Lat., 103º E Long.; thence northward to 9º30
N Lat., 103º E Long.; thence northeastward to
10º15 N Lat., 104º27 E
Long.; thence northward to a point on the West Coast of Vietnam at
the juncture of Vietnam with Cambodia.
The date of the commencing of combatant activities in such area
is hereby designated as January 1, 1964.
Lyndon B. Johnson.
EX. ORD. NO. 12744. DESIGNATION OF ARABIAN PENINSULA AREAS,
AIRSPACE, AND ADJACENT WATERS AS COMBAT ZONE
Ex. Ord. No. 12744, Jan. 21, 1991, 56 F.R. 2663, provided:
By the authority vested in me as President by the Constitution
and the laws of the United States of America, including section 112
of the Internal Revenue Code of 1986 (26 U.S.C. 112), I hereby
designate, for purposes of that section, the following locations,
including the airspace above such locations, as an area in which
Armed Forces of the United States are and have been engaged in
combat:
- the Persian Gulf
- the Red Sea
- the Gulf of Oman
- that portion of the Arabian Sea that lies north of 10 degrees
north latitude and west of 68 degrees east longitude
- the Gulf of Aden
- the total land areas of Iraq, Kuwait, Saudi Arabia, Oman,
Bahrain, Qatar, and the United Arab Emirates.
For the purposes of this order, the date of the commencing of
combatant activities in such zone is hereby designated as January
17, 1991.
George Bush.
EX. ORD. NO. 13002. TERMINATION OF COMBAT ZONE DESIGNATION IN
VIETNAM AND WATERS ADJACENT THERETO
Ex. Ord. No. 13002, May 13, 1996, 61 F.R. 24665, provided:
By the authority vested in me as President by the Constitution
and the laws of the United States of America, including section
112(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C.
112(c)(3)), June 30, 1996, as of midnight thereof, is hereby
designated as the date of termination of combatant activities in
the zone comprised of the area described in Executive Order No.
11216 of April 24, 1965 [set out above].
William J. Clinton.
EX. ORD. NO. 13119. DESIGNATION OF FEDERAL REPUBLIC OF YUGOSLAVIA
(SERBIA/MONTENEGRO), ALBANIA, THE AIRSPACE ABOVE, AND ADJACENT
WATERS AS A COMBAT ZONE
Ex. Ord. No. 13119, April 13, 1999, 64 F.R. 18797, provided:
Pursuant to the authority vested in me as President by the
Constitution and laws of the United States of America, including
section 112 of the Internal Revenue Code of 1986 (26 U.S.C. 112), I
designate, for the purposes of that section, the following
locations, including the airspace above such locations, as an area
in which Armed Forces of the United States are and have been
engaged in combat:
- The Federal Republic of Yugoslavia (Serbia/Montenegro);
- Albania;
- the Adriatic Sea;
- the Ionian Sea north of the 39th parallel.
For the purposes of this order, I designate March 24, 1999, as
the date of the commencement of combatant activities in such zone.
William J. Clinton.
EX. ORD. NO. 13239. DESIGNATION OF AFGHANISTAN AND THE AIRSPACE
ABOVE AS A COMBAT ZONE
Ex. Ord. No. 13239, Dec. 12, 2001, 66 F.R. 64907, provided:
Pursuant to the authority vested in me as President by the
Constitution and the laws of the United States of America,
including section 112 of the Internal Revenue Code of 1986 (26
U.S.C. 112), I designate, for purposes of that section,
Afghanistan, including the airspace above, as an area in which
Armed Forces of the United States are and have been engaged in
combat.
For purposes of this order, I designate September 19, 2001, as
the date of the commencement of combatant activities in such zone.
George W. Bush.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 2, 692, 2201, 3401, 4253,
6013, 7508 of this title; title 5 sections 6304, 6326; title 10
section 1580.
-End-
-CITE-
26 USC Sec. 113 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 113. Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(7),
Nov. 5, 1990, 104 Stat. 1388-520]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 35, related to
mustering-out payments for members of Armed Forces.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC Sec. 114 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 114. Extraterritorial income
-STATUTE-
(a) Exclusion
Gross income does not include extraterritorial income.
(b) Exception
Subsection (a) shall not apply to extraterritorial income which
is not qualifying foreign trade income as determined under subpart
E of part III of subchapter N.
(c) Disallowance of deductions
(1) In general
Any deduction of a taxpayer allocated under paragraph (2) to
extraterritorial income of the taxpayer excluded from gross
income under subsection (a) shall not be allowed.
(2) Allocation
Any deduction of the taxpayer properly apportioned and
allocated to the extraterritorial income derived by the taxpayer
from any transaction shall be allocated on a proportionate basis
between -
(A) the extraterritorial income derived from such transaction
which is excluded from gross income under subsection (a), and
(B) the extraterritorial income derived from such transaction
which is not so excluded.
(d) Denial of credits for certain foreign taxes
Notwithstanding any other provision of this chapter, no credit
shall be allowed under this chapter for any income, war profits,
and excess profits taxes paid or accrued to any foreign country or
possession of the United States with respect to extraterritorial
income which is excluded from gross income under subsection (a).
(e) Extraterritorial income
For purposes of this section, the term "extraterritorial income"
means the gross income of the taxpayer attributable to foreign
trading gross receipts (as defined in section 942) of the taxpayer.
-SOURCE-
(Added Pub. L. 106-519, Sec. 3(a), Nov. 15, 2000, 114 Stat. 2423.)
-MISC1-
PRIOR PROVISIONS
A prior section 114, act Aug. 16, 1954, ch. 736, 68A Stat. 35,
related to sports programs conducted for American National Red
Cross, prior to repeal by Pub. L. 101-508, title XI, Sec.
11801(a)(8), Nov. 5, 1990, 104 Stat. 1388-520.
EFFECTIVE DATE
Section applicable to transactions after Sept. 30, 2000, with
special rules relating to existing foreign sales corporations, see
section 5 of Pub. L. 106-519, set out as a note under section 941
of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 903, 941, 943 of this
title.
-End-
-CITE-
26 USC Sec. 115 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 115. Income of States, municipalities, etc.
-STATUTE-
Gross income does not include -
(1) income derived from any public utility or the exercise of
any essential governmental function and accruing to a State or
any political subdivision thereof, or the District of Columbia;
or
(2) income accruing to the government of any possession of the
United States, or any political subdivision thereof.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 35; Pub. L. 94-455, title XIX,
Sec. 1901(a)(19), Oct. 4, 1976, 90 Stat. 1766.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455 struck out "(a) General rule" before "Gross
income does not include", struck out subsecs. (b) and (c) which
related to contracts concerning public utilities made before Sept.
8, 1916, and contracts concerning bridge acquisition made before
May 29, 1928, respectively, and in par. (1) of former subsec. (a),
struck out "or territory" after "accruing to a State".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 415, 501 of this title;
title 45 section 1207.
-End-
-CITE-
26 USC Sec. 116 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 116. Repealed. Pub. L. 99-514, title VI, Sec. 612(a), Oct.
22, 1986, 100 Stat. 2250]
-MISC1-
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 37; June 25,
1959, Pub. L. 86-69, Sec. 3(a)(2), 73 Stat. 139; Sept. 14, 1960,
Pub. L. 86-779, Sec. 10(f), 74 Stat. 1009; Feb. 26, 1964, Pub. L.
88-272, title II, Sec. 201(c), (d)(6)(C), 78 Stat. 32; Nov. 13,
1966, Pub. L. 89-809, title I, Sec. 103(g), 80 Stat. 1552; Oct. 4,
1976, Pub. L. 94-455, title X, Secs. 1051(h)(2), 1053(d)(1), title
XIX, Sec. 1901(a)(20), 90 Stat. 1647, 1649, 1766; Apr. 2, 1980,
Pub. L. 96-223, title IV, Sec. 404(a), 94 Stat. 305; Aug. 13, 1981,
Pub. L. 97-34, title III, Sec. 302(b)(2), 95 Stat. 272; July 18,
1984, Pub. L. 98-369, div. A, title V, Sec. 542(b), 98 Stat. 891,
authorized partial exclusion of dividends received by individuals.
EFFECTIVE DATE OF REPEAL
Repeal applicable to taxable years beginning after Dec. 31, 1986,
see section 612(c) of Pub. L. 99-514, set out as an Effective Date
of 1986 Amendment note under section 301 of this title.
-End-
-CITE-
26 USC Sec. 117 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 117. Qualified scholarships
-STATUTE-
(a) General rule
Gross income does not include any amount received as a qualified
scholarship by an individual who is a candidate for a degree at an
educational organization described in section 170(b)(1)(A)(ii).
(b) Qualified scholarship
For purposes of this section -
(1) In general
The term "qualified scholarship" means any amount received by
an individual as a scholarship or fellowship grant to the extent
the individual establishes that, in accordance with the
conditions of the grant, such amount was used for qualified
tuition and related expenses.
(2) Qualified tuition and related expenses
For purposes of paragraph (1), the term "qualified tuition and
related expenses" means -
(A) tuition and fees required for the enrollment or
attendance of a student at an educational organization
described in section 170(b)(1)(A)(ii), and
(B) fees, books, supplies, and equipment required for courses
of instruction at such an educational organization.
(c) Limitation
(1) In general
Except as provided in paragraph (2), subsections (a) and (d)
shall not apply to that portion of any amount received which
represents payment for teaching, research, or other services by
the student required as a condition for receiving the qualified
scholarship or qualified tuition reduction.
(2) Exceptions
Paragraph (1) shall not apply to any amount received by an
individual under -
(A) the National Health Service Corps Scholarship Program
under section 338A(g)(1)(A) of the Public Health Service Act,
or
(B) the Armed Forces Health Professions Scholarship and
Financial Assistance program under subchapter I of chapter 105
of title 10, United States Code.
(d) Qualified tuition reduction
(1) In general
Gross income shall not include any qualified tuition reduction.
(2) Qualified tuition reduction
For purposes of this subsection, the term "qualified tuition
reduction" means the amount of any reduction in tuition provided
to an employee of an organization described in section
170(b)(1)(A)(ii) for the education (below the graduate level) at
such organization (or another organization described in section
170(b)(1)(A)(ii)) of -
(A) such employee, or
(B) any person treated as an employee (or whose use is
treated as an employee use) under the rules of section 132(h).
(3) Reduction must not discriminate in favor of highly
compensated, etc.
Paragraph (1) shall apply with respect to any qualified tuition
reduction provided with respect to any highly compensated
employee only if such reduction is available on substantially the
same terms to each member of a group of employees which is
defined under a reasonable classification set up by the employer
which does not discriminate in favor of highly compensated
employees (within the meaning of section 414(q)). For purposes of
this paragraph, the term "highly compensated employee" has the
meaning given such term by section 414(q).
[(4) Repealed. Pub. L. 101-140, title II, Sec. 203(a)(1), (2),
Nov. 8, 1989, 103 Stat. 830]
(5) Special rules for teaching and research assistants
In the case of the education of an individual who is a graduate
student at an educational organization described in section
170(b)(1)(A)(ii) and who is engaged in teaching or research
activities for such organization, paragraph (2) shall be applied
as if it did not contain the phrase "(below the graduate level)".
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 38; Pub. L. 87-256, Sec. 110(a),
Sept. 21, 1961, 75 Stat. 535; Pub. L. 94-455, title XIX, Sec.
1901(b)(8)(A), (c)(3), Oct. 4, 1976, 90 Stat. 1794, 1803; Pub. L.
96-541, Sec. 5(a)(1), Dec. 17, 1980, 94 Stat. 3205; Pub. L. 98-369,
div. A, title V, Sec. 532(a), July 18, 1984, 98 Stat. 887; Pub. L.
99-514, title I, Sec. 123(a), title XI, Secs. 1114(b)(2),
1151(g)(2), Oct. 22, 1986, 100 Stat. 2112, 2450, 2506; Pub. L.
100-647, title I, Sec. 1011B(a)(31)(B), title IV, Sec. 4001(b)(2),
Nov. 10, 1988, 102 Stat. 3488, 3643; Pub. L. 101-140, title II,
Sec. 203(a)(1), (2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 104-188,
title I, Sec. 1703(n)(14), Aug. 20, 1996, 110 Stat. 1878; Pub. L.
107-16, title IV, Sec. 413(a), June 7, 2001, 115 Stat. 64.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 338A(g)(1)(A) of the Public Health Service Act, referred
to in subsec. (c)(2)(A), is classified to section 254l(g)(1)(A) of
Title 42, The Public Health and Welfare.
-MISC1-
AMENDMENTS
2001 - Subsec. (c). Pub. L. 107-16, Secs. 413(a), 901,
temporarily designated existing provisions as par. (1), inserted
par. heading, substituted "Except as provided in paragraph (2),
subsections (a)" for "Subsections (a)", and added par. (2). See
Effective and Termination Dates of 2001 Amendment note below.
1996 - Subsec. (d)(2)(B). Pub. L. 104-188 substituted "section
132(h)" for "section 132(f)".
1989 - Subsec. (d)(4). Pub. L. 101-140, Sec. 203(a)(2), amended
par. (4) to read as if amendments by Pub. L. 100-647, Sec.
1011B(a)(31)(B), had not been enacted, see 1988 Amendment note
below.
Pub. L. 101-140, Sec. 203(a)(1), amended subsec. (d) to read as
if amendments by Pub. L. 99-514, Sec. 1151(g)(2), which added par.
(4), had not been enacted, see 1986 Amendment note below.
1988 - Subsec. (d)(4). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted "there shall" for "there may" and "who are" for "who
may be".
Subsec. (d)(5). Pub. L. 100-647, Sec. 4001(b)(2), added par. (5).
1986 - Pub. L. 99-514, Sec. 123(a), in amending section
generally, substituted "Qualified scholarships" for "Scholarships
and fellowship grants" in section catchline.
Subsec. (a). Pub. L. 99-514, Sec. 123(a), amended subsec. (a)
generally. Prior to amendment, subsec. (a) read as follows: "In the
case of an individual, gross income does not include -
"(1) any amount received -
"(A) as a scholarship at an educational organization
described in section 170(b)(1)(A)(ii), or
"(B) as a fellowship grant, including the value of
contributed services and accommodations; and
"(2) any amount received to cover expenses for -
"(A) travel,
"(B) research,
"(C) clerical help, or
"(D) equipment,
which are incident to such a scholarship or to a fellowship
grant, but only to the extent that the amount is so expended by
the recipient."
Subsec. (b). Pub. L. 99-514, Sec. 123(a), in amending subsec. (b)
generally, substituted qualified scholarship provision for former
limitations provision, which related in par. (1) to individuals who
were candidates for degrees, and in par. (2) to individuals who
were not candidates for degrees, describing in subpar. (A)
conditions for exclusion and in subpar. (B) extent of exclusion,
such detailed provision now covered in subsec. (c).
Subsec. (c). Pub. L. 99-514, Sec. 123(a), in amending subsec. (c)
generally, substituted limitation provision for former provision
relating to Federal grants for tuition and related expenses not
includable merely because there was requirement of future service
as Federal employee.
Subsec. (d). Pub. L. 99-514, Sec. 123(a), in amending subsec. (d)
generally, substituted "reduction" for "reductions" in heading and
inserted "(within the meaning of section 414(q))" after "highly
compensated employees" in par. (3).
Subsec. (d)(3). Pub. L. 99-514, Sec. 1114(b)(2), struck out
"officer, owner, or" after "with respect to any" and "officers,
owners, or" after "in favor of" and inserted at end "For purposes
of this paragraph, the term 'highly compensated employee' has the
meaning given such term by section 414(q)."
Subsec. (d)(4). Pub. L. 99-514, Sec. 1151(g)(2), added par. (4).
1984 - Subsec. (d). Pub. L. 98-369 added subsec. (d).
1980 - Subsec. (c). Pub. L. 96-541 added subsec. (c).
1976 - Subsecs. (a)(1)(A), (b)(1), (2). Pub. L. 94-455, Sec.
1901(b)(8)(A), substituted "educational organization described in
section 170(b)(1)(A)(ii)" for "educational institution (as defined
in section 151(e)(4))" after "scholarship at an".
Subsec. (b)(2)(A)(iv). Pub. L. 94-455, Sec. 1901(c)(3), struck
out "a territory" after "or a State".
Subsec. (b)(2)(B). Pub. L. 94-455, Sec. 1901(b)(8)(A),
substituted "educational organization described in section
170(b)(1)(A)(ii)" for "educational institution (as defined in
section 151(e)(4))" after "degree at an".
1961 - Subsec. (b)(2)(A). Pub. L. 87-256 included cases where the
grantor of the scholarship or fellowship grant is a foreign
government, an international organization, or a binational or
multinational educational and cultural foundation or commission
created or continued pursuant to the Mutual Educational and
Cultural Exchange Act of 1961.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title IV, Sec. 413(b), June 7, 2001, 115 Stat.
64, provided that: "The amendments made by subsection (a) [amending
this section] shall apply to amounts received in taxable years
beginning after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011B(a)(31)(B) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 4001(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section and section 127 of this
title] shall apply to taxable years beginning after December 31,
1987."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 123(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, but only in the case
of scholarships and fellowships granted after Aug. 16, 1986, see
section 151(d) of Pub. L. 99-514, set out as a note under section 1
of this title.
Amendment by section 1114(b)(2) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(g)(2) of Pub. L. 99-514 applicable,
with certain qualifications and exceptions, to years beginning
after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as
amended, set out as a note under section 79 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Section 532(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by this section [amending this section] shall apply
to qualified tuition reductions (as defined in section 117(d)(2) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for
education furnished after June 30, 1985, in taxable years ending
after such date."
Provisions of subsec. (d) treated as in effect on and after Jan.
1, 1984, in case of education described in section 127(c)(8) of
this title, see section 1(g)(5) of Pub. L. 98-611, set out as a
note under section 127 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 5(a)(2) of Pub. L. 96-541 provided: "The amendment made
by paragraph (1) [amending this section] shall apply to taxable
years beginning after December 31, 1980."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1961 AMENDMENT
Section 110(h)(1) of Pub. L. 87-256 provided that: "The
amendments made by subsections (a), (b), and (c) of this section
[amending this section and sections 871 and 872 of this title]
shall apply to taxable years beginning after December 31, 1961."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99-514 IN
RELATION TO TREATY OBLIGATIONS OF UNITED STATES
For nonapplication of amendment by section 123(a) of Pub. L.
99-514 to the extent application of such amendment would be
contrary to any treaty obligation of the United States in effect on
Oct. 22, 1986, with provision that for such purposes any amendment
by title I of Pub. L. 100-647 be treated as if it had been included
in the provision of Pub. L. 99-514 to which such amendment relates,
see section 1012(aa)(3), (4) of Pub. L. 100-647, set out as a note
under section 861 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TRANSITIONAL RULES FOR TREATMENT OF CERTAIN REDUCTIONS IN TUITION
Section 1853(f) of Pub. L. 99-514 provided that:
"(1) A tuition reduction plan shall be treated as meeting the
requirements of section 117(d)(3) of the Internal Revenue Code of
1954 [now 1986] if -
"(A) such plan would have met the requirements of such section
(as amended by this section but without regard to the lack of
evidence that benefits under such plan were the subject of good
faith bargaining) on the day on which eligibility to participate
in the plan was closed,
"(B) at all times thereafter, the tuition reductions available
under such plan are available on substantially the same terms to
all employees eligible to participate in such plan, and
"(C) the eligibility to participate in such plan closed on June
30, 1972, June 30, 1974, or December 31, 1975.
"(2) For purposes of applying section 117(d)(3) of the Internal
Revenue Code of 1954 [now 1986] to all tuition reduction plans of
an employer with at least 1 such plan described in paragraph (1) of
this subsection, there shall be excluded from consideration
employees not included in the plan who are included in a unit of
employees covered by an agreement that the Secretary of the
Treasury or his delegate finds to be a collective bargaining
agreement between employee representatives and 1 or more employers,
if, with respect to plans other than plans described in paragraph
(1), there is evidence that such benefits were the subject of good
faith bargaining.
"(3) Any reduction in tuition provided with respect to a
full-time course of education furnished at the graduate level
before July 1, 1988, shall not be included in gross income if -
"(A) such reduction would not be included in gross income under
the Internal Revenue Service regulations in effect on the date of
the enactment of the Tax Reform Act of 1984 [July 18, 1984], and
"(B) such reduction is provided with respect to a student who
was accepted for admission to such course of education before
July 1, 1984, and began such course of education before June 30,
1985."
NATIONAL RESEARCH SERVICE AWARDS
Pub. L. 95-600, title I, Sec. 161(b), Nov. 6, 1978, 92 Stat.
2810, as amended by Pub. L. 96-167, Sec. 9(b), Dec. 29, 1979, 93
Stat. 1278; Pub. L. 96-541, Sec. 5(b), Dec. 17, 1980, 94 Stat.
3206; Pub. L. 97-248, title II, Sec. 285, Sept. 3, 1982, 96 Stat.
569; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,
provided that any amount paid to, or on behalf of, an individual as
a national research service award under former section 289l-1 of
title 42 during calendar years 1974 through 1983 was to be treated
as a scholarship or fellowship grant under this section.
SCHOLARSHIP PROGRAMS FOR MEMBERS OF THE UNIFORMED SERVICES
Pub. L. 93-483, Sec. 4, Oct. 26, 1974, 88 Stat. 1458, as amended
Pub. L. 94-455, title XXI, Sec. 2130, Oct. 4, 1976, 90 Stat. 1922;
Pub. L. 95-171, Sec. 5, Nov. 12, 1977, 91 Stat. 1355; Pub. L.
95-600, title I, Sec. 161(a), Nov. 6, 1978, 92 Stat. 2810; Pub. L.
95-615, title I, Sec. 6, Nov. 8, 1978, 92 Stat. 3098; Pub. L.
96-167, Sec. 9(a), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - Any amount received from appropriated funds as
a scholarship, including the value of contributed services and
accommodations, by a member of a uniformed service who is receiving
training under the Armed Forces Health Professions Scholarship
Program (or any other program determined by the Secretary of the
Treasury or his delegate to have substantially similar objectives)
from an educational institution (as defined in section 151(e)(4) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) [see
section 170(b)(1)(A)(ii) of this title] shall be treated as a
scholarship under section 117 of such Code [this section], whether
that member is receiving training while on active duty or in an
off-duty or inactive status, and without regard to whether a period
of active duty is required of the member as a condition of
receiving those payments.
"(b) Definition of Uniformed Services. - For purposes of this
section, the term 'uniformed service' has the meaning given it by
section 101(3) of title 37, United States Code.
"(c) Effective Date. - The provisions of this section shall apply
with respect to amounts received during calendar years 1973, 1974,
and 1975, and, in the case of a member of a uniformed service
receiving training after 1975 and before 1981 in programs described
in subsection (a), with respect to amounts received after 1975 and
before 1985."
[Section 6 of Pub. L. 95-615, which reenacted Sec. 4(c) of Pub.
L. 93-483 without change, to cease to have effect on the day after
Nov. 8, 1978, see section 210(a) of Pub. L. 95-615, set out as a
note under section 61 of this title.]
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25A, 74, 125, 127, 135,
414, 1441, 3121, 3231, 3306, 3401, 4941, 4945 of this title; title
42 section 409.
-End-
-CITE-
26 USC Sec. 118 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 118. Contributions to the capital of a corporation
-STATUTE-
(a) General rule
In the case of a corporation, gross income does not include any
contribution to the capital of the taxpayer.
(b) Contributions in aid of construction, etc.
For purposes of subsection (a), except as provided in subsection
(c), the term "contribution to the capital of the taxpayer" does
not include any contribution in aid of construction or any other
contribution as a customer or potential customer.
(c) Special rules for water and sewerage disposal utilities
(1) General rule
For purposes of this section, the term "contribution to the
capital of the taxpayer" includes any amount of money or other
property received from any person (whether or not a shareholder)
by a regulated public utility which provides water or sewerage
disposal services if -
(A) such amount is a contribution in aid of construction,
(B) in the case of contribution of property other than water
or sewerage disposal facilities, such amount meets the
requirements of the expenditure rule of paragraph (2), and
(C) such amount (or any property acquired or constructed with
such amount) is not included in the taxpayer's rate base for
ratemaking purposes.
(2) Expenditure rule
An amount meets the requirements of this paragraph if -
(A) an amount equal to such amount is expended for the
acquisition or construction of tangible property described in
section 1231(b) -
(i) which is the property for which the contribution was
made or is of the same type as such property, and
(ii) which is used predominantly in the trade or business
of furnishing water or sewerage disposal services,
(B) the expenditure referred to in subparagraph (A) occurs
before the end of the second taxable year after the year in
which such amount was received, and
(C) accurate records are kept of the amounts contributed and
expenditures made, the expenditures to which contributions are
allocated, and the year in which the contributions and
expenditures are received and made.
(3) Definitions
For purposes of this subsection -
(A) Contribution in aid of construction
The term "contribution in aid of construction" shall be
defined by regulations prescribed by the Secretary, except that
such term shall not include amounts paid as service charges for
starting or stopping services.
(B) Predominantly
The term "predominantly" means 80 percent or more.
(C) Regulated public utility
The term "regulated public utility" has the meaning given
such term by section 7701(a)(33), except that such term shall
not include any utility which is not required to provide water
or sewerage disposal services to members of the general public
in its service area.
(4) Disallowance of deductions and credits; adjusted basis
Notwithstanding any other provision of this subtitle, no
deduction or credit shall be allowed for, or by reason of, any
expenditure which constitutes a contribution in aid of
construction to which this subsection applies. The adjusted basis
of any property acquired with contributions in aid of
construction to which this subsection applies shall be zero.
(d) Statute of limitations
If the taxpayer for any taxable year treats an amount as a
contribution to the capital of the taxpayer described in subsection
(c), then -
(1) the statutory period for the assessment of any deficiency
attributable to any part of such amount shall not expire before
the expiration of 3 years from the date the Secretary is notified
by the taxpayer (in such manner as the Secretary may prescribe)
of -
(A) the amount of the expenditure referred to in subparagraph
(A) of subsection (c)(2),
(B) the taxpayer's intention not to make the expenditures
referred to in such subparagraph, or
(C) a failure to make such expenditure within the period
described in subparagraph (B) of subsection (c)(2), and
(2) such deficiency may be assessed before the expiration of
such 3-year period notwithstanding the provisions of any other
law or rule of law which would otherwise prevent such assessment.
(e) Cross references
(1) For basis of property acquired by a corporation through a
contribution to its capital, see section 362.
(2) For special rules in the case of contributions of
indebtedness, see section 108(e)(6).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 39; Pub. L. 94-455, title XXI,
Sec. 2120(a), Oct. 4, 1976, 90 Stat. 1912; Pub. L. 95-600, title
III, Sec. 364(a), Nov. 6, 1978, 92 Stat. 2854; Pub. L. 96-589, Sec.
2(e)(2), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 98-369, div. A,
title I, Sec. 163(a), July 18, 1984, 98 Stat. 697; Pub. L. 99-514,
title VIII, Sec. 824(a), Oct. 22, 1986, 100 Stat. 2374; Pub. L.
104-188, title I, Sec. 1613(a)(1), (2), Aug. 20, 1996, 110 Stat.
1848-1850.)
-MISC1-
AMENDMENTS
1996 - Subsec. (b). Pub. L. 104-188, Sec. 1613(a)(2), inserted
"except as provided in subsection (c)," before "the term".
Subsecs. (c) to (e). Pub. L. 104-188, Sec. 1613(a)(1), added
subsecs. (c) and (d) and redesignated former subsec. (c) as (e).
1986 - Subsec. (b). Pub. L. 99-514, Sec. 824(a), added subsec.
(b) and struck out former subsec. (b) relating to contributions in
aid of construction, containing par. (1) general rule, par. (2)
expenditure rule, par. (3) definitions, and par. (4) disallowance
of deductions and investment credit; adjusted basis.
Subsecs. (c), (d). Pub. L. 99-514, Sec. 824(a), redesignated
former subsec. (d) as (c) and struck out former subsec. (c),
statute of limitations, which read as follows: "If the taxpayer for
any taxable year treats an amount as a contribution to the capital
of the taxpayer described in subsection (b), then -
"(1) the statutory period for the assessment of any deficiency
attributable to any part of such amount shall not expire before
the expiration of 3 years from the date the Secretary is notified
by the taxpayer (in such manner as the Secretary may prescribe)
of -
"(A) the amount of the expenditure referred to in
subparagraph (A) of subsection (b)(2),
"(B) the taxpayer's intention not to make the expenditures
referred to in such subparagraph, or
"(C) a failure to make such expenditure within the period
described in subparagraph (B) of subsection (b)(2); and
"(2) such deficiency may be assessed before the expiration of
such 3-year period notwithstanding the provisions of any other
law or rule of law which would otherwise prevent such
assessment."
1984 - Subsecs. (c), (d). Pub. L. 98-369 added subsec. (c) and
redesignated former subsec. (c) as (d).
1980 - Subsec. (c). Pub. L. 96-589 designated existing provisions
as par. (1) and added par. (2).
1978 - Subsec. (b)(1). Pub. L. 95-600, Sec. 364(a)(1), (2),
substituted in provisions preceding subpar. (A) "electric energy,
gas (through a local distribution system or transportation by
pipeline), water," for "water" and in subpar. (B) "electric energy,
gas, steam, water," for "water".
Subsec. (b)(2)(A)(ii). Pub. L. 95-600, Sec. 364(a)(3),
substituted "electric energy, gas, steam, water," for "water".
Subsec. (b)(3)(A). Pub. L. 95-600, Sec. 364(a)(4), substituted
"line to an electric line, a gas main, a steam line, or a main
water or sewer line" for "property to a main water or sewer line".
Subsec. (b)(3)(C). Pub. L. 95-600, Sec. 364(a)(5), substituted
"electric energy, gas, water," for "water" and inserted "(including
in the case of a gas transmission utility, the provision of gas
services by sale for resale to the general public)" after "members
of the general public".
1976 - Subsecs. (b), (c). Pub. L. 94-455, Sec. 2120(a), added
subsec. (b) and redesignated former subsec. (b) as (c).
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1613(a)(3) of Pub. L. 104-188 provided that: "The
amendments made by this subsection [amending this section] shall
apply to amounts received after June 12, 1996."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 824(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1008(j)(2), Nov. 10, 1988, 102 Stat. 3445, provided
that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and section 362 of this title] shall apply to amounts
received after December 31, 1986, in taxable years ending after
such date.
"(2) Treatment of certain water supply projects. - The amendments
made by this section shall not apply to amounts which are paid by
the New Jersey Department of Environmental Protection for
construction of alternative water supply projects in zones of
drinking water contamination and which are designated by such
department as being taken into account under this paragraph. Not
more than $4,631,000 of such amounts may be designated under the
preceding sentence.
"(3) Treatment of certain contributions by transportation
authority. - The amendments made by this section shall not apply to
contributions in aid of construction by a qualified transportation
authority which were clearly identified in a master plan in
existence on September 13, 1984, and which are designated by such
authority as being taken into account under this paragraph. Not
more than $68,000,000 of such contributions may be designated under
the preceding sentence. For purposes of this paragraph, a qualified
transportation authority is an entity which was created on February
20, 1967, and which was established by an interstate compact and
consented to by Congress in Public Law 89-774, 80 Stat. 1324
(1966).
"(4) Treatment of certain partnerships. - In the case of a
partnership with a taxable year beginning May 1, 1986, if such
partnership realized net capital gain during the period beginning
on the 1st day of such taxable year and ending on May 29, 1986,
pursuant to an underwriting agreement dated May 6, 1986, then such
partnership may elect to treat each asset to which such net capital
gain relates as having been distributed to the partners of such
partnership in proportion to their distributive share of the
capital gain or loss realized by the partnership with respect to
such asset and to treat each such asset as having been sold by each
partner on the date of the sale of the asset by the partnership. If
such an election is made, the consideration received by the
partnership in connection with the sale of such assets shall be
treated as having been received by the partners in connection with
the deemed sale of such assets. In the case of a tiered
partnership, for purposes of this paragraph each partnership shall
be treated as having realized net capital gain equal to its
proportionate share of the net capital gain of each partnership in
which it is a partner, and the election provided by this paragraph
shall apply to each tier."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 163(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this section [amending this section and sections
6501 and 6511 of this title] shall apply to expenditures with
respect to which the second taxable year described in section
118(b)(2)(B) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] ends after December 31, 1984."
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-589 applicable to transactions which
occur after Dec. 31, 1980, other than transactions which occur in a
proceeding in a bankruptcy case or similar judicial proceeding or
in a proceeding under Title 11 commencing on or after Dec. 31,
1980, with an exception permitting the debtor to make the amendment
applicable to transactions occurring after Sept. 30, 1979, in a
specified manner, see section 7(a)(1), (f) of Pub. L. 96-589, set
out as a note under section 108 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 364(b) of Pub. L. 95-600 provided that: "The amendments
made by this section [amending this section] shall apply to
contributions made after January 31, 1976."
EFFECTIVE DATE OF 1976 AMENDMENT
Section 2120(c) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and section 362 of this
title] apply to contributions made after January 31, 1976."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 108 of this title.
-End-
-CITE-
26 USC Sec. 119 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 119. Meals or lodging furnished for the convenience of the
employer
-STATUTE-
(a) Meals and lodging furnished to employee, his spouse, and his
dependents, pursuant to employment
There shall be excluded from gross income of an employee the
value of any meals or lodging furnished to him, his spouse, or any
of his dependents by or on behalf of his employer for the
convenience of the employer, but only if -
(1) in the case of meals, the meals are furnished on the
business premises of the employer, or
(2) in the case of lodging, the employee is required to accept
such lodging on the business premises of his employer as a
condition of his employment.
(b) Special rules
For purposes of subsection (a) -
(1) Provisions of employment contract or State statute not to be
determinative
In determining whether meals or lodging are furnished for the
convenience of the employer, the provisions of an employment
contract or of a State statute fixing terms of employment shall
not be determinative of whether the meals or lodging are intended
as compensation.
(2) Certain factors not taken into account with respect to meals
In determining whether meals are furnished for the convenience
of the employer, the fact that a charge is made for such meals,
and the fact that the employee may accept or decline such meals,
shall not be taken into account.
(3) Certain fixed charges for meals
(A) In general
If -
(i) an employee is required to pay on a periodic basis a
fixed charge for his meals, and
(ii) such meals are furnished by the employer for the
convenience of the employer,
there shall be excluded from the employee's gross income an
amount equal to such fixed charge.
(B) Application of subparagraph (A)
Subparagraph (A) shall apply -
(i) whether the employee pays the fixed charge out of his
stated compensation or out of his own funds, and
(ii) only if the employee is required to make the payment
whether he accepts or declines the meals.
(4) Meals furnished to employees on business premises where meals
of most employees are otherwise excludable
All meals furnished on the business premises of an employer to
such employer's employees shall be treated as furnished for the
convenience of the employer if, without regard to this paragraph,
more than half of the employees to whom such meals are furnished
on such premises are furnished such meals for the convenience of
the employer.
(c) Employees living in certain camps
(1) In general
In the case of an individual who is furnished lodging in a camp
located in a foreign country by or on behalf of his employer,
such camp shall be considered to be part of the business premises
of the employer.
(2) Camp
For purposes of this section, a camp constitutes lodging which
is -
(A) provided by or on behalf of the employer for the
convenience of the employer because the place at which such
individual renders services is in a remote area where
satisfactory housing is not available on the open market,
(B) located, as near as practicable, in the vicinity of the
place at which such individual renders services, and
(C) furnished in a common area (or enclave) which is not
available to the public and which normally accommodates 10 or
more employees.
(d) Lodging furnished by certain educational institutions to
employees
(1) In general
In the case of an employee of an educational institution, gross
income shall not include the value of qualified campus lodging
furnished to such employee during the taxable year.
(2) Exception in cases of inadequate rent
Paragraph (1) shall not apply to the extent of the excess of -
(A) the lesser of -
(i) 5 percent of the appraised value of the qualified
campus lodging, or
(ii) the average of the rentals paid by individuals (other
than employees or students of the educational institution)
during such calendar year for lodging provided by the
educational institution which is comparable to the qualified
campus lodging provided to the employee, over
(B) the rent paid by the employee for the qualified campus
lodging during such calendar year.
The appraised value under subparagraph (A)(i) shall be determined
as of the close of the calendar year in which the taxable year
begins, or, in the case of a rental period not greater than 1
year, at any time during the calendar year in which such period
begins.
(3) Qualified campus lodging
For purposes of this subsection, the term "qualified campus
lodging" means lodging to which subsection (a) does not apply and
which is -
(A) located on, or in the proximity of, a campus of the
educational institution, and
(B) furnished to the employee, his spouse, and any of his
dependents by or on behalf of such institution for use as a
residence.
(4) Educational institution, etc.
For purposes of this subsection -
(A) In general
The term "educational institution" means -
(i) an institution described in section 170(b)(1)(A)(ii)
(or an entity organized under State law and composed of
public institutions so described), or
(ii) an academic health center.
(B) Academic health center
For purposes of subparagraph (A), the term "academic health
center" means an entity -
(i) which is described in section 170(b)(1)(A)(iii),
(ii) which receives (during the calendar year in which the
taxable year of the taxpayer begins) payments under
subsection (d)(5)(B) or (h) of section 1886 of the Social
Security Act (relating to graduate medical education), and
(iii) which has as one of its principal purposes or
functions the providing and teaching of basic and clinical
medical science and research with the entity's own faculty.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 39; Pub. L. 95-427, Sec. 4(a),
Oct. 7, 1978, 92 Stat. 997; Pub. L. 95-615, title II, Sec. 205,
Nov. 8, 1978, 92 Stat. 3107; Pub. L. 96-222, title I, Sec.
108(a)(1)(G), Apr. 1, 1980, 94 Stat. 225; Pub. L. 97-34, title I,
Sec. 113, Aug. 13, 1981, 95 Stat. 195; Pub. L. 99-514, title XI,
Sec. 1164(a), Oct. 22, 1986, 100 Stat. 2511; Pub. L. 100-647, title
I, Sec. 1011B(d), Nov. 10, 1988, 102 Stat. 3489; Pub. L. 104-188,
title I, Sec. 1123(a), Aug. 20, 1996, 110 Stat. 1768; Pub. L.
105-206, title V, Sec. 5002(a), July 22, 1998, 112 Stat. 788.)
-REFTEXT-
REFERENCES IN TEXT
Section 1886(d)(5)(B) or (h) of the Social Security Act, referred
to in subsec. (d)(4)(B)(ii), is classified to section
1395ww(d)(5)(B) or (h) of Title 42, The Public Health and Welfare.
-MISC1-
AMENDMENTS
1998 - Subsec. (b)(4). Pub. L. 105-206 added par. (4).
1996 - Subsec. (d)(4). Pub. L. 104-188 amended par. (4)
generally. Prior to amendment, par. (4) read as follows:
"Educational institution. - For purposes of this paragraph, the
term 'educational institution' means an institution described in
section 170(b)(1)(A)(ii)."
1988 - Subsec. (d). Pub. L. 100-647 struck out "(as of the close
of the calendar year in which the taxable year begins)" after
"appraised value" in par. (2)(A)(i) and inserted at end "The
appraised value under subparagraph (A)(i) shall be determined as of
the close of the calendar year in which the taxable year begins,
or, in the case of a rental period not greater than 1 year, at any
time during the calendar year in which such period begins." as
concluding provision.
1986 - Subsec. (d). Pub. L. 99-514 added subsec. (d).
1981 - Subsec. (c). Pub. L. 97-34 added subsec. (c).
1980 - Subsec. (a). Pub. L. 96-222 struck out "General rule" in
subsec. (a) as in effect on the day before the date of enactment of
the Foreign Earned Income Act of 1978 to correct a legislative
oversight in the amendment of subsec. (a) of this section by
section 205 of Pub. L. 95-615. The amendment by Pub. L. 95-615,
however, was executed without reference to "General rule" as the
probable intent of Congress, thereby requiring no change in text.
1978 - Subsec. (a). Pub. L. 95-615 designated existing provisions
as subsec. (a), added subsec. (a) heading, and substituted
"furnished to him, his spouse, or any of his dependents by or on
behalf of his employer for the convenience of the employer" for
"furnished to him by his employer for the convenience of the
employer".
Pub. L. 95-427 inserted provisions relating to factors not taken
into account with respect to meals and certain fixed charges for
meals.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-206, title v, Sec. 5002(b), July 22, 1998, 112 Stat.
789, provided that: "The amendment made by subsection (a) [amending
this section] shall apply to taxable years beginning before, on, or
after the date of the enactment of this Act [July 22, 1998]."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1123(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1995."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1164(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1985."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to taxable
years beginning after Dec. 31, 1981, see section 115 of Pub. L.
97-34, set out as a note under section 911 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective as if included in the
Foreign Earned Income Act of 1978, Pub. L. 95-615, see section
108(a)(2)(A) of Pub. L. 96-222, set out as a note under section 3
of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 4(b) of Pub. L. 95-427 provided that: "The amendment made
by subsection (a) [amending this section] shall apply with respect
to taxable years beginning after December 31, 1953, and ending
after August 16, 1954."
EFFECTIVE DATE OF 1978 AMENDMENT; ELECTION OF PRIOR LAW
Amendment by Pub. L. 95-615 applicable to taxable years beginning
after Dec. 31, 1977, with provision for election of prior law, see
section 209 of Pub. L. 95-615, set out as a note under section 911
of this title.
STATUTE OF LIMITATIONS
Pub. L. 96-605, title I, Sec. 107(b), Dec. 28, 1980, 94 Stat.
3524, provided that: "In the case of any allowance received during
calendar year 1974, 1975, 1976, or 1977, subsections (a)(2) and (e)
of such section 3 [section 3 of Pub. L. 95-427, set out below]
shall be applied by substituting the date one year after the date
of the enactment of this Act [Dec. 28, 1980] for 'April 15, 1979'
each place it appears."
TREATMENT OF CERTAIN STATUTORY SUBSISTENCE ALLOWANCES OR
SUBSISTENCE ALLOWANCES NEGOTIATED IN ACCORDANCE WITH STATE LAW
RECEIVED BY STATE POLICE OFFICERS BEFORE JANUARY 1, 1978
Section 3 of Pub. L. 95-427, as amended by Pub. L. 96-605, title
I, Sec. 107(a), Dec. 28, 1980, 94 Stat. 3524; Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) General Rule. - If -
"(1) an individual who was employed as a State police officer
received a statutory subsistence allowance or a subsistence
allowance negotiated in accordance with State law while so
employed,
"(2) such individual elects, on or before April 15, 1979, and
in such manner and form as the Secretary of the Treasury may
prescribe, to have this section apply to such allowance, and
"(3) this section applies to such allowance,
then, for purposes of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954], such allowance shall not be included in such
individual's gross income.
"(b) Allowances to Which Section Applies. - For purposes of this
section, this section applies to any statutory subsistence
allowance or subsistence allowance negotiated in accordance with
State law which was received -
"(1) after December 31, 1969, and before January 1, 1974, to
the extent such individual did not include such allowance in
gross income on his income tax return for the taxable year in
which such allowance was received, or
"(2) during the calendar year 1974, 1975, 1976, or 1977.
"(c) Other Definitions. - For purposes of this section -
"(1) State police officer. - The term 'State police officer'
means any police officer (including a highway patrolman) employed
by a State (or the District of Columbia) on a full-time basis
with the power to arrest.
"(2) Income tax return. - The term 'income tax return' means
the return of the taxes imposed by subtitle A of the Internal
Revenue Code of 1986. If an individual filed before November 29,
1977, an amended return for any taxable year, such amended return
shall be treated as the return for such taxable year.
"(d) Limitation on Deduction. - If any individual receives a
subsistence allowance which is excluded from gross income under
subsection (a), no deduction shall be allowed under any provision
of chapter 1 of the Internal Revenue Code of 1986 for expenses in
respect of which he has received such allowance, except to the
extent that such expenses exceed the amount excludable from gross
income under subsection (a) and the excess is otherwise allowed as
a deduction under such chapter 1.
"(e) Statute of Limitations. - If refund or credit of any
overpayment of tax resulting from the application of this section
is prevented at any time on or before April 15, 1979, by the
operation of any law or rule of law (including res judicata),
refund or credit of such overpayment (to the extent attributable to
the application of this section) may, nevertheless, be made or
allowed if claim therefor is filed on or before April 15, 1979."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 132, 280A, 1402, 3121,
3231, 3306 of this title; title 42 sections 409, 411.
-End-
-CITE-
26 USC Sec. 120 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 120. Amounts received under qualified group legal services
plans
-STATUTE-
(a) Exclusion by employee for contributions and legal services
provided by employer
Gross income of an employee, his spouse, or his dependents, does
not include -
(1) amounts contributed by an employer on behalf of an
employee, his spouse, or his dependents under a qualified group
legal services plan (as defined in subsection (b)); or
(2) the value of legal services provided, or amounts paid for
legal services, under a qualified group legal services plan (as
defined in subsection (b)) to, or with respect to, an employee,
his spouse, or his dependents.
No exclusion shall be allowed under this section with respect to an
individual for any taxable year to the extent that the value of
insurance (whether through an insurer or self-insurance) against
legal costs incurred by the individual (or his spouse or
dependents) provided under a qualified group legal services plan
exceeds $70.
(b) Qualified group legal services plan
For purposes of this section, a qualified group legal services
plan is a separate written plan of an employer for the exclusive
benefit of his employees or their spouses or dependents to provide
such employees, spouses, or dependents with specified benefits
consisting of personal legal services through prepayment of, or
provision in advance for, legal fees in whole or in part by the
employer, if the plan meets the requirements of subsection (c).
(c) Requirements
(1) Discrimination
The contributions or benefits provided under the plan shall not
discriminate in favor of employees who are highly compensated
employees (within the meaning of section 414(q)).
(2) Eligibility
The plan shall benefit employees who qualify under a
classification set up by the employer and found by the Secretary
not to be discriminatory in favor of employees who are described
in paragraph (1). For purposes of this paragraph, there shall be
excluded from consideration employees not included in the plan
who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and one or more
employers, if there is evidence that group legal services plan
benefits were the subject of good faith bargaining between such
employee representatives and such employer or employers.
(3) Contribution limitation
Not more than 25 percent of the amounts contributed under the
plan during the year may be provided for the class of individuals
who are shareholders or owners (or their spouses or dependents),
each of whom (on any day of the year) owns more than 5 percent of
the stock or of the capital or profits interest in the employer.
(4) Notification
The plan shall give notice to the Secretary, in such manner as
the Secretary may by regulations prescribe, that it is applying
for recognition of the status of a qualified group legal services
plan.
(5) Contributions
Amounts contributed under the plan shall be paid only (A) to
insurance companies, or to organizations or persons that provide
personal legal services, or indemnification against the cost of
personal legal services, in exchange for a prepayment or payment
of a premium, (B) to organizations or trusts described in section
501(c)(20), (C) to organizations described in section 501(c)
which are permitted by that section to receive payments from an
employer for support of one or more qualified group legal
services plan or plans, except that such organizations shall pay
or credit the contribution to an organization or trust described
in section 501(c)(20), (D) as prepayments to providers of legal
services under the plan, or (E) a combination of the above.
(d) Other definitions and special rules
For purposes of this section -
(1) Employee
The term "employee" includes, for any year, an individual who
is an employee within the meaning of section 401(c)(1) (relating
to self-employed individuals).
(2) Employer
An individual who owns the entire interest in an unincorporated
trade or business shall be treated as his own employer. A
partnership shall be treated as the employer of each partner who
is an employee within the meaning of paragraph (1).
(3) Allocations
Allocations of amounts contributed under the plan shall be made
in accordance with regulations prescribed by the Secretary and
shall take into account the expected relative utilization of
benefits to be provided from such contributions or plan assets
and the manner in which any premium or other charge was
developed.
(4) Dependent
The term "dependent" has the meaning given to it by section
152.
(5) Exclusive benefit
In the case of a plan to which contributions are made by more
than one employer, in determining whether the plan is for the
exclusive benefit of an employer's employees or their spouses or
dependents, the employees of any employer who maintains the plan
shall be considered to be the employees of each employer who
maintains the plan.
(6) Attribution rules
For purposes of this section -
(A) ownership of stock in a corporation shall be determined
in accordance with the rules provided under subsections (d) and
(e) of section 1563 (without regard to section 1563(e)(3)(C)),
and
(B) the interest of an employee in a trade or business which
is not incorporated shall be determined in accordance with
regulations prescribed by the Secretary, which shall be based
on principles similar to the principles which apply in the case
of subparagraph (A).
(7) Time of notice to Secretary
A plan shall not be a qualified group legal services plan for
any period prior to the time notification was provided to the
Secretary in accordance with subsection (c)(4), if such notice is
given after the time prescribed by the Secretary by regulations
for giving such notice.
(e) Termination
This section and section 501(c)(20) shall not apply to taxable
years beginning after June 30, 1992.
(f) Cross reference
For reporting and recordkeeping requirements, see section
6039D.
-SOURCE-
(Added Pub. L. 94-455, title XXI, Sec. 2134(a), Oct. 4, 1976, 90
Stat. 1926; amended Pub. L. 97-34, title VIII, Sec. 802(a), Aug.
13, 1981, 95 Stat. 349; Pub. L. 97-448, title I, Sec. 108(a), Jan.
12, 1983, 96 Stat. 2391; Pub. L. 98-612, Sec. 1(a), (b)(3)(A), Oct.
31, 1984, 98 Stat. 3180, 3181; Pub. L. 99-514, title XI, Secs.
1114(b)(3), 1151(c)(3), (g)(1), 1162(b), Oct. 22, 1986, 100 Stat.
2450, 2503, 2506, 2510; Pub. L. 100-647, title I, Sec.
1011B(a)(31)(B), title IV, Sec. 4002(a), (b)(1), Nov. 10, 1988, 102
Stat. 3488, 3643; Pub. L. 101-140, title II, Sec. 203(a)(1), (2),
Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title VII, Sec.
7102(a)(1), Dec. 19, 1989, 103 Stat. 2305; Pub. L. 101-508, title
XI, Sec. 11404(a), Nov. 5, 1990, 104 Stat. 1388-473; Pub. L.
102-227, title I, Sec. 104(a)(1), Dec. 11, 1991, 105 Stat. 1687.)
-MISC1-
PRIOR PROVISIONS
A prior section 120, act Aug. 16, 1954, ch. 736, 68A Stat. 39,
related to statutory subsistence allowance received by police,
prior to repeal by Pub. L. 85-866, title I, Sec. 3(a), (c), Sept.
2, 1958, 72 Stat. 1607, effective with respect to taxable years
ending after Sept. 30, 1958, but only with respect to amounts
received as a statutory subsistence allowance for any day after
Sept. 30, 1958.
AMENDMENTS
1991 - Subsec. (e). Pub. L. 102-227 substituted "June 30, 1992"
for "December 31, 1991".
1990 - Subsec. (e). Pub. L. 101-508 substituted "December 31,
1991" for "September 30, 1990".
1989 - Subsec. (b). Pub. L. 101-140, Sec. 203(a)(1), amended
subsec. (b) to read as if amendments by Pub. L. 99-514, Sec.
1151(c)(3), had not been enacted, see 1986 Amendment note below.
Subsec. (c)(2). Pub. L. 101-140, Sec. 203(a)(2), amended par. (2)
to read as if amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B),
had not been enacted, see 1988 Amendment note below.
Pub. L. 101-140, Sec. 203(a)(1), amended par. (2) to read as if
amendments by Pub. L. 99-514, Sec. 1151(g)(1), had not been
enacted, see 1986 Amendment note below.
Subsec. (e). Pub. L. 101-239 substituted "taxable years beginning
after September 30, 1990" for "taxable years ending after December
31, 1988".
1988 - Subsec. (a). Pub. L. 100-647, Sec. 4002(b)(1), inserted at
end "No exclusion shall be allowed under this section with respect
to an individual for any taxable year to the extent that the value
of insurance (whether through an insurer or self-insurance) against
legal costs incurred by the individual (or his spouse or
dependents) provided under a qualified group legal services plan
exceeds $70."
Subsec. (c)(2). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted "there shall" for "there may" and "who are" for "who
may be".
Subsec. (e). Pub. L. 100-647, Sec. 4002(a), substituted "1988"
for "1987".
1986 - Subsec. (b). Pub. L. 99-514, Sec. 1151(c)(3), amended
subsec. (b) generally. Prior to amendment, subsec. (b) read as
follows: "For purposes of this section, a qualified group legal
services plan is a separate written plan of an employer for the
exclusive benefit of his employees or their spouses or dependents
to provide such employees, spouses, or dependents with specified
benefits consisting of personal legal services through prepayment
of, or provision in advance for, legal fees in whole or in part by
the employer, if the plan meets the requirements of subsection
(c)."
Subsec. (c)(1). Pub. L. 99-514, Sec. 1114(b)(3)(A), substituted
"highly compensated employees (within the meaning of section
414(q))" for "officers, shareholders, self-employed individuals, or
highly compensated".
Subsec. (c)(2). Pub. L. 99-514, Sec. 1151(g)(1), substituted "For
purposes of this paragraph, there may be excluded from
consideration employees who may be excluded from consideration
under section 89(h)." for "For purposes of this paragraph, there
shall be excluded from consideration employees not included in the
plan who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or
more employers, if there is evidence that group legal services plan
benefits were the subject of good faith bargaining between such
employee representatives and such employer or employers."
Subsec. (d)(1). Pub. L. 99-514, Sec. 1114(b)(3)(B), struck out
reference to self-employed individuals in heading, and substituted
"The" for "The term 'self-employed individual' means, and the" in
text.
Subsec. (e). Pub. L. 99-514, Sec. 1162(b), substituted "December
31, 1987" for "December 31, 1985".
1984 - Subsec. (e). Pub. L. 98-612, Sec. 1(a), substituted
"December 31, 1985" for "December 31, 1984".
Subsec. (f). Pub. L. 98-612, Sec. 1(b)(3)(A), added subsec. (f).
1983 - Subsec. (e). Pub. L. 97-448 substituted "This section and
section 501(c)(20) shall not apply" for "This section shall not
apply".
1981 - Subsec. (e). Pub. L. 97-34 added subsec. (e).
EFFECTIVE DATE OF 1991 AMENDMENT
Section 104(b) of Pub. L. 102-227 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1991."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11404(c) of Pub. L. 101-508 provided that: "The
amendments made by this section [amending this section and
repealing provisions set out below] shall apply to taxable years
beginning after December 31, 1989."
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7102(b) of Pub. L. 101-239 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after December 31, 1988."
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011B(a)(31)(B) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 4002(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section and section 125 of this
title] shall apply to taxable years ending after December 31,
1987."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1114(b)(3) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(c)(3), (g)(1) of Pub. L. 99-514
applicable, with certain qualifications and exceptions, to years
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Section 1162(c) of Pub. L. 99-514 provided that:
"(1) Subsection (a). - The amendments made by subsection (a)
[amending section 127 of this title] shall apply to taxable years
beginning after December 31, 1985.
"(2) Subsection (b). - The amendment made by subsection (b)
[amending this section] shall apply to years ending after December
31, 1985.
"(3) Cafeteria plan with group legal benefits. - If, within 60
days after the date of the enactment of this Act [Oct. 22, 1986],
an employee elects under a cafeteria plan under section 125 of the
Internal Revenue Code of 1986 coverage for group legal benefits to
which section 120 of such Code applies, such election may, at the
election of the taxpayer, apply to all legal services provided
during 1986. The preceding sentence shall not apply to any plan
which on August 16, 1986, offered such group legal benefits under
such plan."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 1(d)(1) of Pub. L. 98-612 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after December 31, 1984."
Amendment by section 1(b)(3)(A) of Pub. L. 98-612 effective Jan.
1, 1985, see section 1(d)(2) of Pub. L. 98-612.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE
Section 2134(e) of Pub. L. 94-455, as amended by Pub. L. 95-600,
title VII, Sec. 703(b)(1), Nov. 6, 1978, 92 Stat. 2939; Pub. L.
97-34, title VIII, Sec. 802(b), Aug. 13, 1981, 95 Stat. 349; Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [enacting this section and
section 501 of this title] shall apply to taxable years beginning
after December 31, 1976.
"(2) Notice requirement. - For purposes of section 120(d)(7) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] the time
prescribed by the Secretary of the Treasury by regulations for
giving the notice required by section 120(c)(4) of such Code
shall not expire before the 90th day after the day on which
regulations prescribed under such section 120(c)(4) first become
final.
"(3) Existing plans. -
"(A) For purposes of section 120 of the Internal Revenue Code
of 1986, a written group legal services plan which was in
existence on June 4, 1976, shall be considered as satisfying
the requirements of subsections (b) and (c) of such section 120
for the period ending with the compliance date (determined
under subparagraph (B)).
"(B) Compliance date. - For purposes of this paragraph, the
term 'compliance date' means -
"(i) the date occurring 180 days after the date of the
enactment of this Act [Oct. 4, 1976], or
"(ii) if later, in the case of a plan which is maintained
pursuant to one or more agreements which the Secretary of
Labor finds to be collective bargaining agreements, the
earlier of December 31, 1981, or the date on which the last
of the collective bargaining agreements relating to the plan
terminates (determined without regard to any extension
thereof agreed to after the date of the enactment of this Act
[Oct. 4, 1976])."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
EXTENSION OF EMPLOYER-PROVIDED GROUP LEGAL SERVICES
Section 104(a)(2) of Pub. L. 102-227 provided that: "In the case
of any taxable year beginning in 1992, only amounts paid before
July 1, 1992, by the employer for coverage for the employee, his
spouse, or his dependents, under a qualified group legal services
plan for periods before July 1, 1992, shall be taken into account
in determining the amount excluded under section 120 of the
Internal Revenue Code of 1986 with respect to such employee for
such taxable year."
SPECIAL RULE FOR TAXABLE YEARS BEGINNING IN 1990
Section 7102(a)(2) of Pub. L. 101-239 provided that in the case
of any taxable year beginning in 1990, only amounts paid before
October 1, 1990, by the employer for coverage for the employee, his
spouse, or his dependents under a qualified group legal services
plan for periods before October 1, 1990, would be taken into
account in determining the amount excluded under this section with
respect to such employee for such taxable year, prior to repeal by
Pub. L. 101-508, title XI, Sec. 11404(b), Nov. 5, 1990, 104 Stat.
1388-473.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
STUDY AND REPORT
Section 2134(d) of Pub. L. 94-455 provided that a complete study
and investigation with respect to the desirability and feasibility
of continuing the exclusion from income of certain prepaid group
legal services benefits under section 120 of the Internal Revenue
Code of 1954 be made by the Secretary of Labor and the Secretary of
the Treasury, with a report to the President and the Congress not
later than Dec. 31, 1980.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 414, 501, 3121, 3306,
3231, 6039D of this title; title 42 section 409.
-End-
-CITE-
26 USC Sec. 121 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 121. Exclusion of gain from sale of principal residence
-STATUTE-
(a) Exclusion
Gross income shall not include gain from the sale or exchange of
property if, during the 5-year period ending on the date of the
sale or exchange, such property has been owned and used by the
taxpayer as the taxpayer's principal residence for periods
aggregating 2 years or more.
(b) Limitations
(1) In general
The amount of gain excluded from gross income under subsection
(a) with respect to any sale or exchange shall not exceed
$250,000.
(2) Special rules for joint returns
In the case of a husband and wife who make a joint return for
the taxable year of the sale or exchange of the property -
(A) $500,000 Limitation for certain joint returns
Paragraph (1) shall be applied by substituting "$500,000" for
"$250,000" if -
(i) either spouse meets the ownership requirements of
subsection (a) with respect to such property;
(ii) both spouses meet the use requirements of subsection
(a) with respect to such property; and
(iii) neither spouse is ineligible for the benefits of
subsection (a) with respect to such property by reason of
paragraph (3).
(B) Other joint returns
If such spouses do not meet the requirements of subparagraph
(A), the limitation under paragraph (1) shall be the sum of the
limitations under paragraph (1) to which each spouse would be
entitled if such spouses had not been married. For purposes of
the preceding sentence, each spouse shall be treated as owning
the property during the period that either spouse owned the
property.
(3) Application to only 1 sale or exchange every 2 years
(A) In general
Subsection (a) shall not apply to any sale or exchange by the
taxpayer if, during the 2-year period ending on the date of
such sale or exchange, there was any other sale or exchange by
the taxpayer to which subsection (a) applied.
(B) Pre-May 7, 1997, sales not taken into account
Subparagraph (A) shall be applied without regard to any sale
or exchange before May 7, 1997.
(c) Exclusion for taxpayers failing to meet certain requirements
(1) In general
In the case of a sale or exchange to which this subsection
applies, the ownership and use requirements of subsection (a),
and subsection (b)(3), shall not apply; but the dollar limitation
under paragraph (1) or (2) of subsection (b), whichever is
applicable, shall be equal to -
(A) the amount which bears the same ratio to such limitation
(determined without regard to this paragraph) as
(B)(i) the shorter of -
(I) the aggregate periods, during the 5-year period ending
on the date of such sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence; or
(II) the period after the date of the most recent prior
sale or exchange by the taxpayer to which subsection (a)
applied and before the date of such sale or exchange, bears
to
(ii) 2 years.
(2) Sales and exchanges to which subsection applies
This subsection shall apply to any sale or exchange if -
(A) subsection (a) would not (but for this subsection) apply
to such sale or exchange by reason of -
(i) a failure to meet the ownership and use requirements of
subsection (a), or
(ii) subsection (b)(3), and
(B) such sale or exchange is by reason of a change in place
of employment, health, or, to the extent provided in
regulations, unforeseen circumstances.
(d) Special rules
(1) Joint returns
If a husband and wife make a joint return for the taxable year
of the sale or exchange of the property, subsections (a) and (c)
shall apply if either spouse meets the ownership and use
requirements of subsection (a) with respect to such property.
(2) Property of deceased spouse
For purposes of this section, in the case of an unmarried
individual whose spouse is deceased on the date of the sale or
exchange of property, the period such unmarried individual owned
and used such property shall include the period such deceased
spouse owned and used such property before death.
(3) Property owned by spouse or former spouse
For purposes of this section -
(A) Property transferred to individual from spouse or former
spouse
In the case of an individual holding property transferred to
such individual in a transaction described in section 1041(a),
the period such individual owns such property shall include the
period the transferor owned the property.
(B) Property used by former spouse pursuant to divorce decree,
etc.
Solely for purposes of this section, an individual shall be
treated as using property as such individual's principal
residence during any period of ownership while such
individual's spouse or former spouse is granted use of the
property under a divorce or separation instrument (as defined
in section 71(b)(2)).
(4) Tenant-stockholder in cooperative housing corporation
For purposes of this section, if the taxpayer holds stock as a
tenant-stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), then -
(A) the holding requirements of subsection (a) shall be
applied to the holding of such stock, and
(B) the use requirements of subsection (a) shall be applied
to the house or apartment which the taxpayer was entitled to
occupy as such stockholder.
(5) Involuntary conversions
(A) In general
For purposes of this section, the destruction, theft,
seizure, requisition, or condemnation of property shall be
treated as the sale of such property.
(B) Application of section 1033
In applying section 1033 (relating to involuntary
conversions), the amount realized from the sale or exchange of
property shall be treated as being the amount determined
without regard to this section, reduced by the amount of gain
not included in gross income pursuant to this section.
(C) Property acquired after involuntary conversion
If the basis of the property sold or exchanged is determined
(in whole or in part) under section 1033(b) (relating to basis
of property acquired through involuntary conversion), then the
holding and use by the taxpayer of the converted property shall
be treated as holding and use by the taxpayer of the property
sold or exchanged.
(6) Recognition of gain attributable to depreciation
Subsection (a) shall not apply to so much of the gain from the
sale of any property as does not exceed the portion of the
depreciation adjustments (as defined in section 1250(b)(3))
attributable to periods after May 6, 1997, in respect of such
property.
(7) Determination of use during periods of out-of-residence care
In the case of a taxpayer who -
(A) becomes physically or mentally incapable of self-care,
and
(B) owns property and uses such property as the taxpayer's
principal residence during the 5-year period described in
subsection (a) for periods aggregating at least 1 year,
then the taxpayer shall be treated as using such property as the
taxpayer's principal residence during any time during such 5-year
period in which the taxpayer owns the property and resides in any
facility (including a nursing home) licensed by a State or
political subdivision to care for an individual in the taxpayer's
condition.
(8) Sales of remainder interests
For purposes of this section -
(A) In general
At the election of the taxpayer, this section shall not fail
to apply to the sale or exchange of an interest in a principal
residence by reason of such interest being a remainder interest
in such residence, but this section shall not apply to any
other interest in such residence which is sold or exchanged
separately.
(B) Exception for sales to related parties
Subparagraph (A) shall not apply to any sale to, or exchange
with, any person who bears a relationship to the taxpayer which
is described in section 267(b) or 707(b).
(9) Members of uniformed services and Foreign Service
(A) In general
At the election of an individual with respect to a property,
the running of the 5-year period described in subsections (a)
and (c)(1)(B) and paragraph (7) of this subsection with respect
to such property shall be suspended during any period that such
individual or such individual's spouse is serving on qualified
official extended duty as a member of the uniformed services or
of the Foreign Service of the United States.
(B) Maximum period of suspension
The 5-year period described in subsection (a) shall not be
extended more than 10 years by reason of subparagraph (A).
(C) Qualified official extended duty
For purposes of this paragraph -
(i) In general
The term "qualified official extended duty" means any
extended duty while serving at a duty station which is at
least 50 miles from such property or while residing under
Government orders in Government quarters.
(ii) Uniformed services
The term "uniformed services" has the meaning given such
term by section 101(a)(5) of title 10, United States Code, as
in effect on the date of the enactment of this paragraph.
(iii) Foreign Service of the United States
The term "member of the Foreign Service of the United
States" has the meaning given the term "member of the
Service" by paragraph (1), (2), (3), (4), or (5) of section
103 of the Foreign Service Act of 1980, as in effect on the
date of the enactment of this paragraph.
(iv) Extended duty
The term "extended duty" means any period of active duty
pursuant to a call or order to such duty for a period in
excess of 90 days or for an indefinite period.
(D) Special rules relating to election
(i) Election limited to 1 property at a time
An election under subparagraph (A) with respect to any
property may not be made if such an election is in effect
with respect to any other property.
(ii) Revocation of election
An election under subparagraph (A) may be revoked at any
time.
(e) Denial of exclusion for expatriates
This section shall not apply to any sale or exchange by an
individual if the treatment provided by section 877(a)(1) applies
to such individual.
(f) Election to have section not apply
This section shall not apply to any sale or exchange with respect
to which the taxpayer elects not to have this section apply.
(g) Residences acquired in rollovers under section 1034
For purposes of this section, in the case of property the
acquisition of which by the taxpayer resulted under section 1034
(!1) (as in effect on the day before the date of the enactment of
this section) in the nonrecognition of any part of the gain
realized on the sale or exchange of another residence, in
determining the period for which the taxpayer has owned and used
such property as the taxpayer's principal residence, there shall be
included the aggregate periods for which such other residence (and
each prior residence taken into account under section 1223(7) in
determining the holding period of such property) had been so owned
and used.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 206(a), Feb. 26, 1964, 78
Stat. 38; amended Pub. L. 94-455, title XIV, Sec. 1404(a), title
XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1733, 1834; Pub.
L. 95-600, title IV, Sec. 404(a)-(c)(2), Nov. 6, 1978, 92 Stat.
2869, 2870; Pub. L. 97-34, title I, Sec. 123(a), Aug. 13, 1981, 95
Stat. 197; Pub. L. 100-647, title VI, Sec. 6011(a), Nov. 10, 1988,
102 Stat. 3691; Pub. L. 105-34, title III, Sec. 312(a), Aug. 5,
1997, 111 Stat. 836; Pub. L. 105-206, title VI, Sec. 6005(e)(1),
(2), July 22, 1998, 112 Stat. 805; Pub. L. 107-16, title V, Sec.
542(c), June 7, 2001, 115 Stat. 84; Pub. L. 108-121, title I, Sec.
101(a), Nov. 11, 2003, 117 Stat. 1336.)
-STATAMEND-
AMENDMENT OF SUBSECTION (D)
Pub. L. 107-16, title V, Sec. 542(c), (f)(1), title IX, Sec. 901,
June 7, 2001, 115 Stat. 84, 86, 150, provided that, applicable to
estates of decedents dying after Dec. 31, 2009, subsection (d) of
this section is temporarily amended by adding paragraph (9) at end
to read as follows:
(9) Property acquired from a decedent
The exclusion under this section shall apply to property sold
by -
(A) the estate of a decedent,
(B) any individual who acquired such property from the
decedent (within the meaning of section 1022), and
(C) a trust which, immediately before the death of the
decedent, was a qualified revocable trust (as defined in
section 645(b)(1)) established by the decedent,
determined by taking into account the ownership and use by the
decedent.
See Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this paragraph, referred to in
subsec. (d)(9)(C)(ii), (iii), is the date of enactment of Pub. L.
108-121, which was approved Nov. 11, 2003.
Section 103 of the Foreign Service Act of 1980, referred to in
subsec. (d)(9)(C)(iii), is classified to section 3903 of Title 22,
Foreign Relations and Intercourse.
Section 1034 (as in effect on the day before the date of the
enactment of this section), referred to in subsec. (g), probably
means section 1034 of this title as in effect on the day before the
date of enactment of Pub. L. 105-34 which amended this section
generally and was approved Aug. 5, 1997. Section 1034 was repealed
by Pub. L. 105-34, title III, Sec. 312(b), Aug. 5, 1997, 111 Stat.
839.
-COD-
CODIFICATION
Pub. L. 108-121, title I, Sec. 101(a), (b)(1), Nov. 11, 2003, 117
Stat. 1336, which directed that subsec. (d) of this section be
amended by redesignating paragraph (9) as (10) and adding a new
paragraph (9), effective as if included in the amendments made by
section 312 of the Taxpayer Relief Act of 1997, Pub. L. 105-34,
could not be executed insofar as it directed the redesignation
because subsection (d), as amended by Pub. L. 105-34, did not
contain a paragraph (9).
-MISC1-
PRIOR PROVISIONS
A prior section 121 was renumbered section 140 of this title.
AMENDMENTS
2003 - Subsec. (d)(9). Pub. L. 108-121 added par. (9).
1998 - Subsec. (b)(2). Pub. L. 105-206, Sec. 6005(e)(1),
substituted "Special rules for joint returns" for "$500,000
limitation for certain joint returns" in heading and amended text
generally. Prior to amendment, text read as follows: "Paragraph (1)
shall be applied by substituting '$500,000' for '$250,000' if -
"(A) a husband and wife make a joint return for the taxable
year of the sale or exchange of the property,
"(B) either spouse meets the ownership requirements of
subsection (a) with respect to such property,
"(C) both spouses meet the use requirements of subsection (a)
with respect to such property, and
"(D) neither spouse is ineligible for the benefits of
subsection (a) with respect to such property by reason of
paragraph (3)."
Subsec. (c)(1). Pub. L. 105-206, Sec. 6005(e)(2), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "In the case of a sale or exchange
to which this subsection applies, the ownership and use
requirements of subsection (a) shall not apply and subsection
(b)(3) shall not apply; but the amount of gain excluded from gross
income under subsection (a) with respect to such sale or exchange
shall not exceed -
"(A) the amount which bears the same ratio to the amount which
would be so excluded under this section if such requirements had
been met, as
"(B) the shorter of -
"(i) the aggregate periods, during the 5-year period ending
on the date of such sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence, or
"(ii) the period after the date of the most recent prior sale
or exchange by the taxpayer to which subsection (a) applied and
before the date of such sale or exchange,
bears to 2 years."
1997 - Pub. L. 105-34 amended section catchline and text
generally. Prior to amendment, section related to one-time
exclusion of gain from sale of principal residence by individual
who had attained age 55.
1988 - Subsec. (d)(9). Pub. L. 100-647 added par. (9).
1981 - Subsec. (b)(1). Pub. L. 97-34 substituted "$125,000
($62,500" for "$100,000 ($50,000".
1978 - Pub. L. 95-600, Sec. 404(a), substituted "One-time
exclusion of gain from sale of principal residence by individual
who has attained age 55" for "Gain from sale or exchange of
residence of individual who has attained age 65" in section
catchline.
Subsec. (a). Pub. L. 95-600, Sec. 404(a), substituted "55" for
"65", "5-year" for "8-year", and "3 years" for "5 years".
Subsec. (b). Pub. L. 95-600, Sec. 404(a), in par. (1) substituted
provisions respecting dollar limitations for amount of gain for
provisions setting forth applicable limitations where the adjusted
sales price exceeds $35,000 and added par. (3).
Subsec. (d)(2). Pub. L. 95-600, Sec. 404(c)(1), substituted
"5-year period" for "8-year period".
Subsec. (d)(5). Pub. L. 95-600, Sec. 404(c)(2), substituted
"5-year period" for "8-year period" and "3 years" for "5 years".
Subsec. (d)(8). Pub. L. 95-600, Sec. 404(b), added par. (8).
1976 - Subsec. (b)(1). Pub. L. 94-455, Sec. 1404(a), substituted
"$35,000" for "$20,000" in three places.
Subsecs. (c), (d)(5). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 101(b), Nov. 11, 2003, 117 Stat.
1336, provided that:
"(1) Effective date. - The amendments made by this section
[amending this section] shall take effect as if included in the
amendments made by section 312 of the Taxpayer Relief Act of 1997
[Pub. L. 105-34].
"(2) Waiver of limitations. - If refund or credit of any
overpayment of tax resulting from the amendments made by this
section [amending this section] is prevented at any time before the
close of the 1-year period beginning on the date of the enactment
of this Act [Nov. 11, 2003] by the operation of any law or rule of
law (including res judicata), such refund or credit may
nevertheless be made or allowed if claim therefor is filed before
the close of such period."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title V, Sec. 542(f), June 7, 2001, 115 Stat. 86,
provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [enacting sections 1022 and 6716 of
this title and amending this section and sections 170, 684, 1040,
1221, 1246, 1291, 1296, 4947, 6018, 6019, 6075, and 7701 of this
title] shall apply to estates of decedents dying after December 31,
2009.
"(2) Transfers to nonresidents. - The amendments made by
subsection (e)(1) [amending section 684 of this title] shall apply
to transfers after December 31, 2009.
"(3) Section 4947. - The amendment made by subsection (e)(4)
[amending section 4947 of this title] shall apply to deductions for
taxable years beginning after December 31, 2009."
Amendment by Pub. L. 107-16 inapplicable to estates of decedents
dying, gifts made, or generation skipping transfers, after Dec. 31,
2010, and the Internal Revenue Code of 1986 to be applied and
administered to such estates, gifts, and transfers as if such
amendment had never been enacted, see section 901 of Pub. L.
107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 312(d) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6005(e)(3), July 22, 1998, 112 Stat. 806, provided
that:
"(1) In general. - The amendments made by this section [amending
this section and sections 25, 32, 56, 143, 163, 215, 280A, 464,
512, 1016, 1033, 1038, 1223, 1250, 1274, 6012, 6045, 6212, 6334,
6504, and 7872 of this title and repealing section 1034 of this
title] shall apply to sales and exchanges after May 6, 1997.
"(2) Sales on or before date of enactment. - At the election of
the taxpayer, the amendments made by this section shall not apply
to any sale or exchange on or before the date of the enactment of
this Act [Aug. 5, 1997].
"(3) Certain sales within 2 years after date of enactment. -
Section 121 of the Internal Revenue Code of 1986 (as amended by
this section) shall be applied without regard to subsection
(c)(2)(B) thereof in the case of any sale or exchange of property
during the 2-year period beginning on the date of the enactment of
this Act if the taxpayer held such property on the date of the
enactment of this Act and fails to meet the ownership and use
requirements of subsection (a) thereof with respect to such
property.
"(4) Binding contracts. - At the election of the taxpayer, the
amendments made by this section shall not apply to a sale or
exchange after the date of the enactment of this Act, if -
"(A) such sale or exchange is pursuant to a contract which was
binding on such date, or
"(B) without regard to such amendments, gain would not be
recognized under section 1034 of the Internal Revenue Code of
1986 (as in effect on the day before the date of the enactment of
this Act) on such sale or exchange by reason of a new residence
acquired on or before such date or with respect to the
acquisition of which by the taxpayer a binding contract was in
effect on such date.
This paragraph shall not apply to any sale or exchange by an
individual if the treatment provided by section 877(a)(1) of the
Internal Revenue Code of 1986 applies to such individual."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6011(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to any sale or exchange after September 30, 1988, in
taxable years ending after such date."
EFFECTIVE DATE OF 1981 AMENDMENT
Section 123(b) of Pub. L. 97-34 provided that: "The amendment
made by this section [amending this section] shall apply to
residences sold or exchanged after July 20, 1981."
EFFECTIVE DATE OF 1978 AMENDMENT
Section 404(d)(1) of Pub. L. 95-600 provided that: "The
amendments made by this section [amending this section and sections
1033, 1034, 1038, 1250, and 6012 of this title] shall apply to
sales or exchanges after July 26, 1978, in taxable years ending
after such date."
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1404(b) of Pub. L. 94-455 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1976."
EFFECTIVE DATE
Section 206(c) of Pub. L. 88-272 provided that: "The amendments
made by this section [enacting this section, redesignating former
section 121 as 122, and amending sections 1033, 1034, and 6012 of
this title] shall apply to dispositions after Dec. 31, 1963, in
taxable years ending after such date."
SENSE OF CONGRESS CONCERNING TAX TREATMENT OF PRINCIPAL RESIDENCE
OF MEMBERS OF ARMED FORCES WHILE AWAY FROM HOME ON ACTIVE DUTY
Pub. L. 105-261, div. A, title X, Sec. 1074, Oct. 17, 1998, 112
Stat. 2138, provided that: "It is the sense of Congress that a
member of the Armed Forces should be treated for purposes of
section 121 of the Internal Revenue Code of 1986 as using property
as a principal residence during any continuous period that the
member is serving on active duty for 180 days or more with the
Armed Forces, but only if the member used the property as a
principal residence for any period during or immediately before
that period of active duty."
TRANSITIONAL RULE IN CASE OF SALE OR EXCHANGE OF RESIDENCE BEFORE
JULY 26, 1981
Section 404(d)(2) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of a sale or exchange of a residence before July 26, 1981,
a taxpayer who has attained age 65 on the date of such sale or
exchange may elect to have section 121 of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954] applied by substituting '8-year
period' for '5-year period' and '5 years' for '3 years' in
subsections (a), (d)(2), and (d)(5) of such section."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25, 45F, 56, 72, 143,
163, 216, 280A, 464, 1033, 1038, 1274, 1400C, 6012, 6045, 6334,
7872 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 122 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 122. Certain reduced uniformed services retirement pay
-STATUTE-
(a) General rule
In the case of a member or former member of the uniformed
services of the United States, gross income does not include the
amount of any reduction in his retired or retainer pay pursuant to
the provisions of chapter 73 of title 10, United States Code.
(b) Special rule
(1) Amount excluded from gross income
In the case of any individual referred to in subsection (a),
all amounts received after December 31, 1965, as retired or
retainer pay shall be excluded from gross income until there has
been so excluded an amount equal to the consideration for the
contract. The preceding sentence shall apply only to the extent
that the amounts received would, but for such sentence, be
includible in gross income.
(2) Consideration for the contract
For purposes of paragraph (1) and section 72(n), the term
"consideration for the contract" means, in respect of any
individual, the sum of -
(A) the total amount of the reductions before January 1,
1966, in his retired or retainer pay by reason of an election
under chapter 73 of title 10 of the United States Code, and
(B) any amounts deposited at any time by him pursuant to
section 1438 or 1452(d) of such title 10.
-SOURCE-
(Added Pub. L. 89-365, Sec. 1(a)(1), Mar. 8, 1966, 80 Stat. 32;
amended Pub. L. 93-406, title II, Secs. 2005(c)(10), 2007(a),
(b)(1), Sept. 2, 1974, 88 Stat. 992, 994.)
-MISC1-
PRIOR PROVISIONS
A prior section 122 was renumbered section 140 of this title.
AMENDMENTS
1974 - Subsec. (a). Pub. L. 93-406, Sec. 2007(a), substituted
"United States, gross income does not include the amount of any
reduction in his retired or retainer pay pursuant to the provisions
of chapter 73 of title 10, United States Code" for "United States
who has made an election under chapter 73 of title 10 of the United
States Code to receive a reduced amount of retired or retainer pay,
gross income does not include the amount of any reduction after
December 31, 1965, in his retired or retainer pay by reason of such
election".
Subsec. (b)(2). Pub. L. 93-406, Sec. 2005(c)(10), substituted
"72(n)" for "72(o)".
Subsec. (b)(2)(B). Pub. L. 93-406, Sec. 2007(b)(1), inserted
reference to section 1452(d) of title 10.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by section 2005(c)(10) of Pub. L. 93-406 applicable
only with respect to distributions or payments made after Dec. 31,
1973, in taxable years beginning after Dec. 31, 1973, see section
2005(d) of Pub. L. 93-406, set out as a note under section 402 of
this title.
Section 2007(c) of Pub. L. 93-406 provided that: "The amendments
made by this section [amending this section and sections 72, 101,
and 2039 of this title] apply to taxable years ending on or after
September 21, 1972. The amendments made by paragraphs (3) and (4)
of subsection (b) [amending sections 101 and 2039 of this title]
apply with respect to individuals dying on or after such date".
EFFECTIVE DATE
Section 1(d) of Pub. L. 89-365 provided that: "The amendments
made by subsections (a) and (b) [enacting this section and amending
section 72 of this title] shall apply with respect to taxable years
ending after December 31, 1965. The amendment made by subsection
(c) [amending section 101 of this title] shall apply with respect
to individuals making an election under chapter 73 of title 10 of
the United States Code who die after December 31, 1965."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 72 of this title.
-End-
-CITE-
26 USC Sec. 123 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 123. Amounts received under insurance contracts for certain
living expenses
-STATUTE-
(a) General rule
In the case of an individual whose principal residence is damaged
or destroyed by fire, storm, or other casualty, or who is denied
access to his principal residence by governmental authorities
because of the occurrence or threat of occurrence of such a
casualty, gross income does not include amounts received by such
individual under an insurance contract which are paid to compensate
or reimburse such individual for living expenses incurred for
himself and members of his household resulting from the loss of use
or occupancy of such residence.
(b) Limitation
Subsection (a) shall apply to amounts received by the taxpayer
for living expenses incurred during any period only to the extent
the amounts received do not exceed the amount by which -
(1) the actual living expenses incurred during such period for
himself and members of his household resulting from the loss of
use or occupancy of their residence, exceed
(2) the normal living expenses which would have been incurred
for himself and members of his household during such period.
-SOURCE-
(Added Pub. L. 91-172, title IX, Sec. 901(a), Dec. 30, 1969, 83
Stat. 709.)
-MISC1-
PRIOR PROVISIONS
A prior section 123 was renumbered section 140 of this title.
EFFECTIVE DATE
Section 901(c) of Pub. L. 91-172 provided that: "The amendments
made by this section [enacting this section] shall apply with
respect to amounts received on or after January 1, 1969."
-End-
-CITE-
26 USC Sec. 124 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 124. Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(9),
Nov. 5, 1990, 104 Stat. 1388-520]
-MISC1-
Section, added Pub. L. 95-618, title II, Sec. 242(a), Nov. 9,
1978, 92 Stat. 3193, related to qualified transportation provided
by employers.
A prior section 124 was renumbered section 140 of this title.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC Sec. 125 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 125. Cafeteria plans
-STATUTE-
(a) General rule
Except as provided in subsection (b), no amount shall be included
in the gross income of a participant in a cafeteria plan solely
because, under the plan, the participant may choose among the
benefits of the plan.
(b) Exception for highly compensated participants and key employees
(1) Highly compensated participants
In the case of a highly compensated participant, subsection (a)
shall not apply to any benefit attributable to a plan year for
which the plan discriminates in favor of -
(A) highly compensated individuals as to eligibility to
participate, or
(B) highly compensated participants as to contributions and
benefits.
(2) Key employees
In the case of a key employee (within the meaning of section
416(i)(1)), subsection (a) shall not apply to any benefit
attributable to a plan for which the statutory nontaxable
benefits provided to key employees exceed 25 percent of the
aggregate of such benefits provided for all employees under the
plan. For purposes of the preceding sentence, statutory
nontaxable benefits shall be determined without regard to the
last sentence of subsection (f).
(3) Year of inclusion
For purposes of determining the taxable year of inclusion, any
benefit described in paragraph (1) or (2) shall be treated as
received or accrued in the taxable year of the participant or key
employee in which the plan year ends.
(c) Discrimination as to benefits or contributions
For purposes of subparagraph (B) of subsection (b)(1), a
cafeteria plan does not discriminate where qualified benefits and
total benefits (or employer contributions allocable to qualified
benefits and employer contributions for total benefits) do not
discriminate in favor of highly compensated participants.
(d) Cafeteria plan defined
For purposes of this section -
(1) In general
The term "cafeteria plan" means a written plan under which -
(A) all participants are employees, and
(B) the participants may choose among 2 or more benefits
consisting of cash and qualified benefits.
(2) Deferred compensation plans excluded
(A) In general
The term "cafeteria plan" does not include any plan which
provides for deferred compensation.
(B) Exception for cash and deferred arrangements
Subparagraph (A) shall not apply to a profit-sharing or stock
bonus plan or rural cooperative plan (within the meaning of
section 401(k)(7)) which includes a qualified cash or deferred
arrangement (as defined in section 401(k)(2)) to the extent of
amounts which a covered employee may elect to have the employer
pay as contributions to a trust under such plan on behalf of
the employee.
(C) Exception for certain plans maintained by educational
institutions
Subparagraph (A) shall not apply to a plan maintained by an
educational organization described in section 170(b)(1)(A)(ii)
to the extent of amounts which a covered employee may elect to
have the employer pay as contributions for post-retirement
group life insurance if -
(i) all contributions for such insurance must be made
before retirement, and
(ii) such life insurance does not have a cash surrender
value at any time.
For purposes of section 79, any life insurance described in the
preceding sentence shall be treated as group-term life
insurance.
(D) Exception for health savings accounts
Subparagraph (A) shall not apply to a plan to the extent of
amounts which a covered employee may elect to have the employer
pay as contributions to a health savings account established on
behalf of the employee.
(e) Highly compensated participant and individual defined
For purposes of this section -
(1) Highly compensated participant
The term "highly compensated participant" means a participant
who is -
(A) an officer,
(B) a shareholder owning more than 5 percent of the voting
power or value of all classes of stock of the employer,
(C) highly compensated, or
(D) a spouse or dependent (within the meaning of section 152)
of an individual described in subparagraph (A), (B), or (C).
(2) Highly compensated individual
The term "highly compensated individual" means an individual
who is described in subparagraphs (!1) (A), (B), (C), or (D) of
paragraph (1).
(f) Qualified benefits defined
For purposes of this section, the term "qualified benefit" means
any benefit which, with the application of subsection (a), is not
includible in the gross income of the employee by reason of an
express provision of this chapter (other than section 106(b), 117,
127, or 132). Such term includes any group term life insurance
which is includible in gross income only because it exceeds the
dollar limitation of section 79 and such term includes any other
benefit permitted under regulations. Such term shall not include
any product which is advertised, marketed, or offered as long-term
care insurance.
(g) Special rules
(1) Collectively bargained plan not considered discriminatory
For purposes of this section, a plan shall not be treated as
discriminatory if the plan is maintained under an agreement which
the Secretary finds to be a collective bargaining agreement
between employee representatives and one or more employers.
(2) Health benefits
For purposes of subparagraph (B) of subsection (b)(1), a
cafeteria plan which provides health benefits shall not be
treated as discriminatory if -
(A) contributions under the plan on behalf of each
participant include an amount which -
(i) equals 100 percent of the cost of the health benefit
coverage under the plan of the majority of the highly
compensated participants similarly situated, or
(ii) equals or exceeds 75 percent of the cost of the health
benefit coverage of the participant (similarly situated)
having the highest cost health benefit coverage under the
plan, and
(B) contributions or benefits under the plan in excess of
those described in subparagraph (A) bear a uniform relationship
to compensation.
(3) Certain participation eligibility rules not treated as
discriminatory
For purposes of subparagraph (A) of subsection (b)(1), a
classification shall not be treated as discriminatory if the plan
-
(A) benefits a group of employees described in section
410(b)(2)(A)(i), and
(B) meets the requirements of clauses (i) and (ii):
(i) No employee is required to complete more than 3 years
of employment with the employer or employers maintaining the
plan as a condition of participation in the plan, and the
employment requirement for each employee is the same.
(ii) Any employee who has satisfied the employment
requirement of clause (i) and who is otherwise entitled to
participate in the plan commences participation no later than
the first day of the first plan year beginning after the date
the employment requirement was satisfied unless the employee
was separated from service before the first day of that plan
year.
(4) Certain controlled groups, etc.
All employees who are treated as employed by a single employer
under subsection (b), (c), or (m) of section 414 shall be treated
as employed by a single employer for purposes of this section.
(h) Cross reference
For reporting and recordkeeping requirements, see section
6039D.
(i) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the provisions of this section.
-SOURCE-
(Added Pub. L. 95-600, title I, Sec. 134(a), Nov. 6, 1978, 92 Stat.
2783; amended Pub. L. 96-222, title I, Sec. 101(a)(6)(A), Apr. 1,
1980, 94 Stat. 196; Pub. L. 96-605, title II, Secs. 201(b)(2),
226(a), Dec. 28, 1980, 94 Stat. 3527, 3529; Pub. L. 96-613, Sec.
5(b)(2), Dec. 28, 1980, 94 Stat. 3581; Pub. L. 98-369, div. A,
title V, Sec. 531(b)(1)-(4)(A), July 18, 1984, 98 Stat. 881, 882;
Pub. L. 98-611, Sec. 1(d)(3)(A), Oct. 31, 1984, 98 Stat. 3177; Pub.
L. 98-612, Sec. 1(b)(3)(B), Oct. 31, 1984, 98 Stat. 3181; Pub. L.
99-514, title XI, Sec. 1151(d)(1), title XVIII, Sec. 1853(b)(1),
Oct. 22, 1986, 100 Stat. 2504, 2870; Pub. L. 100-647, title I,
Secs. 1011B(a)(11)-(13), 1018(t)(6), title IV, Sec. 4002(b)(2),
title VI, Sec. 6051(b), Nov. 10, 1988, 102 Stat. 3484, 3485, 3589,
3643, 3696; Pub. L. 101-140, title II, Sec. 203(a)(1), (3), (b)(2),
Nov. 8, 1989, 103 Stat. 830, 831; Pub. L. 101-239, title VII, Sec.
7814(b), Dec. 19, 1989, 103 Stat. 2413; Pub. L. 101-508, title XI,
Sec. 11801(c)(3), Nov. 5, 1990, 104 Stat. 1388-523; Pub. L.
104-191, title III, Secs. 301(d), 321(c)(1), Aug. 21, 1996, 110
Stat. 2051, 2058; Pub. L. 108-173, title XII, Sec. 1201(i), Dec. 8,
2003, 117 Stat. 2479.)
-COD-
CODIFICATION
Pub. L. 101-140, Sec. 203(a)(1), amended this section to read as
if the amendments made by section 1151(d)(1) of Pub. L. 99-514
(amending this section generally) had not been enacted. Subsequent
to amendment by Pub. L. 99-514, this section was amended by Pub. L.
100-647 and Pub. L. 101-239. See 1989 and 1988 Amendment notes
below.
-MISC1-
PRIOR PROVISIONS
A prior section 125 was renumbered section 140 of this title.
AMENDMENTS
2003 - Subsec. (d)(2)(D). Pub. L. 108-173, which directed the
amendment of section 125(d)(2) by adding subpar. (D), was executed
to this section, which is section 125(d)(2) of the Internal Revenue
Code of 1986, to reflect the probable intent of Congress.
1996 - Subsec. (f). Pub. L. 104-191, Sec. 321(c)(1), inserted at
end "Such term shall not include any product which is advertised,
marketed, or offered as long-term care insurance."
Pub. L. 104-191, Sec. 301(d), inserted "106(b)," before "117".
1990 - Subsec. (f). Pub. L. 101-508 substituted "section 117,"
for "section 117, 124,".
1989 - Pub. L. 101-140, Sec. 203(a)(1), amended section to read
as if amendments by Pub. L. 99-514, Sec. 1151(d)(1), had not been
enacted, see 1986 Amendment note below.
Subsec. (d)(2). Pub. L. 101-140, Sec. 203(b)(2), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "The term
'cafeteria plan' does not include any plan which provides for
deferred compensation. The preceding sentence shall not apply in
the case of a profit-sharing or stock bonus plan which includes a
qualified cash or deferred arrangement (as defined in section
401(k)(2)) to the extent of amounts which a covered employee may
elect to have the employer pay as contributions to a trust under
such plan on behalf of the employee."
Subsec. (e)(2)(A). Pub. L. 101-239 substituted "includible only
because" for "includable only because", see Codification note
above.
Subsec. (g)(3)(A). Pub. L. 101-140, Sec. 203(a)(3), substituted
"section 410(b)(2)(A)(i)" for "subparagraph (B) of section
410(b)(1)".
1988 - Subsec. (a). Pub. L. 100-647, Sec. 1011B(a)(11)(A),
amended subsec. (a) generally, see Codification note above. Prior
to amendment, subsec. (a) read as follows: "In the case of a
cafeteria plan -
"(1) amounts shall not be included in gross income of a
participant in such plan solely because, under the plan, the
participant may choose among the benefits of the plan, and
"(2) if the plan fails to meet the requirements of subsection
(b) for any plan year -
"(A) paragraph (1) shall not apply, and
"(B) notwithstanding any other provision of part III of this
subchapter, any qualified benefits received under such
cafeteria plan by a highly compensated employee for such plan
year shall be included in the gross income of such employee for
the taxable year with or within which such plan year ends."
Subsec. (b)(1). Pub. L. 100-647, Sec. 1011B(a)(11)(B),
substituted "In the case of a highly compensated employee,
subsection (a) shall not apply to any benefit attributable to a
plan year" for "A plan shall be treated as failing to meet the
requirements of this subsection", see Codification note above.
Subsec. (b)(2). Pub. L. 100-647, Sec. 1011B(a)(11)(C),
substituted "subsection (a) shall not apply to any plan year" for
"a plan shall be treated as failing to meet the requirements of
this subsection" in first sentence, see Codification note above.
Pub. L. 100-647, Sec. 1011B(a)(13)(B), substituted "shall not
include benefits which (without regard to this paragraph) are
includible in gross income" for "shall be determined without regard
to the last sentence of subsection (e)", see Codification note
above.
Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 1011B(a)(12), amended
subpar. (B) generally, see Codification note above. Prior to
amendment, subpar. (B) read as follows: "the participants may
choose -
"(i) among 2 or more benefits consisting of cash and qualified
benefits, or
"(ii) among 2 or more qualified benefits."
Subsec. (c)(2)(B). Pub. L. 100-647, Sec. 1018(t)(6), inserted "or
rural electric cooperative plan (within the meaning of section
401(k)(7))" after "stock bonus plan", see Codification note above.
Subsec. (c)(2)(C). Pub. L. 100-647, Sec. 6051(b), inserted at end
"In applying section 89 to a plan described in this subparagraph,
contributions under the plan shall be tested as of the time the
contributions were made.", see Codification note above.
Subsec. (e)(1). Pub. L. 100-647, Sec. 1011B(a)(13)(A), inserted
"and without regard to section 89(a)" after "subsection (a)", see
Codification note above.
Subsec. (e)(2)(A). Pub. L. 100-647, Sec. 4002(b)(2), inserted "or
any insurance under a qualified group legal services plan the value
of which is so includable only because it exceeds the limitation of
section 120(a)" after "section 79", see Codification note above.
1986 - Pub. L. 99-514, Sec. 1151(d)(1), amended section
generally, revising and restating as subsecs. (a) to (g) provisions
of former subsecs. (a) to (i) so as to coincide with the coming
into effect of section 89 of this title.
Subsecs. (c), (d)(1)(B). Pub. L. 99-514, Sec. 1853(b)(1)(A),
substituted "qualified benefits" for "statutory nontaxable
benefits" wherever appearing.
Subsec. (f). Pub. L. 99-514, Sec. 1853(b)(1)(B), substituted
"Qualified benefits defined" for "Statutory nontaxable benefits
defined" in heading and amended text generally. Prior to amendment,
text read as follows: "For purposes of this section, the term
'statutory nontaxable benefit' means any benefit which, with the
application of subsection (a) is not includible in the gross income
of the employee by reason of an express provision of this chapter
(other than section 117, 124, 127, or 132). Such term includes any
group term life insurance which is includible in gross income only
because it exceeds the dollar limitation of section 79."
1984 - Subsec. (b). Pub. L. 98-369, Sec. 531(b)(3), amended
subsec. (b) generally, substituting "and key employees" for "where
plan is discriminatory" in heading and "Highly compensated
participants" for "In general" in par. (1) heading, adding par.
(2), redesignating former par. (2) as (3), and inserting therein
references to par. (2) and to taxable year of key employee.
Subsec. (c). Pub. L. 98-369, Sec. 531(b)(2)(B), inserted
"statutory" before "nontaxable benefits" in two places.
Subsec. (d)(1). Pub. L. 98-369, Sec. 531(b)(1), substituted
"among 2 or more benefits consisting of cash and statutory
nontaxable benefits" for "among two or more benefits" in cl. (B)
and struck out "The benefits which may be chosen may be nontaxable
benefits, or cash, property, or other taxable benefits."
Subsec. (f). Pub. L. 98-369, Sec. 531(b)(2)(A), amended subsec.
(f) generally, inserting "Statutory" in heading and "statutory"
before "nontaxable benefit" in text, providing that the benefit be
excluded by reason of an express provision of this chapter (other
than section 117, 124, 127, or 132), and extending the benefit to
include group term life insurance.
Subsec. (h). Pub. L. 98-611 and Pub. L. 98-612, made identical
amendments, substituting cross reference provision for reporting
requirements provisions.
Pub. L. 98-369, Sec. 531(b)(4)(A), added subsec. (h) relating to
reporting requirements provisions. Former subsec. (h) redesignated
(i).
Subsec. (i). Pub. L. 98-369, Sec. 531(b)(4)(A), redesignated
subsec. (h) as (i).
1980 - Subsec. (d)(2). Pub. L. 96-605, Sec. 226(a), inserted
provision that the sentence excluding deferred compensation plans
not apply in the case of a profit-sharing or stock bonus plan which
includes a qualified cash or deferred arrangement, as defined in
section 401(k)(2) to the extent of amounts which a covered employee
may elect to have the employer pay as contributions to a trust
under such plan on behalf of the employee.
Subsec. (g)(3)(B). Pub. L. 96-222 substituted "employment
requirement" for "service requirement" in cls. (i) and (ii).
Subsec. (g)(4). Pub. L. 96-613, Sec. 5(b)(2), and Pub. L. 96-605,
Sec. 201(b)(2), made identical amendments by substituting
"controlled groups, etc." for "controlled groups" in heading, and
by substituting "subsection (b), (c), or (m) of section 414" for
"subsection (b) or (c) of section 414" in text.
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-173 applicable to taxable years
beginning after Dec. 31, 2003, see section 1201(k) of Pub. L.
108-173, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 301(d) of Pub. L. 104-191 applicable to
taxable years beginning after Dec. 31, 1996, see section 301(j) of
Pub. L. 104-191, set out as a note under section 62 of this title.
Amendment by section 321(c)(1) of Pub. L. 104-191 applicable to
contracts issued after Dec. 31, 1996, see section 321(f) of Pub. L.
104-191, set out as an Effective Date note under section 7702B of
this title.
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011B(a)(11)-(13) and 1018(t)(6) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 4002(b)(2) of Pub. L. 100-647 applicable to
taxable years ending after Dec. 31, 1987, see section 4002(c) of
Pub. L. 100-647, set out as a note under section 120 of this title.
Section 6051(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section and section 89 of this
title] shall take effect as if included in the amendments made by
section 1151 of the Reform Act [Pub. L. 99-514, see Effective Date
of 1986 Amendment note set out under section 79 of this title]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1151(d)(1) of Pub. L. 99-514 applicable,
with certain qualifications and exceptions, to years beginning
after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as
amended, set out as a note under section 79 of this title.
Amendment by section 1853(b)(1) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by Pub. L. 98-612 effective Jan. 1, 1985, see section
1(d)(2) of Pub. L. 98-612.
Amendment by Pub. L. 98-611 effective Jan. 1, 1985, see section
1(g)(2) of Pub. L. 98-611, set out as a note under section 127 of
this title.
Amendment by Pub. L. 98-369 effective Jan. 1, 1985, see section
531(h) of Pub. L. 98-369, set out as an Effective Date note under
section 132 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendments by section 201(b)(2) of Pub. L. 96-605 and section
5(b)(2) of Pub. L. 96-613 applicable to years ending after Nov. 30,
1980, except in the case of a plan in existence on Nov. 30, 1980
where amendments by section 201(b)(2) of Pub. L. 96-605 and section
5(b)(2) of Pub. L. 96-613 applicable to plan years beginning after
Nov. 30, 1980, see section 201(c) of Pub. L. 96-605 and section
5(c) of Pub. L. 96-613, set out as a note under section 414 of this
title.
Section 226(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1980."
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 134(c) of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 101(a)(6)(B), Apr. 1, 1980, 94 Stat. 197, provided
that: "The amendments made by this section [enacting this section]
shall apply to plan years beginning after December 31, 1978."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
TREATMENT OF PRE-1989 ELECTIONS FOR DEPENDENT CARE ASSISTANCE UNDER
CAFETERIA PLANS
Section 6063 of Pub. L. 100-647 provided that: "For purposes of
section 125 of the 1986 Code, a plan shall not be treated as
failing to be a cafeteria plan solely because under the plan a
participant elected before January 1, 1989, to receive
reimbursement under the plan for dependent care assistance for
periods after December 31, 1988, and such assistance is includible
in gross income under the provisions of the Family Support Act of
1988 [Pub. L. 100-485, see Tables for classification]."
For provision that for purposes of section 125 of the Internal
Revenue Code of 1986, a plan shall not be treated as failing to be
a cafeteria plan solely because under the plan a participant
elected before January 1, 1988, to receive reimbursement under the
plan for dependent care assistance for periods after December 31,
1987, and such assistance included reimbursement for expenses at a
camp where the dependent stays overnight, see section 10101(b)(2)
of Pub. L. 100-203, as added by Pub. L. 100-647, set out as an
Effective Date of 1987 Amendment note under section 21 of this
title.
EXCEPTION FOR CERTAIN CAFETERIA PLANS AND BENEFITS
Section 531(b)(5) of Pub. L. 98-369, as amended by Pub. L.
99-514, title XVIII, Sec. 1853(b)(2), (3), Oct. 22, 1986, 100 Stat.
2870, 2871, provided that:
"(A) General transitional rule. - Any cafeteria plan in existence
on February 10, 1984, which failed as of such date and continued to
fail thereafter to satisfy the rules relating to section 125 under
proposed Treasury regulations, and any benefit offered under such a
cafeteria plan which failed as of such date and continued to fail
thereafter to satisfy the rules of section 105, 106, 120, or 129
under proposed Treasury regulations, will not fail to be a
cafeteria plan under section 125 or a nontaxable benefit under
section 105, 106, 120, or 129 solely because of such failures. The
preceding sentence shall apply only with respect to cafeteria plans
and benefits provided under cafeteria plans before the earlier of -
"(i) January 1, 1985, or
"(ii) the effective date of any modification to provide
additional benefits after February 10, 1984.
"(B) Special transition rule for advance election benefit banks.
- Any benefit offered under a cafeteria plan in existence on
February 10, 1984, which failed as of such date and continued to
fail thereafter to satisfy the rules of section 105, 106, 120, or
129 under proposed Treasury regulations because an employee was
assured of receiving (in cash or any other benefit) amounts
available but unused for covered reimbursement during the year
without regard to whether he incurred covered expenses, will not
fail to be a nontaxable benefit under such applicable section
solely because of such failure. The preceding sentence shall apply
only with respect to benefits provided under cafeteria plans before
the earlier of -
"(i) July 1, 1985, or
"(ii) the effective date of any modification to provide
additional benefits after February 10, 1984.
Except as provided in Treasury regulations, the special transition
rule is available only for benefits with respect to which, after
December 31, 1984, contributions are fixed before the period of
coverage and taxable cash is not available until the end of such
period of coverage.
"(C) Plans for which substantial implementation costs were
incurred. - For purposes of this paragraph, any plan with respect
to which substantial implementation costs had been incurred before
February 10, 1984, shall be treated as in existence on February 10,
1984.
"(D) Collective bargaining agreements. - In the case of any
cafeteria plan in existence on February 10, 1984, and maintained
pursuant to 1 or more collective bargaining agreements between
employee representatives and 1 or more employers, the date on which
the last of such collective bargaining agreements terminates
(determined without regard to any extension thereof agreed to after
July 18, 1984) shall be substituted for 'January 1, 1985' in
subparagraph (A) and for 'July 1, 1985' in subparagraph (B). For
purposes of the preceding sentence, any plan amendment made
pursuant to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement added by
this section (or any requirement in the regulations under section
125 of the Internal Revenue Code of 1954 [now 1986] proposed on May
6, 1984) shall not be treated as a termination of such collective
bargaining agreement.
"(E) Special rule where contributions or reimbursements
suspended. - For purposes of subparagraphs (A) and (B), a plan
shall not be treated as not continuing to fail to satisfy the rules
referred to in such subparagraphs with respect to any benefit
provided in the form of a flexible spending arrangement merely
because contributions or reimbursements (or both) with respect to
such plan were suspended before January 1, 1985."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 35, 79, 403, 414, 415,
3121, 3306, 6039D, 7701 of this title; title 29 section 2918; title
42 section 409.
-FOOTNOTE-
(!1) So in original. Probably should be "subparagraph".
-End-
-CITE-
26 USC Sec. 126 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 126. Certain cost-sharing payments
-STATUTE-
(a) General rule
Gross income does not include the excludable portion of payments
received under -
(1) The rural clean water program authorized by section 208(j)
of the Federal Water Pollution Control Act (33 U.S.C. 1288(j)).
(2) The rural abandoned mine program authorized by section 406
of the Surface Mining Control and Reclamation Act of 1977 (30
U.S.C. 1236).
(3) The water bank program authorized by the Water Bank Act (16
U.S.C. 1301 et seq.).
(4) The emergency conservation measures program authorized by
title IV of the Agricultural Credit Act of 1978.
(5) The agricultural conservation program authorized by the
Soil Conservation and Domestic Allotment Act (16 U.S.C. 590a).
(6) The great plains conservation program authorized by section
16 (!1) of the Soil Conservation and Domestic Policy Act (16
U.S.C. 590p(b)).
(7) The resource conservation and development program
authorized by the Bankhead-Jones Farm Tenant Act and by the Soil
Conservation and Domestic Allotment Act (7 U.S.C. 1010; 16 U.S.C.
590a et seq.).
(8) The forestry incentives program authorized by section 4 of
the Cooperative Forestry Assistance Act of 1978 (16 U.S.C. 2103).
(9) Any small watershed program administered by the Secretary
of Agriculture which is determined by the Secretary of the
Treasury or his delegate to be substantially similar to the type
of programs described in paragraphs (1) through (8).
(10) Any program of a State, possession of the United States, a
political subdivision of any of the foregoing, or the District of
Columbia under which payments are made to individuals primarily
for the purpose of conserving soil, protecting or restoring the
environment, improving forests, or providing a habitat for
wildlife.
(b) Excludable portion
For purposes of this section -
(1) In general
The term "excludable portion" means that portion (or all) of a
payment made to any person under any program described in
subsection (a) which -
(A) is determined by the Secretary of Agriculture to be made
primarily for the purpose of conserving soil and water
resources, protecting or restoring the environment, improving
forests, or providing a habitat for wildlife, and
(B) is determined by the Secretary of the Treasury or his
delegate as not increasing substantially the annual income
derived from the property.
(2) Payments not chargeable to capital account
The term "excludable portion" does not include that portion of
any payment which is properly associated with an amount which is
allowable as a deduction for the taxable year in which such
amount is paid or incurred.
(c) Election for section not to apply
(1) In general
The taxpayer may elect not to have this section (and section
1255) apply to any excludable portion (or portion thereof).
(2) Manner and time for making election
Any election under paragraph (1) shall be made in the manner
prescribed by the Secretary by regulations and shall be made not
later than the due date prescribed by law (including extensions)
for filing the return of tax under this chapter for the taxable
year in which the payment was received or accrued.
(d) Denial of double benefits
No deduction or credit shall be allowed with respect to any
expenditure which is properly associated with any amount excluded
from gross income under subsection (a).
(e) Basis of property not increased by reason of excludable
payments
Notwithstanding any provision of section 1016 to the contrary, no
adjustment to basis shall be made with respect to property acquired
or improved through the use of any payment, to the extent that such
adjustment would reflect any amount which is excluded from gross
income under subsection (a).
-SOURCE-
(Added Pub. L. 95-600, title V, Sec. 543(a), Nov. 6, 1978, 92 Stat.
2888; amended Pub. L. 96-222, title I, Sec. 105(a)(7)(A), (C), (E),
Apr. 1, 1980, 94 Stat. 220, 221.)
-REFTEXT-
REFERENCES IN TEXT
The Water Bank Act, referred to in subsec. (a)(3), is Pub. L.
91-559, Dec. 19, 1970, 84 Stat. 1468, as amended, which is
classified generally to chapter 29 (Sec. 1301 et seq.) of Title 16,
Conservation. For complete classification of this Act to the Code,
see Short Title note set out under section 1301 of Title 16 and
Tables.
The Agricultural Credit Act of 1978, referred to in subsec.
(a)(4), is Pub. L. 95-334, Aug. 4, 1978, 92 Stat. 420, as amended.
Title IV of the Agricultural Credit Act of 1978 is classified
generally to chapter 42 (Sec. 2201 et seq.) of Title 16,
Conservation. For complete classification of this Act to the Code,
see Tables.
The Soil Conservation and Domestic Allotment Act, referred to in
subsec. (a)(5), (7), is act Apr. 27, 1935, ch. 85, 49 Stat. 163, as
amended, which is classified generally to chapter 3B (Sec. 590a et
seq.) of Title 16, Conservation. For complete classification of
this Act to the Code, see section 590q of Title 16 and Tables.
Section 16 of the Soil Conservation and Domestic Policy Act,
referred to in subsec. (a)(6), probably means section 16 of the
Soil Conservation and Domestic Allotment Act, which was classified
to section 590p of Title 16, Conservation, prior to repeal by Pub.
L. 104-127, title III, Sec. 336(b)(1), Apr. 4, 1996, 110 Stat.
1006.
The Bankhead-Jones Farm Tenant Act, referred to in subsec.
(a)(7), is act July 22, 1937, ch. 517, 50 Stat. 522, as amended,
which is classified generally to chapter 33 (Sec. 1000 et seq.) of
Title 7, Agriculture. For complete classification of this Act to
the Code, see section 1000 of Title 7 and Tables.
-MISC1-
PRIOR PROVISIONS
A prior section 126 was renumbered section 140 of this title.
AMENDMENTS
1980 - Subsec. (a). Pub. L. 96-222, Sec. 105(a)(7)(C), (E),
inserted in par. (9) "or his delegate" after "Secretary of the
Treasury" and substituted in par. (10) "Any program of a State,
possession of the United States, a political subdivision of any of
the foregoing, or the District of Columbia" for "Any State
program".
Subsec. (b). Pub. L. 96-222, Sec. 105(a)(7)(A), inserted
provisions relating to payments not chargeable to capital account.
Subsec. (c). Pub. L. 96-222, Sec. 105(a)(7)(A), substituted
provisions allowing the taxpayer to elect not to have this section
apply to any excludable portion for provisions relating to the
application of subsec. (a) of this section with other sections.
Subsecs. (d), (e). Pub. L. 96-222, Sec. 105(a)(7)(A), added
subsecs. (d) and (e).
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in provisions of the Revenue
Act of 1978, Pub. L. 95-600, to which such amendment relates, see
section 201 of Pub. L. 96-222, set out as a note under section 32
of this title.
EFFECTIVE DATE
Section 543(d) of Pub. L. 95-600 provided that: "The amendments
made by this section [enacting this section and section 1255 of
this title] shall apply with respect to grants made under the
programs after September 30, 1979."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1255 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 127 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 127. Educational assistance programs
-STATUTE-
(a) Exclusion from gross income
(1) In general
Gross income of an employee does not include amounts paid or
expenses incurred by the employer for educational assistance to
the employee if the assistance is furnished pursuant to a program
which is described in subsection (b).
(2) $5,250 maximum exclusion
If, but for this paragraph, this section would exclude from
gross income more than $5,250 of educational assistance furnished
to an individual during a calendar year, this section shall apply
only to the first $5,250 of such assistance so furnished.
(b) Educational assistance program
(1) In general
For purposes of this section an educational assistance program
is a separate written plan of an employer for the exclusive
benefit of his employees to provide such employees with
educational assistance. The program must meet the requirements of
paragraphs (2) through (6) of this subsection.
(2) Eligibility
The program shall benefit employees who qualify under a
classification set up by the employer and found by the Secretary
not to be discriminatory in favor of employees who are highly
compensated employees (within the meaning of section 414(q)) or
their dependents. For purposes of this paragraph, there shall be
excluded from consideration employees not included in the program
who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and one or more
employers, if there is evidence that educational assistance
benefits were the subject of good faith bargaining between such
employee representatives and such employer or employers.
(3) Principal shareholders or owners
Not more than 5 percent of the amounts paid or incurred by the
employer for educational assistance during the year may be
provided for the class of individuals who are shareholders or
owners (or their spouses or dependents), each of whom (on any day
of the year) owns more than 5 percent of the stock or of the
capital or profits interest in the employer.
(4) Other benefits as an alternative
A program must not provide eligible employees with a choice
between educational assistance and other remuneration includible
in gross income. For purposes of this section, the business
practices of the employer (as well as the written program) will
be taken into account.
(5) No funding required
A program referred to in paragraph (1) is not required to be
funded.
(6) Notification of employees
Reasonable notification of the availability and terms of the
program must be provided to eligible employees.
(c) Definitions; special rules
For purposes of this section -
(1) Educational assistance
The term "educational assistance" means -
(A) the payment, by an employer, of expenses incurred by or
on behalf of an employee for education of the employee
(including, but not limited to, tuition, fees, and similar
payments, books, supplies, and equipment), and
(B) the provision, by an employer, of courses of instruction
for such employee (including books, supplies, and equipment),
but does not include payment for, or the provision of, tools or
supplies which may be retained by the employee after completion
of a course of instruction, or meals, lodging, or transportation.
The term "educational assistance" also does not include any
payment for, or the provision of any benefits with respect to,
any course or other education involving sports, games, or
hobbies.
(2) Employee
The term "employee" includes, for any year, an individual who
is an employee within the meaning of section 401(c)(1) (relating
to self-employed individuals).
(3) Employer
An individual who owns the entire interest in an unincorporated
trade or business shall be treated as his own employer. A
partnership shall be treated as the employer of each partner who
is an employee within the meaning of paragraph (2).
(4) Attribution rules
(A) Ownership of stock
Ownership of stock in a corporation shall be determined in
accordance with the rules provided under subsections (d) and
(e) of section 1563 (without regard to section 1563(e)(3)(C)).
(B) Interest in unincorporated trade or business
The interest of an employee in a trade or business which is
not incorporated shall be determined in accordance with
regulations prescribed by the Secretary, which shall be based
on principles similar to the principles which apply in the case
of subparagraph (A).
(5) Certain tests not applicable
An educational assistance program shall not be held or
considered to fail to meet any requirements of subsection (b)
merely because -
(A) of utilization rates for the different types of
educational assistance made available under the program; or
(B) successful completion, or attaining a particular course
grade, is required for or considered in determining
reimbursement under the program.
(6) Relationship to current law
This section shall not be construed to affect the deduction or
inclusion in income of amounts (not within the exclusion under
this section) which are paid or incurred, or received as
reimbursement, for educational expenses under section 117, 162 or
212.
(7) Disallowance of excluded amounts as credit or deduction
No deduction or credit shall be allowed to the employee under
any other section of this chapter for any amount excluded from
income by reason of this section.
(d) Cross reference
For reporting and recordkeeping requirements, see section
6039D.
-SOURCE-
(Added Pub. L. 95-600, title I, Sec. 164(a), Nov. 6, 1978, 92 Stat.
2811; amended Pub. L. 98-611, Sec. 1(a)-(c), (d)(3)(B), (e), Oct.
31, 1984, 98 Stat. 3176-3178; Pub. L. 99-514, title XI, Secs.
1114(b)(4), 1151(c)(4), (g)(3), 1162(a), Oct. 22, 1986, 100 Stat.
2450, 2503, 2507, 2510; Pub. L. 100-647, title I, Sec.
1011B(a)(31)(B), title IV, Sec. 4001(a), (b)(1), Nov. 10, 1988, 102
Stat. 3488, 3643; Pub. L. 101-140, title II, Sec. 203(a)(1), (2),
Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title VII, Secs.
7101(a)(1), 7814(a), Dec. 19, 1989, 103 Stat. 2304, 2413; Pub. L.
101-508, title XI, Sec. 11403(a), (b), Nov. 5, 1990, 104 Stat.
1388-473; Pub. L. 102-227, title I, Sec. 103(a)(1), Dec. 11, 1991,
105 Stat. 1687; Pub. L. 103-66, title XIII, Sec. 13101(a)(1), Aug.
10, 1993, 107 Stat. 420; Pub. L. 104-188, title I, Sec. 1202(a),
(b), Aug. 20, 1996, 110 Stat. 1772, 1773; Pub. L. 105-34, title II,
Sec. 221(a), Aug. 5, 1997, 111 Stat. 818; Pub. L. 106-170, title V,
Sec. 506(a), Dec. 17, 1999, 113 Stat. 1922; Pub. L. 107-16, title
IV, Sec. 411(a), (b), June 7, 2001, 115 Stat. 63.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
PRIOR PROVISIONS
A prior section 127 was renumbered section 140 of this title.
AMENDMENTS
2001 - Subsec. (c)(1). Pub. L. 107-16, Secs. 411(b), 901,
temporarily struck out before period at end ", and such term also
does not include any payment for, or the provision of any benefits
with respect to, any graduate level course of a kind normally taken
by an individual pursuing a program leading to a law, business,
medical, or other advanced academic or professional degree". See
Effective and Termination Dates of 2001 Amendment note below.
Subsecs. (d), (e). Pub. L. 107-16, Secs. 411(a), 901, temporarily
redesignated subsec. (e) as (d) and struck out heading and text of
former subsec. (d). Text read as follows: "This section shall not
apply to expenses paid with respect to courses beginning after
December 31, 2001." See Effective and Termination Dates of 2001
Amendment note below.
1999 - Subsec. (d). Pub. L. 106-170 substituted "December 31,
2001" for "May 31, 2000".
1997 - Subsec. (d). Pub. L. 105-34 amended heading and text of
subsec. (d) generally. Prior to amendment, text read as follows:
"This section shall not apply to taxable years beginning after May
31, 1997. In the case of any taxable year beginning in 1997, only
expenses paid with respect to courses beginning before July 1,
1997, shall be taken into account in determining the amount
excluded under this section."
1996 - Subsec. (c)(1). Pub. L. 104-188, Sec. 1202(b), in closing
provisions, inserted before period at end ", and such term also
does not include any payment for, or the provision of any benefits
with respect to, any graduate level course of a kind normally taken
by an individual pursuing a program leading to a law, business,
medical, or other advanced academic or professional degree".
Subsec. (d). Pub. L. 104-188, Sec. 1202(a), substituted "May 31,
1997. In the case of any taxable year beginning in 1997, only
expenses paid with respect to courses beginning before July 1,
1997, shall be taken into account in determining the amount
excluded under this section." for "December 31, 1994."
1993 - Subsec. (d). Pub. L. 103-66 substituted "December 31,
1994" for "June 30, 1992".
1991 - Subsec. (d). Pub. L. 102-227 substituted "June 30, 1992"
for "December 31, 1991".
1990 - Subsec. (c)(1). Pub. L. 101-508, Sec. 11403(b), struck out
at end "The term 'educational assistance' also does not include any
payment for, or the provision of any benefits with respect to, any
graduate level course of a kind normally taken by an individual
pursuing a program leading to a law, business, medical, or other
advanced academic or professional degree."
Subsec. (d). Pub. L. 101-508, Sec. 11403(a), substituted
"December 31, 1991" for "September 30, 1990".
1989 - Subsec. (b)(1). Pub. L. 101-140, Sec. 203(a)(1), amended
par. (1) to read as if amendments by Pub. L. 99-514, Sec.
1151(c)(4)(A), had not been enacted, see 1986 Amendment note below.
Subsec. (b)(2). Pub. L. 101-140, Sec. 203(a)(2), amended par. (2)
to read as if amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B),
had not been enacted, see 1988 Amendment note below.
Pub. L. 101-140, Sec. 203(a)(1), amended par. (2) to read as if
amendments by Pub. L. 99-514, Sec. 1151(g)(3), had not been
enacted, see 1986 Amendment note below.
Subsec. (b)(6). Pub. L. 101-140, Sec. 203(a)(1), amended par. (6)
to read as if amendments by Pub. L. 99-514, Sec. 1151(c)(4)(B), had
not been enacted, see 1986 Amendment note below.
Subsec. (c)(8). Pub. L. 101-239, Sec. 7814(a), struck out par.
(8) which read as follows: "Coordination with section 117(d). - In
the case of the education of an individual who is a graduate
student at an educational organization described in section
170(b)(1)(A)(ii) and who is engaged in teaching or research
activities for such organization, section 117(d)(2) shall be
applied as if it did not contain the phrase '(below the graduate
level)'."
Subsec. (d). Pub. L. 101-239, Sec. 7101(a)(1), substituted
"September 30, 1990" for "December 31, 1988".
1988 - Subsec. (b)(2). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted "there shall" for "there may" and "who are" for "who
may be" in last sentence.
Subsec. (c)(1). Pub. L. 100-647, Sec. 4001(b)(1), inserted at end
"The term 'educational assistance' also does not include any
payment for, or the provision of any benefits with respect to, any
graduate level course of a kind normally taken by an individual
pursuing a program leading to a law, business, medical, or other
advanced academic or professional degree."
Subsec. (d). Pub. L. 100-647, Sec. 4001(a), substituted "1988"
for "1987".
1986 - Subsec. (a)(2). Pub. L. 99-514, Sec. 1162(a)(2),
substituted "$5,250" for "$5,000" in heading and twice in text.
Subsec. (b)(1). Pub. L. 99-514, Sec. 1151(c)(4)(A), added par.
(1) and struck out former par (1) which read as follows: "For
purposes of this section an educational assistance program is a
separate written plan of an employer for the exclusive benefit of
his employees to provide such employees with educational
assistance. The program must meet the requirements of paragraphs
(2) through (6) of this subsection."
Subsec. (b)(2). Pub. L. 99-514, Sec. 1151(g)(3), substituted "For
purposes of this paragraph, there may be excluded from
consideration employees who may be excluded from consideration
under section 89(h)." for "For purposes of this paragraph, there
shall be excluded from consideration employees not included in the
program who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or
more employers, if there is evidence that educational assistance
benefits were the subject of good faith bargaining between such
employee representatives and such employer or employers."
Pub. L. 99-514, Sec. 1114(b)(4), substituted "highly compensated
employees (within the meaning of section 414(q))" for "officers,
owners, or highly compensated,".
Subsec. (b)(6). Pub. L. 99-514, Sec. 1151(c)(4)(B), struck out
par. (6) which read as follows: "Notification of employees. -
Reasonable notification of the availability and terms of the
program must be provided to eligible employees."
Subsec. (d). Pub. L. 99-514, Sec. 1162(a)(1), substituted
"December 31, 1987" for "December 31, 1985".
1984 - Subsec. (a). Pub. L. 98-611, Sec. 1(b), amended subsec.
generally, substituting "Exclusion from gross income" for "General
rule" in heading, designating existing provision as par. "(1) In
general" and adding par. (2).
Subsec. (c)(7). Pub. L. 98-611, Sec. 1(e), substituted "allowed
to the employee" for "allowed".
Subsec. (c)(8). Pub. L. 98-611, Sec. 1(c), added par. (8).
Subsec. (d). Pub. L. 98-611, Sec. 1(a), substituted "December 31,
1985" for "December 31, 1983".
Subsec. (e). Pub. L. 98-611, Sec. 1(d)(3)(B), added subsec. (e).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable with respect to expenses
relating to courses beginning after Dec. 31, 2001, see section
411(d) of Pub. L. 107-16, set out as a note under section 51A of
this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT
Pub. L. 106-170, title V, Sec. 506(b), Dec. 17, 1999, 113 Stat.
1922, provided that: "The amendment made by subsection (a)
[amending this section] shall apply to courses beginning after May
31, 2000."
EFFECTIVE DATE OF 1997 AMENDMENT
Section 221(b) of Pub. L. 105-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1996."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1202(c)(1), (2) of Pub. L. 104-188 provided that:
"(1) Extension. - The amendment made by subsection (a) [amending
this section] shall apply to taxable years beginning after December
31, 1994.
"(2) Graduate education. - The amendment made by subsection (b)
[amending this section] shall apply with respect to expenses
relating to courses beginning after June 30, 1996."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13101(c)(1) of Pub. L. 103-66 provided that: "The
amendments made by subsection (a) [amending this section and
repealing provisions set out below] shall apply to taxable years
ending after June 30, 1992."
EFFECTIVE DATE OF 1991 AMENDMENT
Section 103(b) of Pub. L. 102-227 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1991."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11403(d) of Pub. L. 101-508 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and
repealing provisions set out below] shall apply to taxable years
beginning after December 31, 1989.
"(2) Subsection (b). - The amendment made by subsection (b)
[amending this section] shall apply to taxable years beginning
after December 31, 1990."
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7101(c) of Pub. L. 101-239 provided that: "The amendments
made by this section [amending this section and section 132 of this
title] shall apply to taxable years beginning after December 31,
1988."
Amendment by section 7814(a) of Pub. L. 101-239 effective, except
as otherwise provided, as if included in the provision of the
Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
to which such amendment relates, see section 7817 of Pub. L.
101-239, set out as a note under section 1 of this title.
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011B(a)(31)(B) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Amendment by section 4001(a), (b)(1) of Pub. L. 100-647
applicable to taxable years beginning after Dec. 31, 1987, see
section 4001(c) of Pub. L. 100-647, set out as a note under section
117 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1114(b)(4) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(c)(4), (g)(3) of Pub. L. 99-514
applicable, with certain qualifications and exceptions, to years
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Amendment by section 1162(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1985, see section 1162(c) of
Pub. L. 99-514, set out as a note under section 120 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 1(g) of Pub. L. 98-611, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [enacting section
6039D of this title and amending this section and sections 125,
3231, and 6652 of this title] shall apply to taxable years
beginning after December 31, 1983.
"(2) Subsection (d). - The amendments made by subsection (d)
[enacting section 6039D and amending this section and sections 125
and 6652 of this title] shall take effect on January 1, 1985.
"(3) Subsection (f). - The amendment made by subsection (f)
[amending section 3231 of this title] shall apply to remuneration
paid after December 31, 1984.
"(4) No penalties or interest on failure to withhold. - No
penalty or interest shall be imposed on any failure to withhold
under subtitle C of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (relating to employment taxes) with respect to amounts
excluded from gross income under section 127 of such Code (as
amended by this section and determined without regard to subsection
(a)(2) thereof) with respect to periods during 1984.
"(5) Coordination with section 117(d). - In the case of education
described in section 127(c)(8) of the Internal Revenue Code of
1986, as added by this section, section 117(d) of such Code shall
be treated as in effect on and after January 1, 1984."
EFFECTIVE DATE
Section 164(d) of Pub. L. 95-600 provided that: "The amendments
made by this section [enacting this section and amending sections
3121, 3306, and 3401 of this title and section 409 of Title 42, The
Public Health and Welfare] shall apply with respect to taxable
years beginning after December 31, 1978."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
EXPEDITED PROCEDURES FOR REFUNDS OF OVERPAYMENTS
Section 1202(c)(3) of Pub. L. 104-188 provided that: "The
Secretary of the Treasury shall establish expedited procedures for
the refund of any overpayment of taxes imposed by the Internal
Revenue Code of 1986 which is attributable to amounts excluded from
gross income during 1995 or 1996 under section 127 of such Code,
including procedures waiving the requirement that an employer
obtain an employee's signature where the employer demonstrates to
the satisfaction of the Secretary that any refund collected by the
employer on behalf of the employee will be paid to the employee."
SPECIAL RULE FOR CERTAIN TAXABLE YEARS
Section 103(a)(2) of Pub. L. 102-227 provided that, in the case
of any taxable year beginning in 1992, only amounts paid before
July 1, 1992, by employer for educational assistance for employee
be taken into account in determining amount excluded under this
section with respect to such employee for such taxable year, prior
to repeal by Pub. L. 103-66, title XIII, Sec. 13101(a)(2), Aug. 10,
1993, 107 Stat. 420.
Section 7101(a)(2) of Pub. L. 101-239 provided that, in the case
of any taxable year beginning in 1990, only amounts paid before
Oct. 1, 1990, by employer for educational assistance for employee
be taken into account in determining amount excluded under this
section with respect to such employee for such taxable year, prior
to repeal by Pub. L. 101-508, title XI, Sec. 11403(c), Nov. 5,
1990, 104 Stat. 1388-473.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 51A, 125, 132, 137, 221,
414, 1397, 3121, 3231, 3306, 3401, 6039D of this title; title 42
section 409.
-End-
-CITE-
26 USC Sec. 128 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 128. Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(10),
Nov. 5, 1990, 104 Stat. 1388-520]
-MISC1-
Section, added and amended Pub. L. 97-34, title III, Secs.
301(a), 302(a), (d)(1), Aug. 13, 1981, 95 Stat. 267, 270, 274; Pub.
L. 97-448, title I, Secs. 103(a)(1), (5), (b), 109, Jan. 12, 1983,
96 Stat. 2374, 2375, 2391; Pub. L. 98-21, title I, Secs. 121(f)(2),
(g), 122(c)(3), (d), Apr. 20, 1983, 97 Stat. 84, 87; Pub. L.
98-369, div. A, title I, Sec. 16(a), July 18, 1984, 98 Stat. 505,
related to interest on certain savings certificates.
A prior section 128 was renumbered section 140 of this title.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC Sec. 129 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 129. Dependent care assistance programs
-STATUTE-
(a) Exclusion
(1) In general
Gross income of an employee does not include amounts paid or
incurred by the employer for dependent care assistance provided
to such employee if the assistance is furnished pursuant to a
program which is described in subsection (d).
(2) Limitation of exclusion
(A) In general
The amount which may be excluded under paragraph (1) for
dependent care assistance with respect to dependent care
services provided during a taxable year shall not exceed $5,000
($2,500 in the case of a separate return by a married
individual).
(B) Year of inclusion
The amount of any excess under subparagraph (A) shall be
included in gross income in the taxable year in which the
dependent care services were provided (even if payment of
dependent care assistance for such services occurs in a
subsequent taxable year).
(C) Marital status
For purposes of this paragraph, marital status shall be
determined under the rules of paragraphs (3) and (4) of section
21(e).
(b) Earned income limitation
(1) In general
The amount excluded from the income of an employee under
subsection (a) for any taxable year shall not exceed -
(A) in the case of an employee who is not married at the
close of such taxable year, the earned income of such employee
for such taxable year, or
(B) in the case of an employee who is married at the close of
such taxable year, the lesser of -
(i) the earned income of such employee for such taxable
year, or
(ii) the earned income of the spouse of such employee for
such taxable year.
(2) Special rule for certain spouses
For purposes of paragraph (1), the provisions of section
21(d)(2) shall apply in determining the earned income of a spouse
who is a student or incapable of caring for himself.
(c) Payments to related individuals
No amount paid or incurred during the taxable year of an employee
by an employer in providing dependent care assistance to such
employee shall be excluded under subsection (a) if such amount was
paid or incurred to an individual -
(1) with respect to whom, for such taxable year, a deduction is
allowable under section 151(c) (relating to personal exemptions
for dependents) to such employee or the spouse of such employee,
or
(2) who is a child of such employee (within the meaning of
section 151(c)(3)) under the age of 19 at the close of such
taxable year.
(d) Dependent care assistance program
(1) In general
For purposes of this section a dependent care assistance
program is a separate written plan of an employer for the
exclusive benefit of his employees to provide such employees with
dependent care assistance which meets the requirements of
paragraphs (2) through (8) of this subsection. If any plan would
qualify as a dependent care assistance program but for a failure
to meet the requirements of this subsection, then,
notwithstanding such failure, such plan shall be treated as a
dependent care assistance program in the case of employees who
are not highly compensated employees.
(2) Discrimination
The contributions or benefits provided under the plan shall not
discriminate in favor of employees who are highly compensated
employees (within the meaning of section 414(q)) or their
dependents.
(3) Eligibility
The program shall benefit employees who qualify under a
classification set up by the employer and found by the Secretary
not to be discriminatory in favor of employees described in
paragraph (2), or their dependents.
(4) Principal shareholders or owners
Not more than 25 percent of the amounts paid or incurred by the
employer for dependent care assistance during the year may be
provided for the class of individuals who are shareholders or
owners (or their spouses or dependents), each of whom (on any day
of the year) owns more than 5 percent of the stock or of the
capital or profits interest in the employer.
(5) No funding required
A program referred to in paragraph (1) is not required to be
funded.
(6) Notification of eligible employees
Reasonable notification of the availability and terms of the
program shall be provided to eligible employees.
(7) Statement of expenses
The plan shall furnish to an employee, on or before January 31,
a written statement showing the amounts paid or expenses incurred
by the employer in providing dependent care assistance to such
employee during the previous calendar year.
(8) Benefits
(A) In general
A plan meets the requirements of this paragraph if the
average benefits provided to employees who are not highly
compensated employees under all plans of the employer is at
least 55 percent of the average benefits provided to highly
compensated employees under all plans of the employer.
(B) Salary reduction agreements
For purposes of subparagraph (A), in the case of any benefits
provided through a salary reduction agreement, a plan may
disregard any employees whose compensation is less than
$25,000. For purposes of this subparagraph, the term
"compensation" has the meaning given such term by section
414(q)(4), except that, under rules prescribed by the
Secretary, an employer may elect to determine compensation on
any other basis which does not discriminate in favor of highly
compensated employees.
(9) Excluded employees
For purposes of paragraphs (3) and (8), there shall be excluded
from consideration -
(A) subject to rules similar to the rules of section
410(b)(4), employees who have not attained the age of 21 and
completed 1 year of service (as defined in section 410(a)(3)),
and
(B) employees not included in a dependent care assistance
program who are included in a unit of employees covered by an
agreement which the Secretary finds to be a collective
bargaining agreement between employee representatives and 1 or
more employees, if there is evidence that dependent care
benefits were the subject of good faith bargaining between such
employee representatives and such employer or employers.
(e) Definitions and special rules
For purposes of this section -
(1) Dependent care assistance
The term "dependent care assistance" means the payment of, or
provision of, those services which if paid for by the employee
would be considered employment-related expenses under section
21(b)(2) (relating to expenses for household and dependent care
services necessary for gainful employment).
(2) Earned income
The term "earned income" shall have the meaning given such term
in section 32(c)(2), but such term shall not include any amounts
paid or incurred by an employer for dependent care assistance to
an employee.
(3) Employee
The term "employee" includes, for any year, an individual who
is an employee within the meaning of section 401(c)(1) (relating
to self-employed individuals).
(4) Employer
An individual who owns the entire interest in an unincorporated
trade or business shall be treated as his own employer. A
partnership shall be treated as the employer of each partner who
is an employee within the meaning of paragraph (3).
(5) Attribution rules
(A) Ownership of stock
Ownership of stock in a corporation shall be determined in
accordance with the rules provided under subsections (d) and
(e) of section 1563 (without regard to section 1563(e)(3)(C)).
(B) Interest in unincorporated trade or business
The interest of an employee in a trade or business which is
not incorporated shall be determined in accordance with
regulations prescribed by the Secretary, which shall be based
on principles similar to the principles which apply in the case
of subparagraph (A).
(6) Utilization test not applicable
A dependent care assistance program shall not be held or
considered to fail to meet any requirements of subsection (d)
(other than paragraphs (4) and (8) thereof) merely because of
utilization rates for the different types of assistance made
available under the program.
(7) Disallowance of excluded amounts as credit or deduction
No deduction or credit shall be allowed to the employee under
any other section of this chapter for any amount excluded from
the gross income of the employee by reason of this section.
(8) Treatment of onsite facilities
In the case of an onsite facility maintained by an employer,
except to the extent provided in regulations, the amount of
dependent care assistance provided to an employee excluded with
respect to any dependent shall be based on -
(A) utilization of the facility by a dependent of the
employee, and
(B) the value of the services provided with respect to such
dependent.
(9) Identifying information required with respect to service
provider
No amount paid or incurred by an employer for dependent care
assistance provided to an employee shall be excluded from the
gross income of such employee unless -
(A) the name, address, and taxpayer identification number of
the person performing the services are included on the return
to which the exclusion relates, or
(B) if such person is an organization described in section
501(c)(3) and exempt from tax under section 501(a), the name
and address of such person are included on the return to which
the exclusion relates.
In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence shall not
apply if it is shown that the taxpayer exercised due diligence in
attempting to provide the information so required.
-SOURCE-
(Added Pub. L. 97-34, title I, Sec. 124(e)(1), Aug. 13, 1981, 95
Stat. 198; amended Pub. L. 97-448, title I, Sec. 101(e), Jan. 12,
1983, 96 Stat. 2366; Pub. L. 98-369, div. A, title IV, Sec.
474(r)(6), July 18, 1984, 98 Stat. 839; Pub. L. 99-514, title I,
Sec. 104(b)(1), title XI, Secs. 1114(b)(4), 1151(c)(5), (f),
(g)(4), 1163(a), (b), Oct. 22, 1986, 100 Stat. 2104, 2450, 2503,
2506, 2507, 2510; Pub. L. 100-485, title VII, Sec. 703(c)(2), Oct.
13, 1988, 102 Stat. 2427; Pub. L. 100-647, title I, Sec.
1011B(a)(14), (15), (18), (30), (31)(A), (c)(1), (2)(A), title III,
Sec. 3021(a)(14), Nov. 10, 1988, 102 Stat. 3485, 3487-3489, 3631;
Pub. L. 101-140, title II, Secs. 203(a)(1), (2), 204(a)(1)-(3)(C),
Nov. 8, 1989, 103 Stat. 830, 832; Pub. L. 101-239, title VII, Sec.
7811(h)(2), Dec. 19, 1989, 103 Stat. 2409; Pub. L. 104-188, title
I, Sec. 1431(c)(1)(B), Aug. 20, 1996, 110 Stat. 1803.)
-COD-
CODIFICATION
Pub. L. 101-140, Sec. 203(a)(1), amended this section to read as
if the amendments made by section 1151(c)(5)(A) of Pub. L. 99-514
(amending subsec. (d)(1)) had not been enacted. Subsequent to
amendment by Pub. L. 99-514, subsec. (d)(1) was amended by Pub. L.
100-647. See 1988 Amendment note below.
-MISC1-
PRIOR PROVISIONS
A prior section 129 was renumbered section 140 of this title.
AMENDMENTS
1996 - Subsec. (d)(8)(B). Pub. L. 104-188 substituted "section
414(q)(4)" for "section 414(q)(7)".
1989 - Subsec. (a). Pub. L. 101-239 struck out at end "For
purposes of the preceding sentence, marital status shall be
determined under the rules of paragraphs (3) and (4) of section
21(e)."
Subsec. (d)(1). Pub. L. 101-140, Sec. 204(a)(3)(B), substituted
"paragraphs (2) through (8)" for "paragraphs (2) through (7)".
Pub. L. 101-140, Sec. 204(a)(1), inserted at end "If any plan
would qualify as a dependent care assistance program but for a
failure to meet the requirements of this subsection, then,
notwithstanding such failure, such plan shall be treated as a
dependent care assistance program in the case of employees who are
not highly compensated employees."
Pub. L. 101-140, Sec. 203(a)(1), amended par. (1) to read as if
the amendments by Pub. L. 99-514, Sec. 1151(c)(5)(A), had not been
enacted, see 1986 Amendment note below.
Subsec. (d)(3). Pub. L. 101-140, Sec. 204(a)(2)(B), struck out at
end "For purposes of this paragraph, there may be excluded from
consideration employees who may be excluded from consideration
under section 89(h)." for "For purposes of this paragraph, there
shall be excluded from consideration employees not included in the
program who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or
more employers, if there is evidence that dependent care benefits
were the subject of good faith bargaining between such employee
representatives and such employer or employers."
Pub. L. 101-140, Sec. 203(a)(2), amended par. (3) to read as if
amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(A)(i), had not
been enacted, see 1988 Amendment note below.
Pub. L. 101-140, Sec. 203(a)(1), amended par. (3) to read as if
amendments by Pub. L. 99-514, Sec. 1151(g)(4), had not been
enacted, see 1986 Amendment note below.
Subsec. (d)(6). Pub. L. 101-140, Sec. 203(a)(1), amended par. (6)
to read as if amendments by Pub. L. 99-514, Sec. 1151(c)(5)(B), had
not been enacted, see 1986 Amendment note below.
Subsec. (d)(7). Pub. L. 101-140, Sec. 204(a)(3)(A), redesignated
par. (7) as (8).
Pub. L. 101-140, Sec. 203(a)(1), amended par. (7) to read as if
amendments by Pub. L. 99-514, Sec. 1151(c)(5)(B), had not been
enacted, see 1986 Amendment note below.
Subsec. (d)(8). Pub. L. 101-140, Sec. 204(a)(3)(A), redesignated
par. (7) as (8).
Pub. L. 101-140, Sec. 203(a)(2), amended par. (8) to read as if
amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(A)(ii), had not
been enacted, see 1988 Amendment note below.
Subsec. (d)(9). Pub. L. 101-140, Sec. 204(a)(2)(A), added par.
(9).
Subsec. (e)(6). Pub. L. 101-140, Sec. 204(a)(3)(C), substituted
"(8)" for "(7)".
1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1011B(c)(2)(A),
amended par. (2) generally. Prior to amendment, par. (2) read as
follows: "The aggregate amount excluded from the gross income of
the taxpayer under this section for any taxable year shall not
exceed $5,000 ($2,500 in the case of a separate return by a married
individual)."
Subsec. (d)(1)(B). Pub. L. 100-647, Sec. 1011B(a)(30),
substituted "(7)" for "(6)", see Codification note above.
Subsec. (d)(3). Pub. L. 100-647, Sec. 1011B(a)(31)(A)(i), struck
out at end "For purposes of this paragraph, there may be excluded
from consideration employees who may be excluded from consideration
under section 89(h)."
Subsec. (d)(7). Pub. L. 100-647, Sec. 1011B(a)(14), redesignated
par. (8) as (7).
Subsec. (d)(7)(A). Pub. L. 100-647, Sec. 1011B(a)(15)(A),
inserted "under all plans of the employer" after second and third
reference to "employees".
Subsec. (d)(7)(B). Pub. L. 100-647, Sec. 3021(a)(14), struck out
"(within the meaning of section 414(q)(7))" after "whose
compensation" and inserted at end "For purposes of this
subparagraph, the term 'compensation' has the meaning given such
term by section 414(q)(7), except that, under rules prescribed by
the Secretary, an employer may elect to determine compensation on
any other basis which does not discriminate in favor of highly
compensated employees."
Pub. L. 100-647, Sec. 1011B(a)(15)(B), (C), substituted "a plan
may disregard" for "there shall be disregarded" and "414(q)(7)" for
"415(q)(7)".
Subsec. (d)(8). Pub. L. 100-647, Sec. 1011B(a)(31)(A)(ii), added
par. (8). Former par. (8) redesignated (7).
Subsec. (e)(6). Pub. L. 100-647, Sec. 1011B(a)(18), inserted
"(other than paragraphs (4) and (7) thereof)" after "subsection
(d)".
Subsec. (e)(8). Pub. L. 100-647, Sec. 1011B(c)(1), in
introductory provisions, inserted "maintained by an employer" after
"onsite facility" and "of dependent care assistance provided to an
employee" after "the amount", in subpar. (A), inserted "of the
facility by a dependent of the employee" after "utilization", and
in subpar. (B), inserted "with respect to such dependent" after
"provided".
Subsec. (e)(9). Pub. L. 100-485 added par. (9).
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1163(a), substituted
"Exclusion" for "In general" in heading and amended text generally.
Prior to amendment, text read as follows: "Gross income of an
employee does not include amounts paid or incurred by the employer
for dependent care assistance provided to such employee if the
assistance is furnished pursuant to a program which is described in
subsection (d)."
Subsec. (c)(1). Pub. L. 99-514, Sec. 104(b)(1)(A), substituted
"section 151(c)" for "section 151(e)".
Subsec. (c)(2). Pub. L. 99-514, Sec. 104(b)(1)(B), substituted
"section 151(c)(3)" for "section 151(e)(3)".
Subsec. (d)(1). Pub. L. 99-514, Sec. 1151(c)(5)(A), added par.
(1) and struck out former par. (1) which read as follows: "For
purposes of this section a dependent care assistance program is a
separate written plan of an employer for the exclusive benefit of
his employees to provide such employees with dependent care
assistance which meets the requirements of paragraphs (2) through
(7) of this subsection."
Subsec. (d)(2). Pub. L. 99-514, Sec. 1114(b)(4), substituted
"highly compensated employees (within the meaning of section
414(q))" for "officers, owners, or highly compensated,".
Subsec. (d)(3). Pub. L. 99-514, Sec. 1151(g)(4), substituted "For
purposes of this paragraph, there may be excluded from
consideration employees who may be excluded from consideration
under section 89(h)." for "For purposes of this paragraph, there
shall be excluded from consideration employees not included in the
program who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or
more employers, if there is evidence that dependent care benefits
were the subject of good faith bargaining between such employee
representatives and such employer or employers."
Subsec. (d)(6), (7). Pub. L. 99-514, Sec. 1151(c)(5)(B),
redesignated par. (7) as (6) and struck out former par. (6) which
read as follows: "Notification of eligible employees. - Reasonable
notification of the availability and terms of the program shall be
provided to eligible employees."
Subsec. (d)(8). Pub. L. 99-514, Sec. 1151(f), added par. (8).
Subsec. (e)(8). Pub. L. 99-514, Sec. 1163(b), added par. (8).
1984 - Subsec. (b)(2). Pub. L. 98-369, Sec. 474(r)(6)(A),
substituted "section 21(d)(2)" for "section 44A(e)(2)".
Subsec. (e)(1). Pub. L. 98-369, Sec. 474(r)(6)(B), substituted
"section 21(b)(2)" for "section 44A(c)(2)".
Subsec. (e)(2). Pub. L. 98-369, Sec. 474(r)(6)(C), substituted
"section 32(c)(2)" for "section 43(c)(2)".
1983 - Subsec. (d)(1). Pub. L. 97-448, Sec. 101(e)(1)(C),
substituted "paragraphs (2) through (7)" for "paragraphs (2)
through (6)".
Subsec. (d)(2). Pub. L. 97-448, Sec. 101(e)(1)(A), added par.
(2). Former par. (2) redesignated (3).
Subsec. (d)(3). Pub. L. 97-448, Sec. 101(e)(1)(A), (B),
redesignated former par. (2) as (3) and substituted "employees
described in paragraph (2), or their dependents" for "employees who
are officers, owners, or highly compensated, or their dependents".
Former par. (3) redesignated (4).
Subsec. (d)(4) to (7). Pub. L. 97-448, Sec. 101(e)(1)(A),
redesignated former pars. (3) to (6) as (4) to (7), respectively.
Subsec. (e)(7). Pub. L. 97-448, Sec. 101(e)(2), substituted
"shall be allowed to the employee under any other section of this
chapter for any amount excluded from the gross income of the
employee" for "shall be allowed under any other section of this
chapter for any amount excluded from income".
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 applicable to years beginning after
Dec. 31, 1996, except that in determining whether an employee is a
highly compensated employee for years beginning in 1997, such
amendment to be treated as having been in effect for years
beginning in 1996, see section 1431(d)(1) of Pub. L. 104-188, set
out as a note under section 414 of this title.
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
Amendment by section 203(a)(1), (2) of Pub. L. 101-140 effective
as if included in section 1151 of Pub. L. 99-514, see section
203(c) of Pub. L. 101-140, set out as a note under section 79 of
this title.
Section 204(a)(3)(D) of Pub. L. 101-140 provided that: "Section
129(d)(8) (as redesignated by subparagraph (A)) shall apply to plan
years beginning after December 31, 1989."
Section 204(d)(1), (2) of Pub. L. 101-140 provided that:
"(1) The amendments made by subsections (a)(1), (a)(2), and
(b)(2) [amending this section and section 414 of this title] shall
apply to years beginning after December 31, 1988.
"(2) The amendments made by subsection (a)(3) [amending this
section] shall apply to plan years beginning after December 31,
1989."
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by section 1011B(a)(14), (15), (18), (30), (31)(A),
(c)(1) of Pub. L. 100-647 effective, except as otherwise provided,
as if included in the provision of the Tax Reform Act of 1986, Pub.
L. 99-514, to which such amendment relates, see section 1019(a) of
Pub. L. 100-647, set out as a note under section 1 of this title.
Section 1011B(c)(2)(C) of Pub. L. 100-647 provided that:
"(i) Except as provided in this subparagraph, the amendments made
by this paragraph [amending this section and section 6051 of this
title] shall apply to taxable years beginning after December 31,
1987.
"(ii) A taxpayer may elect to have the amendment made by
subparagraph (A) [amending this section] apply to taxable years
beginning in 1987.
"(iii) In the case of a taxpayer not making an election under
clause (ii), any dependent care assistance provided in a taxable
year beginning in 1987 with respect to which reimbursement was not
received in such taxable year shall be treated as provided in the
taxpayer's first taxable year beginning after December 31, 1987."
Section 3021(d) of Pub. L. 100-647 provided that:
"(1) Subsection (a). - The amendments made by subsection (a)
[amending this section and sections 89, 410, 4976, 6039D, and 6652
of this title] shall take effect as if included in the amendments
made by section 1151 of the Tax Reform Act of 1986 [Pub. L. 99-514,
see Effective Date note below]; except that the amendment made by
subsection (a)(8) [amending section 89 of this title] shall apply
to testing years beginning after December 31, 1989.
"(2) Subsection (b). - The amendments made by subsection (b)
[amending sections 89 and 414 of this title] shall apply to years
beginning after December 31, 1986."
Amendment by Pub. L. 100-485 applicable to taxable years
beginning after Dec. 31, 1988, see section 703(d) of Pub. L.
100-485, set out as a note under section 21 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 104(b)(1) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1114(b)(4) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(c)(5), (f), (g)(4) of Pub. L. 99-514
applicable, with certain qualifications and exceptions, to years
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Section 1163(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1986."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, and to carrybacks from such years, see section
475(a) of Pub. L. 98-369, set out as a note under section 21 of
this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1981, see section 124(f) of Pub. L. 97-34, set out as an Effective
Date of 1981 Amendment note under section 21 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 21, 51A, 414, 3121, 3306,
3401, 6039D, 6051 of this title; title 42 section 409.
-End-
-CITE-
26 USC Sec. 130 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 130. Certain personal injury liability assignments
-STATUTE-
(a) In general
Any amount received for agreeing to a qualified assignment shall
not be included in gross income to the extent that such amount does
not exceed the aggregate cost of any qualified funding assets.
(b) Treatment of qualified funding asset
In the case of any qualified funding asset -
(1) the basis of such asset shall be reduced by the amount
excluded from gross income under subsection (a) by reason of the
purchase of such asset, and
(2) any gain recognized on a disposition of such asset shall be
treated as ordinary income.
(c) Qualified assignment
For purposes of this section, the term "qualified assignment"
means any assignment of a liability to make periodic payments as
damages (whether by suit or agreement), or as compensation under
any workmen's compensation act, on account of personal injury or
sickness (in a case involving physical injury or physical sickness)
-
(1) if the assignee assumes such liability from a person who is
a party to the suit or agreement, or the workmen's compensation
claim, and
(2) if -
(A) such periodic payments are fixed and determinable as to
amount and time of payment,
(B) such periodic payments cannot be accelerated, deferred,
increased, or decreased by the recipient of such payments,
(C) the assignee's obligation on account of the personal
injuries or sickness is no greater than the obligation of the
person who assigned the liability, and
(D) such periodic payments are excludable from the gross
income of the recipient under paragraph (1) or (2) of section
104(a).
The determination for purposes of this chapter of when the
recipient is treated as having received any payment with respect to
which there has been a qualified assignment shall be made without
regard to any provision of such assignment which grants the
recipient rights as a creditor greater than those of a general
creditor.
(d) Qualified funding asset
For purposes of this section, the term "qualified funding asset"
means any annuity contract issued by a company licensed to do
business as an insurance company under the laws of any State, or
any obligation of the United States, if -
(1) such annuity contract or obligation is used by the assignee
to fund periodic payments under any qualified assignment,
(2) the periods of the payments under the annuity contract or
obligation are reasonably related to the periodic payments under
the qualified assignment, and the amount of any such payment
under the contract or obligation does not exceed the periodic
payment to which it relates,
(3) such annuity contract or obligation is designated by the
taxpayer (in such manner as the Secretary shall by regulations
prescribe) as being taken into account under this section with
respect to such qualified assignment, and
(4) such annuity contract or obligation is purchased by the
taxpayer not more than 60 days before the date of the qualified
assignment and not later than 60 days after the date of such
assignment.
-SOURCE-
(Added Pub. L. 97-473, title I, Sec. 101(b)(1), Jan. 14, 1983, 96
Stat. 2605; amended Pub. L. 99-514, title X, Sec. 1002(a), Oct. 22,
1986, 100 Stat. 2388; Pub. L. 100-647, title VI, Sec. 6079(b)(1),
Nov. 10, 1988, 102 Stat. 3709; Pub. L. 105-34, title IX, Sec.
962(a), Aug. 5, 1997, 111 Stat. 891.)
-MISC1-
PRIOR PROVISIONS
A prior section 130 was renumbered section 140 of this title.
AMENDMENTS
1997 - Subsec. (c). Pub. L. 105-34, Sec. 962(a)(1), inserted ",
or as compensation under any workmen's compensation act," after
"(whether by suit or agreement)" in introductory provisions.
Subsec. (c)(1). Pub. L. 105-34, Sec. 962(a)(2), inserted "or the
workmen's compensation claim," after "agreement,".
Subsec. (c)(2)(D). Pub. L. 105-34, Sec. 962(a)(3), substituted
"paragraph (1) or (2) of section 104(a)" for "section 104(a)(2)".
1988 - Subsec. (c). Pub. L. 100-647, in par. (2), redesignated
subpars. (D) and (E) as (C) and (D), respectively, struck out
former subpar. (C) which provided that the assignee does not
provide to the recipient of such payments rights against the
assignee which are greater than those of a general creditor, and as
concluding provisions, inserted at end "The determination for
purposes of this chapter of when the recipient is treated as having
received any payment with respect to which there has been a
qualified assignment shall be made without regard to any provision
of such assignment which grants the recipient rights as a creditor
greater than those of a general creditor."
1986 - Subsec. (c). Pub. L. 99-514 inserted "(in a case involving
physical injury or physical sickness)".
EFFECTIVE DATE OF 1997 AMENDMENT
Section 962(b) of Pub. L. 105-34 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
claims under workmen's compensation acts filed after the date of
the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6079(b)(2) of Pub. L. 100-647 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to assignments after the date of the enactment of this Act [Nov.
10, 1988]."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1002(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending this section] shall apply to
assignments entered into after December 31, 1986, in taxable years
ending after such date."
EFFECTIVE DATE
Section 101(c) of Pub. L. 97-473 provided that: "The amendments
made by this section [enacting this section and amending section
104 of this title] shall apply to taxable years ending after
December 31, 1982."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 72, 5891 of this title.
-End-
-CITE-
26 USC Sec. 131 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 131. Certain foster care payments
-STATUTE-
(a) General rule
Gross income shall not include amounts received by a foster care
provider during the taxable year as qualified foster care payments.
(b) Qualified foster care payment defined
For purposes of this section -
(1) In general
The term "qualified foster care payment" means any payment made
pursuant to a foster care program of a State or political
subdivision thereof -
(A) which is paid by -
(i) a State or political subdivision thereof, or
(ii) a qualified foster care placement agency, and
(B) which is -
(i) paid to the foster care provider for caring for a
qualified foster individual in the foster care provider's
home, or
(ii) a difficulty of care payment.
(2) Qualified foster individual
The term "qualified foster individual" means any individual who
is living in a foster family home in which such individual was
placed by -
(A) an agency of a State or political subdivision thereof, or
(B) a qualified foster care placement agency.
(3) Qualified foster care placement agency
The term "qualified foster care placement agency" means any
placement agency which is licensed or certified by -
(A) a State or political subdivision thereof, or
(B) an entity designated by a State or political subdivision
thereof,
for the foster care program of such State or political
subdivision to make foster care payments to providers of foster
care.
(4) Limitation based on number of individuals over the age of 18
In the case of any foster home in which there is a qualified
foster care individual who has attained age 19, foster care
payments (other than difficulty of care payments) for any period
to which such payments relate shall not be excludable from gross
income under subsection (a) to the extent such payments are made
for more than 5 such qualified foster individuals.
(c) Difficulty of care payments
For purposes of this section -
(1) Difficulty of care payments
The term "difficulty of care payments" means payments to
individuals which are not described in subsection (b)(1)(B)(i),
and which -
(A) are compensation for providing the additional care of a
qualified foster individual which is -
(i) required by reason of a physical, mental, or emotional
handicap of such individual with respect to which the State
has determined that there is a need for additional
compensation, and
(ii) provided in the home of the foster care provider, and
(B) are designated by the payor as compensation described in
subparagraph (A).
(2) Limitation based on number of individuals
In the case of any foster home, difficulty of care payments for
any period to which such payments relate shall not be excludable
from gross income under subsection (a) to the extent such
payments are made for more than -
(A) 10 qualified foster individuals who have not attained age
19, and
(B) 5 qualified foster individuals not described in
subparagraph (A).
-SOURCE-
(Added Pub. L. 97-473, title I, Sec. 102(a), Jan. 14, 1983, 96
Stat. 2606; amended Pub. L. 99-514, title XVII, Sec. 1707(a), Oct.
22, 1986, 100 Stat. 2781; Pub. L. 107-147, title IV, Sec.
404(a)-(c), Mar. 9, 2002, 116 Stat. 41.)
-MISC1-
PRIOR PROVISIONS
A prior section 131 was renumbered section 140 of this title.
AMENDMENTS
2002 - Subsec. (b)(1). Pub. L. 107-147, Sec. 404(a), amended
provisions preceding subpar. (B) generally. Prior to amendment,
text of such provisions read as follows: "The term 'qualified
foster care payment' means any amount -
"(A) which is paid by a State or political subdivision thereof
or by a placement agency which is described in section 501(c)(3)
and exempt from tax under section 501(a), and".
Subsec. (b)(2)(B). Pub. L. 107-147, Sec. 404(b), amended subpar.
(B) generally. Prior to amendment, subpar. (B) read as follows: "in
the case of an individual who has not attained age 19, an
organization which is licensed by a State (or political subdivision
thereof) as a placement agency and which is described in section
501(c)(3) and exempt from tax under section 501(a)."
Subsec. (b)(3), (4). Pub. L. 107-147, Sec. 404(c), added par. (3)
and redesignated former par. (3) as (4).
1986 - Subsec. (a). Pub. L. 99-514 amended subsec. (a) generally.
Prior to amendment, subsec. (a) read as follows: "Gross income
shall not include amounts received by a foster parent during the
taxable year as qualified foster care payments."
Subsec. (b). Pub. L. 99-514 amended subsec. (b) generally. Prior
to amendment, par. (1) "In general" read as follows: "The term
'qualified foster care payment' means any amount -
"(A) which is paid by a State or political subdivision thereof
or by a child-placing agency which is described in section
501(c)(3) and exempt from tax under section 501(a), and
"(B) which is -
"(i) paid to reimburse the foster parent for the expenses of
caring for a qualified foster child in the foster parent's
home, or
"(ii) a difficulty of care payment."
and par. (2) "Qualified foster child" read as follows: "The term
'qualified foster child' means any individual who -
"(A) has not attained age 19, and
"(B) is living in a foster family home in which such individual
was placed by -
"(i) an agency of a State or political subdivision thereof,
or
"(ii) an organization which is licensed by a State (or
political subdivision thereof) as a child-placing agency and
which is described in section 501(c)(3) and exempt from tax
under section 501(a)."
Subsec. (c). Pub. L. 99-514, in amending subsec. (c) generally,
in par. (1)(A), substituted references to "qualified foster
individual", "such individual", and "foster care provider" for
references to "qualified foster child", "such child", and "foster
parent", respectively, and in par. (2) substituted "more than (A)
10 qualified foster individuals who have not attained age 19, and
(B) 5 qualified foster individuals not described in subparagraph
(A)" for "more than 10 qualified foster children".
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-147, title IV, Sec. 404(d), Mar. 9, 2002, 116 Stat.
42, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2001."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1707(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1985."
EFFECTIVE DATE
Section 102(c) of Pub. L. 97-473 provided that: "The amendments
made by this section [enacting this section] shall apply to taxable
years beginning after December 31, 1978."
-End-
-CITE-
26 USC Sec. 132 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 132. Certain fringe benefits
-STATUTE-
(a) Exclusion from gross income
Gross income shall not include any fringe benefit which qualifies
as a -
(1) no-additional-cost service,
(2) qualified employee discount,
(3) working condition fringe,
(4) de minimis fringe,
(5) qualified transportation fringe,
(6) qualified moving expense reimbursement,
(7) qualified retirement planning services, or
(8) qualified military base realignment and closure fringe.
(b) No-additional-cost service defined
For purposes of this section, the term "no-additional-cost
service" means any service provided by an employer to an employee
for use by such employee if -
(1) such service is offered for sale to customers in the
ordinary course of the line of business of the employer in which
the employee is performing services, and
(2) the employer incurs no substantial additional cost
(including forgone revenue) in providing such service to the
employee (determined without regard to any amount paid by the
employee for such service).
(c) Qualified employee discount defined
For purposes of this section -
(1) Qualified employee discount
The term "qualified employee discount" means any employee
discount with respect to qualified property or services to the
extent such discount does not exceed -
(A) in the case of property, the gross profit percentage of
the price at which the property is being offered by the
employer to customers, or
(B) in the case of services, 20 percent of the price at which
the services are being offered by the employer to customers.
(2) Gross profit percentage
(A) In general
The term "gross profit percentage" means the percent which -
(i) the excess of the aggregate sales price of property
sold by the employer to customers over the aggregate cost of
such property to the employer, is of
(ii) the aggregate sale price of such property.
(B) Determination of gross profit percentage
Gross profit percentage shall be determined on the basis of -
(i) all property offered to customers in the ordinary
course of the line of business of the employer in which the
employee is performing services (or a reasonable
classification of property selected by the employer), and
(ii) the employer's experience during a representative
period.
(3) Employee discount defined
The term "employee discount" means the amount by which -
(A) the price at which the property or services are provided
by the employer to an employee for use by such employee, is
less than
(B) the price at which such property or services are being
offered by the employer to customers.
(4) Qualified property or services
The term "qualified property or services" means any property
(other than real property and other than personal property of a
kind held for investment) or services which are offered for sale
to customers in the ordinary course of the line of business of
the employer in which the employee is peforming (!1) services.
(d) Working condition fringe defined
For purposes of this section, the term "working condition fringe"
means any property or services provided to an employee of the
employer to the extent that, if the employee paid for such property
or services, such payment would be allowable as a deduction under
section 162 or 167.
(e) De minimis fringe defined
For purposes of this section -
(1) In general
The term "de minimis fringe" means any property or service the
value of which is (after taking into account the frequency with
which similar fringes are provided by the employer to the
employer's employees) so small as to make accounting for it
unreasonable or administratively impracticable.
(2) Treatment of certain eating facilities
The operation by an employer of any eating facility for
employees shall be treated as a de minimis fringe if -
(A) such facility is located on or near the business premises
of the employer, and
(B) revenue derived from such facility normally equals or
exceeds the direct operating costs of such facility.
The preceding sentence shall apply with respect to any highly
compensated employee only if access to the facility is available
on substantially the same terms to each member of a group of
employees which is defined under a reasonable classification set
up by the employer which does not discriminate in favor of highly
compensated employees. For purposes of subparagraph (B), an
employee entitled under section 119 to exclude the value of a
meal provided at such facility shall be treated as having paid an
amount for such meal equal to the direct operating costs of the
facility attributable to such meal.
(f) Qualified transportation fringe
(1) In general
For purposes of this section, the term "qualified
transportation fringe" means any of the following provided by an
employer to an employee:
(A) Transportation in a commuter highway vehicle if such
transportation is in connection with travel between the
employee's residence and place of employment.
(B) Any transit pass.
(C) Qualified parking.
(2) Limitation on exclusion
The amount of the fringe benefits which are provided by an
employer to any employee and which may be excluded from gross
income under subsection (a)(5) shall not exceed -
(A) $100 per month in the case of the aggregate of the
benefits described in subparagraphs (A) and (B) of paragraph
(1), and
(B) $175 per month in the case of qualified parking.
(3) Cash reimbursements
For purposes of this subsection, the term "qualified
transportation fringe" includes a cash reimbursement by an
employer to an employee for a benefit described in paragraph (1).
The preceding sentence shall apply to a cash reimbursement for
any transit pass only if a voucher or similar item which may be
exchanged only for a transit pass is not readily available for
direct distribution by the employer to the employee.
(4) No constructive receipt
No amount shall be included in the gross income of an employee
solely because the employee may choose between any qualified
transportation fringe and compensation which would otherwise be
includible in gross income of such employee.
(5) Definitions
For purposes of this subsection -
(A) Transit pass
The term "transit pass" means any pass, token, farecard,
voucher, or similar item entitling a person to transportation
(or transportation at a reduced price) if such transportation
is -
(i) on mass transit facilities (whether or not publicly
owned), or
(ii) provided by any person in the business of transporting
persons for compensation or hire if such transportation is
provided in a vehicle meeting the requirements of
subparagraph (B)(i).
(B) Commuter highway vehicle
The term "commuter highway vehicle" means any highway vehicle
-
(i) the seating capacity of which is at least 6 adults (not
including the driver), and
(ii) at least 80 percent of the mileage use of which can
reasonably be expected to be -
(I) for purposes of transporting employees in connection
with travel between their residences and their place of
employment, and
(II) on trips during which the number of employees
transported for such purposes is at least 1/2 of the
adult seating capacity of such vehicle (not including the
driver).
(C) Qualified parking
The term "qualified parking" means parking provided to an
employee on or near the business premises of the employer or on
or near a location from which the employee commutes to work by
transportation described in subparagraph (A), in a commuter
highway vehicle, or by carpool. Such term shall not include any
parking on or near property used by the employee for
residential purposes.
(D) Transportation provided by employer
Transportation referred to in paragraph (1)(A) shall be
considered to be provided by an employer if such transportation
is furnished in a commuter highway vehicle operated by or for
the employer.
(E) Employee
For purposes of this subsection, the term "employee" does not
include an individual who is an employee within the meaning of
section 401(c)(1).
(6) Inflation adjustment
(A) In general
In the case of any taxable year beginning in a calendar year
after 1999, the dollar amounts contained in subparagraphs (A)
and (B) of paragraph (2) shall be increased by an amount equal
to -
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting "calendar year 1998" for "calendar
year 1992".
In the case of any taxable year beginning in a calendar year
after 2002, clause (ii) shall be applied by substituting
"calendar year 2001" for "calendar year 1998" for purposes of
adjusting the dollar amount contained in paragraph (2)(A).
(B) Rounding
If any increase determined under subparagraph (A) is not a
multiple of $5, such increase shall be rounded to the next
lowest multiple of $5.
(7) Coordination with other provisions
For purposes of this section, the terms "working condition
fringe" and "de minimis fringe" shall not include any qualified
transportation fringe (determined without regard to paragraph
(2)).
(g) Qualified moving expense reimbursement
For purposes of this section, the term "qualified moving expense
reimbursement" means any amount received (directly or indirectly)
by an individual from an employer as a payment for (or a
reimbursement of) expenses which would be deductible as moving
expenses under section 217 if directly paid or incurred by the
individual. Such term shall not include any payment for (or
reimbursement of) an expense actually deducted by the individual in
a prior taxable year.
(h) Certain individuals treated as employees for purposes of
subsections (a)(1) and (2)
For purposes of paragraphs (1) and (2) of subsection (a) -
(1) Retired and disabled employees and surviving spouse of
employee treated as employee
With respect to a line of business of an employer, the term
"employee" includes -
(A) any individual who was formerly employed by such employer
in such line of business and who separated from service with
such employer in such line of business by reason of retirement
or disability, and
(B) any widow or widower of any individual who died while
employed by such employer in such line of business or while an
employee within the meaning of subparagraph (A).
(2) Spouse and dependent children
(A) In general
Any use by the spouse or a dependent child of the employee
shall be treated as use by the employee.
(B) Dependent child
For purposes of subparagraph (A), the term "dependent child"
means any child (as defined in section 151(c)(3)) of the
employee -
(i) who is a dependent of the employee, or
(ii) both of whose parents are deceased and who has not
attained age 25.
For purposes of the preceding sentence, any child to whom
section 152(e) applies shall be treated as the dependent of
both parents.
(3) Special rule for parents in the case of air transportation
Any use of air transportation by a parent of an employee
(determined without regard to paragraph (1)(B)) shall be treated
as use by the employee.
(i) Reciprocal agreements
For purposes of paragraph (1) of subsection (a), any service
provided by an employer to an employee of another employer shall be
treated as provided by the employer of such employee if -
(1) such service is provided pursuant to a written agreement
between such employers, and
(2) neither of such employers incurs any substantial additional
costs (including foregone revenue) in providing such service or
pursuant to such agreement.
(j) Special rules
(1) Exclusions under subsection (a)(1) and (2) apply to highly
compensated employees only if no discrimination
Paragraphs (1) and (2) of subsection (a) shall apply with
respect to any fringe benefit described therein provided with
respect to any highly compensated employee only if such fringe
benefit is available on substantially the same terms to each
member of a group of employees which is defined under a
reasonable classification set up by the employer which does not
discriminate in favor of highly compensated employees.
(2) Special rule for leased sections of department stores
(A) In general
For purposes of paragraph (2) of subsection (a), in the case
of a leased section of a department store -
(i) such section shall be treated as part of the line of
business of the person operating the department store, and
(ii) employees in the leased section shall be treated as
employees of the person operating the department store.
(B) Leased section of department store
For purposes of subparagraph (A), a leased section of a
department store is any part of a department store where
over-the-counter sales of property are made under a lease or
similar arrangement where it appears to the general public that
individuals making such sales are employed by the person
operating the department store.
(3) Auto salesmen
(A) In general
For purposes of subsection (a)(3), qualified automobile
demonstration use shall be treated as a working condition
fringe.
(B) Qualified automobile demonstration use
For purposes of subparagraph (A), the term "qualified
automobile demonstration use" means any use of an automobile by
a full-time automobile salesman in the sales area in which the
automobile dealer's sales office is located if -
(i) such use is provided primarily to facilitate the
salesman's performance of services for the employer, and
(ii) there are substantial restrictions on the personal use
of such automobile by such salesman.
(4) On-premises gyms and other athletic facilities
(A) In general
Gross income shall not include the value of any on-premises
athletic facility provided by an employer to his employees.
(B) On-premises athletic facility
For purposes of this paragraph, the term "on-premises
athletic facility" means any gym or other athletic facility -
(i) which is located on the premises of the employer,
(ii) which is operated by the employer, and
(iii) substantially all the use of which is by employees of
the employer, their spouses, and their dependent children
(within the meaning of subsection (h)).
(5) Special rule for affiliates of airlines
(A) In general
If -
(i) a qualified affiliate is a member of an affiliated
group another member of which operates an airline, and
(ii) employees of the qualified affiliate who are directly
engaged in providing airline-related services are entitled to
no-additional-cost service with respect to air transportation
provided by such other member,
then, for purposes of applying paragraph (1) of subsection (a)
to such no-additional-cost service provided to such employees,
such qualified affiliate shall be treated as engaged in the
same line of business as such other member.
(B) Qualified affiliate
For purposes of this paragraph, the term "qualified
affiliate" means any corporation which is predominantly engaged
in airline-related services.
(C) Airline-related services
For purposes of this paragraph, the term "airline-related
services" means any of the following services provided in
connection with air transportation:
(i) Catering.
(ii) Baggage handling.
(iii) Ticketing and reservations.
(iv) Flight planning and weather analysis.
(v) Restaurants and gift shops located at an airport.
(vi) Such other similar services provided to the airline as
the Secretary may prescribe.
(D) Affiliated group
For purposes of this paragraph, the term "affiliated group"
has the meaning given such term by section 1504(a).
(6) Highly compensated employee
For purposes of this section, the term "highly compensated
employee" has the meaning given such term by section 414(q).
(7) Air cargo
For purposes of subsection (b), the transportation of cargo by
air and the transportation of passengers by air shall be treated
as the same service.
(8) Application of section to otherwise taxable educational or
training benefits
Amounts paid or expenses incurred by the employer for education
or training provided to the employee which are not excludable
from gross income under section 127 shall be excluded from gross
income under this section if (and only if) such amounts or
expenses are a working condition fringe.
(k) Customers not to include employees
For purposes of this section (other than subsection (c)(2)), the
term "customers" shall only include customers who are not
employees.
(l) Section not to apply to fringe benefits expressly provided for
elsewhere
This section (other than subsections (e) and (g)) shall not apply
to any fringe benefits of a type the tax treatment of which is
expressly provided for in any other section of this chapter.
(m) Qualified retirement planning services
(1) In general
For purposes of this section, the term "qualified retirement
planning services" means any retirement planning advice or
information provided to an employee and his spouse by an employer
maintaining a qualified employer plan.
(2) Nondiscrimination rule
Subsection (a)(7) shall apply in the case of highly compensated
employees only if such services are available on substantially
the same terms to each member of the group of employees normally
provided education and information regarding the employer's
qualified employer plan.
(3) Qualified employer plan
For purposes of this subsection, the term "qualified employer
plan" means a plan, contract, pension, or account described in
section 219(g)(5).
(n) Qualified military base realignment and closure fringe
For purposes of this section -
(1) In general
The term "qualified military base realignment and closure
fringe" means 1 or more payments under the authority of section
1013 of the Demonstration Cities and Metropolitan Development Act
of 1966 (42 U.S.C. 3374) (as in effect on the date of the
enactment of this subsection) to offset the adverse effects on
housing values as a result of a military base realignment or
closure.
(2) Limitation
With respect to any property, such term shall not include any
payment referred to in paragraph (1) to the extent that the sum
of all of such payments related to such property exceeds the
maximum amount described in clause (1) of subsection (c) of such
section (as in effect on such date).
(o) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 531(a)(1), July 18,
1984, 98 Stat. 877; amended Pub. L. 99-272, title XIII, Sec.
13207(a)(1), (b)(1), Apr. 7, 1986, 100 Stat. 319; Pub. L. 99-514,
title XI, Secs. 1114(b)(5), 1151(e)(2)(A), (g)(5), title XVIII,
Secs. 1853(a), 1899A(5), Oct. 22, 1986, 100 Stat. 2451, 2506, 2507,
2870, 2958; Pub. L. 100-647, title I, Sec. 1011B(a)(31)(B), title
VI, Sec. 6066(a), Nov. 10, 1988, 102 Stat. 3488, 3702; Pub. L.
101-140, title II, Sec. 203(a)(1), (2), Nov. 8, 1989, 103 Stat.
830; Pub. L. 101-239, title VII, Secs. 7101(b), 7841(d)(7), (19),
Dec. 19, 1989, 103 Stat. 2304, 2428, 2429; Pub. L. 102-486, title
XIX, Sec. 1911(a)-(c), Oct. 24, 1992, 106 Stat. 3012-3014; Pub. L.
103-66, title XIII, Secs. 13101(b), 13201(b)(3)(F), 13213(d)(1),
(2), (3)(B), (C), Aug. 10, 1993, 107 Stat. 420, 459, 474; Pub. L.
105-34, title IX, Sec. 970(a), title X, Sec. 1072(a), Aug. 5, 1997,
111 Stat. 897, 948; Pub. L. 105-178, title IX, Sec. 9010(a)(1),
(b)(1), (2), (c)(1), (2), June 9, 1998, 112 Stat. 507, 508; Pub. L.
107-16, title VI, Sec. 665(a), (b), June 7, 2001, 115 Stat. 143;
Pub. L. 108-121, title I, Sec. 103(a), (b), Nov. 11, 2003, 117
Stat. 1337.)
-STATAMEND-
QUALIFIED TRANSPORTATION FRINGE BENEFIT EXCLUSION ADJUSTMENT FOR
TAXABLE YEARS BEGINNING IN 2004
For adjustment of qualified transportation fringe benefit
exclusion amount under this section for taxable years beginning in
2004, see section 3.12 of Revenue Procedure 2003-85, set out as a
note under section 1 of this title.
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this subsection, referred to in
subsec. (n), is the date of enactment of Pub. L. 108-121, which was
approved Nov. 11, 2003.
-MISC1-
PRIOR PROVISIONS
A prior section 132 was renumbered section 140 of this title.
AMENDMENTS
2003 - Subsec. (a)(8). Pub. L. 108-121, Sec. 103(a), added par.
(8).
Subsecs. (n), (o). Pub. L. 108-121, Sec. 103(b), added subsec.
(n) and redesignated former subsec. (n) as (o).
2001 - Subsec. (a)(7). Pub. L. 107-16, Secs. 665(a), 901,
temporarily added par. (7). See Effective and Termination Dates of
2001 Amendment note below.
Subsecs. (m), (n). Pub. L. 107-16, Secs. 665(b), 901, temporarily
added subsec. (m) and redesignated former subsec. (m) as (n). See
Effective and Termination Dates of 2001 Amendment note below.
1998 - Subsec. (f)(2)(A). Pub. L. 105-178, Sec. 9010(c)(1),
substituted "$100" for "$65".
Pub. L. 105-178, Sec. 9010(b)(2)(A), substituted "$65" for "$60".
Subsec. (f)(2)(B). Pub. L. 105-178, Sec. 9010(b)(2)(B),
substituted "$175" for "$155".
Subsec. (f)(4). Pub. L. 105-178, Sec. 9010(a)(1), amended heading
and text of par. (4) generally. Prior to amendment, text read as
follows: "Subsection (a)(5) shall not apply to any qualified
transportation fringe unless such benefit is provided in addition
to (and not in lieu of) any compensation otherwise payable to the
employee. This paragraph shall not apply to any qualified parking
provided in lieu of compensation which otherwise would have been
includible in gross income of the employee, and no amount shall be
included in the gross income of the employee solely because the
employee may choose between the qualified parking and
compensation."
Subsec. (f)(6). Pub. L. 105-178, Sec. 9010(b)(1), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "In the case of any taxable year
beginning in a calendar year after 1993, the dollar amounts
contained in paragraph (2)(A) and (B) shall be increased by an
amount equal to -
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins.
If any increase determined under the preceding sentence is not a
multiple of $5, such increase shall be rounded to the next lowest
multiple of $5."
Subsec. (f)(6)(A). Pub. L. 105-178, Sec. 9010(c)(2), inserted
concluding provisions.
1997 - Subsec. (e)(2). Pub. L. 105-34, Sec. 970(a), inserted at
end of concluding provisions "For purposes of subparagraph (B), an
employee entitled under section 119 to exclude the value of a meal
provided at such facility shall be treated as having paid an amount
for such meal equal to the direct operating costs of the facility
attributable to such meal."
Subsec. (f)(4). Pub. L. 105-34, Sec. 1072(a), inserted at end
"This paragraph shall not apply to any qualified parking provided
in lieu of compensation which otherwise would have been includible
in gross income of the employee, and no amount shall be included in
the gross income of the employee solely because the employee may
choose between the qualified parking and compensation."
1993 - Subsec. (a)(6). Pub. L. 103-66, Sec. 13213(d)(1), added
par. (6).
Subsec. (f)(6)(B). Pub. L. 103-66, Sec. 13201(b)(3)(F), struck
out before period at end ", determined by substituting 'calendar
year 1992' for 'calendar year 1989' in subparagraph (B) thereof".
Subsecs. (g), (h). Pub. L. 103-66, Sec. 13213(d)(2), added
subsec. (g) and redesignated former subsec. (g) as (h). Former
subsec. (h) redesignated (i).
Subsec. (i). Pub. L. 103-66, Sec. 13213(d)(2), redesignated
subsec. (h) as (i). Former subsec. (i) redesignated (j).
Subsec. (i)(8). Pub. L. 103-66, Sec. 13101(b), amended heading
and text of par. (8) generally. Prior to amendment, text read as
follows: "Amounts which would be excludible from gross income under
section 127 but for subsection (a)(2) thereof or the last sentence
of subsection (c)(1) thereof shall be excluded from gross income
under this section if (and only if) such amounts are a working
condition fringe."
Subsec. (j). Pub. L. 103-66, Sec. 13213(d)(2), redesignated
subsec. (i) as (j). Former subsec. (j) redesignated (k).
Subsec. (j)(4)(B)(iii). Pub. L. 103-66, Sec. 13213(d)(3)(B),
substituted "subsection (h)" for "subsection (f)".
Subsec. (k). Pub. L. 103-66, Sec. 13213(d)(2), redesignated
subsec. (j) as (k). Former subsec. (k) redesignated (l).
Subsec. (l). Pub. L. 103-66, Sec. 13213(d)(2), (3)(C),
redesignated subsec. (k) as (l) and substituted "subsections (e)
and (g)" for "subsection (e)". Former subsec. (l) redesignated (m).
Subsec. (m). Pub. L. 103-66, Sec. 13213(d)(2), redesignated
subsec. (l) as (m).
1992 - Subsec. (a)(5). Pub. L. 102-486, Sec. 1911(a), added par.
(5).
Subsecs. (f) to (h). Pub. L. 102-486, Sec. 1911(b), added subsec.
(f) and redesignated former subsecs. (f) and (g) as (g) and (h),
respectively. Former subsec. (h) redesignated (i).
Subsec. (i). Pub. L. 102-486, Sec. 1911(b), (c), redesignated
subsec. (h) as (i), redesignated pars. (5) to (9) as (4) to (8),
respectively, and struck out former par. (4), "Parking", which read
as follows: "The term 'working condition fringe' includes parking
provided to an employee on or near the business premises of the
employer." Former subsec. (i) redesignated (j).
Subsecs. (j) to (l). Pub. L. 102-486, Sec. 1911(b), redesignated
subsecs. (i) to (k) as (j) to (l), respectively.
1989 - Subsec. (f)(2)(B). Pub. L. 101-239, Sec. 7841(d)(19),
substituted "section 151(c)(3)" for "section 151(e)(3)" in
introductory provisions.
Subsec. (h)(1). Pub. L. 101-239, Sec. 7841(d)(7), substituted "to
highly compensated employees" for "to officers, etc.," in heading.
Pub. L. 101-140, Sec. 203(a)(2), amended par. (1) to read as if
amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B), had not been
enacted, see 1988 Amendment note below.
Pub. L. 101-140, Sec. 203(a)(1), amended par. (1) to read as if
amendments by Pub. L. 99-514, Sec. 1151(g)(5), had not been
enacted, see 1986 Amendment note below.
Subsec. (h)(9). Pub. L. 101-239, Sec. 7101(b), added par. (9).
1988 - Subsec. (h)(1). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted "there shall" for "there may be" and "who are" for "who
may be" in last sentence.
Subsec. (h)(8). Pub. L. 100-647, Sec. 6066(a), added par. (8).
1986 - Subsec. (c)(3)(A). Pub. L. 99-514, Sec. 1853(a)(2),
substituted "are provided by the employer to an employee for use by
such employee" for "are provided to the employee by the employer".
Subsec. (e)(2). Pub. L. 99-514, Sec. 1114(b)(5)(A), struck out
"officer, owner, or" before "highly compensated employee" and
"officers, owners, or" before "highly compensated employees" in
last sentence.
Subsec. (f)(2)(B)(ii). Pub. L. 99-514, Sec. 1853(a)(1),
substituted "are deceased and who has not attained age 25" for "are
deceased".
Subsec. (f)(3). Pub. L. 99-272, Sec. 13207(a)(1), added par. (3).
Subsec. (g). Pub. L. 99-514, Sec. 1151(e)(2)(A), in amending
subsec. (g) generally, designated par. (2) as the entire
subsection, struck out former subsec. heading, "Special rules
relating to employer", struck out "For purposes of this section -
", and struck out par. (1) which read as follows: "All employees
treated as employed by a single employer under subsection (b), (c),
or (m) of section 414 shall be treated as employed by a single
employer for purposes of this section."
Subsec. (h)(1). Pub. L. 99-514, Sec. 1151(g)(5), inserted "For
purposes of this paragraph and subsection (e), there may be
excluded from consideration employees who may be excluded from
consideration under section 89(h)."
Pub. L. 99-514, Sec. 1114(b)(5)(A), struck out "officer, owner,
or" before "highly compensated employee" and "officers, owners, or"
before "highly compensated employees".
Subsec. (h)(3)(B)(i). Pub. L. 99-514, Sec. 1899A(5), substituted
"such use is" for "such use in".
Subsec. (h)(6). Pub. L. 99-272, Sec. 13207(b)(1), added par. (6).
Subsec. (h)(7). Pub. L. 99-514, Sec. 1114(b)(5)(B), added par.
(7).
Subsec. (i). Pub. L. 99-514, Sec. 1853(a)(3), substituted
"subsection (c)(2)" for "subsection (c)(2)(B)".
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 103(c), Nov. 11, 2003, 117 Stat.
1338, provided that: "The amendments made by this section [amending
this section] shall apply to payments made after the date of the
enactment of this Act [Nov. 11, 2003]."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 665(c), June 7, 2001, 115 Stat.
143, provided that: "The amendments made by this section [amending
this section] shall apply to years beginning after December 31,
2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-178, title IX, Sec. 9010(a)(2), June 9, 1998, 112
Stat. 507, provided that: "The amendment made by this subsection
[amending this section] shall apply to taxable years beginning
after December 31, 1997."
Pub. L. 105-178, title IX, Sec. 9010(b)(3), June 9, 1998, 112
Stat. 508, provided that: "The amendments made by this subsection
[amending this section] shall apply to taxable years beginning
after December 31, 1998."
Pub. L. 105-178, title IX, Sec. 9010(c)(3), June 9, 1998, 112
Stat. 508, provided that: "The amendments made by this subsection
[amending this section] shall apply to taxable years beginning
after December 31, 2001."
EFFECTIVE DATE OF 1997 AMENDMENT
Section 970(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
Section 1072(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13101(c)(2) of Pub. L. 103-66 provided that: "The
amendment made by subsection (b) [amending this section] shall
apply to taxable years beginning after December 31, 1988."
Amendment by section 13201(b)(3)(F) of Pub. L. 103-66 applicable
to taxable years beginning after Dec. 31, 1992, see section
13201(c) of Pub. L. 103-66, set out as a note under section 1 of
this title.
Amendment by section 13213(d)(1), (2), (3)(B) and (C) of Pub. L.
103-66 applicable to reimbursements or other payments in respect of
expenses incurred after Dec. 31, 1993, see section 13213(e) of Pub.
L. 103-66, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Section 1911(d) of Pub. L. 102-486 provided that: "The amendments
made by this section [amending this section] shall apply to
benefits provided after December 31, 1992."
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by section 7101(b) of Pub. L. 101-239 applicable to
taxable years beginning after Dec. 31, 1988, see section 7101(c) of
Pub. L. 101-239, set out as a note under section 127 of this title.
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011B(a)(31)(B) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6066(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
transportation furnished after December 31, 1987, in taxable years
ending after such date."
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1114(b)(5) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(e)(2)(A), (g)(5) of Pub. L. 99-514
applicable, with certain qualifications and exceptions, to years
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Amendment by section 1853(a) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
Section 13207(a)(2) of Pub. L. 99-272 provided that: "The
amendment made by this subsection [amending this section] shall
take effect on January 1, 1985."
Section 13207(b)(2) of Pub. L. 99-272 provided that: "The
amendment made by this subsection [amending this section] shall
take effect on January 1, 1985."
EFFECTIVE DATE
Section 531(i) of Pub. L. 98-369, formerly Sec. 531(h), as
redesignated by Pub. L. 99-272, title XIII, Sec. 13207(d), Apr. 7,
1986, 100 Stat. 320, provided that: "The amendments made by this
section [enacting this section and section 4977 of this title,
amending sections 61, 125, 3121, 3231, 3306, 3401, 3501, and 6652
of this title and section 409 of Title 42, The Public Health and
Welfare, redesignating former section 132 of this title as 133, and
enacting provisions set out as notes under this section and section
125 of this title] shall take effect on January 1, 1985."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
CERTAIN RECORDKEEPING REQUIREMENTS
Section 1567 of Pub. L. 99-514 provided that:
"(a) In General. - For purposes of sections 132 and 274 of the
Internal Revenue Code of 1954 [now 1986], use of an automobile by a
special agent of the Internal Revenue Service shall be treated in
the same manner as use of an automobile by an officer of any other
law enforcement agency.
"(b) Effective Date. - The provisions of this section shall take
effect on January 1, 1985."
TREATMENT OF CERTAIN LEASED OPERATIONS OF DEPARTMENT STORES
Section 1853(e) of Pub. L. 99-514 provided that: "For purposes of
section 132(h)(2)(B) [now 132(j)(2)(B)] of the Internal Revenue
Code of 1954 [now 1986], a leased section of a department store
which, in connection with the offering of beautician services,
customarily makes sales of beauty aids in the ordinary course of
business shall be treated as engaged in over-the-counter sales of
property."
TRANSITIONAL RULE FOR DETERMINATION OF LINE OF BUSINESS IN CASE OF
AFFILIATED GROUP OPERATING AIRLINE
Section 13207(c) of Pub. L. 99-272, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If, as of
September 12, 1984 -
"(1) an individual -
"(A) was an employee (within the meaning of section 132 of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954],
including subsection (f) [now (h)] thereof) of one member of an
affiliated group (as defined in section 1504 of such Code),
hereinafter referred to as the 'first corporation', and
"(B) was eligible for no-additional-cost service in the form
of air transportation provided by another member of such
affiliated group, hereinafter referred to as the 'second
corporation',
"(2) at least 50 percent of the individuals performing service
for the first corporation were or had been employees of, or had
previously performed services for, the second corporation, and
"(3) the primary business of the affiliated group was air
transportation of passengers,
then, for purposes of applying paragraphs (1) and (2) of section
132(a) of the Internal Revenue Code of 1986, with respect to
no-additional-cost services and qualified employee discounts
provided after December 31, 1984, for such individual by the second
corporation, the first corporation shall be treated as engaged in
the same air transportation line of business as the second
corporation. For purposes of the preceding sentence, an employee of
the second corporation who is performing services for the first
corporation shall also be treated as an employee of the first
corporation."
SPECIAL RULE FOR SERVICES RELATED TO PROVIDING AIR TRANSPORTATION
Section 531(g) of Pub. L. 98-369, as added by Pub. L. 99-272,
title XIII, Sec. 13207(d), Apr. 7, 1986, 100 Stat. 320; amended
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
"(1) In general. - If -
"(A) an individual performs services for a qualified air
transportation organization, and
"(B) such services are performed primarily for persons engaged
in providing air transportation and are of the kind which (if
performed on September 12, 1984) would qualify such individual
for no-additional-cost services in the form of air
transportation,
then, with respect to such individual, such qualified air
transportation organization shall be treated as engaged in the line
of business of providing air transportation.
"(2) Qualified air transportation organization. - For purposes of
paragraph (1), the term 'qualified air transportation organization'
means any organization -
"(A) if such organization (or a predecessor) was in existence
on September 12, 1984,
"(B) if -
"(i) such organization is described in section 501(c)(6) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] and
the membership of such organization is limited to entities
engaged in the transportation by air of individuals or property
for compensation or hire, or
"(ii) such organization is a corporation all the stock of
which is owned entirely by entities referred to in clause (i),
and
"(C) if such organization is operated in furtherance of the
activities of its members or owners."
DETERMINATION OF LINE OF BUSINESS IN CASE OF AFFILIATED GROUP
OPERATING RETAIL DEPARTMENT STORES
Section 531(f) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If -
"(1) as of October 5, 1983, the employees of one member of an
affiliated group (as defined in section 1504 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] without regard to
subsections (b)(2) and (b)(4) thereof) were entitled to employee
discounts at the retail department stores operated by another
member of such affiliated group, and
"(2) the primary business of the affiliated group is the
operation of retail department stores,
then, for purpose of applying section 132(a)(2) of the Internal
Revenue Code of 1986, with respect to discounts provided for such
employees at the retail department stores operated by such other
member, the employer shall be treated as engaged in the same line
of business as such other member."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 74, 82, 102, 117, 125,
274, 403, 414, 415, 3121, 3231, 3306, 3401, 4977 of this title;
title 5 section 7905; title 42 section 409.
-FOOTNOTE-
(!1) So in original. Probably should be "performing".
-End-
-CITE-
26 USC Sec. 133 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
[Sec. 133. Repealed. Pub. L. 104-188, title I, Sec. 1602(a), Aug.
20, 1996, 110 Stat. 1833]
-MISC1-
Section, added Pub. L. 98-369, div. A, title V, Sec. 543(a), July
18, 1984, 98 Stat. 891; amended Pub. L. 99-514, title XI, Sec.
1173(b)(1)(A), (2), title XVIII, Sec. 1854(c)(2)(A), (C), (D), Oct.
22, 1986, 100 Stat. 2515, 2879; Pub. L. 100-647, title I, Sec.
1011B(h)(1), (2), Nov. 10, 1988, 102 Stat. 3490; Pub. L. 101-239,
title VII, Sec. 7301(a)-(c), Dec. 19, 1989, 103 Stat. 2346, 2347,
prior to repeal, read as follows:
Sec. 133. Interest on certain loans used to acquire employer
securities
(a) In general
Gross income does not include 50 percent of the interest received
by -
(1) a bank (within the meaning of section 581),
(2) an insurance company to which subchapter L applies,
(3) a corporation actively engaged in the business of lending
money, or
(4) a regulated investment company (as defined in section 851),
with respect to a securities acquisition loan.
(b) Securities acquisition loan
(1) In general
For purposes of this section, the term "securities acquisition
loan" means -
(A) any loan to a corporation or to an employee stock
ownership plan to the extent that the proceeds are used to
acquire employer securities for the plan, or
(B) any loan to a corporation to the extent that, within 30
days, employer securities are transferred to the plan in an
amount equal to the proceeds of such loan and such securities
are allocable to accounts of plan participants within 1 year of
the date of such loan.
For purposes of this paragraph, the term "employer securities"
has the meaning given such term by section 409(l). The term
"securities acquisition loan" shall not include a loan with a
term greater than 15 years.
(2) Loans between related persons
The term "securities acquisition loan" shall not include -
(A) any loan made between corporations which are members of
the same controlled group of corporations, or
(B) any loan made between an employee stock ownership plan
and any person that is -
(i) the employer of any employees who are covered by the
plan; or
(ii) a member of a controlled group of corporations which
includes such employer.
For purposes of this paragraph, subparagraphs (A) and (B) shall
not apply to any loan which, but for such subparagraphs, would be
a securities acquisition loan if such loan was not originated by
the employer of any employees who are covered by the plan or by
any member of the controlled group of corporations which includes
such employer, except that this section shall not apply to any
interest received on such loan during such time as such loan is
held by such employer (or any member of such controlled group).
(3) Terms applicable to certain securities acquisition loans
A loan to a corporation shall not fail to be treated as a
securities acquisition loan merely because the proceeds of such
loan are lent to an employee stock ownership plan sponsored by
such corporation (or by any member of the controlled group of
corporations which includes such corporation) if such loan
includes -
(A) repayment terms which are substantially similar to the
terms of the loan of such corporation from a lender described
in subsection (a), or
(B) repayment terms providing for more rapid repayment of
principal or interest on such loan, but only if allocations
under the plan attributable to such repayment do not
discriminate in favor of highly compensated employees (within
the meaning of section 414(q)).
(4) Controlled group of corporations
For purposes of this paragraph, the term "controlled group of
corporations" has the meaning given such term by section
409(l)(4).
(5) Treatment of refinancings
The term "securities acquisition loan" shall include any loan
which -
(A) is (or is part of a series of loans) used to refinance a
loan described in subparagraph (A) or (B) of paragraph (1), and
(B) meets the requirements of paragraphs (2) and (3).
(6) Plan must hold more than 50 percent of stock after
acquisition or transfer
(A) In general
A loan shall not be treated as a securities acquisition loan
for purposes of this section unless, immediately after the
acquisition or transfer referred to in subparagraph (A) or (B)
of paragraph (1), respectively, the employee stock ownership
plan owns more than 50 percent of -
(i) each class of outstanding stock of the corporation
issuing the employer securities, or
(ii) the total value of all outstanding stock of the
corporation.
(B) Failure to retain minimum stock interest
(i) In general
Subsection (a) shall not apply to any interest received
with respect to a securities acquisition loan which is
allocable to any period during which the employee stock
ownership plan does not own stock meeting the requirements of
subparagraph (A).
(ii) Exception
To the extent provided by the Secretary, clause (i) shall
not apply to any period if, within 90 days of the first date
on which the failure occurred (or such longer period not in
excess of 180 days as the Secretary may prescribe), the plan
acquires stock which results in its meeting the requirements
of subparagraph (A).
(C) Stock
For purposes of subparagraph (A) -
(i) In general
The term "stock" means stock other than stock described in
section 1504(a)(4).
(ii) Treatment of certain rights
The Secretary may provide that warrants, options, contracts
to acquire stock, convertible debt interests and other
similar interests be treated as stock for 1 or more purposes
under subparagraph (A).
(D) Aggregation rule
For purposes of determining whether the requirements of
subparagraph (A) are met, an employee stock ownership plan
shall be treated as owning stock in the corporation issuing the
employer securities which is held by any other employee stock
ownership plan which is maintained by -
(i) the employer maintaining the plan, or
(ii) any member of a controlled group of corporations
(within the meaning of section 409(l)(4)) of which the
employer described in clause (i) is a member.
(7) Voting rights of employer securities
A loan shall not be treated as a securities acquisition loan
for purposes of this section unless -
(A) the employee stock ownership plan meets the requirements
of section 409(e)(2) with respect to all employer securities
acquired by, or transferred to, the plan in connection with
such loan (without regard to whether or not the employer has a
registration-type class of securities), and
(B) no stock described in section 409(l)(3) is acquired by,
or transferred to, the plan in connection with such loan unless
-
(i) such stock has voting rights equivalent to the stock to
which it may be converted, and
(ii) the requirements of subparagraph (A) are met with
respect to such voting rights.
(c) Employee stock ownership plan
For purposes of this section, the term "employee stock ownership
plan" has the meaning given to such term by section 4975(e)(7).
(d) Application with section 483 and original issue discount rules
In applying section 483 and subpart A of part V of subchapter P
to any obligation to which this section applies, appropriate
adjustments shall be made to the applicable Federal rate to take
into account the exclusion under subsection (a).
(e) Period to which interest exclusion applies
(1) In general
In the case of -
(A) an original securities acquisition loan, and
(B) any securities acquisition loan (or series of such loans)
used to refinance the original securities acquisition loan,
subsection (a) shall apply only to interest accruing during the
excludable period with respect to the original securities
acquisition loan.
(2) Excludable period
For purposes of this subsection, the term "excludable period"
means, with respect to any original securities acquisition loan -
(A) In general
The 7-year period beginning on the date of such loan.
(B) Loans described in subsection (b)(1)(A)
If the term of an original securities acquisition loan
described in subsection (b)(1)(A) is greater than 7 years, the
term of such loan. This subparagraph shall not apply to a loan
described in subsection (b)(3)(B).
(3) Original securities acquisition loan
For the purposes of this subsection, the term "original
securities acquisition loan" means a securities acquisition loan
described in subparagraph (A) or (B) of subsection (b)(1).
PRIOR PROVISIONS
A prior section 133 was renumbered section 140 of this title.
EFFECTIVE DATE OF REPEAL
Section 1602(c) of Pub. L. 104-188 provided that:
"(1) In general. - The amendments made by this section [amending
sections 291, 812, 852, 4978, 6047, and 7872 of this title and
repealing this section and section 4978B of this title] shall apply
to loans made after the date of the enactment of this Act [Aug. 20,
1996].
"(2) Refinancings. - The amendments made by this section shall
not apply to loans made after the date of the enactment of this Act
to refinance securities acquisition loans (determined without
regard to section 133(b)(1)(B) of the Internal Revenue Code of
1986, as in effect on the day before the date of the enactment of
this Act) [set out above] made on or before such date or to
refinance loans described in this paragraph if -
"(A) the refinancing loans meet the requirements of section 133
of such Code (as so in effect),
"(B) immediately after the refinancing the principal amount of
the loan resulting from the refinancing does not exceed the
principal amount of the refinanced loan (immediately before the
refinancing), and
"(C) the term of such refinancing loan does not extend beyond
the last day of the term of the original securities acquisition
loan.
For purposes of this paragraph, the term 'securities acquisition
loan' includes a loan from a corporation to an employee stock
ownership plan described in section 133(b)(3) of such Code (as so
in effect).
"(3) Exception. - Any loan made pursuant to a binding written
contract in effect before June 10, 1996, and at all times
thereafter before such loan is made, shall be treated for purposes
of paragraphs (1) and (2) as a loan made on or before the date of
the enactment of this Act."
-End-
-CITE-
26 USC Sec. 134 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 134. Certain military benefits
-STATUTE-
(a) General rule
Gross income shall not include any qualified military benefit.
(b) Qualified military benefit
For purposes of this section -
(1) In general
The term "qualified military benefit" means any allowance or
in-kind benefit (other than personal use of a vehicle) which -
(A) is received by any member or former member of the
uniformed services of the United States or any dependent of
such member by reason of such member's status or service as a
member of such uniformed services, and
(B) was excludable from gross income on September 9, 1986,
under any provision of law, regulation, or administrative
practice which was in effect on such date (other than a
provision of this title).
(2) No other benefit to be excludable except as provided by this
title
Notwithstanding any other provision of law, no benefit shall be
treated as a qualified military benefit unless such benefit -
(A) is a benefit described in paragraph (1), or
(B) is excludable from gross income under this title without
regard to any provision of law which is not contained in this
title and which is not contained in a revenue Act.
(3) Limitations on modifications
(A) In general
Except as provided in subparagraphs (B) and (C) and paragraph
(4), no modification or adjustment of any qualified military
benefit after September 9, 1986, shall be taken into account.
(B) Exception for certain adjustments to cash benefits
Subparagraph (A) shall not apply to any adjustment to any
qualified military benefit payable in cash which -
(i) is pursuant to a provision of law or regulation (as in
effect on September 9, 1986), and
(ii) is determined by reference to any fluctuation in cost,
price, currency, or other similar index.
(C) Exception for death gratuity adjustments made by law
Subparagraph (A) shall not apply to any adjustment to the
amount of death gratuity payable under chapter 75 of title 10,
United States Code, which is pursuant to a provision of law
enacted after September 9, 1986.
(4) Clarification of certain benefits
For purposes of paragraph (1), such term includes any dependent
care assistance program (as in effect on the date of the
enactment of this paragraph) for any individual described in
paragraph (1)(A).
-SOURCE-
(Added Pub. L. 99-514, title XI, Sec. 1168(a), Oct. 22, 1986, 100
Stat. 2512; amended Pub. L. 100-647, title I, Sec. 1011B(f)(1),
(2)(A), (3), Nov. 10, 1988, 102 Stat. 3489, 3490; Pub. L. 108-121,
title I, Secs. 102(b)(1), (2), 106(a), (b)(1), Nov. 11, 2003, 117
Stat. 1337-1339.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this paragraph, referred to in
subsec. (b)(4), is the date of enactment of Pub. L. 108-121, which
was approved Nov. 11, 2003.
-MISC1-
PRIOR PROVISIONS
A prior section 134 was renumbered section 140 of this title.
AMENDMENTS
2003 - Subsec. (b)(3)(A). Pub. L. 108-121, Sec. 106(b)(1),
inserted "and paragraph (4)" after "subparagraphs (B) and (C)".
Pub. L. 108-121, Sec. 102(b)(2), substituted "subparagraphs (B)
and (C)" for "subparagraph (B)".
Subsec. (b)(3)(C). Pub. L. 108-121, Sec. 102(b)(1), added subpar.
(C).
Subsec. (b)(4). Pub. L. 108-121, Sec. 106(a), added par. (4).
1988 - Subsec. (b)(1). Pub. L. 100-647, Sec. 1011B(f)(2)(A),
inserted "(other than personal use of a vehicle)" after "in-kind
benefit" in introductory text.
Subsec. (b)(1)(B). Pub. L. 100-647, Sec. 1011B(f)(1), substituted
", regulation, or administrative practice" for "or regulation
thereunder".
Subsec. (b)(3)(A). Pub. L. 100-647, Sec. 1011B(f)(3), struck out
"under any provision of law or regulation described in paragraph
(1)" after "September 9, 1986,".
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 102(b)(3), Nov. 11, 2003, 117
Stat. 1337, provided that: "The amendments made by this subsection
[amending this section] shall apply with respect to deaths
occurring after September 10, 2001."
Pub. L. 108-121, title I, Sec. 106(c), Nov. 11, 2003, 117 Stat.
1339, provided that: "The amendments made by this section [amending
this section and sections 3121, 3306, and 3401 of this title] shall
apply to taxable years beginning after December 31, 2002."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1011B(f)(2)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to taxable years beginning after December 31, 1986."
Amendment by section 1011B(f)(1), (3) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
EFFECTIVE DATE
Section 1168(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011B(f)(4), Nov. 10, 1988, 102 Stat. 3490, provided
that: "The amendments made by this section [enacting this section]
shall apply to taxable years beginning after December 31, 1984."
NO INFERENCE TO BE DRAWN FROM AMENDMENT BY PUB. L. 108-121
Pub. L. 108-121, title I, Sec. 106(d), Nov. 11, 2003, 117 Stat.
1339, provided that: "No inference may be drawn from the amendments
made by this section [amending this section and sections 3121,
3306, and 3401 of this title] with respect to the tax treatment of
any amounts under the program described in section 134(b)(4) of the
Internal Revenue Code of 1986 (as added by this section) for any
taxable year beginning before January 1, 2003."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 3121, 3306, 3401 of this
title.
-End-
-CITE-
26 USC Sec. 135 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 135. Income from United States savings bonds used to pay
higher education tuition and fees
-STATUTE-
(a) General rule
In the case of an individual who pays qualified higher education
expenses during the taxable year, no amount shall be includible in
gross income by reason of the redemption during such year of any
qualified United States savings bond.
(b) Limitations
(1) Limitation where redemption proceeds exceed higher education
expenses
(A) In general
If -
(i) the aggregate proceeds of qualified United States
savings bonds redeemed by the taxpayer during the taxable
year exceed
(ii) the qualified higher education expenses paid by the
taxpayer during such taxable year,
the amount excludable from gross income under subsection (a)
shall not exceed the applicable fraction of the amount
excludable from gross income under subsection (a) without
regard to this subsection.
(B) Applicable fraction
For purposes of subparagraph (A), the term "applicable
fraction" means the fraction the numerator of which is the
amount described in subparagraph (A)(ii) and the denominator of
which is the amount described in subparagraph (A)(i).
(2) Limitation based on modified adjusted gross income
(A) In general
If the modified adjusted gross income of the taxpayer for the
taxable year exceeds $40,000 ($60,000 in the case of a joint
return), the amount which would (but for this paragraph) be
excludable from gross income under subsection (a) shall be
reduced (but not below zero) by the amount which bears the same
ratio to the amount which would be so excludable as such excess
bears to $15,000 ($30,000 in the case of a joint return).
(B) Inflation adjustment
In the case of any taxable year beginning in a calendar year
after 1990, the $40,000 and $60,000 amounts contained in
subparagraph (A) shall be increased by an amount equal to -
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment under section 1(f)(3)
for the calendar year in which the taxable year begins,
determined by substituting "calendar year 1989" for "calendar
year 1992" in subparagraph (B) thereof.
(C) Rounding
If any amount as adjusted under subparagraph (B) is not a
multiple of $50, such amount shall be rounded to the nearest
multiple of $50 (or if such amount is a multiple of $25, such
amount shall be rounded to the next highest multiple of $50).
(c) Definitions
For purposes of this section -
(1) Qualified United States savings bond
The term "qualified United States savings bond" means any
United States savings bond issued -
(A) after December 31, 1989,
(B) to an individual who has attained age 24 before the date
of issuance, and
(C) at discount under section 3105 of title 31, United States
Code.
(2) Qualified higher education expenses
(A) In general
The term "qualified higher education expenses" means tuition
and fees required for the enrollment or attendance of -
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any dependent of the taxpayer with respect to whom
the taxpayer is allowed a deduction under section 151,
at an eligible educational institution.
(B) Exception for education involving sports, etc.
Such term shall not include expenses with respect to any
course or other education involving sports, games, or hobbies
other than as part of a degree program.
(C) Contributions to qualified tuition program and Coverdell
education savings accounts
Such term shall include any contribution to a qualified
tuition program (as defined in section 529) on behalf of a
designated beneficiary (as defined in such section), or to a
Coverdell education savings account (as defined in section 530)
on behalf of an account beneficiary, who is an individual
described in subparagraph (A); but there shall be no increase
in the investment in the contract for purposes of applying
section 72 by reason of any portion of such contribution which
is not includible in gross income by reason of this
subparagraph.
(3) Eligible educational institution
The term "eligible educational institution" has the meaning
given such term by section 529(e)(5).
(4) Modified adjusted gross income
The term "modified adjusted gross income" means the adjusted
gross income of the taxpayer for the taxable year determined -
(A) without regard to this section and sections 137, 221,
222, 911, 931, and 933, and
(B) after the application of sections 86, 469, and 219.
(d) Special rules
(1) Adjustment for certain scholarships and veterans benefits
The amount of qualified higher education expenses otherwise
taken into account under subsection (a) with respect to the
education of an individual shall be reduced (before the
application of subsection (b)) by the sum of the amounts received
with respect to such individual for the taxable year as -
(A) a qualified scholarship which under section 117 is not
includable in gross income,
(B) an educational assistance allowance under chapter 30, 31,
32, 34, or 35 of title 38, United States Code,
(C) a payment (other than a gift, bequest, devise, or
inheritance within the meaning of section 102(a)) for
educational expenses, or attributable to attendance at an
eligible educational institution, which is exempt from income
taxation by any law of the United States, or
(D) a payment, waiver, or reimbursement of qualified higher
education expenses under a qualified tuition program (within
the meaning of section 529(b)).
(2) Coordination with other higher education benefits
The amount of the qualified higher education expenses otherwise
taken into account under subsection (a) with respect to the
education of an individual shall be reduced (before the
application of subsection (b)) by -
(A) the amount of such expenses which are taken into account
in determining the credit allowed to the taxpayer or any other
person under section 25A with respect to such expenses; and
(B) the amount of such expenses which are taken into account
in determining the exclusions under sections 529(c)(3)(B) and
530(d)(2).
(3) No exclusion for married individuals filing separate returns
If the taxpayer is a married individual (within the meaning of
section 7703), this section shall apply only if the taxpayer and
his spouse file a joint return for the taxable year.
(4) Regulations
The Secretary may prescribe such regulations as may be
necessary or appropriate to carry out this section, including
regulations requiring record keeping and information reporting.
-SOURCE-
(Added Pub. L. 100-647, title VI, Sec. 6009(a), Nov. 10, 1988, 102
Stat. 3688; amended Pub. L. 101-239, title VII, Sec. 7816(c)(2),
Dec. 19, 1989, 103 Stat. 2420; Pub. L. 101-508, title XI, Secs.
11101(d)(1)(E), 11702(h), Nov. 5, 1990, 104 Stat. 1388-405,
1388-516; Pub. L. 104-188, title I, Secs. 1703(d), 1806(b)(1),
1807(c)(2), Aug. 20, 1996, 110 Stat. 1875, 1898, 1902; Pub. L.
105-34, title II, Secs. 201(d), 211(c), 213(e)(2), Aug. 5, 1997,
111 Stat. 805, 811, 817; Pub. L. 105-206, title VI, Sec.
6004(c)(1), (d)(4), (9), July 22, 1998, 112 Stat. 793-795; Pub. L.
105-277, div. J, title IV, Sec. 4003(a)(2)(B), Oct. 21, 1998, 112
Stat. 2681-908; Pub. L. 107-16, title IV, Secs. 401(g)(2)(B),
402(a)(4)(A), (B), (b)(2)(A), 431(c)(1), June 7, 2001, 115 Stat.
59-62, 68; Pub. L. 107-22, Sec. 1(b)(1)(B), (3)(B), July 26, 2001,
115 Stat. 197.)
-STATAMEND-
ADJUSTMENT OF LIMITATION ON EXCLUSION OF INCOME UNDER THIS SECTION
FOR TAXABLE YEARS BEGINNING IN 2004
For adjustment of limitation on exclusion for income from
redemption of United States savings bonds for taxpayers who pay
qualified higher education expenses under this section for taxable
years beginning in 2004, see section 3.13 of Revenue Procedure
2003-85, set out as a note under section 1 of this title.
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
PRIOR PROVISIONS
A prior section 135 was renumbered section 140 of this title.
AMENDMENTS
2001 - Subsec. (c)(2)(C). Pub. L. 107-22, in heading substituted
"Coverdell education savings" for "education individual retirement"
and in text substituted "a Coverdell education savings" for "an
education individual retirement".
Pub. L. 107-16, Secs. 402(a)(4)(A), (B), 901, temporarily
substituted "qualified tuition" for "qualified State tuition" in
heading and text. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(4)(A). Pub. L. 107-16, Secs. 431(c)(1), 901,
temporarily inserted "222," after "221,". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (d)(1)(D). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (d)(2)(A). Pub. L. 107-16, Secs. 401(g)(2)(B), 901,
temporarily substituted "allowed" for "allowable". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (d)(2)(B). Pub. L. 107-16, Secs. 402(b)(2)(A), 901,
temporarily substituted "the exclusions under sections 529(c)(3)(B)
and 530(d)(2)" for "the exclusion under section 530(d)(2)". See
Effective and Termination Dates of 2001 Amendment note below.
1998 - Subsec. (c)(2)(C). Pub. L. 105-206, Sec. 6004(d)(9),
inserted "and education individual retirement accounts" after
"program" in heading and substituted "section 72" for "section
529(c)(3)(A)" in text.
Subsec. (c)(3). Pub. L. 105-206, Sec. 6004(c)(1), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "The term 'eligible educational
institution' means -
"(A) an institution described in section 1201(a) or
subparagraph (C) or (D) of section 481(a)(1) of the Higher
Education Act of 1965 (as in effect on October 21, 1988), and
"(B) an area vocational education school (as defined in
subparagraph (C) or (D) of section 521(3) of the Carl D. Perkins
Vocational Education Act) which is in any State (as defined in
section 521(27) of such Act), as such sections are in effect on
October 21, 1988."
Subsec. (c)(4)(A). Pub. L. 105-277 inserted "221," after "137,".
Subsec. (d)(2). Pub. L. 105-206, Sec. 6004(d)(4), substituted
"other higher education benefits" for "higher education credit" in
heading and amended text of par. (2) generally. Prior to amendment,
text read as follows: "The amount of the qualified higher education
expenses otherwise taken into account under subsection (a) with
respect to the education of an individual shall be reduced (before
the application of subsection (b)) by the amount of such expenses
which are taken into account in determining the credit allowable to
the taxpayer or any other person under section 25A with respect to
such expenses."
1997 - Subsec. (c)(2)(C). Pub. L. 105-34, Sec. 213(e)(2),
inserted ", or to an education individual retirement account (as
defined in section 530) on behalf of an account beneficiary," after
"(as defined in such section)".
Pub. L. 105-34, Sec. 211(c), added subpar. (C).
Subsec. (d)(2) to (4). Pub. L. 105-34, Sec. 201(d), added par.
(2) and redesignated former pars. (2) and (3) as (3) and (4),
respectively.
1996 - Subsec. (b)(2)(B)(ii). Pub. L. 104-188, Sec. 1703(d),
inserted ", determined by substituting 'calendar year 1989' for
'calendar year 1992' in subparagraph (B) thereof" before period at
end.
Subsec. (c)(4)(A). Pub. L. 104-188, Sec. 1807(c)(2), inserted
"137," before "911".
Subsec. (d)(1)(D). Pub. L. 104-188, Sec. 1806(b)(1), added
subpar. (D).
1990 - Subsec. (b)(2)(B). Pub. L. 101-508, Sec. 11702(h)(1),
substituted "the $40,000 and $60,000 amounts" for "each dollar
amount" in introductory provisions.
Subsec. (b)(2)(B)(ii). Pub. L. 101-508, Sec. 11101(d)(1)(E),
struck out before period at end ", determined by substituting
'calendar year 1989' for 'calendar year 1987' in subparagraph (B)
thereof".
Subsec. (b)(2)(C). Pub. L. 101-508, Sec. 11702(h)(2), struck out
"(A) or" after "subparagraph".
1989 - Subsec. (d)(1). Pub. L. 101-239 substituted "subsection
(a) with respect to" for "subsection (a) respect to".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Amendment by section 401(g)(2)(B) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 401(h) of
Pub. L. 107-16, set out as a note under section 25A of this title.
Amendment by section 402(a)(4)(A), (B), (b)(2)(A) of Pub. L.
107-16 applicable to taxable years beginning after Dec. 31, 2001,
see section 402(h) of Pub. L. 107-16, set out as a note under
section 72 of this title.
Amendment by section 431(c)(1) of Pub. L. 107-16 applicable to
payments made in taxable years beginning after Dec. 31, 2001, see
section 431(d) of Pub. L. 107-16, set out as a note under section
62 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by Pub. L. 105-277 effective as if included in the
provision of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 4003(l) of Pub. L.
105-277, set out as a note under section 86 of this title.
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 201(d) of Pub. L. 105-34 applicable to
expenses paid after Dec. 31, 1997 (in taxable years ending after
such date), for education furnished in academic periods beginning
after such date, see section 201(f) of Pub. L. 105-34, set out as
an Effective Date note under section 25A of this title.
Amendment by section 211(c) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 211(f) of
Pub. L. 105-34, set out as a note under section 529 of this title.
Amendment by section 213(e)(2) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 213(f) of
Pub. L. 105-34, set out as a note under section 26 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1703(d) of Pub. L. 104-188 effective as if
included in the provision of the Revenue Reconciliation Act of
1993, Pub. L. 103-66, Secs. 13001-13444, to which such amendment
relates, see section 1703(o) of Pub. L. 104-188, set out as a note
under section 39 of this title.
Amendment by section 1806(b)(1) of Pub. L. 104-188 applicable to
taxable years ending after Aug. 20, 1996, with transition rules
applicable where States or agencies or instrumentalities thereof
maintain on such date programs under which persons may purchase
tuition credits or certificates on behalf of, or make contributions
for education expenses of, designated beneficiaries, see section
1806(c) of Pub. L. 104-188, set out as an Effective Date note under
section 529 of this title.
Amendment by section 1807(c)(2) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1807(e) of
Pub. L. 104-188, set out as an Effective Date note under section 23
of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11101(d)(1)(E) of Pub. L. 101-508 applicable
to taxable years beginning after Dec. 31, 1990, see section
11101(e) of Pub. L. 101-508, set out as a note under section 1 of
this title.
Amendment by section 11702(h) of Pub. L. 101-508 effective as if
included in the provision of the Technical and Miscellaneous
Revenue Act of 1988, Pub. L. 100-647, to which such amendment
relates, see section 11702(j) of Pub. L. 101-508, set out as a note
under section 59 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1989, see section 6009(d) of Pub. L. 100-647, set out as an
Effective Date of 1988 Amendment note under section 86 of this
title.
PROMOTION OF PUBLIC AWARENESS OF PROGRAM
Section 6009(b) of Pub. L. 100-647 provided that: "The Secretary
of the Treasury or his delegate shall take such actions as may be
necessary to make the general public aware of the program
established by this section [enacting this section, amending
sections 86, 219, and 469 of this title, renumbering former section
135 of this title as section 136 of this title, and enacting
provisions set out as notes below and under section 86 of this
title]."
PARENTAL ASSISTANCE WITH TUITION STAMP STUDY
Section 6009(e) of Pub. L. 100-647 directed Secretary of the
Treasury or his delegate, after consultation with Secretary of
Education or his delegate, to conduct a study of feasibility of
using stamps or similar programs to encourage and facilitate
savings by parents towards purchase of Series EE bonds eligible for
exclusion and to submit, not later than Dec. 31, 1989, results of
such study, together with any recommendations deemed appropriate,
to Committee on Ways and Means of House of Representatives and
Committee on Finance of Senate.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 62, 86, 137, 219, 221,
222, 469, 6103 of this title; title 42 section 1395r.
-End-
-CITE-
26 USC Sec. 136 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 136. Energy conservation subsidies provided by public
utilities
-STATUTE-
(a) Exclusion
Gross income shall not include the value of any subsidy provided
(directly or indirectly) by a public utility to a customer for the
purchase or installation of any energy conservation measure.
(b) Denial of double benefit
Notwithstanding any other provision of this subtitle, no
deduction or credit shall be allowed for, or by reason of, any
expenditure to the extent of the amount excluded under subsection
(a) for any subsidy which was provided with respect to such
expenditure. The adjusted basis of any property shall be reduced by
the amount excluded under subsection (a) which was provided with
respect to such property.
(c) Energy conservation measure
(1) In general
For purposes of this section, the term "energy conservation
measure" means any installation or modification primarily
designed to reduce consumption of electricity or natural gas or
to improve the management of energy demand with respect to a
dwelling unit.
(2) Other definitions
For purposes of this subsection -
(A) Dwelling unit
The term "dwelling unit" has the meaning given such term by
section 280A(f)(1).
(B) Public utility
The term "public utility" means a person engaged in the sale
of electricity or natural gas to residential, commercial, or
industrial customers for use by such customers. For purposes of
the preceding sentence, the term "person" includes the Federal
Government, a State or local government or any political
subdivision thereof, or any instrumentality of any of the
foregoing.
(d) Exception
This section shall not apply to any payment to or from a
qualified cogeneration facility or qualifying small power
production facility pursuant to section 210 of the Public Utility
Regulatory Policy Act of 1978.
-SOURCE-
(Added Pub. L. 102-486, title XIX, Sec. 1912(a), Oct. 24, 1992, 106
Stat. 3014; amended Pub. L. 104-188, title I, Sec. 1617(a), (b),
Aug. 20, 1996, 110 Stat. 1858.)
-REFTEXT-
REFERENCES IN TEXT
Section 210 of the Public Utility Regulatory Policy Act of 1978,
referred to in subsec. (d), probably means section 210 of the
Public Utility Regulatory Policies Act of 1978, Pub. L. 95-617,
which is classified to section 824a-3 of Title 16, Conservation.
-MISC1-
PRIOR PROVISIONS
A prior section 136 was renumbered section 140 of this title.
AMENDMENTS
1996 - Subsec. (a). Pub. L. 104-188, Sec. 1617(b)(1), reenacted
heading without change and amended text generally, substituting
present provisions for former provisions which consisted of general
exclusion in par. (1) and limitation for exclusion on
nonresidential property in par. (2).
Subsec. (c)(1). Pub. L. 104-188, Sec. 1617(a), substituted
"energy demand with respect to a dwelling unit." for "energy demand
-
"(A) with respect to a dwelling unit, and
"(B) on or after January 1, 1995, with respect to property
other than dwelling units.
The purchase and installation of specially defined energy property
shall be treated as an energy conservation measure described in
subparagraph (B)."
Subsec. (c)(2). Pub. L. 104-188, Sec. 1617(b)(2), struck out "and
special rules" after "definitions" in heading, redesignated
subpars. (B) and (C) as (A) and (B), respectively, and struck out
former subpar. (A) which related to "specially defined energy
property".
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1617(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to amounts
received after December 31, 1996, unless received pursuant to a
written binding contract in effect on September 13, 1995, and at
all times thereafter."
EFFECTIVE DATE
Section 1912(c) of Pub. L. 102-486 provided that: "The amendments
made by this section [enacting this section and renumbering former
section 136 as 137] shall apply to amounts received after December
31, 1992."
-End-
-CITE-
26 USC Sec. 137 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 137. Adoption assistance programs
-STATUTE-
(a) Exclusion
(1) In general
Gross income of an employee does not include amounts paid or
expenses incurred by the employer for qualified adoption expenses
in connection with the adoption of a child by an employee if such
amounts are furnished pursuant to an adoption assistance program.
(2) $10,000 exclusion for adoption of child with special needs
regardless of expenses
In the case of an adoption of a child with special needs which
becomes final during a taxable year, the qualified adoption
expenses with respect to such adoption for such year shall be
increased by an amount equal to the excess (if any) of $10,000
over the actual aggregate qualified adoption expenses with
respect to such adoption during such taxable year and all prior
taxable years.
(b) Limitations
(1) Dollar limitation
The aggregate of the amounts paid or expenses incurred which
may be taken into account under subsection (a) for all taxable
years with respect to the adoption of a child by the taxpayer
shall not exceed $10,000.
(2) Income limitation
The amount excludable from gross income under subsection (a)
for any taxable year shall be reduced (but not below zero) by an
amount which bears the same ratio to the amount so excludable
(determined without regard to this paragraph but with regard to
paragraph (1)) as -
(A) the amount (if any) by which the taxpayer's adjusted
gross income exceeds $150,000, bears to
(B) $40,000.
(3) Determination of adjusted gross income
For purposes of paragraph (2), adjusted gross income shall be
determined -
(A) without regard to this section and sections 221, 222,
911, 931, and 933, and
(B) after the application of sections 86, 135, 219, and 469.
(c) Adoption assistance program
For purposes of this section, an adoption assistance program is a
separate written plan of an employer for the exclusive benefit of
such employer's employees -
(1) under which the employer provides such employees with
adoption assistance, and
(2) which meets requirements similar to the requirements of
paragraphs (2), (3), (5), and (6) of section 127(b).
An adoption reimbursement program operated under section 1052 of
title 10, United States Code (relating to armed forces) or section
514 of title 14, United States Code (relating to members of the
Coast Guard) shall be treated as an adoption assistance program for
purposes of this section.
(d) Qualified adoption expenses
For purposes of this section, the term "qualified adoption
expenses" has the meaning given such term by section 23(d)
(determined without regard to reimbursements under this section).
(e) Certain rules to apply
Rules similar to the rules of subsections (e), (f), and (g) of
section 23 shall apply for purposes of this section.
(f) Adjustments for inflation
In the case of a taxable year beginning after December 31, 2002,
each of the dollar amounts in subsection (a)(2) and paragraphs (1)
and (2)(A) of subsection (b) shall be increased by an amount equal
to -
(1) such dollar amount, multiplied by
(2) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
determined by substituting "calendar year 2001" for "calendar
year 1992" in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $10, such amount shall be rounded to the nearest
multiple of $10.
-SOURCE-
(Added Pub. L. 104-188, title I, Sec. 1807(b), Aug. 20, 1996, 110
Stat. 1901; amended Pub. L. 105-34, title XVI, Sec. 1601(h)(2)(C),
Aug. 5, 1997, 111 Stat. 1092; Pub. L. 105-277, div. J, title IV,
Sec. 4003(a)(2)(C), Oct. 21, 1998, 112 Stat. 2681-908; Pub. L.
107-16, title II, Sec. 202(a)(2), (b)(1)(B), (2)(B), (d)(2),
(e)(2), title IV, Sec. 431(c)(1), June 7, 2001, 115 Stat. 47, 48,
68; Pub. L. 107-147, title IV, Secs. 411(c)(2), 418(a)(2), Mar. 9,
2002, 116 Stat. 45, 57.)
-STATAMEND-
ADJUSTMENT FOR ADOPTION ASSISTANCE PROGRAM EXPENSES EXCLUSION FOR
TAXABLE YEARS BEGINNING IN 2004
For inflation adjustment for taxable years beginning in 2004 of
maximum exclusion in subsection (a)(2) of this section in
connection with employee's adoption of a child with special needs,
of maximum exclusion in subsection (b)(1) of this section in
connection with adoption assistance program for other adoptions,
and of phaseout of exclusion in subsection (b)(2)(A) of this
section, see section 3.14 of Revenue Procedure 2003-85, set out as
a note under section 1 of this title.
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
PRIOR PROVISIONS
A prior section 137 was renumbered section 140 of this title.
AMENDMENTS
2002 - Subsec. (a). Pub. L. 107-147, Sec. 411(c)(2)(A), amended
heading and text of subsec. (a) generally. Prior to amendment, text
read as follows: "Gross income of an employee does not include
amounts paid or expenses incurred by the employer for adoption
expenses in connection with the adoption of a child by an employee
if such amounts are furnished pursuant to an adoption assistance
program. The amount of the exclusion shall be -
"(1) in the case of an adoption of a child other than a child
with special needs, the amount of the qualified adoption expenses
paid or incurred by the taxpayer, and
"(2) in the case of an adoption of a child with special needs,
$10,000."
Subsec. (b)(1). Pub. L. 107-147, Sec. 411(c)(2)(B), which
directed the substitution of "subsection (a)" for "subsection
(a)(1)" in par. (2) of subsec. (b), was executed to par. (1), to
reflect the probable intent of Congress because par. (2) contains
no reference to "subsection (a)(1)".
Subsec. (f). Pub. L. 107-147, Sec. 418(a)(2), inserted at end "If
any amount as increased under the preceding sentence is not a
multiple of $10, such amount shall be rounded to the nearest
multiple of $10."
2001 - Subsec. (a). Pub. L. 107-16, Secs. 202(a)(2), 901,
temporarily reenacted heading without change and amended text
generally. Prior to amendment, text read as follows: "Gross income
of an employee does not include amounts paid or expenses incurred
by the employer for qualified adoption expenses in connection with
the adoption of a child by an employee if such amounts are
furnished pursuant to an adoption assistance program." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b)(1). Pub. L. 107-16, Secs. 202(b)(1)(B), 901,
temporarily substituted "subsection (a)(1)" for "subsection (a)"
and "$10,000" for "$5,000 ($6,000, in the case of a child with
special needs)". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(2)(A). Pub. L. 107-16, Secs. 202(b)(2)(B), 901,
temporarily substituted "$150,000" for "$75,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(3)(A). Pub. L. 107-16, Secs. 431(c)(1), 901,
temporarily inserted "222," after "221,". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (f). Pub. L. 107-16, Secs. 202(d)(2), (e)(2), 901,
temporarily added subsec. (f) and struck out heading and text of
former subsec. (f). Text read as follows: "This section shall not
apply to amounts paid or expenses incurred after December 31,
2001." See Effective and Termination Dates of 2001 Amendment note
below.
1998 - Subsec. (b)(3)(A). Pub. L. 105-277 inserted "221," after
"and sections".
1997 - Subsec. (b)(1). Pub. L. 105-34 substituted "of the amounts
paid or expenses incurred which may be taken into account" for
"amount excludable from gross income".
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by section 411(c)(2) of Pub. L. 107-147 applicable to
taxable years beginning after Dec. 31, 2002, except that amendment
by section 411(c)(2)(B) applicable to taxable years beginning after
Dec. 31, 2001, see section 411(c)(3) of Pub. L. 107-147, set out as
a note under section 23 of this title.
Amendment by section 418(a)(2) of Pub. L. 107-147 effective as if
included in the provisions of the Economic Growth and Tax Relief
Reconciliation Act of 2001, Pub. L. 107-16, to which such amendment
relates, see section 418(c) of Pub. L. 107-147, set out as a note
under section 21 of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 202(b)(1)(B), (2)(B), (d)(2), (e)(2) of Pub.
L. 107-16 applicable to taxable years beginning after Dec. 31,
2001, see section 202(g)(1) of Pub. L. 107-16, set out as a note
under section 23 of this title.
Amendment by section 202(a)(2) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2002, see section 202(g)(2)
of Pub. L. 107-16, set out as a note under section 23 of this
title.
Amendment by section 431(c)(1) of Pub. L. 107-16 applicable to
payments made in taxable years beginning after Dec. 31, 2001, see
section 431(d) of Pub. L. 107-16, set out as a note under section
62 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-277 effective as if included in the
provision of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 4003(l) of Pub. L.
105-277, set out as a note under section 86 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 effective as if included in the
provisions of the Small Business Job Protection Act of 1996, Pub.
L. 104-188, to which it relates, see section 1601(j) of Pub. L.
105-34, set out as a note under section 23 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1996, see section 1807(e) of Pub. L. 104-188, set out as a note
under section 23 of this title.
-TRANS-
TRANSFER OF FUNCTIONS
For transfer of authorities, functions, personnel, and assets of
the Coast Guard, including the authorities and functions of the
Secretary of Transportation relating thereto, to the Department of
Homeland Security, and for treatment of related references, see
sections 468(b), 551(d), 552(d), and 557 of Title 6, Domestic
Security, and the Department of Homeland Security Reorganization
Plan of November 25, 2002, as modified, set out as a note under
section 542 of Title 6.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 23, 86, 135, 219, 221,
222, 414, 469, 1016, 6039D of this title.
-End-
-CITE-
26 USC Sec. 138 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 138. Medicare+Choice MSA
-STATUTE-
(a) Exclusion
Gross income shall not include any payment to the Medicare+Choice
MSA of an individual by the Secretary of Health and Human Services
under part C of title XVIII of the Social Security Act.
(b) Medicare+Choice MSA
For purposes of this section, the term "Medicare+Choice MSA"
means an Archer MSA (as defined in section 220(d)) -
(1) which is designated as a Medicare+Choice MSA,
(2) with respect to which no contribution may be made other
than -
(A) a contribution made by the Secretary of Health and Human
Services pursuant to part C of title XVIII of the Social
Security Act, or
(B) a trustee-to-trustee transfer described in subsection
(c)(4),
(3) the governing instrument of which provides that
trustee-to-trustee transfers described in subsection (c)(4) may
be made to and from such account, and
(4) which is established in connection with an MSA plan
described in section 1859(b)(3) of the Social Security Act.
(c) Special rules for distributions
(1) Distributions for qualified medical expenses
In applying section 220 to a Medicare+Choice MSA -
(A) qualified medical expenses shall not include amounts paid
for medical care for any individual other than the account
holder, and
(B) section 220(d)(2)(C) shall not apply.
(2) Penalty for distributions from Medicare+ÐChoice MSA not used
for qualified medical expenses if minimum balance not
maintained
(A) In general
The tax imposed by this chapter for any taxable year in which
there is a payment or distribution from a Medicare+Choice MSA
which is not used exclusively to pay the qualified medical
expenses of the account holder shall be increased by 50 percent
of the excess (if any) of -
(i) the amount of such payment or distribution, over
(ii) the excess (if any) of -
(I) the fair market value of the assets in such MSA as of
the close of the calendar year preceding the calendar year
in which the taxable year begins, over
(II) an amount equal to 60 percent of the deductible
under the Medicare+ÐChoice MSA plan covering the account
holder as of January 1 of the calendar year in which the
taxable year begins.
Section 220(f)(4) shall not apply to any payment or
distribution from a Medicare+ÐChoice MSA.
(B) Exceptions
Subparagraph (A) shall not apply if the payment or
distribution is made on or after the date the account holder -
(i) becomes disabled within the meaning of section
72(m)(7), or
(ii) dies.
(C) Special rules
For purposes of subparagraph (A) -
(i) all Medicare+Choice MSAs of the account holder shall be
treated as 1 account,
(ii) all payments and distributions not used exclusively to
pay the qualified medical expenses of the account holder
during any taxable year shall be treated as 1 distribution,
and
(iii) any distribution of property shall be taken into
account at its fair market value on the date of the
distribution.
(3) Withdrawal of erroneous contributions
Section 220(f)(2) and paragraph (2) of this subsection shall
not apply to any payment or distribution from a Medicare+Choice
MSA to the Secretary of Health and Human Services of an erroneous
contribution to such MSA and of the net income attributable to
such contribution.
(4) Trustee-to-trustee transfers
Section 220(f)(2) and paragraph (2) of this subsection shall
not apply to any trustee-to-trustee transfer from a
Medicare+Choice MSA of an account holder to another
Medicare+ÐChoice MSA of such account holder.
(d) Special rules for treatment of account after death of account
holder
In applying section 220(f)(8)(A) to an account which was a
Medicare+Choice MSA of a decedent, the rules of section 220(f)
shall apply in lieu of the rules of subsection (c) of this section
with respect to the spouse as the account holder of such
Medicare+Choice MSA.
(e) Reports
In the case of a Medicare+Choice MSA, the report under section
220(h) -
(1) shall include the fair market value of the assets in such
Medicare+Choice MSA as of the close of each calendar year, and
(2) shall be furnished to the account holder -
(A) not later than January 31 of the calendar year following
the calendar year to which such reports relate, and
(B) in such manner as the Secretary prescribes in such
regulations.
(f) Coordination with limitation on number of taxpayers having
Archer MSAs
Subsection (i) of section 220 shall not apply to an individual
with respect to a Medicare+Choice MSA, and Medicare+Choice MSA's
shall not be taken into account in determining whether the
numerical limitations under section 220(j) are exceeded.
-SOURCE-
(Added Pub. L. 105-33, title IV, Sec. 4006(a), Aug. 5, 1997, 111
Stat. 332; amended Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(3), (b)(6), (10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628,
2763A-629.)
-REFTEXT-
REFERENCES IN TEXT
The Social Security Act, referred to in subsecs. (a) and
(b)(2)(A), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended.
Part C of title XVIII of the Act is classified generally to part C
(Sec. 1395w-21 et seq.) of subchapter XVIII of chapter 7 of Title
42, The Public Health and Welfare. Section 1859 of the Act is
classified to section 1395w-28 of Title 42. For complete
classification of this Act to the Code, see section 1305 of Title
42 and Tables.
-MISC1-
PRIOR PROVISIONS
A prior section 138 was renumbered section 140 of this title.
AMENDMENTS
2000 - Subsec. (b). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(10)], substituted "an Archer MSA" for "a Archer MSA" in
introductory provisions.
Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(3)],
substituted "Archer MSA" for "medical savings account" in
introductory provisions.
Subsec. (f). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(6)], substituted "Archer MSAs" for "medical savings
accounts" in heading.
-CHANGE-
CHANGE OF NAME
References to Medicare+Choice deemed to refer to Medicare
Advantage or MA, subject to an appropriate transition provided by
the Secretary of Health and Human Services in the use of those
terms, see section 201 of Pub. L. 108-173, set out as a note under
section 1395w-21 of Title 42, The Public Health and Welfare.
-MISC2-
EFFECTIVE DATE
Section 4006(c) of Pub. L. 105-33 provided that: "The amendments
made by this section [enacting this section, amending sections 220
and 4973 of this title, and renumbering former section 138 of this
title as section 139 of this title] shall apply to taxable years
beginning after December 31, 1998."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 26, 4973 of this title;
title 42 section 1395w-23.
-End-
-CITE-
26 USC Sec. 139 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 139. Disaster relief payments
-STATUTE-
(a) General rule
Gross income shall not include any amount received by an
individual as a qualified disaster relief payment.
(b) Qualified disaster relief payment defined
For purposes of this section, the term "qualified disaster relief
payment" means any amount paid to or for the benefit of an
individual -
(1) to reimburse or pay reasonable and necessary personal,
family, living, or funeral expenses incurred as a result of a
qualified disaster,
(2) to reimburse or pay reasonable and necessary expenses
incurred for the repair or rehabilitation of a personal residence
or repair or replacement of its contents to the extent that the
need for such repair, rehabilitation, or replacement is
attributable to a qualified disaster,
(3) by a person engaged in the furnishing or sale of
transportation as a common carrier by reason of the death or
personal physical injuries incurred as a result of a qualified
disaster, or
(4) if such amount is paid by a Federal, State, or local
government, or agency or instrumentality thereof, in connection
with a qualified disaster in order to promote the general
welfare,
but only to the extent any expense compensated by such payment is
not otherwise compensated for by insurance or otherwise.
(c) Qualified disaster defined
For purposes of this section, the term "qualified disaster" means
-
(1) a disaster which results from a terroristic or military
action (as defined in section 692(c)(2)),
(2) a Presidentially declared disaster (as defined in section
1033(h)(3)),
(3) a disaster which results from an accident involving a
common carrier, or from any other event, which is determined by
the Secretary to be of a catastrophic nature, or
(4) with respect to amounts described in subsection (b)(4), a
disaster which is determined by an applicable Federal, State, or
local authority (as determined by the Secretary) to warrant
assistance from the Federal, State, or local government or agency
or instrumentality thereof.
(d) Coordination with employment taxes
For purposes of chapter 2 and subtitle C, a qualified disaster
relief payment shall not be treated as net earnings from
self-employment, wages, or compensation subject to tax.
(e) No relief for certain individuals
Subsections (a) and (f) shall not apply with respect to any
individual identified by the Attorney General to have been a
participant or conspirator in a terroristic action (as so defined),
or a representative of such individual.
(f) Exclusion of certain additional payments
Gross income shall not include any amount received as payment
under section 406 of the Air Transportation Safety and System
Stabilization Act.
-SOURCE-
(Added Pub. L. 107-134, title I, Sec. 111(a), Jan. 23, 2002, 115
Stat. 2432.)
-REFTEXT-
REFERENCES IN TEXT
Section 406 of the Air Transportation Safety and System
Stabilization Act, referred to in subsec. (f), is section 406 of
Pub. L. 107-42, which is set out as a note under section 40101 of
Title 49, Transportation.
-MISC1-
PRIOR PROVISIONS
A prior section 139 was renumbered section 140 of this title.
EFFECTIVE DATE
Pub. L. 107-134, title I, Sec. 111(c), Jan. 23, 2002, 115 Stat.
2433, provided that: "The amendments made by this section [enacting
this section and renumbering former section 139 as section 140 of
this title] shall apply to taxable years ending on or after
September 11, 2001."
-End-
-CITE-
26 USC Sec. 139A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 139A. Federal subsidies for prescription drug plans
-STATUTE-
Gross income shall not include any special subsidy payment
received under section 1860D-22 of the Social Security Act. This
section shall not be taken into account for purposes of determining
whether any deduction is allowable with respect to any cost taken
into account in determining such payment.
-SOURCE-
(Added Pub. L. 108-173, title XII, Sec. 1202(a), Dec. 8, 2003, 117
Stat. 2480.)
-REFTEXT-
REFERENCES IN TEXT
Section 1860D-22 of the Social Security Act, referred to in text,
is classified to section 1395w-132 of Title 42, The Public Health
and Welfare.
-MISC1-
EFFECTIVE DATE
Section applicable to taxable years ending after Dec. 8, 2003,
see section 1202(d) of Pub. L. 108-173, set out as an Effective
Date of 2003 Amendment note under section 56 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 56 of this title.
-End-
-CITE-
26 USC Sec. 140 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
-HEAD-
Sec. 140. Cross references to other Acts
-STATUTE-
(a) For exemption of -
(1) Allowances and expenditures to meet losses sustained by
persons serving the United States abroad, due to appreciation
of foreign currencies, see section 5943 of title 5, United
States Code.
(2) Amounts credited to the Maritime Administration under
section 9(b)(6) of the Merchant Ship Sales Act of 1946, see
section 9(c)(1) of that Act (50 U.S.C. App. 1742).(!1)
(3) Benefits under laws administered by the Veterans'
Administration, see section 5301 of title 38, United States
Code.
(4) Earnings of ship contractors deposited in special
reserve funds, see section 607(d) of the Merchant Marine Act,
1936 (46 U.S.C. 1177).(!1)
(5) Income derived from Federal Reserve banks, including
capital stock and surplus, see section 7 of the Federal
Reserve Act (12 U.S.C. 531).
(6) Special pensions of persons on Army and Navy medal of
honor roll, see 38 U.S.C. 1562(a)-(c).
(b) For extension of military income tax-exemption benefits
to commissioned officers of Public Health Service in certain
circumstances, see section 212 of the Public Health Service Act
(42 U.S.C. 213).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 39, Sec. 121; Aug. 1, 1956, ch.
837, title V, Sec. 501(t), 70 Stat. 885; Pub. L. 85-56, title XXII,
Sec. 2201(25), June 17, 1957, 71 Stat. 160; Pub. L. 85-857, Sec.
13(t), Sept. 2, 1958, 72 Stat. 1266; renumbered Sec. 122, Pub. L.
88-272, title II, Sec. 206(a), Feb. 26, 1964, 78 Stat. 38;
renumbered Sec. 123, Pub. L. 89-365, Sec. 1(a)(1), Mar. 8, 1966, 80
Stat. 32; renumbered Sec. 124, Pub. L. 91-172, title IX, Sec.
901(a), Dec. 30, 1969, 83 Stat. 709; amended Pub. L. 94-455, title
XIX, Sec. 1901(a)(21), Oct. 4, 1976, 90 Stat. 1766; renumbered Sec.
125, Pub. L. 95-618, title II, Sec. 242(a), Nov. 9, 1978, 92 Stat.
3193; renumbered Sec. 126, renumbered Sec. 127, renumbered Sec.
128, Pub. L. 95-600, title I, Secs. 134(a), 164(a), title V,
543(a), Nov. 6, 1978, 92 Stat. 2783, 2811, 2888; amended Pub. L.
96-222, title I, Sec. 101(a)(3), Apr. 1, 1980, 94 Stat. 195; Pub.
L. 96-589, Sec. 6(i)(1), Dec. 24, 1980, 94 Stat. 3410; renumbered
Sec. 129, renumbered Sec. 130, Pub. L. 97-34, title I, Sec.
124(e)(1), title III, Sec. 301(a), Aug. 13, 1981, 95 Stat. 198,
267; renumbered Sec. 131, renumbered Sec. 132, Pub. L. 97-473,
title I, Secs. 101(b)(1), 102(a), Jan. 14, 1983, 96 Stat. 2605,
2606; renumbered Sec. 133, renumbered Sec. 134 and amended Pub. L.
98-369, div. A, title V, Secs. 531(a)(1), 543(a), div. B, title VI,
Sec. 2661(o)(2), July 18, 1984, 98 Stat. 877, 891, 1159; renumbered
Sec. 135, Pub. L. 99-514, title XI, Sec. 1168(a), Oct. 22, 1986,
100 Stat. 2512; renumbered Sec. 136, Pub. L. 100-647, title VI,
Sec. 6009(a), Nov. 10, 1988, 102 Stat. 3688; Pub. L. 102-40, title
IV, Sec. 402(d)(2), May 7, 1991, 105 Stat. 239; Pub. L. 102-83,
Sec. 5(c)(2), Aug. 6, 1991, 105 Stat. 406; renumbered Sec. 137,
Pub. L. 102-486, title XIX, Sec. 1912(a), Oct. 24, 1992, 106 Stat.
3014; renumbered Sec. 138, Pub. L. 104-188, title I, Sec. 1807(b),
Aug. 20, 1996, 110 Stat. 1901; renumbered Sec. 139, Pub. L. 105-33,
title IV, Sec. 4006(a), Aug. 5, 1997, 111 Stat. 331; renumbered
Sec. 140, Pub. L. 107-134, title I, Sec. 111(a), Jan. 23, 2002, 115
Stat. 2432.)
-REFTEXT-
REFERENCES IN TEXT
Section 9 of the Merchant Ship Sales Act of 1946 (50 U.S.C. App.
1742), referred to in subsec. (a)(2), was repealed by Pub. L.
94-412, title V, Sec. 501(g), Sept. 14, 1976, 90 Stat. 1258.
Section 607(d) of the Merchant Marine Act, 1936, referred to in
subsec. (a)(4), is classified to section 1177 of the Appendix to
Title 46, Shipping.
-MISC1-
AMENDMENTS
2002 - Pub. L. 107-134 renumbered section 139 of this title as
this section.
1997 - Pub. L. 105-33 renumbered section 138 of this title as
this section.
1996 - Pub. L. 104-188 renumbered section 137 of this title as
this section.
1992 - Pub. L. 102-486 renumbered section 136 of this title as
this section.
1991 - Subsec. (a)(3). Pub. L. 102-40 substituted "5301" for
"3101".
Subsec. (a)(6). Pub. L. 102-83 substituted "1562(a)-(c)" for
"562(a)-(c)".
1988 - Pub. L. 100-647 renumbered section 135 of this title as
this section.
1986 - Pub. L. 99-514 renumbered section 134 of this title as
this section.
1984 - Pub. L. 98-369, Secs. 531(a)(1), 543(a), successively
renumbered sections 132 and 133 of this title as this section.
Subsec. (a)(6) to (8). Pub. L. 98-369, Sec. 2661(o)(2), struck
out par. (6) relating to railroad retirement annuities and
pensions, struck out par. (7) relating to railroad unemployment
benefits, and redesignated par. (8) as (6).
1983 - Pub. L. 97-473 successively renumbered sections 130 and
131 of this title as this section.
1981 - Pub. L. 97-34 successively renumbered sections 128 and 129
of this title as this section.
1980 - Subsec. (a). Pub. L. 96-589 redesignated pars. (2) to (9)
as (1) to (8), respectively. Former par. (1), relating to section
1079 of title 11 for adjustments of indebtedness under wage
earners' plans, was struck out.
Subsec. (a)(8). Pub. L. 96-222 substituted "benefits which are
not includible in gross income under section 85," for "benefits,
see".
1978 - Pub. L. 95-600 successively renumbered sections 125, 126,
and 127 of this title as this section.
Pub. L. 95-618 renumbered section 124 of this title as this
section.
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1901(a)(21), struck out
pars. (4), (5), (6), (9), (10), (11), (12), (13), and (17) relating
to: benefits under World War Adjustment Compensation Act; benefits
under World War Veteran's Act 1924; dividends and interest derived
from certain preferred stock by Reconstruction Finance Corporation;
income derived from Ogdensburg bridge; income derived from
Owensburg bridge and ferries; income from Saint Clair River bridge
and ferries; leave compensation payments under section 6 of Armed
Forces Leave Act of 1946; mustering-out payments under
Mustering-Out Payment Act of 1944; and gain derived from sale or
other disposition of Treasury Bills issued after June 17, 1930,
under the Second Liberty Bond Act, respectively, renumbered pars.
(7), (8), (14), (15), (16), and (18) as pars. (5), (6), (7), (8),
(9), and (4), respectively, struck out references to Statutes at
Large, and updated cross references to the United States Code.
Subsec. (b). Pub. L. 94-455, Sec. 1901(a)(21), struck out "58
Stat. 689;" after "Health Service Act".
1969 - Pub. L. 91-172 renumbered section 123 of this title as
this section.
1966 - Pub. L. 89-365 renumbered section 122 of this title as
this section.
1964 - Pub. L. 88-272 renumbered section 121 of this title as
this section.
1958 - Subsec. (a)(18). Pub. L. 85-857 substituted "section 3101
of title 38, United States Code" for "section 1001 of the Veterans'
Benefits Act of 1957".
1957 - Subsec. (a)(18). Pub. L. 85-56 substituted provisions
relating to benefits under laws administered by Veterans'
Administration, for provisions which related to dependency and
indemnity compensation.
1956 - Subsec. (a). Act Aug. 1, 1956, added par. (18) relating to
dependency and indemnity compensation.
-CHANGE-
CHANGE OF NAME
Reference to Veterans' Administration deemed to refer to
Department of Veterans Affairs pursuant to section 10 of Pub. L.
100-527, set out as a Department of Veterans Affairs Act note under
section 301 of Title 38, Veterans' Benefits.
-MISC2-
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 2661(o)(2) of Pub. L. 98-369 effective as
though included in the enactment of the Social Security Amendments
of 1983, Pub. L. 98-21, see section 2664(a) of Pub. L. 98-369, set
out as a note under section 401 of Title 42, The Public Health and
Welfare.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendment by Pub. L. 96-589 effective Oct. 1, 1979, but not to
apply to proceedings under Title 11 commenced before Oct. 1, 1979,
see section 7 of Pub. L. 96-589, set out as a note under section
108 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-857 effective Jan. 1, 1959, see section 2
of Pub. L. 85-857, set out as an Effective Date note preceding Part
I of Title 38, Veterans' Benefits.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND
LOCAL BONDS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
-HEAD-
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
-MISC1-
Subpart
A. Private activity bonds.
B. Requirements applicable to all State and local bonds.
C. Definitions and special rules.
AMENDMENTS
1986 - Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986,
100 Stat. 2603, in amending part IV generally, substituted "TAX
EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS" for
"DETERMINATION OF MARITAL STATUS" as heading for part IV and added
part analysis.
1977 - Pub. L. 95-30, title I, Sec. 101(e)(2), May 23, 1977, 91
Stat. 134, substituted "DETERMINATION OF MARITAL STATUS" for
"STANDARD DEDUCTION FOR INDIVIDUALS" as heading for part IV.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 103, 1394, 1503 of this
title.
-End-
-CITE-
26 USC Subpart A - Private Activity Bonds 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
SUBPART A - PRIVATE ACTIVITY BONDS
-MISC1-
Sec.
141. Private activity bond; qualified bond.
142. Exempt facility bond.
143. Mortgage revenue bonds: qualified mortgage and
qualified veterans' mortgage bond.(!1)
144. Qualified small issue bond; qualified student loan
bond; qualified redevelopment bond.
145. Qualified 501(c)(3) bond.
146. Volume cap.
147. Other requirements applicable to certain private
activity bonds.
AMENDMENTS
1986 - Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986,
100 Stat. 2603, in amending part IV generally, added subpart
heading and analysis and struck out item 143 "Determination of
marital status".
1977 - Pub. L. 95-30, title I, Sec. 101(e)(2), May 23, 1977, 91
Stat. 134, struck out items 141 "Standard deduction", 142
"Individuals not eligible for standard deduction", 144 "Election of
standard deduction", and 145 "Cross reference".
-SECREF-
SUBPART REFERRED TO IN OTHER SECTIONS
This subpart is referred to in title 12 section 1441a.
-FOOTNOTE-
(!1) So in original. Does not conform to section catchline.
-End-
-CITE-
26 USC Sec. 141 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 141. Private activity bond; qualified bond
-STATUTE-
(a) Private activity bond
For purposes of this title, the term "private activity bond"
means any bond issued as part of an issue -
(1) which meets -
(A) the private business use test of paragraph (1) of
subsection (b), and
(B) the private security or payment test of paragraph (2) of
subsection (b), or
(2) which meets the private loan financing test of subsection
(c).
(b) Private business tests
(1) Private business use test
Except as otherwise provided in this subsection, an issue meets
the test of this paragraph if more than 10 percent of the
proceeds of the issue are to be used for any private business
use.
(2) Private security or payment test
Except as otherwise provided in this subsection, an issue meets
the test of this paragraph if the payment of the principal of, or
the interest on, more than 10 percent of the proceeds of such
issue is (under the terms of such issue or any underlying
arrangement) directly or indirectly -
(A) secured by any interest in -
(i) property used or to be used for a private business use,
or
(ii) payments in respect of such property, or
(B) to be derived from payments (whether or not to the
issuer) in respect of property, or borrowed money, used or to
be used for a private business use.
(3) 5 percent test for private business use not related or
disproportionate to government use financed by the issue
(A) In general
An issue shall be treated as meeting the tests of paragraphs
(1) and (2) if such tests would be met if such paragraphs were
applied -
(i) by substituting "5 percent" for "10 percent" each place
it appears, and
(ii) by taking into account only -
(I) the proceeds of the issue which are to be used for
any private business use which is not related to any
government use of such proceeds,
(II) the disproportionate related business use proceeds
of the issue, and
(III) payments, property, and borrowed money with respect
to any use of proceeds described in subclause (I) or (II).
(B) Disproportionate related business use proceeds
For purposes of subparagraph (A), the disproportionate
related business use proceeds of an issue is an amount equal to
the aggregate of the excesses (determined under the following
sentence) for each private business use of the proceeds of an
issue which is related to a government use of such proceeds.
The excess determined under this sentence is the excess of -
(i) the proceeds of the issue which are to be used for the
private business use, over
(ii) the proceeds of the issue which are to be used for the
government use to which such private business use relates.
(4) Lower limitation for certain output facilities
An issue 5 percent or more of the proceeds of which are to be
used with respect to any output facility (other than a facility
for the furnishing of water) shall be treated as meeting the
tests of paragraphs (1) and (2) if the nonqualified amount with
respect to such issue exceeds the excess of -
(A) $15,000,000, over
(B) the aggregate nonqualified amounts with respect to all
prior tax-exempt issues 5 percent or more of the proceeds of
which are or will be used with respect to such facility (or any
other facility which is part of the same project).
There shall not be taken into account under subparagraph (B) any
bond which is not outstanding at the time of the later issue or
which is to be redeemed (other than in an advance refunding) from
the net proceeds of the later issue.
(5) Coordination with volume cap where nonqualified amount
exceeds $15,000,000
If the nonqualified amount with respect to an issue -
(A) exceeds $15,000,000, but
(B) does not exceed the amount which would cause a bond which
is part of such issue to be treated as a private activity bond
without regard to this paragraph,
such bond shall nonetheless be treated as a private activity bond
unless the issuer allocates a portion of its volume cap under
section 146 to such issue in an amount equal to the excess of
such nonqualified amount over $15,000,000.
(6) Private business use defined
(A) In general
For purposes of this subsection, the term "private business
use" means use (directly or indirectly) in a trade or business
carried on by any person other than a governmental unit. For
purposes of the preceding sentence, use as a member of the
general public shall not be taken into account.
(B) Clarification of trade or business
For purposes of the 1st sentence of subparagraph (A), any
activity carried on by a person other than a natural person
shall be treated as a trade or business.
(7) Government use
The term "government use" means any use other than a private
business use.
(8) Nonqualified amount
For purposes of this subsection, the term "nonqualified amount"
means, with respect to an issue, the lesser of -
(A) the proceeds of such issue which are to be used for any
private business use, or
(B) the proceeds of such issue with respect to which there
are payments (or property or borrowed money) described in
paragraph (2).
(9) Exception for qualified 501(c)(3) bonds
There shall not be taken into account under this subsection or
subsection (c) the portion of the proceeds of an issue which (if
issued as a separate issue) would be treated as a qualified
501(c)(3) bond if the issuer elects to treat such portion as a
qualified 501(c)(3) bond.
(c) Private loan financing test
(1) In general
An issue meets the test of this subsection if the amount of the
proceeds of the issue which are to be used (directly or
indirectly) to make or finance loans (other than loans described
in paragraph (2)) to persons other than governmental units
exceeds the lesser of -
(A) 5 percent of such proceeds, or
(B) $5,000,000.
(2) Exception for tax assessment, etc., loans
For purposes of paragraph (1), a loan is described in this
paragraph if such loan -
(A) enables the borrower to finance any governmental tax or
assessment of general application for a specific essential
governmental function, or
(B) is a nonpurpose investment (within the meaning of section
148(f)(6)(A)).
(d) Certain issues used to acquire nongovernmental output property
treated as private activity bonds
(1) In general
For purposes of this title, the term "private activity bond"
includes any bond issued as part of an issue if the amount of the
proceeds of the issue which are to be used (directly or
indirectly) for the acquisition by a governmental unit of
nongovernmental output property exceeds the lesser of -
(A) 5 percent of such proceeds, or
(B) $5,000,000.
(2) Nongovernmental output property
Except as otherwise provided in this subsection, for purposes
of paragraph (1), the term "nongovernmental output property"
means any property (or interest therein) which before such
acquisition was used (or held for use) by a person other than a
governmental unit in connection with an output facility (within
the meaning of subsection (b)(4)) (other than a facility for the
furnishing of water). For purposes of the preceding sentence, use
(or the holding for use) before October 14, 1987, shall not be
taken into account.
(3) Exception for property acquired to provide output to certain
areas
For purposes of paragraph (1) -
(A) In general
The term "nongovernmental output property" shall not include
any property which is to be used in connection with an output
facility 95 percent or more of the output of which will be
consumed in -
(i) a qualified service area of the governmental unit
acquiring the property, or
(ii) a qualified annexed area of such unit.
(B) Definitions
For purposes of subparagraph (A) -
(i) Qualified service area
The term "qualified service area" means, with respect to
the governmental unit acquiring the property, any area
throughout which such unit provided (at all times during the
10-year period ending on the date such property is acquired
by such unit) output of the same type as the output to be
provided by such property. For purposes of the preceding
sentence, the period before October 14, 1987, shall not be
taken into account.
(ii) Qualified annexed area
The term "qualified annexed area" means, with respect to
the governmental unit acquiring the property, any area if -
(I) such area is contiguous to, and annexed for general
governmental purposes into, a qualified service area of
such unit,
(II) output from such property is made available to all
members of the general public in the annexed area, and
(III) the annexed area is not greater than 10 percent of
such qualified service area.
(C) Limitation on size of annexed area not to apply where
output capacity does not increase by more than 10 percent
Subclause (III) of subparagraph (B)(ii) shall not apply to an
annexation of an area by a governmental unit if the output
capacity of the property acquired in connection with the
annexation, when added to the output capacity of all other
property which is not treated as nongovernmental output
property by reason of subparagraph (A)(ii) with respect to such
annexed area, does not exceed 10 percent of the output capacity
of the property providing output of the same type to the
qualified service area into which it is annexed.
(D) Rules for determining relative size, etc.
For purposes of subparagraphs (B)(ii) and (C) -
(i) The size of any qualified service area and the output
capacity of property serving such area shall be determined as
the close of the calendar year preceding the calendar year in
which the acquisition of nongovernmental output property or
the annexation occurs.
(ii) A qualified annexed area shall be treated as part of
the qualified service area into which it is annexed for
purposes of determining whether any other area annexed in a
later year is a qualified annexed area.
(4) Exception for property converted to nonoutput use
For purposes of paragraph (1) -
(A) In general
The term "nongovernmental output property" shall not include
any property which is to be converted to a use not in
connection with an output facility.
(B) Exception
Subparagraph (A) shall not apply to any property which is
part of the output function of a nuclear power facility.
(5) Special rules
In the case of a bond which is a private activity bond solely
by reason of this subsection -
(A) subsections (c) and (d) of section 147 (relating to
limitations on acquisition of land and existing property) shall
not apply, and
(B) paragraph (8) of section 142(a) shall be applied as if it
did not contain "local".
(6) Treatment of joint action agencies
With respect to nongovernmental output property acquired by a
joint action agency the members of which are governmental units,
this subsection shall be applied at the member level by treating
each member as acquiring its proportionate share of such
property.
(e) Qualified bond
For purposes of this part, the term "qualified bond" means any
private activity bond if -
(1) In general
Such bond is -
(A) an exempt facility bond,
(B) a qualified mortgage bond,
(C) a qualified veterans' mortgage bond,
(D) a qualified small issue bond,
(E) a qualified student loan bond,
(F) a qualified redevelopment bond, or
(G) a qualified 501(c)(3) bond.
(2) Volume cap
Such bond is issued as part of an issue which meets the
applicable requirements of section 146, and (!1)
(3) Other requirements
Such bond meets the applicable requirements of each subsection
of section 147.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2603; amended Pub. L. 100-203, title X, Sec. 10631(a), Dec.
22, 1987, 101 Stat. 1330-453; Pub. L. 100-647, title I, Sec.
1013(a)(38), Nov. 10, 1988, 102 Stat. 3544.)
-MISC1-
PRIOR PROVISIONS
A prior section 141, acts Aug. 16, 1954, ch. 736, 68A Stat. 40;
Feb. 26, 1964, Pub. L. 88-272, title I, Sec. 112(a), 78 Stat. 23;
Dec. 30, 1969, Pub. L. 91-172, title VIII, Sec. 802(a), (c)(4),
(e), 83 Stat. 676, 678; Dec. 10, 1971, Pub. L. 92-178, title II,
Secs. 202, 203(a)-(c), title III, Sec. 301(a), 85 Stat. 511, 520;
Mar. 29, 1975, Pub. L. 94-12, title II, Secs. 201(a), 202(a), 89
Stat. 28, 29; Dec. 23, 1975, Pub. L. 94-164, Sec. 2(a)(1), (b)(1),
89 Stat. 970, 971; Oct. 4, 1976, Pub. L. 94-455, title IV, Sec.
401(b)(1), (2), title XIX, Sec. 1906(b)(13)(A), 90 Stat. 1556,
1834, provided for standard deduction, prior to repeal by Pub. L.
95-30, title I, Sec. 101(d)(1), May 23, 1977, 91 Stat. 133,
applicable to taxable years beginning after Dec. 31, 1976.
AMENDMENTS
1988 - Subsec. (b)(5)(B). Pub. L. 100-647 substituted "cause a
bond" for "cause bond".
1987 - Subsecs. (d), (e). Pub. L. 100-203 added subsec. (d) and
redesignated former subsec. (d) as (e).
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10631(c) of Pub. L. 100-203 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 142 and 146 of this title] shall apply to
bonds issued after October 13, 1987 (other than bonds issued to
refund bonds issued on or before such date).
"(2) Binding agreements. - The amendments made by this section
shall not apply to bonds (other than advance refunding bonds) with
respect to a facility acquired after October 13, 1987, pursuant to
a binding contract entered into on or before such date.
"(3) Transitional rule. - The amendments made by this section
shall not apply to bonds issued -
"(A) after October 13, 1987, by an authority created by a
statute -
"(i) approved by the State Governor on July 24, 1986, and
"(ii) sections 1 through 10 of which became effective on
January 15, 1987, and
"(B) to provide facilities serving the area specified in such
statute on the date of its enactment."
EFFECTIVE DATE; TRANSITIONAL RULES
Subtitle B (Secs. 1311-1318) of title XIII of Pub. L. 99-514, as
amended by Pub. L. 100-647, title I, Sec. 1013(b), (c)(1), (2)(A),
(3)-(11)(D), (13), (14)(A), (d), (e)(1), (2)(A), (f)(1)(A),
(2)-(7)(A), (8), (9), (11), (g), (h), Nov. 10, 1988, 102 Stat.
3545-3550, 3558; Pub. L. 101-239, title VII, Sec. 7831(e), Dec. 19,
1989, 103 Stat. 2427, provided that:
"SEC. 1311. GENERAL EFFECTIVE DATES.
"(a) In General. - Except as otherwise provided in this subtitle,
the amendments made by section 1301 [enacting sections 141 to 150
and 7703 of this title, amending sections 2, 22, 25, 32, 86, 103,
105, 152, 153, 163, 194, 269A, 414, 879, 1398, 3402, 4701, 4940,
4942, 4988, 6362, 6652, and 7871 of this title, repealing section
103A of this title, omitting former section 143 of this title,
enacting provisions set out as notes under sections 141 and 148 of
this title, and amending provisions set out as a note under section
103A of this title] shall apply to bonds issued after August 15,
1986.
"(b) Section 1301(f). -
"(1) Increase in trade-in rate. - The amendments made by
paragraph (1) of section 1301(f) [amending section 25 of this
title] shall apply to nonissued bond amounts elected after August
15, 1986.
"(2) Certificates. - The amendments made by paragraph (2) of
section 1301(f) [amending section 25 of this title] shall apply
to certificates issued with respect to non-issued bond amounts
elected after August 15, 1986.
"(c) Changes in Use, Etc., of Facilities Financed With Private
Activity Bonds. - Subsection (b) of section 150 of the 1986 Code
shall apply to changes in use (and ownership) after August 15,
1986, but only with respect to financing (including refinancings)
provided after such date.
"(d) Public Approval and Information Reporting. - Sections 147(f)
and 149(e) of the 1986 Code shall apply to bonds issued after
December 31, 1986.
"(e) Rebate Requirement for Qualified Scholarship Funding Bonds.
- Section 150(d) of the 1986 Code shall apply to payments made
after August 15, 1986.
"(f) Section 1303. - The amendments made by section 1303
[amending sections 172, 1016, and 3402 of this title and repealing
sections 1391 to 1397 and 6039B of this title] shall take effect on
the date of the enactment of this Act [Oct. 22, 1986].
"SEC. 1312. TRANSITIONAL RULES FOR CONSTRUCTION OR BINDING
AGREEMENTS AND CERTAIN GOVERNMENT BONDS ISSUED AFTER AUGUST 15,
1986.
"(a) Exception for Construction or Binding Agreements. -
"(1) In general. - The amendments made by section 1301 [for
classification see section 1311(a) of this note] shall not apply
to bonds (other than a refunding bond) with respect to a facility
-
"(A)(i) the original use of which commences with the
taxpayer, and the construction, reconstruction, or
rehabilitation of which began before September 26, 1985, and
was completed on or after such date,
"(ii) the original use of which begins with the taxpayer and
with respect to which a binding contract to incur significant
expenditures for construction, reconstruction, or
rehabilitation was entered into before September 26, 1985, and
some of such expenditures are incurred on or after such date,
or
"(iii) acquired on or after September 26, 1985, pursuant to a
binding contract entered into before such date, and
"(B) described in an inducement resolution or other
comparable preliminary approval adopted by an issuing authority
(or by a voter referendum) before September 26, 1985.
"(2) Significant expenditures. - For purposes of paragraph
(1)(A), the term 'significant expenditures' means expenditures
greater than 10 percent of the reasonably anticipated cost of the
construction, reconstruction, or rehabilitation of the facility
involved.
"(b) Certain Amendments To Apply to Bonds Under Subsection (a)
Transitional Rule. -
"(1) In general. - In the case of a bond issued after August
15, 1986, and to which subsection (a) of this section applies,
the requirements of the following provisions shall be treated as
included in section 103 and section 103A (as appropriate) of the
1954 Code:
"(A) The requirement that 95 percent or more of the net
proceeds of an issue are to be used for a purpose described in
section 103(b)(4) or (5) of such Code in order for section
103(b)(4) or (5) of such Code to apply, including the
application of section 142(b)(2) of the 1986 Code (relating to
limitation on office space).
"(B) The requirement that 95 percent or more of the net
proceeds of an issue are to be used for a purpose described in
section 103(b)(6)(A) of the 1954 Code in order for section
103(b)(6)(A) of such Code to apply.
"(C) The requirements of section 143 of the 1986 Code
(relating to qualified mortgage bonds and qualified veterans'
mortgage bonds) in order for section 103A(b)(2) of the 1954
Code to apply.
"(D) The requirements of section 144(a)(11) of the 1986 Code
(relating to limitation on acquisition of depreciable farm
property) in order for section 103(b)(6)(A) of the 1954 Code to
apply.
"(E) The requirements of section 147(b) of the 1986 Code
(relating to maturity may not exceed 120 percent of economic
life).
"(F) The requirements of section 147(f) of the 1986 Code
(relating to public approval required for private activity
bonds).
"(G) The requirements of section 147(g) of the 1986 Code
(relating to restriction on issuance costs financed by issue).
"(H) The requirements of section 148 of the 1986 Code
(relating to arbitrage).
"(I) The requirements of section 149(e) of the 1986 Code
(relating to information reporting).
"(J) The provisions of section 150(b) of the 1986 Code
(relating to changes in use).
"(2) Certain requirements apply only to bonds issued after
december 31, 1986. - In the case of subparagraphs (F) and (I) of
paragraphs (1), paragraph (1) shall be applied by substituting
'December 31, 1986' for 'August 15, 1986'.
"(3) Application of volume cap. - Except as provided in section
1315, any bond to which this subsection applies shall be treated
as a private activity bond for purposes of section 146 of the
1986 Code if such bond would have been taken into account under
section 103(n) or 103A(g) of the 1954 Code (determined without
regard to any carryforward election) were such bond issued before
August 16, 1986.
"(4) Application of provisions. - For purposes of applying the
requirements referred to in any subparagraph of paragraph (1) or
of subsection (a)(3) or (b)(3) of section 1313 to any bond, such
bond shall be treated as described in the subparagraph of section
141(d)(1) of the 1986 Code to which the use of the proceeds of
such bond most closely relates.
"(c) Special Rules for Certain Government Bonds Issued After
August 15, 1986. -
"(1) In general. - In the case of any bond described in
paragraph (2) -
"(A) section 1311(a) and (c) and subsection (b) of this
section shall be applied by substituting 'August 31, 1986' for
'August 15, 1986' each place it appears,
"(B) subsection (b)(1) shall be applied without regard to
subparagraphs (F), (G), and (J), and
"(C) such bond shall not be treated as a private activity
bond for purposes of applying the requirements referred to in
subparagraphs (H) and (I) of subsection (b)(1).
"(2) Bond described. - A bond is described in this paragraph if
such bond is not -
"(A) an industrial development bond, as defined in section
103(b)(2) of the 1954 Code but determined -
"(i) by inserting 'directly or indirectly' after 'is' in
the material preceding clause (i) of subparagraph (B)
thereof, and
"(ii) without regard to subparagraph (B) of section
103(b)(3) of such Code,
"(B) a mortgage subsidy bond (as defined in section
103A(b)(1) of such Code, without regard to any exception from
such definition), or
"(C) a private loan bond (as defined in section 103(o)(2)(A)
of such Code, without regard to any exception from such
definition other than section 103(o)(2)(C) of such Code).
"(d) Election Out. - This section shall not apply to any issue
with respect to which the issuer elects not to have this section
apply.
"SEC. 1313. TRANSITIONAL RULES RELATING TO REFUNDINGS.
"(a) Certain Current Refundings. -
"(1) In general. - Except as provided in paragraph (3), the
amendments made by section 1301 [for classification see section
1311(a) of this note] shall not apply to any bond the proceeds of
which are used exclusively to refund (other than to advance
refund) a qualified bond (or a bond which is part of a series of
refundings of a qualified bond) if -
"(A) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
"(B)(i) the average maturity of the issue of which the
refunding bond is a part does not exceed 120 percent of the
average reasonably expected economic life of the facilities
being financed with the net proceeds of such issue (determined
under section 147(b) of the 1986 Code), or
"(ii) the refunding bond has a maturity date not later than
the date which is 17 years after the date on which the
qualified bond was issued.
In the case of a qualified bond which was (when issued) a
qualified mortgage bond or a qualified veterans' mortgage bond,
subparagraph (B)(i) shall not apply and subparagraph (B)(ii)
shall be applied by substituting '32 years' for '17 years'.
"(2) Qualified bond. - For purposes of paragraph (1), the term
'qualified bond' means any bond (other than a refunding bond) -
"(A) issued before August 16, 1986, or
"(B) issued after August 15, 1986, if section 1312(a) applies
to such bond.
"(3) Certain amendments to apply. - The following provisions of
the 1986 Code shall be treated as included in section 103 and
section 103A (as appropriate) of the 1954 Code and shall apply to
refunding bonds described in paragraph (1):
"(A) The requirements of section 147(f) (relating to public
approval required for private activity bonds) but only if the
maturity date of the refunding bond is later than the maturity
date of the refunded bond.
"(B) The requirements of section 147(g) (relating to
restriction on issuance costs financed by issue).
"(C) The requirements of sections 143(g) and 148 (relating to
arbitrage).
"(D) The requirements of section 149(e) (relating to
information reporting).
"(E) The provisions of section 150(b) (relating to changes in
use).
Subparagraphs (A) and (D) shall apply only if the refunding bond
is issued after December 31, 1986. In the case of a refunding
bond described in paragraph (1) with respect to a qualified bond
described in paragraph (2)(B), the requirements of section
1312(b)(1) which applied to such qualified bond shall be treated
as specified in this paragraph with respect to such refunding
bond.
"(4) Special rules for certain government bonds issued after
august 15, 1986. - In the case of any bond described in section
1312(c)(2) -
"(A) paragraph (2) of this subsection shall be applied by
substituting 'August 31, 1986' for 'August 15, 1986' and by
substituting 'September 1, 1986' for 'August 16, 1986',
"(B) paragraph (3) shall be applied without regard to
subparagraphs (A), (B), and (E), and
"(C) such bond shall not be treated as a private activity
bond for purposes of applying the requirements referred to in
subparagraphs (C) and (D) of paragraph (3).
"(b) Certain Advance Refundings. -
"(1) In general. - Except as provided in paragraph (3), the
amendments made by section 1301 [for classification see section
1311(a) of this note] shall not apply to any bond the proceeds of
which are used exclusively to advance refund a bond if -
"(A) the refunded bond is described in paragraph (2), and
"(B) the requirements of subsection (a)(1)(B) are met.
"(2) Non-idb's, etc. - A bond is described in this paragraph if
such bond is not described in subsection (b)(2) or (o)(2)(A) of
section 103 of the 1954 Code and was issued (or was issued to
refund a bond issued) before August 16, 1986. For purposes of the
preceding sentence, the determination of whether a bond is
described in such subsection (o)(2)(A) shall be made without
regard to any exception other than section 103(o)(2)(C) of such
Code.
"(3) Certain amendments to apply. - The following provisions of
the 1986 Code shall be treated as included in section 103 and
section 103A (as appropriate) of the 1954 Code and shall apply to
refunding bonds described in paragraph (1):
"(A) The requirements of section 147(f) (relating to public
approval required for private activity bonds).
"(B) The requirements of section 147(g) (relating to
restriction on issuance costs financed by issue).
"(C) The requirements of section 148 (relating to arbitrage),
except that section 148(d)(3) shall not apply to proceeds of
such bonds to be used to discharge the refunded bonds.
"(D) The requirements of paragraphs (3) and (4) of section
149(d) (relating to advance refundings).
"(E) The requirements of section 149(e) (relating to
information reporting).
"(F) The provisions of section 150(b) (relating to changes in
use).
"(G) Except as provided in the last sentence of subsection
(c)(2) of this section, the requirements of section 145(b)
(relating to $150,000,000 limitation on bonds other than
hospital bonds).
Subparagraphs (A) and (E) shall apply only if the refunding bond
is issued after December 31, 1986.
"(4) Special rule for certain government bonds issued after
august 15, 1986. - In the case of any bond described in section
1312(c)(2) -
"(A) paragraph (2) of this subsection shall be applied by
substituting 'September 1, 1986' for 'August 16, 1986',
"(B) paragraph (3) shall be applied without regard to
subparagraphs (A), (B), and (F), and
"(C) such bond shall not be treated as a private activity
bond for purposes of applying the requirements referred to in
subparagraphs (C) and (E).
"(5) Certain refunding bonds subject to volume cap. - Any
refunding bond described in paragraph (1) the proceeds of which
are used to refund a bond issued as part of an issue 5 percent or
more of the net proceeds of which are or will be used to provide
an output facility (within the meaning of section 141(b)(4) of
the 1986 Code) shall be treated as a private activity bond for
purposes of section 146 of the 1986 Code (to the extent of the
nongovernmental use of such issue, under rules similar to the
rules of section 146(m)(2) of such Code). For purposes of the
preceding sentence, use by a 501(c)(3) organization with respect
to its activities which do not constitute unrelated trades or
businesses (determined by applying section 513(a) of the 1986
Code) shall not be taken into account.
"(c) Treatment of Certain Refundings of Certain IDB's and
501(c)(3) Bonds. -
"(1) $40,000,000 limit for certain small issue bonds. -
Paragraph (10) of section 144(a) of the 1986 Code shall not apply
to any bond (or series of bonds) the proceeds of which are used
exclusively to refund a tax-exempt bond to which such paragraph
and the corresponding provision of prior law did not apply if -
"(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue,
"(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
"(C) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the date
of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A) of the 1986
Code.
"(2) $150,000,000 limitation for certain 501(c)(3) bonds. -
Subsection (b) of section 145 of the 1986 Code (relating to
$150,000,000 limitation for nonhospital bonds) shall not apply to
any bond (or series of bonds) the proceeds of which are used
exclusively to refund a tax-exempt bond to which such subsection
did not apply if -
"(A)(i) the average maturity of the issue of which the
refunding bond is a part does not exceed 120 percent of the
average reasonably expected economic life of the facilities
being financed with the net proceeds of such issue (determined
under section 147(b) of the 1986 Code), or
"(ii) the refunding bond has a maturity date not later than
the later of the date which is 17 years after the date on which
the qualified bond (as defined in subsection (a)(2)) was
issued, and
"(B) the requirements of subparagraphs (B) and (C) of
paragraph (1) are met with respect to the refunding bond.
Subsection (b) of section 145 of the 1986 Code shall not apply to
the 1st advance refunding after March 14, 1986, of a bond issued
before January 1, 1986.
"(3) Application to later issues. - Any bond to which section
144(a)(10) or 145(b) of the 1986 Code does not apply by reason of
this section shall be taken into account in determining whether
such section applies to any later issue.
"(d) Mortgage and Student Loan Targeting Rules To Apply to Loans
Made More Than 3 Years After the Date of the Original Issue. -
Subsections (a)(3) and (b)(3) shall be treated as including the
requirements of subsections (e) and (f) of section 143 and
paragraphs (3) and (4) of section 144(b) of the 1986 Code with
respect to bonds the proceeds of which are used to finance loans
made more than 3 years after the date of the issuance of the
original bond.
"SEC. 1314. SPECIAL RULES WHICH OVERRIDE OTHER RULES IN THIS
SUBTITLE.
"(a) Arbitrage Restriction on Investments in Annuities. - In the
case of a bond issued after September 25, 1985, section 103(c) of
the 1954 Code shall be applied by treating the reference to
securities in paragraph (2) thereof as including a reference to an
annuity contract. The preceding sentence shall not apply to the
first advance refunding after September 25, 1985, if a bond issued
before September 26, 1985.
"(b) Temporary Period for Advance Refundings. - In the case of a
bond issued after December 31, 1985, to advance refund a bond, the
initial temporary period under section 103(c) of the 1954 Code with
respect to the proceeds of the refunding bond shall end not later
than 30 days after the date of issue of the refunding bond.
"(c) Determination of Yield. - In the case of a bond issued after
December 31, 1985, for purposes of section 103(c) of the 1954 Code,
the yield on an issue shall be determined on the basis of the issue
price (within the meaning of sections 1273 and 1274 of the 1986
Code).
"(d) Arbitrage Rebate Requirement. -
"(1) In general. - Except as otherwise provided in this
subsection, in the case of a bond issued after December 31, 1985,
section 103 of the 1954 Code shall be treated as including the
requirements of section 148(f) of the 1986 Code in order for
section 103(a) of the 1954 Code to apply.
"(2) Government bonds. - In the case of a bond described in
section 1312(c)(2) (and not described in paragraph (3) of this
subsection), paragraph (1) shall be applied by substituting
'August 31, 1986' for 'December 31, 1985'.
"(3) Certain pools. -
"(A) In general. - In the case of a bond described in section
1312(c)(2) and issued as part of an issue described in
subparagraph (B), (C), (D), or (E), paragraph (1) shall be
applied by substituting '3 p.m. E.D.T., July 17, 1986' for
'December 31, 1985'. Such a bond shall not be treated as a
private activity bond for purposes of applying section 148(f)
of the 1986 Code.
"(B) Loans to unrelated governmental units. - An issue is
described in this subparagraph if any portion of the proceeds
of the issue is to be used to make or finance loans to any
governmental unit other than any governmental unit which is
subordinate to the issuer and the jurisdiction of which is
within -
"(i) the jurisdiction of the issuer, or
"(ii) the jurisdiction of the governmental unit on behalf
of which such issuer issued the issue.
"(C) Less than 75 percent of projects identified. - An issue
is described in this subparagraph if less than 75 percent of
the proceeds of the issue is to be used to make or finance
loans to initial borrowers to finance projects identified (with
specificity) by the issuer, on or before the date of issuance
of the issue, as projects to be financed with the proceeds of
the issue.
"(D) Less than 25 percent of funds committed to be borrowed.
- An issue is described in this subparagraph if, on or before
the date of issuance of the issue, commitments have not been
entered into by initial borrowers to borrow at least 25 percent
of the proceeds of the issue.
"(E) Certain long maturity issues. - An issue is described in
this subparagraph if -
"(i) the maturity date of any bond issued as part of such
issue exceeds 30 years, and
"(ii) any principal payment on any loan made or financed by
the proceeds of the issue is to be used to make or finance
additional loans.
"(F) Special rules. -
"(i) Exception from subparagraphs (c) and (d) where similar
pools issued by issuer. - An issue shall not be treated as
described in subparagraph (C) or (D) with respect to any
issue to make or finance loans to governmental units if -
"(I) the issuer, before 1986, issued 1 or more similar issues
to make or finance loans to governmental units, and
"(II) the aggregate face amount of such issues issued during
1986 does not exceed 250 percent of the average of the annual
aggregate face amounts of such similar issues issued during
1983, 1984, or 1985.
"(ii) Determination of issuance. - For purposes of
subparagraph (A), an issue shall not be treated as issued
until -
"(I) the bonds issued as part of such issue are offered to the
public (pursuant to final offering materials), and
"(II) at least 25 percent of such bonds is sold to the public.
For purposes of the preceding sentence, the sale of a bond to
a securities firm, broker, or other person acting in the
capacity of an underwriter or wholesaler shall not be treated
as a sale to the public.
"(e) Information Reporting. - In the case of a bond issued after
December 31, 1986, nothing in section 103(a) of the 1986 Code or
any other provision of law shall be construed to provide an
exemption from Federal income tax for interest on any bond unless
such bond satisfies the requirements of section 149(e) of the 1986
Code. A bond described in section 1312(c)(2) shall not be treated
as a private activity bond for purposes of applying such
requirements.
"(f) Abusive Transaction Limitation on Advance Refundings To
Apply. - In the case of a bond issued after August 31, 1986,
nothing in section 103(a) of the 1986 Code or any other provision
of law shall be construed to provide an exemption from Federal
income tax for interest on any bond if the issue of which such bond
is a part is described in paragraph (4) of section 149(d) of the
1986 Code (relating to abusive transactions).
"(g) Termination of Mortgage Bond Policy Statement Requirement. -
Paragraph (5) of section 103A(j) of the 1954 Code (relating to
policy statement) shall not apply to any bond issued after August
15, 1986, and shall not apply to nonissued bond amounts elected
under section 25 of the 1986 Code after such date.
"(h) Arbitrage Restriction on Investments in Investment-Type
Property. - In the case of a bond issued before August 16, 1986
(September 1, 1986 in the case of a bond described in section
1312(c)(2)), section 103(c) of the 1954 Code shall be applied by
treating the reference to securities in paragraph (2) thereof as
including a reference to investment-type property but only for
purposes of determining whether any bond issued after October 16,
1987, to advance refund such bond (or a bond which is part of a
series of refundings of such bond) is an arbitrage bond (within the
meaning of section 148(a) of the 1986 Code).
"(i) Section To Override Other Rules. - Except as otherwise
expressly provided by reference to a provision to which a
subsection of this section applies, nothing in any other section of
this subtitle shall be construed as exempting any bond from the
application of such provision.
"SEC. 1315. TRANSITIONAL RULES RELATING TO VOLUME CAP.
"(a) In General. - Except as otherwise provided in this section,
section 146(f) of the 1986 Code shall not apply with respect to an
issuing authority's volume cap under section 103(n) of the 1954
Code, and no carryforward under such section 103(n) shall be
recognized for bonds issued after August 15, 1986.
"(b) Certain Bonds for Carryforward Projects Outside of Volume
Cap. - Bonds issued pursuant to an election under section
103(n)(10) of the 1954 Code (relating to elective carryforward of
unused limitation for specified project) made before November 1,
1985, shall not be taken into account under section 146 of the 1986
Code if the carryforward project is a facility to which the
amendments made by section 1301 [for classification see section
1311(a) of this note] do not apply by reason of section 1312(a) of
this Act.
"(c) Volume Cap Not To Apply With Respect to Certain Facilities
and Purposes. - Section 146 of the 1986 Code shall not apply to any
bond issued with respect to any facility or purpose described in a
paragraph of subsection (d) if -
"(1) such bond would not have been taken into account under
section 103(n) of the 1954 Code for calendar year 1986
(determined without regard to any carryforward election) were
such bond issued on August 15, 1986, or
"(2) such bond would not have been taken into account under
section 103(n) of the 1954 Code for calendar year 1986
(determined with regard to any carryforward election made before
January 1, 1986) were such bond issued on August 15, 1986.
The preceding sentence shall not apply to the extent section
1313(b)(5) treats any bond as a private activity bond for purposes
of section 146 of the 1986 Code.
"(d) Facilities and Purposes Described. -
"(1) A facility is described in this paragraph if the
amendments made by section 201 of this Act [amending sections 46,
167, 168, 178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245,
4162, 6111, and 7701 of this title] (relating to depreciation) do
not apply to such facility by reason of section 204(a)(8) of this
Act [set out as a note under section 168 of this title] (or, in
the case of a facility which is governmentally owned, would not
apply to such facility were it owned by a nongovernmental
person).
"(2) A facility or purpose is described in this paragraph if
the facility or purpose is described in a paragraph of section
1317.
"(3) A facility is described in this paragraph if the facility
-
"(A) serves Los Osos, California, and
"(B) would be described in paragraph (1) were it a solid
waste disposal facility.
The aggregate face amount of bonds to which this paragraph
applies shall not exceed $35,000,000.
"(4) A facility is described in this paragraph if it is a
sewage disposal facility with respect to which -
"(A) on September 13, 1985, the State public facilities
authority took official action authorizing the issuance of
bonds for such facility, and
"(B) on December 30, 1985, there was an executive order of
the State Governor granting allocation of the State ceiling
under section 103(n) of the 1954 Code in the amount of
$250,000,000 to the Industrial Development Board of the Parish
of East Baton Rouge, Louisiana.
The aggregate face amount of bonds to which this paragraph
applies shall not exceed $98,500,000.
"(5) A facility is described in this paragraph if -
"(A) such facility is a solid waste disposal facility in
Charleston, South Carolina, and
"(B) a State political subdivision took formal action on
April 1, 1980, to commit development funds for such facility.
For purposes of determining whether a bond issued as part of an
issue for a facility described in the preceding sentence is an
exempt facility bond for purposes of part IV of subchapter B of
chapter 1 of the 1986 Code, '90 percent' shall be substituted for
'95 percent' in section 142(a) of the 1986 Code.
"The aggregate face amount of bonds to which this paragraph
applies shall not exceed $75,000,000.
"(6) A facility is described in this paragraph if -
"(A) such facility is a wastewater treatment facility for
which site preparation commenced before September 1985, and
"(B) a parish council approved a service agreement with
respect to such facility on December 4, 1985.
The aggregate face amount of bonds to which this paragraph
applies shall not exceed $120,000,000.
"(e) Treatment of Redevelopment Bonds. - Any bond to which
section 1317(6) of this Act applies shall be treated for purposes
of this section as described in subsection (c)(1). The preceding
sentence shall not apply to any bond which (if issued on August 15,
1986) would have been an industrial development bond (as defined in
section 103(b)(2) of the 1954 Code).
"SEC. 1316. PROVISIONS RELATING TO CERTAIN ESTABLISHED STATE
PROGRAMS.
"(a) Certain Loans to Veterans for the Purchase of Land. -
"(1) In general. - A bond described in paragraph (2) shall be
treated as described in section 141(d)(1) of the 1986 Code and as
having a carryforward purpose described in section 146(f)(5) of
such Code, but subsections (a), (b), (c), and (d) of section 147
of such Code shall not apply to such bond.
"(2) Bond described. - A bond is described in this paragraph if
-
"(A) such bond is a private activity bond solely by reason of
section 141(c) of such Code, and
"(B) such bond is issued as part of an issue 95 percent or
more of the net proceeds of which are to be used to carry out a
program established under State law to provide loans to
veterans for the purchase of land and which has been in effect
in substantially the same form during the 30-year period ending
on July 18, 1984, but only if such proceeds are used to make
loans or to fund similar obligations -
"(i) in the same manner in which,
"(ii) in the same (or lesser) amount or multiple of acres
per participant, and
"(iii) for the same purposes for which,
such program was operated on March 15, 1984.
"(b) Renewable Energy Property. -
"(1) In general. - A bond described in paragraph (2) shall be
treated as described in section 141(d)(1) of the 1986 Code and as
having a carryforward purpose described in section 146(f)(5) of
such Code.
"(2) Bond described. - A bond is described in this paragraph if
paragraph (1) of section 103(b) of the 1954 Code would not
(without regard to the amendments made by this title) have
applied to such bond by reason of section 243 of the Crude Oil
Windfall Profit Tax Act of 1980 [section 243 of Pub. L. 96-223,
set out as a note under section 103 of this title] if -
"(A) such section 243 were applied by substituting '95
percent or more of the net proceeds' for 'substantially all of
the proceeds' in subsection (a)(1) thereof, and
"(B) subparagraph (E) of subsection (a)(1) thereof referred
to section 149(b) of the 1986 Code.
"(c) Certain State Programs. -
"(1) In general. - A bond described in paragraph (2) shall be
treated as described in section 141(d)(1) of the 1986 Code and as
having a carryforward purpose described in section 146(f)(5) of
such Code.
"(2) Bond described. - A bond is described in this paragraph if
such bond is issued as part of an issue 95 percent or more of the
net proceeds of which are to be used to carry out a program
established under sections 280A, 280B, and 280C of the Iowa Code,
but only if -
"(A) such program has been in effect in substantially the
same form since July 1, 1983, and
"(B) such proceeds are to be used to make loans or fund
similar obligations for the same purposes as permitted under
such program on July 1, 1986.
"(3) $100,000,000 limitation. - The aggregate face amount of
outstanding bonds to which this subsection applies shall not
exceed $100,000,000.
"(4) Application of section 147(b). - A bond to which this
subsection applies (other than a refunding bond) shall be treated
as meeting the requirements of section 147(b) of the 1986 Code if
the average maturity (determined in accordance with section
147(b)(2)(A) of such Code) of the issue of which such bond is a
part does not exceed 20 years. A bond issued to refund (or which
is part of a series of bonds issued to refund) a bond described
in the preceding sentence shall be treated as meeting the
requirements of such section if the refunding bond has a maturity
date not later than the date which is 20 years after the date on
which the original bond was issued.
"(d) Use by Certain Federal Instrumentalities Treated as Use by
Governmental Units. - Use by an instrumentality of the United
States shall be treated as use by a State or local governmental
unit for purposes of section 103, and part IV of subchapter B of
chapter 1, of the 1986 Code with respect to a program approved by
Congress before August 3, 1972, but only if -
"(1) a portion of such program has been financed by bonds
issued before such date, to which section 103(a) of the 1954 Code
applied pursuant to a ruling issued by the Commissioner of the
Internal Revenue Service, and
"(2) construction of 1 or more facilities comprising a part of
such program commenced before such date.
"(e) Refunding Permitted of Certain Bonds Invested in Federally
Insured Deposits. -
"(1) In general. - Section 149(b)(2)(B)(ii) of the 1986 Code
(and section 103(h)(2)(B)(ii) of the 1954 Code) shall not apply
to any bond issued to refund a bond -
"(A) which, when issued, would have been treated as federally
guaranteed by reason of being described in clause (ii) of
section 103(h)(2)(B) of the 1954 Code if such section had
applied to such bond, and
"(B)(i) which was issued before April 15, 1983, or
"(ii) to which such clause did not apply by reason of the
except clause in section 631(c)(2) of the Tax Reform Act of
1984 [section 631(c)(2) of Pub. L. 98-369, set out as a note
under section 103 of this title].
Section 147(c) of the 1986 Code (and section 103(b)(16) of the
1954 Code) shall not apply to any refunding bond permitted under
the preceding sentence if section 103(b)(16) of the 1954 Code did
not apply to the refunded bond when issued.
"(2) Requirements. - A refunding bond meets the requirements of
this paragraph if -
"(A) the refunding bond has a maturity date not later than
the maturity date of the refunded bond,
"(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond,
"(C) the weighted average interest rate on the refunding bond
is lower than the weighted average interest rate on the
refunded bond, and
"(D) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the date
of the issuance of the refunding bond.
"(f) Certain Hydroelectric Generating Property. -
"(1) In general. - A bond described in paragraph (2) shall be
treated as described in section 141(d)(1) of the 1986 Code and as
having a carryforward purpose described in section 146(f)(5) of
such Code.
"(2) Description. - A bond is described in this paragraph if
such bond is issued as part of an issue 95 percent or more of the
net proceeds of which are to be used to provide a facility
described in section 103(b)(4)(H) of the 1954 Code determined -
"(A) by substituting 'an application for a license' for 'an
application' in section 103(b)(8)(E)(ii) of the 1954 Code, and
"(B) by applying the requirements of section 142(b)(2) of the
1986 Code.
"(g) Treatment of Bonds Subject to Transitional Rules Under Tax
Reform Act of 1984. -
"(1) Subsections (d)(3) and (f) of section 148 of the 1986 Code
shall not apply to any bond described in section 624(c)(2) of the
Tax Reform Act of 1984 [section 624(c)(2) of Pub. L. 98-369, set
out as a note under section 103 of this title].
"(2)(A) There shall not be taken into account under section 146
of the 1986 Code any bond issued to provide a facility described
in paragraph (3) of section 631(a) of the Tax Reform Act of 1984
[section 631(a)(3) of Pub. L. 98-369, set out as a note under
section 103 of this title] relating to exception for certain
bonds for a convention center and resource recovery project.
"(B) If a bond issued as part of an issue substantially all of
the proceeds of which are used to provide the convention center
to which such paragraph (3) applies, such bond shall be treated
as an exempt facility bond as defined in section 142(a) of the
1986 Code.
"(C) If a bond which is issued as part of an issue
substantially all of the proceeds of which are used to provide
the resource recovery project to which such paragraph (3)
applies, such bond shall be treated as an exempt facility bond as
defined in section 142(a) of the 1986 Code and section 149(b) of
such Code shall not apply.
"(3) The amendments made by section 1301 [for classification
see section 1311(a) of this note] shall not apply to bonds issued
to finance any property described in section 631(d)(4) of the Tax
Reform Act of 1984 [section 631(d)(4) of Pub. L. 98-369, set out
as a note under section 103 of this title].
"(4) The amendments made by section 1301 [for classification
see section 1311(a) of this note] shall not apply to -
"(A) any bond issued to finance property described in section
631(d)(5) of the Tax Reform Act of 1984 [section 631(d)(5) of
Pub. L. 98-369, set out as a note under section 103 of this
title],
"(B) any bond described in paragraph (2), (3), (4), (5), (6),
or (7) of section 632(a), or section 632(b), of such Act [Pub.
L. 98-369, div. A, title VI, Sec. 632, July 18, 1984, 98 Stat.
937], and
"(C) any bond to which section 632(g)(2) of such Act applies.
In the case of bonds to which this paragraph applies, the
requirements of sections 148 and 149(d) shall be treated as
included in section 103 of the 1954 Code and shall apply to such
bonds.
"(5) The preceding provisions of this subsection shall not
apply to any bond issued after December 31, 1988.
"(6) The amendments made by section 1301 [for classification
see section 1311(a) of this note] (and the provisions of section
1314) shall not apply to any bond issued to finance property
described in section 216(b)(3) of the Tax Equity and Fiscal
Responsibility Act of 1982 [section 216(b)(3) of Pub. L. 97-248,
set out as a note under section 168 of this title].
"(7) In the case of a bond described in section 632(d) of the
Tax Reform Act of 1984 [Pub. L. 98-369, div. A, title VI, Sec.
632(d), July 18, 1984, 98 Stat. 938] -
"(A) section 141 of the 1986 Code shall be applied without
regard to subsection (a)(2) and paragraphs (4) and (5) of
subsection (b),
"(B) paragraphs (1) and (2) of section 141(b) of the 1986
Code shall be applied by substituting '25 percent' for '10
percent' each place it appears, and
"(C) section 149(b) of the 1986 Code shall not apply.
This paragraph shall not apply to any bond issued after December
31, 1990.
"(8)(A) The amendments made by section 1301 [for classification
see section 1311(a) of this note] shall not apply to any bond to
which section 629(a)(1) of the Tax Reform Act of 1984 [section
629(a)(1) of Pub. L. 98-369, set out as a note under section 103
of this title] applies, but such bond shall be treated as a
private activity bond for purposes of section 146 of the 1986
Code and as having a carryforward purpose described in section
146(f)(5) of such Code.
"(B) Section 629 of the Tax Reform Act of 1984 [section 629 of
Pub. L. 98-369, set out as a note under section 103 of this
title] is amended -
"(i) in subsection (c)(2), by striking out '$625,000,000' and
inserting in lieu thereof '$911,000,000',
"(ii) in subsection (c)(3), by adding at the end thereof the
following new subparagraphs:
" '(D) Improvements to existing generating facilities.
" '(E) Transmission lines.
" '(F) Electric generating facilities.', and
"(iii) in subsection (a), by adding at the end thereof the
following new sentence: 'The preceding sentence shall be
applied by inserting "and a rural electric cooperative utility"
after "regulated public utility" but only if not more than 1
percent of the load of the public power authority is sold to
such rural electric cooperative utility.'
"(h) Certain Pollution Bonds. - Any bond which is treated as
described in section 103(b)(4)(F) of the 1954 Code by reason of
section 13209 of the Consolidated Omnibus Budget Reconciliation Act
of 1985 [Pub. L. 99-272, title XIII, Sec. 13209, Apr. 7, 1986, 100
Stat. 322] shall be treated as an exempt facility bond for purposes
of part IV of subchapter B of chapter 1 of the 1986 Code, and
section 147(d) of the 1986 Code shall not apply to such bond.
"(i) Transition Rule for Aggregate Limit per Taxpayer. - For
purposes of section 144(a)(10) of the 1986 Code, tax increment
bonds described in section 1869(c)(3) of this Act [set out as a
note under section 103 of this title] which are issued before
August 16, 1986, shall not be taken into account under subparagraph
(B)(ii) thereof.
"(j) Extension of Advance Refunding Exception for Qualified
Public Facility. - Paragraph (4) of section 631(c) of the Tax
Reform Act of 1984 [section 631(c)(4) of Pub. L. 98-369, set out as
a note under section 103 of this title] is amended -
"(1) by striking out 'or the Dade County, Florida, airport' in
the last sentence, and
"(2) by adding at the end thereof the following new sentence:
'In the case of refunding obligations not to exceed $100,000,000
issued after October 21, 1986, by Dade County, Florida, for the
purpose of advance refunding its Aviation Revenue Bonds (Series
J), the first sentence of this paragraph shall be applied by
substituting "the date which is 1 year after the date of the
enactment of the Technical and Miscellaneous Revenue Act of 1988"
[Nov. 10, 1988] for "December 31, 1984" and the amendments made
by section 1301 of the Tax Reform Act of 1986 shall not apply.'
"(k) Expansion of Exception for River Place Project. - Section
1104 of the Mortgage Subsidy Bond Tax Act of 1980 [section 1104 of
Pub. L. 96-499, formerly set out as a note under section 103A of
this title], as added by the Tax Reform Act of 1984, is amended -
"(1) by striking out 'December 31, 1984,' in subsection (p) and
inserting in lieu thereof 'December 31, 1984 (other than
obligations described in subsection (r)(1)),', and
"(2) by striking out '$55,000,000,' in subsection (r)(1)(B) and
inserting in lieu thereof '$110,000,000 of which no more than
$55,000,000 shall be outstanding later than November 1, 1987'.
"SEC. 1317. TRANSITIONAL RULES FOR SPECIFIC FACILITIES.
"(1) Docks and wharves. - A bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide any dock or wharf (within the meaning of section
103(b)(4)(D) of the 1954 Code) shall be treated as an exempt
facility bond (for a facility described in section 142(a)(2) of the
1986 Code) for purposes of part IV of subchapter B of chapter 1 of
the 1986 Code if such dock or wharf is described in any of the
following subparagraphs:
"(A) A dock or wharf is described in this subparagraph if -
"(i) the issue to finance such dock or wharf was approved by
official city action on September 3, 1985, and by voters on
November 5, 1985, and
"(ii) such dock or wharf is for a slack water harbor with
respect to which a Corps of Engineers grant of approximately
$2,000,000 has been made under section 107 of the Rivers and
Harbors Act [33 U.S.C. 577].
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $2,500,000.
"(B) A dock or wharf is described in this subparagraph if -
"(i) inducement resolutions were adopted on May 23, 1985,
September 18, 1985, and September 24, 1985, for the issuance of
the bonds to finance such dock or wharf,
"(ii) a harbor dredging contract with respect thereto was
entered into on August 2, 1985, and
"(iii) a construction management and joint venture agreement
with respect thereto was entered into on October 1, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $625,000,000.
"(C) A facility is described in this subparagraph if -
"(i) the legislature first authorized on June 29, 1981, the
State agency issuing the bond to issue at least $30,000,000 of
bonds,
"(ii) the developer of the facility was selected on April 26,
1985, and
"(iii) an inducement resolution for the issuance of such
issue was adopted on October 9, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000.
"(D) A facility is described in this subparagraph if -
"(i) an inducement resolution was adopted on October 17,
1985, for such issue, and
"(ii) the city council for the city in which the facility is
to be located approved on July 30, 1985, an application for an
urban development action grant with respect to such facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $36,500,000. A facility shall be treated
as described in this subparagraph if it would be so described if
'90 percent' were substituted for '95 percent' in the material
preceding subparagraph (A) of this paragraph.
"(2) Pollution control facilities. - A bond issued as part of an
issue 95 percent or more of the net proceeds of which are to be
used to provide air or water pollution control facilities (within
the meaning of section 103(b)(4)(F) of the 1954 Code) shall be
treated as an exempt facility bond for purposes of part IV of
subchapter B of chapter 1 of the 1986 Code if such facility is
described in any of the following subparagraphs:
"(A) A facility is described in this subparagraph if -
"(i) inducement resolutions with respect to such facility
were adopted on September 23, 1974, and on April 5, 1985,
"(ii) a bond resolution for such facility was adopted on
September 6, 1985, and
"(iii) the issuance of the bonds to finance such facility was
delayed by action of the Securities and Exchange Commission
(file number 70-7127).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $120,000,000.
"(B) A facility is described in this subparagraph if -
"(i) there was an inducement resolution for such facility on
November 19, 1985, and
"(ii) design and engineering studies for such facility were
completed in March of 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $25,000,000.
"(C) A facility is described in this subparagraph if -
"(i) a resolution was adopted by the county board of
supervisors pertaining to an issuance of bonds with respect to
such facility on April 10, 1974, and
"(ii) such facility was placed in service on June 12, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $90,000,000. For purposes of this
subparagraph, a pollution control facility includes a sewage or
solid waste disposal facility (within the meaning of section
103(b)(4)(E) of the 1954 Code).
"(D) A facility is described in this subparagraph if -
"(i) the issuance of the bonds for such facility was approved
by a State agency on August 22, 1979, and
"(ii) the authority to issue such bonds was scheduled to
expire (under terms of the State approval) on August 22, 1989.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $198,000,000.
"(E) A facility is described in this subparagraph if -
"(i) such facility is 1 of 4 such facilities in 4 States with
respect to which the Ball Corporation transmitted a letter of
intent to purchase such facilities on February 26, 1986, and
"(ii) inducement resolutions were issued on December 30,
1985, January 15, 1986, January 22, 1986, and March 17, 1986
with respect to bond issuance in the 4 respective States.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $6,000,000.
"(F) A facility is described in this subparagraph if -
"(i) inducement resolutions for bonds with respect to such
facility were adopted on September 27, 1977, May 27, 1980, and
October 8, 1981, and
"(ii) such facility is located at a geothermal power complex
owned and operated by a single investor-owned utility.
For purposes of this subparagraph and section 103 of the 1986
Code, all hydrogen sulfide air and water pollution control
equipment, together with functionally related and subordinate
equipment and structures, located or to be located at such power
complex shall be treated as a single pollution control facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $600,000,000.
"(G) A facility is described in this subparagraph if -
"(i) such facility is an air pollution control facility
approved by a State bureau of pollution control on July 10,
1986, and by a State board of economic development on July 17,
1986, and
"(ii) on August 15, 1986, the State bond attorney gave notice
to the clerk to initiate validation proceedings with respect to
such issue and on August 28, 1986, the validation decree was
entered.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $900,000.
"(I) A facility is described in this subparagraph if -
"(i) a private company met with a State air control board on
November 14, 1985, to propose construction of a sulften unit,
and
"(ii) the sulften unit is being constructed under a letter of
intent to construct which was signed on April 8, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $11,000,000.
"(J) A facility is described in this subparagraph if it is part
of a 250 megawatt coal-fired electric plant in northeastern
Nevada on which the Sierra Pacific Power Company, a subsidiary of
Sierra Pacific Resources, began in 1980 work to design, finance,
construct, and operate. The aggregate face amount of bonds to
which this subparagraph applies shall not exceed $200,000,000.
"(K) A facility is described in this subparagraph if -
"(i) there was an inducement resolution adopted by a State
industrial development authority on January 14, 1976, and
"(ii) such facility is named in a resolution of such
authority relating to carryforward of the State's unused 1985
private activity bond limit passed by such industrial
development authority on December 18, 1985.
This subparagraph shall apply only to obligations issued at the
request of the party pursuant to whose request the January 14,
1976, inducement was given. The aggregate face amount of bonds to
which this subparagraph applies shall not exceed $75,000,000.
"(L) A facility is described in this subparagraph if a city
council passed an ordinance (ordinance number 4626) agreeing to
issue bonds for such project, December 16, 1985. The aggregate
face amount of obligations to which this subparagraph applies
shall not exceed $45,000,000.
"(3) Sports facilities. - A bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide sports facilities (within the meaning of section
103(b)(4)(B) of the 1954 Code) shall be treated as an exempt
facility bond for purposes of part IV of subchapter B of chapter 1
of the 1986 Code if such facilities are described in any of the
following subparagraphs:
"(A) A facility is described in this subparagraph if it is a
stadium -
"(i) which was the subject of a city ordinance passed on
September 23, 1985,
"(ii) for which a loan of approximately $4,000,000 for land
acquisition was approved on October 28, 1985, by the State
Controlling Board, and
"(iii) a stadium operating corporation with respect to which
was incorporated on March 20, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000.
"(B) A facility is described in this subparagraph if -
"(i) it is a stadium with respect to which a lease agreement
for the ground on which the stadium is to be built was entered
into between a county and the stadium corporation for such
stadium on July 3, 1984,
"(ii) there was a resolution approved on November 14, 1984,
by an industrial development authority setting forth the terms
under which the bonds to be issued to finance such stadium
would be issued, and
"(iii) there was an agreement for consultant and engineering
services for such stadium entered into on September 28, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $90,000,000.
"(C) A facility is described in this subparagraph if -
"(i) it is one or more stadiums to be used either by an
American League baseball team or a National Football League
team currently using a stadium in a city having a population in
excess of 2,500,000 and described in section 146(d)(3) of the
1986 Code,
"(ii) the bonds to be used to provide financing for one or
more such stadiums are issued by a political subdivision or a
State agency pursuant to a resolution approving an inducement
resolution adopted by a State agency on November 20, 1985, as
it may be amended (whether or not the beneficiaries of such
issue or issues are the beneficiaries (if any) specified in
such inducement resolution and whether or not the number of
such stadiums and the locations thereof are as specified in
such inducement resolution) or pursuant to P.A. 84-1470 of the
State in which such city is located (and by an agency created
thereby), and
"(iii) such stadium or stadiums are located in the city
described in (i).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $250,000,000. In the case of any
carryforward of volume cap for one or more stadiums described in
the first sentence of this subparagraph, such carryforward shall
be valid with respect to bonds issued for such stadiums
notwithstanding any other provision of the 1986 Code or the 1954
Code, and whether or not (i) there is a change in the number of
stadiums or the beneficiaries or sites of the stadium or stadiums
and (ii) the bonds are issued by either of the state agencies
described in the first sentence of this subparagraph.
"(D) A facility is described in this subparagraph if -
"(i) such facility is a stadium or sports arena for Memphis,
Tennessee,
"(ii) there was an inducement resolution adopted on November
12, 1985, for the issuance of bonds to expand or renovate an
existing stadium and sports arena and/or to construct a new
arena, and
"(iii) the city council for such city adopted a resolution on
April 19, 1983, to include funds in the capital budget of the
city for such facility or facilities.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $35,000,000.
"(E) A facility is described in this subparagraph if such
facility is a baseball stadium located in Bergen, Essex, Union,
Middlesex, or Hudson County, New Jersey with respect to which
governmental action occurred on November 7, 1985. The aggregate
face amount of bonds to which this subparagraph applies shall not
exceed $150,000,000.
"(F) A facility is described in this subparagraph if -
"(i) it is a facility with respect to which -
"(I) an inducement resolution dated December 24, 1985, was
adopted by the county industrial development authority,
"(II) a public hearing of the county industrial development
authority was held on February 6, 1986, regarding such
facility, and
"(III) a contract was entered into by the county, dated
February 19, 1986, for engineering services for a highway
improvement in connection with such project, or
"(ii) it is a domed football stadium adjacent to Cervantes
Convention Center in St. Louis, Missouri, with respect to which
a proposal to evaluate market demand, financial operations, and
economic impact was dated May 9, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $175,000,000.
"(G) A project to provide a roof or dome for an existing sports
facility is described in this subparagraph if -
"(i) in December 1984 the county sports complex authority
filed a carryforward election under section 103(n) of the 1954
Code with respect to such project,
"(ii) in January 1985, the State authorized issuance of
$30,000,000 in bonds in the next 3 years for such project, and
"(iii) an 11-member task force was appointed by the county
executive in June 1985, to further study the feasibility of the
project.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $30,000,000.
"(H) A sports facility renovation or expansion project is
described in this subparagraph if -
"(i) an amendment to the sports team's lease agreement for
such facility was entered into on May 23, 1985, and
"(ii) the lease agreement had previously been amended in
January 1976, on July 6, 1984, on April 1, 1985, and on May 7,
1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $20,000,000.
"(I) A facility is described in this subparagraph if -
"(i) an appraisal for such facility was completed on March 6,
1985,
"(ii) an inducement resolution was adopted with respect to
such facility on June 7, 1985, and
"(iii) a State bond commission granted preliminary approval
for such project on September 3, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $3,200,000.
"(J) A sports facility renovation or expansion project is
described in this subparagraph if -
"(i) such facility is a domed stadium which commenced
operations in 1965,
"(ii) such facility has been the subject of an ongoing
construction, expansion, or renovation program of planned
improvements,
"(iii) part 1 of such improvements began in 1982 with a
preliminary renovation program financed by tax-exempt bonds,
"(iv) part 2 of such program was previously scheduled for a
bond election on February 25, 1986, pursuant to a Commissioners
Court Order of November 5, 1985, and
"(v) the bond election for improvements to such facility was
subsequently postponed on December 10, 1985, in order to
provide for more comprehensive construction planning.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(K) A facility is described in this subparagraph if -
"(i) the 1985 State legislature appropriated a maximum sum of
$22,500,000 to the State urban development corporation to be
made available for such project, and
"(ii) a development and operation agreement was entered into
among such corporation, the city, the State budget director,
and the county industrial development agency, as of March 1,
1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $28,000,000.
"(L) A facility is described in this subparagraph if -
"(i) it is to consist of 1 or 2 stadiums appropriate for
football games and baseball games with related structures and
facilities,
"(ii) governmental action was taken on August 7, 1985, by the
county commission, and on December 19, 1985, by the city
council, concerning such facility, and
"(iii) such facility is located in a city having a National
League baseball team.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000.
"(M) A facility is described in this subparagraph if -
"(i) such facility consists of 1 or 2 stadium projects (1 of
which may be a stadium renovation or expansion project) with
related structures and facilities,
"(ii) a special advisory commission commissioned a study by a
national accounting firm with respect to a project for such
facility, which study was released in September 1985, and
recommended construction of either a new multipurpose or a new
baseball-only stadium,
"(iii) a nationally recognized design and architectural firm
released a feasibility study with respect to such project in
April 1985, and
"(iv) the metropolitan area in which the facility is located
is presently the home of an American League baseball team.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000.
"(N) A facility is described in this subparagraph if -
"(i) it is to consist of 1 or 2 stadiums appropriate for
football games and baseball games with related structures and
facilities,
"(ii) the site for such facility was approved by the council
of the city in which such facility is to be located on July 9,
1985, and
"(iii) the request for proposals process was authorized by
the council of the city in which such facility is to be located
on November 5, 1985, and such requests were distributed to
potential developers on November 15, 1985, with responses due
by February 14, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000.
"(O) A facility is described in this subparagraph if -
"(i) such facility is described in a feasibility study dated
September 1985, and
"(ii) resolutions were adopted or other actions taken on
February 21, 1985, July 18, 1985, August 8, 1985, October 17,
1985, and November 7, 1985, by the Board of Supervisors of the
county in which such facility will be located with respect to
such feasibility study, appropriations to obtain land for such
facility, and approving the location of such facility in the
county.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $20,000,000.
"(P) A facility is described in this subparagraph if such
facility constructed on a site acquired with the sale of revenue
bonds authorized by a city council on December 2, 1985,
(Ordinances No. 669 and 670, series 1985). The aggregate face
amount of bonds to which this subparagraph applies shall not
exceed $90,000,000.
"(Q) A facility is described in this subparagraph if -
"(i) resolutions were adopted approving a ground lease dated
June 27, 1983, by a sports authority (created by a State
legislature) with respect to the land on which the facility
will be erected,
"(ii) such facility is described in a market study dated June
13, 1983, and
"(iii) such facility was the subject of an Act of the State
legislature which was signed on July 1, 1983.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $81,000,000.
"(R) A facility is described in this subparagraph if such
facility is a baseball stadium and adjacent parking facilities
with respect to which a city made a carryforward election of
$52,514,000 on February 25, 1985. The aggregate face amount of
bonds to which this subparagraph applies shall not exceed
$50,000,000.
"(S) A facility is described in this subparagraph if -
"(i) such facility is to be used by both a National Hockey
League team and a National Basketball Association team,
"(ii) such facility is to be constructed on a platform using
air rights over land acquired by a State authority and
identified as site B in a report dated May 30, 1984, prepared
for a State urban development corporation, and
"(iii) such facility is eligible for real property tax (and
power and energy) benefits pursuant to State legislation
approved and effective as of July 7, 1982.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $225,000,000.
"(T) A facility is described in this subparagraph if -
"(i) a resolution authorizing the financing of the facility
through an issuance of revenue bonds was adopted by the City
Commission on August 5, 1986, and
"(ii) the metropolitan area in which the facility is to be
located is currently the spring training home of an American
league baseball team located during the regular season in a
city described in subparagraph (C).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $10,000,000.
"(U) A facility is described in this subparagraph if it is a
football stadium located in Oakland, California, with respect to
which a design was completed by a nationally recognized
architectural firm for a stadium seating approximately 72,000, to
be located on property adjacent to an existing coliseum complex,
or is a renovation of an existing stadium located in Oakland,
California, and used by an American League baseball team. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $100,000,000.
"(V) A facility is described in this subparagraph if it is a
sports arena (and related parking facility) for Grand Rapids,
Michigan. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $80,000,000.
"(W) A facility is described in this subparagraph if such
facility is located adjacent to the Anacostia River in the
District of Columbia. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $25,000,000.
"(X) A facility is described in this subparagraph if it is a
spectator sports facility for the City of San Antonio, Texas. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $125,000,000.
"(Y) A facility is described in this subparagraph if it will be
part of, or adjacent to, an existing stadium which has been owned
and operated by a State university and if -
"(i) the stadium was the subject of a feasibility report by a
certified public accounting firm which is dated December 28,
1984, and
"(ii) a report by an independent research organization was
prepared in December 1985 demonstrating support among donors
and season ticket holders for the addition of a dome to the
stadium.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $50,000,000.
"(Z) A facility is described in this subparagraph if -
"(i) such facility was a redevelopment project that was
approved in concept by the city council sitting as the
redevelopment agency in October 1984, and
"(ii) $20,000,000 in funds for such facility was identified
in a 5-year budget approved by the city redevelopment agency on
October 25, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $80,000,000.
"(4) Residential rental property. - A bond issued as part of an
issue 95 percent or more of the net proceeds of which are to be
used to finance a residential rental project within the meaning of
section 103(b)(4) of the 1954 Code shall be treated as an exempt
facility bond within the meaning of section 142(a)(7) of the 1986
Code if the facility with respect to the bond is issued satisfies
all low-income occupancy requirements applicable to such bonds
before August 15, 1986, and the bonds are issued pursuant to -
"(A) a contract to purchase such property dated August 12,
1985;
"(B) the county housing authority approved the property and the
financing thereof on September 24, 1985, and
"(C) there was an inducement resolution adopted on October 10,
1985, by the county industrial development authority.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $25,400,000.
"(5) Airports. - A bond issued as a part of an issue 95 percent
or more of the net proceeds of which are to be used to provide an
airport (within the meaning of section 103(b)(4)(D) of the 1954
Code) shall be treated as an exempt facility bond (for facilities
described in section 142(a)(1) of the 1986 Code) for purposes of
part IV of subchapter B of chapter 1 of the 1986 Code if the
facility is described in any of the following subparagraphs:
"(A) A facility is described in this subparagraph if such
facility is a hotel at an airport facility serving a city
described in section 631(a)(3) of the Tax Reform Act of 1984
[section 631(a)(3) of Pub. L. 98-369, set out as a note under
section 103 of this title] (relating to certain bonds for a
convention center and resource recovery project). The aggregate
face amount of bonds to which this subparagraph applies shall not
exceed $40,000,000.
"(B) A facility is described in this subparagraph if such
facility is the primary airport for a city described in paragraph
(3)(C). The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $500,000,000. Section
148(d)(2) of the 1986 Code shall not apply to any issue to which
this subparagraph applies. A facility shall be described in this
subparagraph if it would be so described if '90 percent' were
substituted for '95 percent' in the material preceding
subparagraph (A).
"(C) A facility is described in this subparagraph if such
facility is a hotel at Logan airport and such hotel is located on
land leased from a State authority under a lease contemplating
development of such hotel dated May 1, 1983, or under an
amendment, renewal, or extension of such a lease. The aggregate
face amount of bonds to which this subparagraph applies shall not
exceed $40,000,000.
"(D) A facility is described in this subparagraph if such
facility is the airport for the County of Sacramento, California.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $150,000,000.
"(6) Redevelopment projects. - A bond issued as part of an issue
95 percent or more of the net proceeds of which are to be used to
finance redevelopment activities as part of a project within a
specific designated area shall be treated as a qualified
redevelopment bond for purposes of part IV of subchapter B of
chapter 1 of the 1986 Code if such project is described in any of
the following subparagraphs:
"(A) A project is described in this subparagraph if it was the
subject of a city ordinance numbered 82-115 and adopted on
December 2, 1982, or numbered 9590 and adopted on April 6, 1983.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $9,000,000.
"(B) A project is described in this subparagraph if it is a
redevelopment project for an area in a city described in
paragraph (3)(C) which was designated as commercially blighted on
November 14, 1975, by the city council and the redevelopment plan
for which will be approved by the city council before January 31,
1987. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $20,000,000.
"(C) A project is described in this subparagraph if it is a
redevelopment project for an area in a city described in
paragraph (3)(C) which was designated as commercially blighted on
March 28, 1979, by the city council and the redevelopment plan
for which was approved by the city council on June 20, 1984. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $100,000,000.
"(D) A project is described in this subparagraph if it is any
one of three redevelopment projects in areas in a city described
in paragraph (3)(C) designated as blighted by a city council
before January 31, 1987 and with respect to which the
redevelopment plan is approved by the city council before January
31, 1987. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $20,000,000.
"(E) A project is described in this subparagraph if such
project is for public improvements (including street
reconstruction and improvement of underground utilities) for
Great Falls, Montana, with respect to which engineering estimates
are due on October 1, 1986. The aggregate face amount of bonds to
which this subparagraph applies shall not exceed $3,000,000.
"(F) A project is described in this subparagraph if -
"(i) such project is located in an area designated as
blighted by the governing body of the city on February 15, 1983
(Resolution No. 4573), and
"(ii) such project is developed pursuant to a redevelopment
plan adopted by the governing body of the city on March 1, 1983
(Ordinance No. 15073).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $5,000,000.
"(G) A project is described in this subparagraph if -
"(i) such project is located in an area designated by the
governing body of the city in 1983,
"(ii) such project is described in a letter dated August 8,
1985, from the developer's legal counsel to the development
agency of the city, and
"(iii) such project consists primarily of retail facilities
to be built by the developer named in a resolution of the
governing body of the city on August 30, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $75,000,000.
"(H) A project is described in this subparagraph if -
"(i) such project is a project for research and development
facilities to be used primarily to benefit a State university
and related hospital, with respect to which an urban renewal
district was created by the city council effective October 11,
1985, and
"(ii) such project was announced by the university and the
city in March 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $40,000,000.
"(I) A project is described in this subparagraph if such
project is a downtown redevelopment project with respect to which
-
"(i) an urban development action grant was made, but only if
such grant was preliminarily approved on November 3, 1983, and
received final approval before June 1, 1984, and
"(ii) the issuer of bonds with respect to such facility
adopted a resolution indicating the issuer's intent to adopt
such redevelopment project on October 6, 1981, and the issuer
adopted an ordinance adopting such redevelopment project on
December 13, 1983.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $10,000,000.
"(J) A project is described in this subparagraph if -
"(i) with respect to such project the city council adopted on
December 16, 1985, an ordinance directing the urban renewal
authority to study blight and produce an urban renewal plan,
"(ii) the blight survey was accepted and approved by the
urban renewal authority on March 20, 1986, and
"(iii) the city planning board approved the urban renewal
plan on May 7, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(K) A project is described in this subparagraph if -
"(i) the city redevelopment agency approved resolutions
authorizing issuance of land acquisition and public
improvements bonds with respect to such project on August 8,
1978,
"(ii) such resolutions were later amended in June 1979, and
"(iii) the State Supreme Court upheld a lower court decree
validating the bonds on December 11, 1980.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $380,000,000.
"(L) A project is described in this subparagraph if it is a
mixed use redevelopment project either -
"(i) in an area (known as the Near South Development Area)
with respect to which the planning department of a city
described in paragraph 3(C) promulgated a draft development
plan dated March 1986, and which was the subject of public
hearings held by a subcommittee of the plan commission of such
city on May 28, 1986, and June 10, 1986, or
"(ii) in an area located within the boundaries of any 1 or
more census tracts which are directly adjacent to a river whose
course runs through such city.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $75,000,000.
"(M) A project is described in this subparagraph if it is a
redevelopment project for an area in a city described in
paragraph 3(C) and such area -
"(i) was the subject of a report released in May 1986,
prepared by the National Park Service, and
"(ii) was the subject of a report released January 1986,
prepared by a task force appointed by the Mayor of such city.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $75,000,000.
"(N) A project is described in this subparagraph if it is a
city-university redevelopment project approved by a city
ordinance No. 152-0-84 and the development plan for which was
adopted on January 28, 1985. The aggregate face amount of bonds
to which this subparagraph applies shall not exceed $23,760,000.
"(O) A project is described in this subparagraph if -
"(i) an inducement resolution was passed on March 9, 1984,
for issuance of bonds with respect to such project,
"(ii) such resolution was extended by resolutions passed on
August 14, 1984, April 2, 1985, August 13, 1985, and July 8,
1986,
"(iii) an urban development action grant was preliminarily
approved for part or all of such project on July 3, 1986, and
"(iv) the project is located in a district designated as the
Peabody-Gayoso District.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $140,000,000.
"(P) A project is described in this subparagraph if the project
is a 1-block area of a central business district containing a
YMCA building with respect to which -
"(i) the city council adopted a resolution expressing an
intent to issue bonds for the project on September 27, 1985,
"(ii) the city council approved project guidelines for the
project on December 20, 1985, and
"(iii) the city council by resolution (adopted on July 30,
1986) directed completion of a development agreement.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $26,000,000.
"(Q) A project is described in this subparagraph if the project
is a 2-block area of a central business district designated as
blocks E and F with respect to which -
"(i) the city council adopted guidelines and criteria and
authorized a request for development proposals on July 22,
1985,
"(ii) the city council adopted a resolution expressing an
intent to issue bonds for the project on September 27, 1985,
and
"(iii) the city issued requests for development proposals on
March 28, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $47,000,000.
"(R) A project is described in this subparagraph if the project
is an urban renewal project covering approximately 5.9 acres of
land in the Shaw area of the northwest section of the District of
Columbia and the 1st portion of such project was the subject of a
District of Columbia public hearing on June 2, 1986. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $10,000,000.
"(S) A project is described in this subparagraph if such
project is a hotel, commercial, and residential project on the
east bank of the Grand River in Grand Rapids, Michigan, with
respect to which a developer was selected by the city in June
1985 and a planning agreement was executed in August 1985. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $39,000,000.
"(T) A project is described in this subparagraph if such
project is the Wurzburg Block Redevelopment Project in Grand
Rapids, Michigan. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $60,000,000.
"(U) A project is described in this subparagraph if such
project is consistent with an urban renewal plan adopted or
ordered prepared before August 28, 1986, by the city council of
the most populous city in a state which entered the Union on
February 14, 1859. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $83,000,000.
"(V) A project is described in this subparagraph if such
project is consistent with an urban renewal plan which was
adopted (or ordered prepared) before August 13, 1985, by an
appropriate jurisdiction of a state which entered the Union on
February 14, 1859. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $135,000,000 and the
limitation on the period during which bonds under this section
may be issued shall not apply to such bonds.
"(W) A project is described in this subparagraph if such
project is -
"(i) a part of the Kenosha Downtown Redevelopment project,
and
"(ii) located in an area bounded -
"(I) on the east by the east wall of the Army Corps of
Engineers Confined Disposal Facility (extended),
"(II) on the north by 48th Street (extended),
"(III) on the west by the present Chicago & Northwestern
Railroad tracks, and
"(IV) on the south by the north line of Eichelman Park
(60th Street) (extended).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $105,000,000.
"(X) A project is described in this subparagraph if a
redevelopment plan for such project was approved by the city
council of Bell Gardens, California, on June 12, 1979. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $10,000,000.
"(Y) Nothing in this paragraph shall be construed as having the
effect of exempting from tax interest on any bond issued after
June 10, 1987, if such interest would not have been exempt from
tax were such bond issued on August 15, 1986.
"(Z) Any designated area with respect to which a project is
described in any subparagraph of this paragraph shall be taken
into account in applying section 144(c)(4)(C) of the 1986 Code in
determining whether other areas (not so described) may be
designated.
"(7) Convention centers. - A bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide any convention or trade show facility (within the meaning
of section 103(b)(4)(C) of the 1954 Code) shall be treated as an
exempt facility bond for purposes of part IV of subchapter B of
chapter 1 of the 1986 Code if such facility is described in any of
the following subparagraphs:
"(A) A facility is described in this subparagraph if -
"(i) a feasibility consultant and a design consultant were
hired on April 3, 1985, with respect to such facility, and
"(ii) a draft feasibility report with respect to such
facility was presented on November 3, 1985, to the Mayor of the
city in which such facility is to be located.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $190,000,000. For purposes of this
subparagraph, not more than $20,000,000 of bonds issued to
advance refund existing convention facility bonds sold on May 12,
1978, shall be treated as bonds described in this subparagraph
and section 149(d)(2) of the 1986 Code shall not apply to bonds
so treated.
"(B) A facility is described in this subparagraph if -
"(i) an application for a State loan for such facility was
approved by the city council on March 4, 1985, and
"(ii) the city council of the city in which such facility is
to be located approved on March 25, 1985, an application for an
urban development action grant.
The aggregate face amount of bonds which this subparagraph
applies shall not exceed $10,000,000.
"(C) A facility is described in this subparagraph if -
"(i) on November 1, 1983, a convention development tax took
effect and was dedicated to financing such facility,
"(ii) the State supreme court of the State in which the
facility is to be located validated such tax on February 8,
1985, and
"(iii) an agreement was entered into on November 14, 1985,
between the city and county in which such facility is to be
located on the terms of the bonds to be issued with respect to
such facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $66,000,000.
"(D) A facility is described in this subparagraph if -
"(i) it is a convention, trade, or spectator facility,
"(ii) a regional convention, trade, and spectator facilities
study committee was created before March 19, 1985, with respect
to such facility, and
"(iii) feasibility and preliminary design consultants were
hired on May 1, 1985, and October 31, 1985, with respect to
such facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed the excess of $175,000,000 over the
amount of bonds to which paragraph (48)(B) applies.
"(E) A facility is described in this subparagraph if -
"(i) such facility is meeting rooms for a convention center,
and
"(ii) resolutions and ordinances were adopted with respect to
such meeting rooms on January 17, 1983, July 11, 1983, December
17, 1984, and September 23, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $75,000,000.
"(F) A facility is described in this subparagraph if it is an
international trade center which is part of the 125th Street
redevelopment project in New York, New York. The aggregate face
amount of obligations to which this subparagraph applies shall
not exceed $165,000,000.
"(G) A facility is described in this subparagraph if -
"(i) such facility is located in a city which was the subject
of a convention center market analysis or study dated March
1983, and prepared by a nationally recognized accounting firm,
"(ii) such facility's location was approved in December 1985
by a task force created jointly by the Governor of the State
within which such facility will be located and the mayor of the
capital city of such State, and
"(iii) the size of such facility is not more than 200,000
square feet.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $70,000,000.
"(H) A facility is described in this subparagraph if an
analysis of operations and recommendations of utilization of such
facility was prepared by a certified public accounting firm
pursuant to an engagement authorized on March 6, 1984, and
presented on June 11, 1984, to officials of the city in which
such facility is located. The aggregate face amount of bonds to
which this subparagraph applies shall not exceed $75,000,000.
"(I) A facility is described in this subparagraph if -
"(i) voters approved a bond issue to finance the acquisition
of the site for such facility on May 4, 1985,
"(ii) title of the property was transferred from the Illinois
Center Gulf Railroad to the city on September 30, 1985, and
"(iii) a United States judge rendered a decision regarding
the fair market value of the site of such facility on December
30, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $131,000,000.
"(J) A facility is described in this subparagraph if -
"(i) such facility is to be used for an annual aquafestival,
"(ii) a referendum was held on April 6, 1985, in which voters
permitted the city council to lease 130 acres of dedicated
parkland for the purpose of constructing such facility, and
"(iii) the city council passed an inducement resolution on
June 19, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $10,000,000.
"(K) A facility is described in this subparagraph if -
"(i) voters approved a bond issued to finance a portion of
the cost of such facility on December 1, 1984, and
"(ii) such facility was the subject of a market study and
financial projections dated March 21, 1986, prepared by a
nationally recognized accounting firm.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $5,000,000.
"(L) A facility is described in this subparagraph if -
"(i) on July 12, 1984, the city council passed a resolution
increasing the local hotel and motel tax to 7 percent to assist
in paying for such facility,
"(ii) on October 25, 1984, the city council selected a
consulting firm for such facility, and
"(iii) with respect to such facility, the city council
appropriated funds for additional work on February 7, 1985,
October 3, 1985, and June 26, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $120,000,000.
"(M) A facility is described in this subparagraph if -
"(i) a board of county commissioners, in an action dated
January 21, 1986, supported an application for official
approval of the facility, and
"(ii) the State economic development commission adopted a
resolution dated February 25, 1986, determining the facility to
be an eligible facility pursuant to State law and the rules
adopted by the commission.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $7,500,000.
"(8) Sports or convention facilities. - A bond issued as a part
of an issue 95 percent or more of the net proceeds of which are to
be used to provide either a sports facility (within the meaning of
section 103(b)(4)(B) of the 1954 Code) or a convention facility
(within the meaning of section 103(b)(4)(C) of the 1954 Code) shall
be treated as an exempt facility bond for purposes of part IV of
subchapter B of chapter 1 of the 1986 Code if such facility is
described in any of the following subparagraphs:
"(A) A combined convention and arena facility, or any part
thereof (whether on the same or different sites), is described in
this subparagraph if -
"(i) bonds for the expansion, acquisition, or construction of
such combined facility are payable from a tax and are issued
under a plan initially approved by the voters of the taxing
authority on April 25, 1978, and
"(ii) such bonds were authorized for expanding a convention
center, for acquiring an arena site, and for building an arena
or any of the foregoing pursuant to a resolution adopted by the
governing body of the bond issuer on March 17, 1986, and
superseded by a resolution adopted by such governing body on
May 27, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $160,000,000.
"(B) A sports or convention facility is described in this
subparagraph if -
"(i) on March 4, 1986, county commissioners held public
hearings on creation of a county convention facilities
authority, and
"(ii) on March 7, 1986, the county commissioners voted to
create a county convention facilities authority and to submit
to county voters a 1/2 cent sales and use tax to finance such
facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $150,000,000.
"(C) A sports or convention facility is described in this
subparagraph if -
"(i) a feasibility consultant and a design consultant were
hired prior to October 1980 with respect to such facility,
"(ii) a feasibility report dated October 1980 with respect to
such facility was presented to a city or county in which such
facility is to be located, and
"(iii) on September 7, 1982, a joint city/county resolution
appointed a committee which was charged with the task of
independently reviewing the studies and present need for the
facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(D) A sports or convention facility is described in this
subparagraph if -
"(i) such facility is a multipurpose coliseum facility for
which, before January 1, 1985, a city, an auditorium district
created by the State legislature within which such facility
will be located, and a limited partnership executed an
enforceable contract,
"(ii) significant governmental action regarding such facility
was taken before May 23, 1983, and
"(iii) inducement resolutions were passed for issuance of
bonds with respect to such facility on May 26, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $25,000,000.
"(9) Parking facilities. - A bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide a parking facility (within the meaning of section
103(b)(4)(D) of the 1954 Code) shall be treated as an exempt
facility bond for purposes of part IV of subchapter B of chapter 1
of the 1986 Code if such facility is described in any of the
following subparagraphs:
"(A) A facility is described in this subparagraph if -
"(i) there was an inducement resolution on March 9, 1984, for
the issuance of bonds with respect to such facility, and
"(ii) such resolution was extended by resolutions passed on
August 14, 1984, April 2, 1985, August 13, 1985, and July 8,
1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $30,000,000.
"(B) A facility is described in this subparagraph if -
"(i) such facility is for a university medical school,
"(ii) the last parcel of land necessary for such facility was
purchased on February 4, 1985, and
"(iii) the amount of bonds to be issued with respect to such
facility was increased by the State legislature of the State in
which the facility is to be located as part of its 1983-1984
general appropriations act.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $9,000,000.
"(C) A facility is described in this subparagraph if -
"(i) the development agreement with respect to the project of
which such facility is a part was entered into during May 1984,
and
"(ii) an inducement resolution was passed on October 9, 1985,
for the issuance of bonds with respect to the facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $35,000,000.
"(D) A facility is described in this subparagraph if the city
council approved a resolution of intent to issue tax-exempt bonds
(Resolution 34083) for such facility on April 30, 1986. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $8,000,000. Solely for purposes of this
subparagraph, a heliport constructed as part of such facility
shall be deemed to be functionally related and subordinate to
such facility.
"(E) A facility is described in this subparagraph if -
"(i) resolutions were adopted by a public joint powers
authority relating to such facility on March 6, 1985, May 1,
1985, October 2, 1985, December 4, 1985, and February 5, 1986;
and
"(ii) such facility is to be located at an exposition park
which includes a coliseum and sports arena.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $150,000,000.
"(F) A facility is described in this subparagraph if -
"(i) it is to be constructed as part of an overall
development that is the subject of a development agreement
dated October 1, 1983, between a developer and an organization
described in section 501(c)(3) of the 1986 Code, and
"(ii) an environmental notification form with respect to the
overall development was filed with a State environmental agency
on February 28, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(G) A facility is described in this subparagraph if -
"(i) an inducement resolution was passed by the city
redevelopment agency on December 3, 1984, and a resolution to
carryforward the private activity bond limit was passed by such
agency on December 21, 1984, with respect to such facility, and
"(ii) the owner participation agreement with respect to such
facility was entered into on July 30, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $18,000,000.
"(H) A facility is described in this subparagraph if -
"(i) an application (dated August 28, 1986) for financial
assistance was submitted to the county industrial development
agency with respect to such facility, and
"(ii) the inducement resolution for such facility was passed
by the industrial development agency on September 10, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $8,000,000.
"(I) A facility is described in this subparagraph if -
"(i) it is located in a city the parking needs of which were
comprehensively described in a 'Downtown Parking Plan' dated
January 1983, and approved by the city's City Plan Commission
on June 1, 1983, and
"(ii) obligations with respect to the construction of which
are issued on behalf of a State or local governmental unit by a
corporation empowered to issue the same which was created by
the legislative body of a State by an Act introduced on May 21,
1985, and thereafter passed, which Act became effective without
the governor's signature on June 26, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $50,000,000.
"(J) A facility is described in this subparagraph if -
"(i) such facility is located in a city which was the subject
of a convention center market analysis or study dated March
1983 and prepared by a nationally recognized accounting firm,
"(ii) such facility is intended for use by, among others,
persons attending a convention center located within the same
town or city, and
"(iii) such facility's location was approved in December 1985
by a task force created jointly by the governor of the State
within which such facility will be located and the mayor of the
capital city of such State.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $30,000,000.
"(K) A facility is described in this subparagraph if -
"(i) scale and components for the facility were determined by
a city downtown plan adopted October 31, 1984 (resolution
number 3882), and
"(ii) the site area for the facility is approximately 51,200
square feet.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $5,000,000.
"(L) A facility is described in this subparagraph if -
"(i) the property for such facility was offered for
development by a city renewal agency on March 19, 1986
(resolution number 920), and
"(ii) the site area for the facility is approximately 25,600
square feet.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $5,000,000.
"(M) A facility is described in this subparagraph if such
facility was approved by official action of the city council on
July 26, 1984 (resolution number 33718), and is for the Moyer
Theatre. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $8,000,000.
"(N) A facility is described in this subparagraph if it is part
of a renovation project involving the Outlet Company building in
Providence, Rhode Island. The aggregate face amount of
obligations to which this subparagraph applies shall not exceed
$6,000,000.
"(10) Certain advance refundings. -
"(A) Section 149(d)(3) of the 1986 Code shall not apply to a
bond issued by a State admitted to the Union on November 16,
1907, for the advance refunding of not more than $186,000,000
State turnpike obligations.
"(B) A refunding of the Charleston, West Virginia Town Center
Garage Bonds shall not be treated for purposes of part IV of
subchapter A of chapter 1 of the 1986 Code as an advance
refunding if it would not be so treated if '100' were substituted
for '90' in section 149(d)(5) of such Code.
"(11) Principal user provisions. -
"(A) In the case of a bond issued as part of an issue the
proceeds of which are to be used to provide a facility described
in subparagraph (B) or (C), the determination of whether such
bond is an exempt facility bond shall be made by substituting '90
percent' for '95 percent' in section 142(a) of the 1986 Code.
"(B) A facility is described in this subparagraph if -
"(i) it is a waste-to-energy project for which a contract for
the sale of electricity was executed in September 1984, and
"(ii) the design, construction, and operation contract for
such project was signed in March 1985 and the order to begin
construction was issued on March 31, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $29,100,000.
"(C) A facility is described in this subparagraph if it is
described in section 1865(c)(2)(C) of this Act [set out as a note
under section 103 of this title].
"(12) Qualified scholarship funding bonds. - Subsections (d)(3)
and (f) of section 148 of the 1986 Code shall not apply to any bond
or series of bonds the proceeds of which are used exclusively to
refund qualified scholarship funding bonds (as defined in section
150 of the 1986 Code) issued before January 1, 1986, if -
"(A) the amount of the refunding bonds does not exceed the
aggregate face amount of the refunded bonds,
"(B) the maturity date of such refunding bond is not later than
later of -
"(i) the maturity date of the bond to be refunded, or
"(ii) the date which is 15 years after the date on which the
refunded bond was issued (or, in the case of a series of
refundings, the date on which the original bond was issued),
"(C) the bonds to be refunded were issued by the California
Student Loan Finance Corporation, and
"(D) the face amount of the refunding bonds does not exceed
$175,000,000.
"(13) Residential rental property projects. - A bond issued as
part of an issue 95 percent or more of the net proceeds of which
are to be used to provide a project for residential rental property
which satisfies the requirements of section 103(b)(4)(A) of the
1954 Code shall be treated as an exempt facility bond (for projects
described in section 142(a)(7) of the 1986 Code) for purposes of
part IV of subchapter B of chapter 1 of the 1986 Code if the
project is described in any of the following subparagraphs:
"(A) A residential rental property project is described in this
subparagraph if -
"(i) a public building development corporation was formed on
June 6, 1984, with respect to such project,
"(ii) a partnership of which the corporation is a general
partner was formed on June 8, 1984, and
"(iii) the partnership entered into a preliminary agreement
with the State public facilities authority effective as of May
4, 1984, with respect to the issuance of the bonds for such
project.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $6,200,000.
"(B) A residential rental property project is described in this
subparagraph if -
"(i) the Board of Commissioners of the city housing authority
officially selected such project's developer on December 19,
1985,
"(ii) the Board of the City Redevelopment Commission agreed
on February 13, 1986, to conduct a public hearing with respect
to the project on March 6, 1986,
"(iii) an official action resolution for such project was
adopted on March 6, 1986, and
"(iv) an allocation of a portion of the State ceiling was
made with respect to such project on July 29, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $10,000,000.
"(C) A residential rental property project is described in this
subparagraph if -
"(i) the issuance of $1,289,882 of bonds for such project was
approved by a State agency on September 11, 1985, and
"(ii) the authority to issue such bonds was scheduled to
expire (under the terms of the State approval) on September 9,
1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $1,300,000.
"(D) A residential rental property project is described in this
subparagraph if -
"(i) the issuance of $7,020,000 of bonds for such project was
approved by a State agency on October 10, 1985, and
"(ii) the authority to issue such bonds was scheduled to
expire (under the terms of the State approval) on October 9,
1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $7,020,000.
"(E) A residential rental property project is described in this
subparagraph if -
"(i) it is to be located in a city urban renewal project area
which was established pursuant to an urban renewal plan adopted
by the city council on May 17, 1960,
"(ii) the urban renewal plan was revised in 1972 to permit
multifamily dwellings in areas of the urban renewal project
designated as a central business district,
"(iii) an inducement resolution was adopted for such project
on December 14, 1984, and
"(iv) the city council approved on November 6, 1985, an
agreement which provides for conveyance to the city of fee
title to such project site.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(F) A residential rental property project is described in this
subparagraph if -
"(i) such project is to be located in a city urban renewal
project area which was established pursuant to an urban renewal
plan adopted by the city council on May 17, 1960,
"(ii) the urban renewal plan was revised in 1972 to permit
multifamily dwellings in areas of the urban renewal project
designated as a central business district,
"(iii) the amended urban renewal plan adopted by the city
council on May 19, 1972, also provides for the conversion of
any public area site in Block J of the urban renewal project
area for the development of residential facilities, and
"(iv) acquisition of all of the parcels comprising the Block
J project site was completed by the city on December 28, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $60,000,000.
"(G) A residential rental property project is described in this
subparagraph if -
"(i) such project is to be located on a city-owned site which
is to become available for residential development upon the
relocation of a bus maintenance facility,
"(ii) preliminary design studies for such project site were
completed in December 1985, and
"(iii) such project is located in the same State as the
projects described in subparagraphs (E) and (F).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $100,000,000.
"(H) A residential rental property project is described in this
subparagraph if -
"(i) at least 20 percent of the residential units in such
project are to be utilized to fulfill the requirements of a
unilateral agreement date July 21, 1983, relating to the
provision of low- and moderate-income housing,
"(ii) the unilateral agreement was incorporated into
ordinance numbers 83-49 and 83-50, adopted by the city council
and approved by the mayor on August 24, 1983, and
"(iii) an inducement resolution was adopted for such project
on September 25, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $8,000,000.
"(I) A residential rental property project is described in this
subparagraph if -
"(i) a letter of understanding was entered into on December
11, 1985, between the city and county housing and community
development office and the project developer regarding the
conveyance of land for such project, and
"(ii) such project is located in the same State as the
projects described in subparagraphs (E), (F), (G), and (H).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed an amount which, together with the
amounts allowed under subparagraphs (E), (F), (G), and (H), does
not exceed $250,000,000.
"(J) A residential rental property project is described in this
subparagraph if it is a multifamily residential development
located in Arrowhead Springs, within the county of San
Bernardino, California, and a portion of the site of which
currently is owned by the Campus Crusade for Christ. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $350,000,000.
"(K) A residential rental property project is described in this
subparagraph if -
"(i) it is a new residential development with approximately
309 dwelling units located in census tract No. 3202, and
"(ii) there was an inducement ordinance for such project
adopted by a city council on November 20, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $32,000,000.
"(L) A residential rental property project is described in this
subparagraph if -
"(i) it is a new residential development with approximately
70 dwelling units located in census tract No. 3901, and
"(ii) there was an inducement ordinance for such project
adopted by a city council on August 14, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $4,000,000.
"(M) A residential rental property project is described in this
subparagraph if -
"(i) it is a new residential development with approximately
98 dwelling units located in census tract No. 4701, and
"(ii) there was an inducement ordinance for such project
adopted by a city council on August 14, 1984.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $7,000,000.
"(N) A project or projects are described in this subparagraph
if they are part of the Willow Road residential improvement plan
in Menlo Park, California. The aggregate face amount of
obligations to which this subparagraph applies shall not exceed
$9,000,000.
"(O) A residential rental property project is described in this
subparagraph if -
"(i) an inducement resolution for such project was approved
on July 18, 1985, by the city council,
"(ii) such project was approved by such council on August 11,
1986, and
"(iii) such project consists of approximately 22 duplexes to
be used for housing qualified low and moderate income tenants.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $1,500,000.
"(P) A residential rental property project is described in this
subparagraph if -
"(i) an inducement resolution for such project was approved
on April 22, 1986, by the city council,
"(ii) such project was approved by such council on August 11,
1986, and
"(iii) such project consists of a unit apartment complex
(having approximately 60 units) to be used for housing
qualified low and moderate income tenants.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $1,625,000.
"(Q) A residential rental property project is described in this
subparagraph if -
"(i) a State housing authority granted a notice of official
action for the project on May 24, 1985, and
"(ii) a binding agreement was executed for such project with
the State housing finance authority on May 14, 1986, and such
agreement was accepted by the State housing authority on June
5, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $7,800,000.
"(R) A residential rental property project is described in this
subparagraph if such project is either of 2 projects (located in
St. Louis, Missouri) which received commitments to provide
construction and permanent financing through the issuance of
bonds in principal amounts of up to $242,130 and $654,045, on
July 16, 1986. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $1,000,000.
"(S) A residential rental property project is described in this
subparagraph if -
"(i) a local housing authority approved an inducement
resolution for such project on January 28, 1985, and
"(ii) a suit relating to such project was dismissed without
right of further appeal on April 4, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $13,200,000.
"(T) A residential rental property project is described in this
subparagraph if -
"(i) such project is the renovation of a hotel for residents
for senior citizens,
"(ii) an inducement resolution for such project was adopted
on November 20, 1985, by the State Development Finance
Authority, and
"(iii) such project is to be located in the metropolitan area
of the city described in paragraph (3)(C).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $9,500,000.
"(U) A residential rental property project is described in this
subparagraph if -
"(i) such project is the renovation of apartment housing,
"(ii) an inducement resolution for such project was adopted
on December 20, 1985, by the State Housing Development
Authority, and
"(iii) such project is to be located in the metropolitan area
of the city described in paragraph (3)(C).
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $12,000,000.
"(V) A residential rental project is described in this
subparagraph if it is a renovation and construction project for
low-income housing in central Louisville, Kentucky, and local
board approval for such project was granted April 22, 1986. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $500,000.
"(W) A residential rental project is described in this
subparagraph if -
"(i) such project is 1 of 6 residential rental projects
having in the aggregate approximately 1,010 units,
"(ii) inducement resolutions for such projects were adopted
by the county residential finance authority on November 21,
1985, and
"(iii) a public hearing of the county residential finance
authority was held by such authority on December 19, 1985,
regarding such projects to be constructed by an in-commonwealth
developer.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $62,000,000.
"(X) A residential rental project is described in this
subparagraph if -
"(i) an inducement resolution with respect to such project
was adopted by the State housing development authority on
January 25, 1985, and
"(ii) the issuance of bonds for such project was the subject
of a law suit filed on October 25, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $64,000,000.
"(Y) A project or projects are described in this subparagraph
if they are financed with bonds issued by the Tulare, California,
County Housing Authority. The aggregate face amount of
obligations to which this subparagraph applies shall not exceed
$8,000,000.
"(Z) A residential rental project is described in this
subparagraph if such project is a multifamily mixed-use housing
project located in a city described in paragraph (3)(C), the
zoning for which was changed to residential-business planned
development on November 26, 1985, and with respect to which both
the city on December 4, 1985, and the state housing finance
agency on December 20, 1985, adopted inducement resolutions. The
aggregate face amount of obligations to which this subparagraph
applies shall not exceed $90,000,000.
"(AA) A residential rental property project is described in
this subparagraph if it is the Carriage Trace residential rental
project in Clinton, Tennessee. The aggregate face amount of bonds
to which this subparagraph applies shall not exceed $10,000,000.
"(BB) A residential rental property project is described in
this subparagraph if -
"(i) a contract to purchase such property was dated as of
August 9, 1985,
"(ii) there was an inducement resolution adopted on September
27, 1985, for the issuance of obligations to finance such
property,
"(iii) there was a State court final validation of such
financing on November 15, 1985, and
"(iv) the certificate of nonappeal from such validation was
available on December 15, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $27,750,000.
"(14) Qualified student loans. - The amendments made by section
1301 [for classification see section 1311(a) of this note] shall
not apply to any qualified student loan bonds (as defined in
section 144 of the 1986 Code) issued by the Volunteer State Student
Assistance Corporation incorporated on February 20, 1985. The
aggregate face amount of bonds to which this paragraph applies
shall not exceed $130,000,000. In the case of bonds to which this
paragraph applies, the requirements of sections 148 and 149(d) of
the 1986 Code shall be treated as included in section 103 of the
1954 Code and shall apply to such bonds.
"(15) Annuity contracts. - The treatment of annuity contracts as
investment property under section 148(b)(2) of the 1986 Code shall
not apply to any bond described in any of the following
subparagraphs:
"(A) A bond is described in this subparagraph if such bond is
issued by a city located in a noncontiguous State if -
"(i) the authority to acquire such a contract was approved on
September 24, 1985, by city ordinance A085-176, and
"(ii) formal bid requests for such contracts were mailed to
insurance companies on September 6, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $57,000,000.
"(B) A bond is described in this subparagraph if -
"(i) on or before May 12, 1985, the governing board of the
city pension fund authorized an agreement with an underwriter
to provide planning and financial guidance for a possible bond
issue, and
"(ii) the proceeds of the sale of such bond issue are to be
used to purchase an annuity to fund the unfunded liability of
the City of Berkeley, California's Safety Members Pension Fund.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $40,000,000.
"(C) A bond is described in this subparagraph if such bond is
issued by the South Dakota Building Authority if on September 18,
1985, representatives of such authority and its underwriters met
with bond counsel and approved financing the purchase of an
annuity contract through the sale and leaseback of State
properties. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $175,000,000.
"(D) A bond is described in this subparagraph if -
"(i) such bond is issued by Los Angeles County, and
"(ii) such county, before September 25, 1985, paid or
incurred at least $50,000 of costs related to the issuance of
such bonds.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $500,000,000.
"(16) Solid waste disposal facility. - The amendments made by
section 1301 [for classification see section 1311(a) of this note]
shall not apply to any solid waste disposal facility if -
"(A) construction of such facility was approved by State law
I.C. 36-9-31,
"(B) there was an inducement resolution on November 19, 1984,
for the bonds with respect to such facility, and
"(C) a carryforward election of unused 1984 volume cap was made
for such project on February 25, 1985.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $120,000,000.
"(17) Refunding of bond anticipation notes. - There shall not be
taken into account under section 146 of the 1986 Code any refunding
of bond anticipation notes -
"(A) issued in December of 1984 by the Rhode Island Housing and
Mortgage Finance Corporation,
"(B) which mature in December of 1986,
"(C) which is not an advance refunding within the meaning of
section 149(d)(5) of the 1986 Code (determined by substituting
'180 days' for '90 days' therein), and
"(D) the aggregate face amount of the refunding bonds does not
exceed $25,500,000.
"(18) Certain airports. - The amendments made by section 1301
[for classification see section 1311(a) of this note] shall not
apply to a bond issued as part of an issue 95 percent or more of
the net proceeds of which are to be used to provide any airport
(within the meaning of section 103(b)(4)(D) of the 1954 Code) if
such airport is a mid-field airport terminal and accompanying
facilities at a major air carrier airport which during April 1980
opened a new precision instrument approach runway 10R28L. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $425,000,000.
"(19) Mass commuting facilities. - A bond issued as a part of an
issue 95 percent or more of the net proceeds of which are to be
used to provide a mass commuting facility (within the meaning of
section 103(b)(4)(D) of the 1954 Code) shall be treated as an
exempt facility bond (for facilities described in section 142(a)(3)
of the 1986 Code) for purposes of part IV of subchapter B of
chapter 1 of the 1986 Code if such facility is described in 1 of
the following subparagraphs:
"(A) A facility is described in this subparagraph if -
"(i) such facility provides access to an international
airport,
"(ii) a corporation was formed in connection with such
project in September 1984,
"(iii) the Board of Directors of such corporation authorized
the hiring of various firms to conduct a feasibility study with
respect to such project in April 1985, and
"(iv) such feasibility study was completed in November 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $150,000,000.
"(B) A facility is described in this subparagraph if -
"(i) enabling legislation with respect to such project was
approved by the State legislature in 1979,
"(ii) a 1-percent local sales tax assessment to be dedicated
to the financing of such project was approved by the voters on
August 13, 1983, and
"(iii) a capital fund with respect to such project was
established upon the issuance of $90,000,000 of notes on
October 22, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000 and such bonds must be
issued before January 1, 1996.
"(C) A facility is described in this subparagraph if -
"(i) bonds issued therefor are issued by or on behalf of an
authority organized in 1979 pursuant to enabling legislation
originally enacted by the State legislature in 1973, and
"(ii) such facility is part of a system connector described
in a resolution adopted by the board of directors of the
authority on March 27, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $400,000,000. Notwithstanding the last
paragraph of this subsection, this subparagraph shall apply to
bonds issued before January 1, 1996.
"(D) A facility is described in this subparagraph if -
"(i) the facility is a fixed guideway project,
"(ii) enabling legislation with respect to the issuing
authority was approved by the State legislature in May 1973,
"(iii) on October 28, 1985, a board issued a request for
consultants to conduct a feasibility study on mass transit
corridor analysis in connection with the facility, and
"(iv) on May 12, 1986, a board approved a further binding
contract for expenditures of approximately $1,494,963, to be
expended on a facility study.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $250,000,000. Notwithstanding the last
paragraph of this subsection, this subparagraph shall apply to
bonds issued before January 1, 1996.
"(20) Private colleges. - Subsections (c)(2) and (f) of section
148 of the 1986 Code shall not apply to any bond which is issued as
part of an issue if such bond -
"(A) is issued by a political subdivision pursuant to home rule
and interlocal cooperation powers conferred by the constitution
and laws of a State to provide funds to finance the costs of the
purchase and construction of educational facilities for private
colleges and universities, and
"(B) was the subject of a resolution of official action by such
political subdivision (Resolution No. 86-1039) adopted by the
governing body of such political subdivision on March 18, 1986.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $100,000,000.
"(21) Pooled financing programs. -
"(A) Section 147(b) of the 1986 Code shall not apply to any
hospital pooled financing program with respect to which -
"(i) a formal presentation was made to a city hospital
facilities authority on January 14, 1986, and
"(ii) such authority passed a resolution approving the bond
issue in principle on February 5, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $95,000,000.
"(B) Subsections (c)(2) and (f) of section 148 of the 1986 Code
shall not apply to bonds for which closing occurred on July 16,
1986, and for which a State municipal league served as
administrator for use in a State described in section
103A(g)(5)(C) of the Internal Revenue Code of 1954. The aggregate
face amount of obligations to which this subparagraph applies
shall not exceed $585,000,000.
"(22) Downtown redevelopment project. - Subsection (b) of section
626 of the Tax Reform Act of 1984 [section 626(b) of Pub. L.
98-369, set out as a note under section 103 of this title] is
amended by adding at the end thereof the following new paragraph:
" '(7) Exception for certain downtown redevelopment project. -
The amendments made by this section shall not apply to any
obligation which is issued as part of an issue 95 percent or more
of the proceeds of which are to be used to provide a project to
acquire and redevelop a downtown area if -
" '(A) on August 15, 1985, a downtown redevelopment authority
adopted a resolution to issue obligations for such project,
" '(B) before September 26, 1985, the city expended, or entered
into binding contracts to expend, more than $10,000,000 in
connection with such project, and
" '(C) the State supreme court issued a ruling regarding the
proposed financing structure for such project on December 11,
1985.
The aggregate face amount of obligations to which this paragraph
applies shall not exceed $85,000,000 and such obligations must be
issued before January 1, 1992.'
"(23) Mass commuting and parking facilities. - A bond issued as
part of an issue 95 percent or more of the net proceeds of which
are to be used to provide any mass commuting facility or parking
facility (within the meaning of section 103(b)(4)(D) of the 1954
Code) shall be treated as an exempt facility bond for purposes of
part IV of subchapter B of chapter 1 of the 1986 Code if such
facility is provided in connection with the rehabilitation,
renovation, or other improvement to an existing railroad station
owned on the date of the enactment of this Act [Oct. 22, 1986] by
the National Railroad Passenger Corporation in the Northeast
Corridor and which was placed in partial service in 1934 and was
placed in the National Register of Historic Places in 1978. The
aggregate face amount of bonds to which this paragraph applies
shall not exceed $30,000,000.
"(24) Tax-exempt status of bonds of certain educational
organizations. -
"(A) In general. - For purposes of section 103 and part IV of
subchapter B of chapter 1 of the 1986 Code, a qualified
educational organization shall be treated as a governmental unit,
but only with respect to a trade or business carried on by such
organization which is not an unrelated trade or business
(determined by applying section 513(a) of such Code to such
organization). The last paragraph of this section shall not apply
to the treatment under the preceding sentence.
"(B) Qualified educational organization. - For purposes of
subparagraph (A), the term 'qualified educational organization'
means a college or university -
"(i) which was reincorporated and renewed with perpetual
existence as a corporation by specific act of the legislature
of the State within which such college or university is located
on March 19, 1913, or
"(ii) which -
"(I) was initially incorporated or created on February 28,
1787, on April 29, 1854, or on May 14, 1888, and
"(II) as an instrumentality of the State, serves as a
'State-related' university by a specific act of the
legislature of the State within which such college or
university is located.
"(25) Tax-exempt status of bonds of certain public utilities. -
"(A) In general. - Except as provided in subparagraph (B), a
bond shall be treated as a qualified bond for purposes of section
103 of the 1986 Code if such bond is issued after the date of the
enactment of this Act [Oct. 22, 1986] with respect to a public
utility facility if such facility is -
"(i) located at any non-federally owned dam (or on project
waters or adjacent lands) located wholly or partially in 1 or
more of 3 counties, 2 of which are contiguous to the third,
where the rated capacity of the hydroelectric generating
facilities at 5 of such dams on October 18, 1979, was more than
650 megawatts each,
"(ii) located at a dam (or on the project waters or adjacent
lands) at which hydroelectric generating facilities were
financed with the proceeds of tax-exempt obligations before
December 31, 1968,
"(iii) owned and operated by a State, political subdivision
of a State, or any agency or instrumentality of any of the
foregoing, and
"(iv) located at a dam (or on project waters or adjacent
lands) where the general public has access for recreational
purposes to such dam or to such project waters or adjacent
lands.
"(B) Special rules for subparagraph (a). -
"(i) Bonds subject to cap. - Section 146 of the 1986 Code
shall apply to any bond described in subparagraph (A) which
(without regard to subparagraph (A)) is a private activity
bond. For purposes of applying section 146(k) of the 1986 Code,
the public utility facility described in subparagraph (A) shall
be treated as described in paragraph (2) of such section and
such paragraph shall be applied without regard to the
requirement that the issuer establish that a State's share of
the use of a facility (or its output) will equal or exceed the
State's share of the private activity bonds issued to finance
the facility.
"(ii) Limitation on amount of bonds to which subparagraph (a)
applies. - The aggregate face amount of bonds to which
subparagraph (A) applies shall not exceed $750,000,000, not
more than $350,000,000 of which may be issued before January 1,
1992.
"(iii) Limitation on purposes. - Subparagraph (A) shall only
apply to bonds issued as part of an issue 95 percent or more of
the net proceeds of which are used to provide 1 or more of the
following:
"(I) A fish by-pass facility or fisheries enhancement
facility.
"(II) A recreational facility or other improvement which is
required by Federal licensing terms and conditions or other
Federal, State, or local law requirements.
"(III) A project of repair, maintenance, renewal, or
replacement, and safety improvement.
"(IV) Any reconstruction, replacement, or improvement,
including any safety improvement, which increases, or allows
an increase in, the capacity, efficiency, or productivity of
the existing generating equipment.
"(26) Convention and parking facilities. - A bond shall not be
treated as a private activity bond for purposes of section 103 and
part IV of subchapter B of chapter 1 of the 1986 Code if -
"(A) such bond is issued to provide a sports or convention
facility described in section 103(b)(4)(B) or (C) of the 1954
Code,
"(B) such bond is not described in section 103(b)(2) or
(o)(2)(A) of such Code,
"(C) legislation by a State legislature in connection with such
facility was enacted on July 19, 1985, and was designated Chapter
375 of the Laws of 1985, and
"(D) legislation by a State legislature in connection with the
appropriation of funds to a State public benefit corporation for
loans in connection with the construction of such facility was
enacted on April 17, 1985, and was designated Chapter 41 of the
Laws of 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $35,000,000.
"(27) Small issue termination. - Section 144(a)(12) of the 1986
Code shall not apply to any bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide a facility described in any of the following subparagraphs:
"(A) A facility is described in this subparagraph if -
"(i) the facility is a hotel and office facility located in a
State capital,
"(ii) the economic development corporation of the city in
which the facility is located adopted an initial inducement
resolution on October 30, 1985, and
"(iii) a feasibility consultant was retained on February 21,
1986, with respect to such facility.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $10,000,000.
"(B) A facility is described in this subparagraph if such
facility is financed by bonds issued by a State finance authority
which was created in April 1985 by Act 1062 of the State General
Assembly, and the Bond Guarantee Act (Act 505 of 1985) allowed
such authority to pledge the interest from investment of the
State's general fund as a guarantee for bonds issued by such
authority. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $75,000,000.
"(C) A facility is described in this subparagraph if such
facility is a downtown mall and parking project for Holland,
Michigan, with respect to which an initial agreement was
formulated with the city in May 1985 and a formal memorandum of
understanding was executed on July 2, 1986. The aggregate face
amount of bonds to which this subparagraph applies shall not
exceed $18,200,000.
"(D) A facility is described in this subparagraph if such
facility is a downtown mall and parking ramp project for Traverse
City, Michigan, with respect to which a final development
agreement was signed in June 1986. The aggregate face amount of
bonds to which this subparagraph applies shall not exceed
$21,500,000.
"(E) A facility is described in this subparagraph if such
facility is the rehabilitation of the Heritage Hotel in
Marquette, Michigan. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $5,000,000.
"(F) A facility is described in this subparagraph if it is the
Lakeland Center Hotel in Lakeland, Florida. The aggregate face
amount of obligations to which this subparagraph applies shall
not exceed $10,000,000.
"(G) A facility is described in this subparagraph if it is the
Marble Arcade office building renovation project in Lakeland,
Florida. The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $5,900,000.
"(H) A facility is described in this subparagraph if it is a
medical office building in Bradenton, Florida, with respect to
which -
"(i) a memorandum of agreement was entered into on October
17, 1985, and
"(ii) the city council held a public hearing and approved
issuance of the bonds on November 13, 1985.
The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $8,500,000.
"(I) A facility is described in this subparagraph if it
consists of the rehabilitation of the Andover Town Hall in
Andover, Massachusetts. The provisions of section 149(b) of the
1986 Code (relating to federally guaranteed obligations) shall
not apply to obligations to finance such project solely as a
result of the occupation of a portion of such building by a
United States Post Office. For purposes of determining whether
any bond to which this subparagraph applies is a qualified small
issue bond, there shall not be taken into account under section
144(a) of the 1986 Code capital expenditures with respect to any
facility of the United States Government and there shall not be
taken into account any bond allocable to the United States
Government.
"(J) A facility is described in this subparagraph if it is the
Central Bank Building renovation project in Grand Rapids,
Michigan. The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $1,000,000.
"(28) Certain private loans not taken into account. - For
purposes of determining whether any bond is a private activity
bond, an amount of loans (but not in excess of $75,000,000)
provided from the proceeds of 1 or more issues shall not be taken
into account if such loans are provided in furtherance of -
"(A) a city Emergency Conservation Plan as set forth in an
ordinance adopted by the city council of such city on February
17, 1983, or
"(B) a resolution adopted by the city council of such city on
March 10, 1983, committing such city to a goal of reducing the
peak load of such city's electric generation and distribution
system by 553 megawatts in 15 years.
"(29) Certain private business use not taken into account. -
"(A) The nonqualified amount of the proceeds of an issue shall
not be taken into account under section 141(b)(5) of the 1986
Code or in determining whether a bond described in subparagraph
(B) (which is part of such issue) is a private activity bond for
purposes of section 103 and part IV of subchapter B of chapter 1
of the 1986 Code.
"(B) A bond is described in this subparagraph if -
"(i) such bond is issued before January 1, 1993, by the State
of Connecticut, and
"(ii) such bond is issued pursuant to a resolution of the
State Bond Commission adopted before September 26, 1985.
"(C) The nonqualified amount to which this paragraph applies
shall not exceed $150,000,000.
"(D) For purposes of this paragraph, the term 'nonqualified
amount' has the meaning given such term by section 141(b)(8) of
the 1986 Code, except that such term shall include the amount of
the proceeds of an issue which is to be used (directly or
indirectly) to make or finance loans (other than loans described
in section 141(c)(2) of the 1986 Code) to persons other than
governmental units.
"(30) Volume cap not to apply to certain facilities. - For
purposes of section 146 of the 1986 Code, any exempt facility bond
for the following facility shall not be taken into account: The
facility is a facility for the furnishing of water which was
authorized under Public Law 90-537 [43 U.S.C. 1501 et seq.] of the
United States if -
"(A) construction of such facility began on May 6, 1973, and
"(B) forward funding will be provided for the remainder of the
project pursuant to a negotiated agreement between State and
local water users and the Secretary of the Interior signed April
15, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $391,000,000.
"(31) Certain hydroelectric generating property. - A bond shall
be treated as described in paragraph (2) of section 1316(f) of this
Act if -
"(A) such bond would be so described but for the substitution
specified in such paragraph,
"(B) on January 7, 1983, an application for a preliminary
permit was filed for the project for which such bond is issued
and received docket no. 6986, and
"(C) on September 20, 1983, the Federal Energy Regulatory
Commission issued an order granting the preliminary permit for
the project.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $12,000,000.
"(32) Volume cap. - The State ceiling applicable under section
146 of the 1986 Code for calendar year 1987 for the State which
ratified the United States Constitution on May 29, 1790, shall be
$150,000,000 higher than the State ceiling otherwise applicable
under such section for such year.
"(33) Application of $150,000,000 limitation for certain
qualified 501(c)(3) bonds. - Proceeds of an issue described in any
of the following subparagraphs shall not be taken into account
under section 145(b) of the 1986 Code.
"(A) Proceeds of an issue are described in this subparagraph if
-
"(i) such proceeds are used to provide medical school
facilities or medical research and clinical facilities for a
university medical center,
"(ii) such proceeds are of -
"(I) a $21,550,000 issue dated August 1, 1980,
"(II) a $84,400,000 issue dated September 1, 1984, and
"(III) a $48,500,000 issue (Series 1985 A and 1985 B) dated
on December 1, 1985, and
"(iii) the issuer of all such issues is the same.
"(B) Proceeds of an issue are described in this subparagraph if
such proceeds are for use by Yale University and -
"(i) the bonds are issued after August 8, 1986, by the State
of Connecticut Health and Educational Facilities Authority, or
"(ii) the bonds are the 1st or 2nd refundings (including
advance refundings) of the bonds described in clause (i) or of
original bonds issued before August 7, 1986, by such Authority.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $90,000,000.
"(C) Proceeds of an issue are described in this subparagraph if
-
"(i) such issue is issued on behalf of a university
established by Charter granted by King George II of England on
October 31, 1754, to accomplish a refunding (including an
advance refunding) of bonds issued to finance 1 or more
projects, and
"(ii) the application or other request for the issuance of
the issue to the appropriate State issuer was made by or on
behalf of such university before February 26, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $250,000,000.
"(D) Proceeds of an issue are described in this subparagraph if
-
"(i) such proceeds are to be used for finance construction of
a new student recreation center,
"(ii) a contract for the development phase of the project was
signed by the university on May 21, 1986, with a private
company for 5 percent of the costs of the project, and
"(iii) a committee of the university board of administrators
approved the major program elements for the center on August
11, 1986.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $25,000,000.
"(E) Proceeds of an issue are described in this subparagraph if
-
"(i) such proceeds are to be used in the construction of new
life sciences facilities for a university for medical research
and education,
"(ii) the president of the university authorized a
faculty/administration planning committee for such facilities
on September 17, 1982,
"(iii) the trustees of such university authorized site and
architect selection on October 30, 1984, and
"(iv) the university negotiated a $2,600,000 contract with
the architect on August 9, 1985.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $47,500,000.
"(F) Proceeds of an issue are described in this subparagraph if
such proceeds are to be used to renovate undergraduate chemistry
and engineering laboratories, and to rehabilitate other basic
science facilities, for an institution of higher education in
Philadelphia, Pennsylvania, chartered by legislative Acts of the
Commonwealth of Pennsylvania, including an Act dated September
30, 1791. The aggregate face amount of bonds to which this
subparagraph applies shall not exceed $6,500,000.
"(G) Proceeds of an issue are described in this subparagraph if
such proceeds are of bonds which are the first advance refunding
of bonds issued during 1985 for the development of a computer
network, and construction and renovation or rehabilitation of
other facilities, for an institution of higher education
described in subparagraph (F). The aggregate face amount of bonds
to which this subparagraph applies shall not exceed $80,000,000.
"(H) Proceeds of an issue are described in this subparagraph if
-
"(i) the issue is issued on behalf of a university founded in
1789, and
"(ii) the proceeds of the issue are to be used to finance
projects (to be determined by such university and the issuer)
which are similar to those projects intended to be financed by
bonds that were the subject of a request transmitted to
Congress on November 7, 1985[.]
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $200,000,000. Bonds to which this
subparagraph applies shall be treated as qualified 501(c)(3)
bonds if such bonds would not (if issued on August 15, 1986) be
industrial development bonds (as defined in section 103(b)(2) of
the 1954 Code), and section 147(f) of the 1986 Code shall not
apply to the issue of which such bonds are a part. Bonds issued
to finance facilities described in this subparagraph shall be
treated as issued to finance such facilities notwithstanding the
fact that a period in excess of 1 year has expired since the
facilities were placed in service.
"(I) Proceeds of an issue are described in this subparagraph if
the issue is issued on behalf of a university established on
August 6, 1872, for a project approved by the trustees thereof on
November 1, 1985. The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $100,000,000.
"(J) Proceeds of an issue are described in this subparagraph if
-
"(i) the issue is issued on behalf of a university for which
the founding grant was signed on November 11, 1885, and
"(ii) such bond is issued for the purpose of providing a Near
West Campus Redevelopment Project and a Student Housing
Project.
The aggregate face amount of bonds to which this subparagraph
applies shall not exceed $105,000,000.
"(J) Proceeds of an issue are described in this subparagraph if
-
"(i) they are the proceeds of advance refunding obligations
issued on behalf of a university established on April 21, 1831,
and
"(ii) the application or other request for the issuance of
such obligations was made to the appropriate State issuer
before July 12, 1986.
The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $175,000,000.
"(K) Proceeds of an issue are described in this subparagraph if
-
"(i) the issue or issues are for the purpose of financing or
refinancing costs associated with university facilities
including at least 900 units of housing for students, faculty,
and staff in up to two buildings and an office building
containing up to 245,000 square feet of space, and
"(ii) a bond act authorizing the issuance of such bonds for
such project was adopted on July 8, 1986, and such act under
Federal law was required to be transmitted to Congress.
The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $112,000,000.
"(L) Proceeds of an issue are described in this subparagraph if
such issue is for Cornell University in an aggregate face amount
of not more than $150,000,000.
"(M) Proceeds of an issue are described in this subparagraph if
such issue is issued on behalf of the Society of the New York
Hospital to finance completion of a project commenced by such
hospital in 1981 for construction of a diagnostic and treatment
center or to refund bonds issued on behalf of such hospital in
connection with the construction of such diagnostic and treatment
center or to finance construction and renovation projects
associated with an inpatient psychiatric care facility. The
aggregate face amount of bonds to which this subparagraph applies
shall not exceed $150,000,000.
"(N) Any bond to which section 145(b) of the 1986 Code does not
apply by reason of this paragraph (other than subparagraph (A)
thereof) shall be taken into account in determining whether such
section applies to any later issue.
"(O) In the case of any refunding bond -
"(i) to which any subparagraph of this paragraph applies, and
"(ii) to which the last sentence of section 1313(c)(2)
applies,
such bond shall be treated as having such subparagraph apply (and
the refunding bond shall be treated for purposes of such section
as issued before January 1, 1986, and as not being an advance
refunding) unless the issuer elects the opposite result.
"(34) Arbitrage rebate. - Section 148(f) of the 1986 Code shall
not apply to any period before October 1, 1990, with respect to any
bond the proceeds of which are to be used to provide a high-speed
rail system for the State of Ohio. The aggregate face amount of
bonds to which this paragraph applies shall not exceed
$2,000,000,000.
"(35) Extension of carryforward period. -
"(A) In the case of a carryforward under section 103(n)(10) of
the 1954 Code of $170,000,000 of bond limit for calendar year
1984 for a project described in subparagraph (B), clause (i) of
section 103(n)(10)(C) of the 1954 Code shall be applied by
substituting '6 calendar years' for '3 calendar years', and such
carryforward may be used by any authority designated by the State
in which the facility is located.
"(B) A project is described in this subparagraph if -
"(i) such project is a facility for local furnishing of
electricity described in section 645 of the Tax Reform Act of
1984 [Pub. L. 98-369, div. A, title VI, Sec. 645, July 18,
1984, 98 Stat. 940], and
"(ii) construction of such facility commenced within the
3-year period following the calendar year in which the
carryforward arose.
"(36) Power purchase bonds. - A bond issued to finance purchase
of power from a power facility at a dam being renovated pursuant to
P.L. 98-381 [43 U.S.C. 619 et seq.] shall not be treated as a
private activity bond if it would not be such under section
141(b)(1) and (2) of the 1986 Code if 25 percent were substituted
for 10 percent and the provisions of section 141(b)(3), (4), and
(5) of the 1986 Code did not apply. The aggregate face amount of
bonds to which this paragraph applies shall not exceed
$400,000,000.
"(37) Qualified mortgage bonds. - A bond issued as part of either
of 2 issues no later than September 8, 1986, shall be treated as a
qualified mortgage bond within the meaning of section 141(d)(1)(B)
of the 1986 Code if it satisfies the requirements of section 103A
of the 1954 Code and if the issues are issued by the two most
populous cities in the Tar Heel State. The aggregate face amount of
bonds to which this paragraph applies shall not exceed $4,000,000.
"(38) Exempt facility bonds. - A bond shall be treated as an
exempt facility bond within the meaning of section 142(a) of the
1986 Code if it is issued to fund residential, office, retail,
light industrial, recreational and parking development known as
Tobacco Row. Such bond shall be subject to section 146 of the 1986
Code. The aggregate face amount of bonds to which this paragraph
applies shall not exceed $100,000,000.
"(39) Certain bonds treated as qualified 501(c)(3) bonds. - A
bond issued as part of an issue shall be treated for purposes of
part IV of subchapter B of chapter 1 of the 1986 Code as a
qualified 501(c)(3) bond if -
"(A) such bond would not (if issued on August 15, 1986) be an
industrial development bond (as defined in section 103(b)(2) of
the 1954 Code), and
"(B) such issue was approved by city voters on January 19,
1985, for construction or renovation of facilities for the
cultural and performing arts.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $5,000,000.
"(40) Certain library bonds. - In the case of a bond issued
before January 1, 1986, by the City of Los Angeles Community
Redevelopment Agency to provide the library and related structures
associated with the City of Los Angeles Central Library Project,
the ownership and use of the land and facilities associated with
such project by persons which are not governmental units (or
payments from such persons) shall not adversely affect the
exclusion from gross income under section 103 of the 1954 Code of
interest on such bonds.
"(41) Certain refunding obligations for certain power facilities.
- With respect to 2 net billed nuclear power facilities located in
the State of Washington on which construction has been suspended,
the requirements of section 147(b) of the 1986 Code shall be
treated as satisfied with respect to refunding bonds issued before
1992 if -
"(A) each refunding bond has a maturity date not later than the
maturity date of the refunded bond, and
"(B) the facilities have not been placed in service as of the
date of issuance of the refunding bond.
The aggregate face amount of bonds to which this paragraph applies
shall not exceed $2,000,000,000. Section 146 of the 1986 Code and
the last paragraph of this section shall not apply to bonds to
which this paragraph applies.
"(42) Residential rental property. - A bond issued to finance a
residential rental project within the meaning of 103(b)(4) of the
1954 Code shall be treated as an exempt facility bond within the
meaning of section 142(a)(7) of the 1986 Code if the county housing
finance authority adopted an inducement resolution with respect to
the project on May 8, 1985, and the project is located in Polk
County, Florida. The aggregate face amount of bonds to which this
paragraph applies shall not exceed $4,100,000.
"(43) Extension of advance refunding for certain facilities. -
Paragraph (4) of section 631(c) of the Tax Reform Act of 1984
[section 631(c)(4) of Pub. L. 98-369, set out as a note under
section 103 of this title] is amended -
"(A) by striking out the second sentence thereof,
"(B) by adding at the end thereof the following new sentence:
'In the case of refunding obligations not exceeding $100,000,000
issued by the Alabama State Docks Department, the first sentence
of this paragraph shall be applied by substituting "December 31,
1987" for "December 31, 1984".'
"(44) Pool bonds. - The following amounts of pool bonds are
exempt from the arbitrage rebate requirement of section 148(f) of
the 1986 Code and the temporary period limitation of section
148(c)(2) of the 1986 Code:
Pool 2Maximum
Bond Amount
--------------------------------------------------------------------
Tennessee Utility Districts Pool $80,000,000
New Mexico Hospital Equipment Loan Council $35,000,000
Pennsylvania Local Government Investment Trust Po $375,000,000
Indiana Bond Bank Pool $240,000,000
Hernando County, Florida Bond Pool $300,000,000
Utah Municipal Finance Cooperative Pool $262,000,000
North Carolina League of Municipalities Pool $200,000,000
Kentucky Municipal League Bond Pool $170,000,000
Kentucky Association of Counties Bond Pool $200,000,000
Homewood Municipal Bond Pool $50,000,000
Colorado Association of School Boards Pool $300,000,000
Tennessee Municipal League Pooled Bonds $75,000,000
Georgia Municipal Association Pool $130,000,000
--------------------------------------------------------------------
"(45) Certain carryforward elections. - Notwithstanding any other
provision of this title [enacting this section and sections 142 to
150 and 7703 of this title, amending sections 2, 22, 25, 32, 86,
103, 105, 152, 153, 163, 172, 194, 269A, 414, 879, 1016, 1398,
3402, 4701, 4940, 4942, 4988, 6362, 6652, and 7871 of this title,
repealing sections 103A, 1391 to 1397, and 6039B of this title,
omitting former section 143 of this title, enacting provisions set
out as notes under this section and sections 148 and 501 of this
title, and amending provisions set out as a note under section 103A
of this title] -
"(A) In the case of a metropolitan service district created
pursuant to State revised statutes, chapter 268, up to
$100,000,000 unused 1985 bond authority may be carried forward to
any year until 1989 (regardless of the date on which such
carryforward election is made).
"(B) If -
"(i) official action was taken by an industrial development
board on September 16, 1985, with respect to the issuance of
not more than $98,500,000, of waste water treatment revenue
bonds, and
"(ii) an executive order of the governor granted a
carryforward of State bond authority for such project on
December 30, 1985,
such carryforward election shall be valid for any year through
1988. The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $98,500,000.
"(46) Treatment of certain obligations to finance hydroelectric
generating facility. - If -
"(A) obligations are issued in an amount not exceeding
$5,000,000 to finance the construction of a hydroelectric
generating facility located on the North Fork of Cache Creek in
Lake County, California, which was the subject of a preliminary
resolution of the issuer of the obligations on June 29, 1982, or
are issued to refund any of such obligations,
"(B) substantially all of the electrical power generated by
such facility is to be sold to a nongovernmental person pursuant
to a long-term power sales agreement in accordance with the
Public Utility Regulatory Policies Act of 1978 [Pub. L. 95-617,
see Short Title note set out under 16 U.S.C. 2601], and
"(C) the initially issued obligations are issued on or before
December 31, 1986, and any of such refunding obligations are
issued on or before December 31, 1996,
then the person referred to in subparagraph (B) shall not be
treated as a principal user of such facilities by reason of such
sales for purposes of subparagraphs (D) and (E) of section
103(b)(6) of the 1954 Code.
"(47) Treatment of certain obligations to finance steam and
electric cogeneration facility. - If -
"(A) obligations are issued on or before December 31, 1986, in
an amount not exceeding $4,400,000 to finance a facility for the
generation and transmission of steam and electricity having a
maximum electrical capacity of approximately 5.3 megawatts and
located within the City of San Jose, California, or are issued to
refund any of such obligations,
"(B) substantially all of the electrical power generated by
such facility that is not sold to an institution of higher
education created by statute of the State of California is to be
sold to a nongovernmental person pursuant to a long-term power
sales agreement in accordance with the Public Utility Regulatory
Policies Act of 1978 [Pub. L. 95-617, see Short Title note set
out under 16 U.S.C. 2601], and
"(C) the initially issued obligations are issued on or before
December 31, 1986, and any of such refunding obligations are
issued on or before December 31, 1996,
then the nongovernmental person referred to in subparagraph (B)
shall not be treated as a principal user of such facilities by
reason of such sales for purposes of subparagraphs (D) and (E) of
section 103(b)(6) of the Internal Revenue Code of 1954.
"(48) Treatment of certain obligations. - A bond which is not an
industrial development bond under section 103(b)(2) of the Internal
Revenue Code of 1954 shall not be treated as a private activity
bond for purposes of part IV of subchapter B of chapter 1 of the
1986 Code if 95 percent or more of the net proceeds of the issue of
which such bond is a part are used to provide facilities described
in any of the following subparagraphs:
"(A) A facility is described in this subparagraph if it is a
governmentally-owned and operated State fair and exposition
center with respect to which -
"(i) the 1985 session of the State legislature authorized
revenue bonds to be issued in a maximum amount of $10,000,000,
and
"(ii) a market feasibility study dated June 30, 1986,
relating to a major capital improvemental program at the
facility was prepared for the advisory board of the State fair
and exposition center by a certified public accounting firm.
The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $10,000,000.
"(B) A facility is described in this subparagraph if it is a
convention, trade, or spectator facility which is to be located
in the State with respect to which paragraph (6)(U) applies and
with respect to which feasibility and preliminary design
consultants were hired on May 1, 1985 and October 31, 1985. The
aggregate face amount of obligations to which this subparagraph
applies shall not exceed $175,000,000.
"(C) A facility which is part of a project described in
paragraph (6)(O). The aggregate face amount of bonds to which
this subparagraph applies shall not exceed $20,000,000.
"(49) Transition rule for refunding certain housing bonds. -
Sections 146 and 149(d)(2) of the 1986 Code shall not apply to the
refunding of any bond issued under section 11(b) of the United
States Housing Act of 1937 [42 U.S.C. 1437i(b)] before December 31,
1983, if -
"(A) the bond has an original term to maturity of at least 40
years,
"(B) the maturity date of the refunding bonds does not exceed
the maturity date of the refunded bonds,
"(C) the amount of the refunding bonds does not exceed the
outstanding amount of the refunded bonds,
"(D) the interest rate on the refunding bonds is lower than the
interest rate of the refunded bonds, and
"(E) the refunded bond is required to be redeemed not later
than the earliest date on which such bond could be redeemed at
par.
"(50) Transitioned bonds subject to certain rules. - In the case
of any bond to which any provision of this section applies, except
as otherwise expressly provided, sections 103 and 103A of the 1954
Code shall be applied as if the requirements of sections 147(g),
148, and 149(d) of the 1986 Code were included in each such
section.
"(51) Certain additional projects. - Section 141(b) of the 1986
Code shall be applied by substituting '25' for '10' each place it
appears and by not applying sections 141(b)(3) and 141(c)(1)(B) to
bonds substantially all of the proceeds are used for -
"(A) A project is described in this subparagraph if it consists
of a capital improvements program for a metropolitan sewer
district, with respect to which a proposition was submitted to
voters on August 7, 1984. The aggregate face amount of
obligations to which this subparagraph applies shall not exceed
$60,000,000.
"(B) Facilities described in this subparagraph if it consists
of additions, extensions, and improvements to the wastewater
system for Lakeland, Florida. The aggregate face amount of
obligations to which this subparagraph applies shall not exceed
$20,000,000.
"(C) A project is described in this subparagraph if it is the
Central Valley Water Reclamation Project in Utah. The aggregate
face amount of obligations to which this subparagraph applies
shall not exceed $100,000,000.
"(D) A project is described in this subparagraph if it is a
project to construct approximately 26 miles of toll expressways,
with respect to which any appeal to validation was filed July 11,
1986. The aggregate face amount of obligations to which this
subparagraph applies shall not exceed $450,000,000.
"(52) Termination. - Except as otherwise provided in this
section, this section shall not apply to any bond issued after
December 31, 1990.
"SEC. 1318. DEFINITIONS, ETC., RELATING TO EFFECTIVE DATES AND
TRANSITIONAL RULES.
"(a) Definitions. - For purposes of this subtitle -
"(1) 1954 code. - The term '1954 Code' means the Internal
Revenue Code of 1954 as in effect on the day before the date of
the enactment of this Act [Oct. 22, 1986].
"(2) 1986 code. - The term '1986 Code' means the Internal
Revenue Code of 1986 as amended by this Act [see Tables for
classification].
"(3) Bond. - The term 'bond' includes any obligation.
"(4) Advance refund. - A bond shall be treated as issued to
advance refund another bond if it is issued more than 90 days
before the redemption of the refunded bond.
"(5) Net proceeds. - The term 'net proceeds' has the meaning
given such term by section 150(a) of the 1986 Code.
"(6) Continued application of the 1954 code. - Nothing in this
subtitle shall be construed to exempt any bond from any provision
of the 1954 Code by reason of a delay in (or exemption from) the
application of any amendment made by subtitle A [sections 1301 to
1303 of Pub. L. 99-514, enacting this section and sections 142 to
150 and 7703 of this title, amending sections 2, 22, 25, 32, 86,
103, 105, 152, 153, 163, 172, 194, 269A, 414, 879, 1016, 1398,
3402, 4701, 4940, 4942, 4988, 6362, 6652, and 7871 of this title,
repealing sections 103A, 1391 to 1397, and 6039B of this title,
omitting former section 143 of this title, enacting provisions
set out as notes under this section and sections 148 and 501 of
this title, and amending provisions set out as a note under
section 103A of this title].
"(7) Treatment as exempt facility. - Any bond which is treated
as an exempt facility bond by section 1316 or 1317 shall not fail
to be so treated by reason of subsection (b) of section 142 of
the 1986 Code.
"(8) Application of future legislation to transitioned bonds. -
In the case of any bond to which the amendments made by section
1301 [for classification see section 1311(a) of this note] do not
apply by reason of a provision of this Act [see Tables for
classification], any amendment of the 1986 Code (and any other
provision applicable to such Code) included in any law enacted
after October 22, 1986, shall be treated as included in section
103 and section 103A (as appropriate) of the 1954 Code with
respect to such bond unless -
"(A) such law expressly provides that such amendment (or
other provision) shall not apply to such bond, or
"(B) such amendment (or other provision) applies to a
provision of the 1986 Code -
"(i) for which there is no corresponding provision in
section 103 and section 103A (as appropriate) of the 1954
Code, and
"(ii) which is not otherwise treated as included in such
sections 103 and 103A with respect to such bond.
"(b) Minimum Tax Treatment. -
"(1) In general. - Any bond described in paragraph (2) shall
not be treated as a private activity bond for purposes of section
57 of the 1986 Code unless such bond would (if issued on August
7, 1986) be -
"(A) an industrial development bond (as defined in section
103(b)(2) of the 1954 Code), or
"(B) a private loan bond (as defined in section 103(o)(2)(A)
of the 1954 Code, without regard to any exception from such
definition other than section 103(o)(2)(C) of such Code).
"(2) Bonds described. - For purposes of paragraph (1), a bond
is described in this paragraph if -
"(A) the amendments made by section 1301 [for classification
see section 1311(a) of this note] do not apply to such bond by
reason of section 1312 or 1316(g),
"(B) any provision of section 1317 applies to such bond, or
"(C) the proceeds of such bond are used to refund any bond
referred to in subparagraph (A) or (B) (or any bond which is
part of a series of refundings of such a bond) if the
requirements of paragraphs (1), (2), and (3) of subsection (c)
are met with respect to the refunding bond.
"(c) Current Refundings Not Taken Into Account in Applying
Aggregate Limit on Bonds to Which Transitional Rules Apply. - The
limitation on the aggregate face amount of bonds to which any
provision of section 1316(g) or 1317 applies shall not be reduced
by the face amount of any bond the proceeds of which are to be used
exclusively to refund any bond to which such provision applies (or
any bond which is part of a series of refundings of such bond) if -
"(1) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue,
"(2) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
"(3) the net proceeds of the refunding bond are used to redeem
the refunded bond not later than 90 days after the date of the
issuance of the refunding bond.
For purposes of paragraph (1), average maturity shall be determined
in accordance with section 147(b)(2)(A) of the 1986 Code. No
limitation in section 1316(g) or 1317 on the period during which
bonds may be issued under such section shall apply to any refunding
bond which meets the requirements of this subsection.
"(d) Special Rule Permitting Carryforward of Volume Cap for
Certain Transitioned Projects. - A bond to which section 1312 or
1317 applies shall be treated as having a carryforward purpose
described in section 146(f)(5) of the 1986 Code, and the
requirement of section 146(f)(2)(A) of the 1986 Code shall be
treated as met if such project is identified with reasonable
specificity. The preceding sentence shall not apply so as to permit
a carryforward with respect to any qualified small issue bond."
[Section 1013(c)(2)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending section 1313(a)(3)(C)
of Pub. L. 99-514, set out above] shall apply to bonds issued after
June 30, 1987".]
[Section 1013(c)(11)(E) of Pub. L. 100-647 provided that: "A
refunding bond issued before July 1, 1987, shall be treated as
meeting the requirement of subparagraph (A) of section 1313(c)(1)
of the Reform Act [Pub. L. 99-514, set out above] if such bond met
the requirement of such subparagraph as in effect before the
amendments made by this paragraph [amending section 1313(c) of Pub.
L. 99-514, set out above]."]
[Section 1013(c)(14)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending section 1313 of Pub.
L. 99-514, set out above] shall apply with respect to refunding
bonds issued after October 16, 1987."]
[Section 1013(e)(2)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending section 1315(e) of
Pub. L. 99-514, set out above] shall apply to bonds issued after
June 10, 1987."]
[Section 1013(f)(1)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending section 1316 of Pub.
L. 99-514, set out above] shall apply only with respect to
carryforwards of volume cap for years after 1986."]
[Section 1013(f)(7)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending section 1316(g)(8) of
Pub. L. 99-514, set out above] shall apply only with respect to
carryforwards of volume cap for years after 1986."]
REGULATIONS
Section 1301(i) of Pub. L. 99-514 provided that: "The Secretary
of the Treasury or his delegate shall amend the provision in the
Federal income tax regulations relating to when use pursuant to
certain output contracts is considered to satisfy the private
business tests of paragraphs (1) and (2) of section 141(b) of the
Internal Revenue Code of 1986 to eliminate the requirement of a 3
percent guaranteed minimum payment."
APPLICATION OF SECURITY INTEREST TEST TO BOND FINANCING OF
HAZARDOUS WASTE CLEAN-UP ACTIVITIES
Section 6179 of Pub. L. 100-647 provided that: "Before January 1,
1989, the Secretary of the Treasury or his delegate shall issue
guidance concerning the application of the private security or
payment test under section 141(b)(2) of the Internal Revenue Code
of 1986 to tax-exempt bond financing by State and local governments
of hazardous waste clean-up activities conducted by such
governments where some of the activities occur on privately owned
land."
STATE AND LOCAL GOVERNMENT SERIES MODIFICATIONS
Section 1301(d) of Pub. L. 99-514 provided that: "Notwithstanding
any other provision of law or any regulations promulgated
thereunder (including the provisions of 31 CFR part 344) the
Secretary of the Treasury shall extend by January 1, 1987, the
State and Local Government Series program to provide -
"(1) instruments allowing flexible investment of bond proceeds
in a manner eliminating the earning of rebatable arbitrage,
"(2) demand deposits under such program by eliminating advance
notice and minimum maturity requirements related to the purchase
of bonds,
"(3) operation of such program at no net cost to the Federal
Government, and
"(4) deposits for a stated maturity under reasonable advance
notice requirements."
MANAGEMENT CONTRACTS
Section 1301(e) of Pub. L. 99-514 provided that: "The Secretary
of the Treasury or his delegate shall modify the Secretary's
advance ruling guidelines relating to when use of property pursuant
to a management contract is not considered a trade or business use
by a private person for purposes of section 141(a) of the Internal
Revenue Code of 1986 to provide that use pursuant to a management
contract generally shall not be treated as trade or business use as
long as -
"(1) the term of such contract (including renewal options) does
not exceed 5 years,
"(2) the exempt owner has the option to cancel such contract at
the end of any 3-year period,
"(3) the manager under the contract is not compensated (in
whole or in part) on the basis of a share of net profits, and
"(4) at least 50 percent of the annual compensation of the
manager under such contract is based on a periodic fixed fee."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 48, 57, 103, 142, 143,
144, 145, 146, 148, 149, 265, 1400L, 7871 of this title.
-FOOTNOTE-
(!1) So in original. Probably should end with a period after
"146".
-End-
-CITE-
26 USC Sec. 142 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 142. Exempt facility bond
-STATUTE-
(a) General rule
For purposes of this part, the term "exempt facility bond" means
any bond issued as part of an issue 95 percent or more of the net
proceeds of which are to be used to provide -
(1) airports,
(2) docks and wharves,
(3) mass commuting facilities,
(4) facilities for the furnishing of water,
(5) sewage facilities,
(6) solid waste disposal facilities,
(7) qualified residential rental projects,
(8) facilities for the local furnishing of electric energy or
gas,
(9) local district heating or cooling facilities,
(10) qualified hazardous waste facilities,
(11) high-speed intercity rail facilities,
(12) environmental enhancements of hydroelectric generating
facilities, or
(13) qualified public educational facilities.
(b) Special exempt facility bond rules
For purposes of subsection (a) -
(1) Certain facilities must be governmentally owned
(A) In general
A facility shall be treated as described in paragraph (1),
(2), (3), or (12) of subsection (a) only if all of the property
to be financed by the net proceeds of the issue is to be owned
by a governmental unit.
(B) Safe harbor for leases and management contracts
For purposes of subparagraph (A), property leased by a
governmental unit shall be treated as owned by such
governmental unit if -
(i) the lessee makes an irrevocable election (binding on
the lessee and all successors in interest under the lease)
not to claim depreciation or an investment credit with
respect to such property,
(ii) the lease term (as defined in section 168(i)(3)) is
not more than 80 percent of the reasonably expected economic
life of the property (as determined under section 147(b)),
and
(iii) the lessee has no option to purchase the property
other than at fair market value (as of the time such option
is exercised).
Rules similar to the rules of the preceding sentence shall
apply to management contracts and similar types of operating
agreements.
(2) Limitation on office space
An office shall not be treated as described in a paragraph of
subsection (a) unless -
(A) the office is located on the premises of a facility
described in such a paragraph, and
(B) not more than a de minimis amount of the functions to be
performed at such office is not directly related to the
day-to-day operations at such facility.
(c) Airports, docks and wharves, mass commuting facilities and
high-speed intercity rail facilities
For purposes of subsection (a) -
(1) Storage and training facilities
Storage or training facilities directly related to a facility
described in paragraph (1), (2), (3) or (11) of subsection (a)
shall be treated as described in the paragraph in which such
facility is described.
(2) Exception for certain private facilities
Property shall not be treated as described in paragraph (1),
(2), (3) or (11) of subsection (a) if such property is described
in any of the following subparagraphs and is to be used for any
private business use (as defined in section 141(b)(6)).
(A) Any lodging facility.
(B) Any retail facility (including food and beverage
facilities) in excess of a size necessary to serve passengers
and employees at the exempt facility.
(C) Any retail facility (other than parking) for passengers
or the general public located outside the exempt facility
terminal.
(D) Any office building for individuals who are not employees
of a governmental unit or of the operating authority for the
exempt facility.
(E) Any industrial park or manufacturing facility.
(d) Qualified residential rental project
For purposes of this section -
(1) In general
The term "qualified residential rental project" means any
project for residential rental property if, at all times during
the qualified project period, such project meets the requirements
of subparagraph (A) or (B), whichever is elected by the issuer at
the time of the issuance of the issue with respect to such
project:
(A) 20-50 test
The project meets the requirements of this subparagraph if 20
percent or more of the residential units in such project are
occupied by individuals whose income is 50 percent or less of
area median gross income.
(B) 40-60 test
The project meets the requirements of this subparagraph if 40
percent or more of the residential units in such project are
occupied by individuals whose income is 60 percent or less of
area median gross income.
For purposes of this paragraph, any property shall not be treated
as failing to be residential rental property merely because part
of the building in which such property is located is used for
purposes other than residential rental purposes.
(2) Definitions and special rules
For purposes of this subsection -
(A) Qualified project period
The term "qualified project period" means the period
beginning on the 1st day on which 10 percent of the residential
units in the project are occupied and ending on the latest of -
(i) the date which is 15 years after the date on which 50
percent of the residential units in the project are occupied,
(ii) the 1st day on which no tax-exempt private activity
bond issued with respect to the project is outstanding, or
(iii) the date on which any assistance provided with
respect to the project under section 8 of the United States
Housing Act of 1937 terminates.
(B) Income of individuals; area median gross income
The income of individuals and area median gross income shall
be determined by the Secretary in a manner consistent with
determinations of lower income families and area median gross
income under section 8 of the United States Housing Act of 1937
(or, if such program is terminated, under such program as in
effect immediately before such termination). Determinations
under the preceding sentence shall include adjustments for
family size. Section 7872(g) shall not apply in determining the
income of individuals under this subparagraph.
(3) Current income determinations
For purposes of this subsection -
(A) In general
The determination of whether the income of a resident of a
unit in a project exceeds the applicable income limit shall be
made at least annually on the basis of the current income of
the resident.
(B) Continuing resident's income may increase above the
applicable limit
If the income of a resident of a unit in a project did not
exceed the applicable income limit upon commencement of such
resident's occupancy of such unit (or as of any prior
determination under subparagraph (A)), the income of such
resident shall be treated as continuing to not exceed the
applicable income limit. The preceding sentence shall cease to
apply to any resident whose income as of the most recent
determination under subparagraph (A) exceeds 140 percent of the
applicable income limit if after such determination, but before
the next determination, any residential unit of comparable or
smaller size in the same project is occupied by a new resident
whose income exceeds the applicable income limit.
(4) Special rule in case of deep rent skewing
(A) In general
In the case of any project described in subparagraph (B), the
2d sentence of subparagraph (B) of paragraph (3) shall be
applied by substituting -
(i) "170 percent" for "140 percent", and
(ii) "any low-income unit in the same project is occupied
by a new resident whose income exceeds 40 percent of area
median gross income" for "any residential unit of comparable
or smaller size in the same project is occupied by a new
resident whose income exceeds the applicable income limit".
(B) Deep rent skewed project
A project is described in this subparagraph if the owner of
the project elects to have this paragraph apply and, at all
times during the qualified project period, such project meets
the requirements of clauses (i), (ii), and (iii):
(i) The project meets the requirements of this clause if 15
percent or more of the low-income units in the project are
occupied by individuals whose income is 40 percent or less of
area median gross income.
(ii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 30 percent of the applicable income
limit which applies to individuals occupying the unit.
(iii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 1/2 of the average gross rent with
respect to units of comparable size which are not occupied by
individuals who meet the applicable income limit.
(C) Definitions applicable to subparagraph (B)
For purposes of subparagraph (B) -
(i) Low-income unit
The term "low-income unit" means any unit which is required
to be occupied by individuals who meet the applicable income
limit.
(ii) Gross rent
The term "gross rent" includes -
(I) any payment under section 8 of the United States
Housing Act of 1937, and
(II) any utility allowance determined by the Secretary
after taking into account such determinations under such
section 8.
(5) Applicable income limit
For purposes of paragraphs (3) and (4), the term "applicable
income limit" means -
(A) the limitation under subparagraph (A) or (B) of paragraph
(1) which applies to the project, or
(B) in the case of a unit to which paragraph (4)(B)(i)
applies, the limitation which applies to such unit.
(6) Special rule for certain high cost housing area
In the case of a project located in a city having 5 boroughs
and a population in excess of 5,000,000, subparagraph (B) of
paragraph (1) shall be applied by substituting "25 percent" for
"40 percent".
(7) Certification to Secretary
The operator of any project with respect to which an election
was made under this subsection shall submit to the Secretary (at
such time and in such manner as the Secretary shall prescribe) an
annual certification as to whether such project continues to meet
the requirements of this subsection. Any failure to comply with
the provisions of the preceding sentence shall not affect the
tax-exempt status of any bond but shall subject the operator to
penalty, as provided in section 6652(j).
(e) Facilities for the furnishing of water
For purposes of subsection (a)(4), the term "facilities for the
furnishing of water" means any facility for the furnishing of water
if -
(1) the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users), and
(2) either the facility is operated by a governmental unit or
the rates for the furnishing or sale of the water have been
established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or
by a public service or public utility commission or other similar
body of any State or political subdivision thereof.
(f) Local furnishing of electric energy or gas
For purposes of subsection (a)(8) -
(1) In general
The local furnishing of electric energy or gas from a facility
shall only include furnishing solely within the area consisting
of -
(A) a city and 1 contiguous county, or
(B) 2 contiguous counties.
(2) Treatment of certain electric energy transmitted outside
local area
(A) In general
A facility shall not be treated as failing to meet the local
furnishing requirement of subsection (a)(8) by reason of
electricity transmitted pursuant to an order of the Federal
Energy Regulatory Commission under section 211 or 213 of the
Federal Power Act (as in effect on the date of the enactment of
this paragraph) if the portion of the cost of the facility
financed with tax-exempt bonds is not greater than the portion
of the cost of the facility which is allocable to the local
furnishing of electric energy (determined without regard to
this paragraph).
(B) Special rule for existing facilities
In the case of a facility financed with bonds issued before
the date of an order referred to in subparagraph (A) which
would (but for this subparagraph) cease to be tax-exempt by
reason of subparagraph (A), such bonds shall not cease to be
tax-exempt bonds (and section 150(b)(4) shall not apply) if, to
the extent necessary to comply with subparagraph (A) -
(i) an escrow to pay principal of, premium (if any), and
interest on the bonds is established within a reasonable
period after the date such order becomes final, and
(ii) bonds are redeemed not later than the earliest date on
which such bonds may be redeemed.
(3) Termination of future financing
For purposes of this section, no bond may be issued as part of
an issue described in subsection (a)(8) with respect to a
facility for the local furnishing of electric energy or gas on or
after the date of the enactment of this paragraph unless -
(A) the facility will -
(i) be used by a person who is engaged in the local
furnishing of that energy source on January 1, 1997, and
(ii) be used to provide service within the area served by
such person on January 1, 1997 (or within a county or city
any portion of which is within such area), or
(B) the facility will be used by a successor in interest to
such person for the same use and within the same service area
as described in subparagraph (A).
(4) Election to terminate tax-exempt bond financing by certain
furnishers
(A) In general
In the case of a facility financed with bonds issued before
the date of the enactment of this paragraph which would cease
to be tax-exempt by reason of the failure to meet the local
furnishing requirement of subsection (a)(8) as a result of a
service area expansion, such bonds shall not cease to be
tax-exempt bonds (and section 150(b)(4) shall not apply) if the
person engaged in such local furnishing by such facility makes
an election described in subparagraph (B).
(B) Election
An election is described in this subparagraph if it is an
election made in such manner as the Secretary prescribes, and
such person (or its predecessor in interest) agrees that -
(i) such election is made with respect to all facilities
for the local furnishing of electric energy or gas, or both,
by such person,
(ii) no bond exempt from tax under section 103 and
described in subsection (a)(8) may be issued on or after the
date of the enactment of this paragraph with respect to all
such facilities of such person,
(iii) any expansion of the service area -
(I) is not financed with the proceeds of any exempt
facility bond described in subsection (a)(8), and
(II) is not treated as a nonqualifying use under the
rules of paragraph (2), and
(iv) all outstanding bonds used to finance the facilities
for such person are redeemed not later than 6 months after
the later of -
(I) the earliest date on which such bonds may be
redeemed, or
(II) the date of the election.
(C) Related persons
For purposes of this paragraph, the term "person" includes a
group of related persons (within the meaning of section
144(a)(3)) which includes such person.
(g) Local district heating or cooling facility
(1) In general
For purposes of subsection (a)(9), the term "local district
heating or cooling facility" means property used as an integral
part of a local district heating or cooling system.
(2) Local district heating or cooling system
(A) In general
For purposes of paragraph (1), the term "local district
heating or cooling system" means any local system consisting of
a pipeline or network (which may be connected to a heating or
cooling source) providing hot water, chilled water, or steam to
2 or more users for -
(i) residential, commercial, or industrial heating or
cooling, or
(ii) process steam.
(B) Local system
For purposes of this paragraph, a local system includes
facilities furnishing heating and cooling to an area consisting
of a city and 1 contiguous county.
(h) Qualified hazardous waste facilities
For purposes of subsection (a)(10), the term "qualified hazardous
waste facility" means any facility for the disposal of hazardous
waste by incineration or entombment but only if -
(1) the facility is subject to final permit requirements under
subtitle C of title II of the Solid Waste Disposal Act (as in
effect on the date of the enactment of the Tax Reform Act of
1986), and
(2) the portion of such facility which is to be provided by the
issue does not exceed the portion of the facility which is to be
used by persons other than -
(A) the owner or operator of such facility, and
(B) any related person (within the meaning of section
144(a)(3)) to such owner or operator.
(i) High-speed intercity rail facilities
(1) In general
For purposes of subsection (a)(11), the term "high-speed
intercity rail facilities" means any facility (not including
rolling stock) for the fixed guideway rail transportation of
passengers and their baggage between metropolitan statistical
areas (within the meaning of section 143(k)(2)(B)) using vehicles
that are reasonably expected to operate at speeds in excess of
150 miles per hour between scheduled stops, but only if such
facility will be made available to members of the general public
as passengers.
(2) Election by nongovernmental owners
A facility shall be treated as described in subsection (a)(11)
only if any owner of such facility which is not a governmental
unit irrevocably elects not to claim -
(A) any deduction under section 167 or 168, and
(B) any credit under this subtitle,
with respect to the property to be financed by the net proceeds
of the issue.
(3) Use of proceeds
A bond issued as part of an issue described in subsection
(a)(11) shall not be considered an exempt facility bond unless
any proceeds not used within a 3-year period of the date of the
issuance of such bond are used (not later than 6 months after the
close of such period) to redeem bonds which are part of such
issue.
(j) Environmental enhancements of hydroelectric generating
facilities
(1) In general
For purposes of subsection (a)(12), the term "environmental
enhancements of hydroelectric generating facilities" means
property -
(A) the use of which is related to a federally licensed
hydroelectric generating facility owned and operated by a
governmental unit, and
(B) which -
(i) protects or promotes fisheries or other wildlife
resources, including any fish by-pass facility, fish
hatchery, or fisheries enhancement facility, or
(ii) is a recreational facility or other improvement
required by the terms and conditions of any Federal licensing
permit for the operation of such generating facility.
(2) Use of proceeds
A bond issued as part of an issue described in subsection
(a)(12) shall not be considered an exempt facility bond unless at
least 80 percent of the net proceeds of the issue of which it is
a part are used to finance property described in paragraph
(1)(B)(i).
(k) Qualified public educational facilities
(1) In general
For purposes of subsection (a)(13), the term "qualified public
educational facility" means any school facility which is -
(A) part of a public elementary school or a public secondary
school, and
(B) owned by a private, for-profit corporation pursuant to a
public-private partnership agreement with a State or local
educational agency described in paragraph (2).
(2) Public-private partnership agreement described
A public-private partnership agreement is described in this
paragraph if it is an agreement -
(A) under which the corporation agrees -
(i) to do 1 or more of the following: construct,
rehabilitate, refurbish, or equip a school facility, and
(ii) at the end of the term of the agreement, to transfer
the school facility to such agency for no additional
consideration, and
(B) the term of which does not exceed the term of the issue
to be used to provide the school facility.
(3) School facility
For purposes of this subsection, the term "school facility"
means -
(A) any school building,
(B) any functionally related and subordinate facility and
land with respect to such building, including any stadium or
other facility primarily used for school events, and
(C) any property, to which section 168 applies (or would
apply but for section 179), for use in a facility described in
subparagraph (A) or (B).
(4) Public schools
For purposes of this subsection, the terms "elementary school"
and "secondary school" have the meanings given such terms by
section 14101 of the Elementary and Secondary Education Act of
1965 (20 U.S.C. 8801), as in effect on the date of the enactment
of this subsection.
(5) Annual aggregate face amount of tax-exempt financing
(A) In general
An issue shall not be treated as an issue described in
subsection (a)(13) if the aggregate face amount of bonds issued
by the State pursuant thereto (when added to the aggregate face
amount of bonds previously so issued during the calendar year)
exceeds an amount equal to the greater of -
(i) $10 multiplied by the State population, or
(ii) $5,000,000.
(B) Allocation rules
(i) In general
Except as otherwise provided in this subparagraph, the
State may allocate the amount described in subparagraph (A)
for any calendar year in such manner as the State determines
appropriate.
(ii) Rules for carryforward of unused limitation
A State may elect to carry forward an unused limitation for
any calendar year for 3 calendar years following the calendar
year in which the unused limitation arose under rules similar
to the rules of section 146(f), except that the only purpose
for which the carryforward may be elected is the issuance of
exempt facility bonds described in subsection (a)(13).
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2606; amended Pub. L. 100-647, title I, Sec. 1013(a)(1),
(39), title VI, Sec. 6180(a)-(b)(2), Nov. 10, 1988, 102 Stat. 3537,
3544, 3727, 3728; Pub. L. 101-239, title VII, Secs. 7108(e)(3),
(n)(1), 7816(s)(1), Dec. 19, 1989, 103 Stat. 2313, 2318, 2423; Pub.
L. 102-486, title XIX, Secs. 1919(a), 1921(a), (b)(1), (2), Oct.
24, 1992, 106 Stat. 3025, 3027, 3028; Pub. L. 104-188, title I,
Secs. 1608(a), 1704(j)(7), Aug. 20, 1996, 110 Stat. 1840, 1882;
Pub. L. 105-206, title VI, Sec. 6023(5), July 22, 1998, 112 Stat.
825; Pub. L. 107-16, title IV, Sec. 422(a), (b), June 7, 2001, 115
Stat. 65.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 8 of the United States Housing Act of 1937, referred to
in subsec. (d)(2)(A)(iii), (B), (4)(C)(ii), is classified to
section 1437f of Title 42, The Public Health and Welfare.
Sections 211 and 213 of the Federal Power Act, referred to in
subsec. (f)(2)(A), are classified to sections 824j and 824l,
respectively, of Title 16, Conservation.
The date of the enactment of this paragraph, referred to in
subsec. (f)(2)(A), is the date of enactment of Pub. L. 102-486,
which was approved Oct. 24, 1992.
The date of the enactment of this paragraph, referred to in
subsec. (f)(3), (4)(A), (B)(ii), is the date of enactment of Pub.
L. 104-188, which was approved Aug. 20, 1996.
The Solid Waste Disposal Act, referred to in subsec. (h)(1), is
title II of Pub. L. 89-272, Oct. 20, 1965, 79 Stat. 997, as amended
generally by Pub. L. 94-580, Sec. 2, Oct. 21, 1976, 90 Stat. 2795.
Subtitle C of the Solid Waste Disposal Act is classified generally
to subchapter III (Sec. 6921 et seq.) of chapter 82 of Title 42,
The Public Health and Welfare. For complete classification of this
Act to the Code, see Short Title note set out under section 6901 of
Title 42 and Tables.
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (h)(1), is the date of enactment of Pub. L. 99-514,
which was approved Oct. 22, 1986.
Section 14101 of the Elementary and Secondary Education Act of
1965, referred to in subsec. (k)(4), is section 14101 of Pub. L.
89-10, which was classified to section 8801 of Title 20, Education,
prior to repeal by Pub. L. 107-110, title X, Sec. 1011(5)(C), Jan.
8, 2002, 115 Stat. 1986.
The date of the enactment of this subsection, referred to in
subsec. (k)(4), means the date of enactment of Pub. L. 107-16,
which was approved June 7, 2001.
-MISC1-
PRIOR PROVISIONS
A prior section 142, act Aug. 16, 1954, ch. 736, 68A Stat. 40,
enumerated individuals not eligible for standard deduction, prior
to repeal by Pub. L. 95-30, title I, Sec. 101(d)(1), May 23, 1977,
91 Stat. 133, applicable to taxable years beginning after Dec. 31,
1976.
AMENDMENTS
2001 - Subsec. (a)(13). Pub. L. 107-16, Secs. 422(a), 901,
temporarily added par. (13). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (k). Pub. L. 107-16, Secs. 422(b), 901, temporarily added
subsec. (k). See Effective and Termination Dates of 2001 Amendment
note below.
1998 - Subsec. (f)(3)(A)(ii). Pub. L. 105-206 struck out comma
after "1997".
1996 - Subsec. (b)(1)(A). Pub. L. 104-188, Sec. 1704(j)(7),
provided that section 1921(b)(2) of Pub. L. 102-486 shall be
applied as if a comma appeared after "(2)" in the material proposed
to be stricken. See 1992 Amendment note below.
Subsec. (f)(3), (4). Pub. L. 104-188, Sec. 1608(a), added pars.
(3) and (4).
1992 - Subsec. (a)(12). Pub. L. 102-486, Sec. 1921(a), added par.
(12).
Subsec. (b)(1)(A). Pub. L. 102-486, Sec. 1921(b)(2), which
directed the substitution of "(2), (3), or (12)" for "(2) or (3)",
was executed by making the substitution for "(2), or (3)". See 1996
Amendment note above.
Subsec. (f). Pub. L. 102-486, Sec. 1919(a), amended subsec. (f)
generally. Prior to amendment, subsec. (f) read as follows: "For
purposes of subsection (a)(8), the local furnishing of electric
energy or gas from a facility shall only include furnishing solely
within the area consisting of -
"(1) a city and 1 contiguous county, or
"(2) 2 contiguous counties."
Subsec. (j). Pub. L. 102-486, Sec. 1921(b)(1), added subsec. (j).
1989 - Subsec. (d)(2)(B). Pub. L. 101-239, Sec. 7108(e)(3),
inserted at end "Section 7872(g) shall not apply in determining the
income of individuals under this subparagraph."
Subsec. (d)(4)(B)(iii). Pub. L. 101-239, Sec. 7108(n)(1),
substituted "exceed 1/2 " for "exceed 1/3 ".
Subsec. (i)(1). Pub. L. 101-239, Sec. 7816(s)(1), inserted
heading "In general".
1988 - Subsec. (a)(11). Pub. L. 100-647, Sec. 6180(a), added par.
(11).
Subsec. (b)(1)(B)(ii). Pub. L. 100-647, Sec. 1013(a)(39),
inserted "section" before "168(i)(3)".
Subsec. (c). Pub. L. 100-647, Sec. 6180(b)(2), substituted "mass
commuting facilities and high-speed intercity rail facilities" for
"and mass commuting facilities" in heading and substituted
"paragraph (1), (2), (3) or (11) of subsection (a)" for "paragraph
(1), (2), or (3) of subsection (a)" in par. (1) and in introductory
text of par. (2).
Subsec. (d)(4)(B)(iii). Pub. L. 100-647, Sec. 1013(a)(1),
substituted "average gross rent" for "average rent".
Subsec. (i). Pub. L. 100-647, Sec. 6180(b)(1), added subsec. (i).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title IV, Sec. 422(f), June 7, 2001, 115 Stat.
66, provided that: "The amendments made by this section [amending
this section and sections 146 and 147 of this title] shall apply to
bonds issued after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Section 1919(b) of Pub. L. 102-486 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
obligations issued before, on, or after the date of the enactment
of this Act [Oct. 24, 1992]."
Section 1921(c) of Pub. L. 102-486 provided that: "The amendments
made by this section [amending this section and section 146 of this
title] shall apply to bonds issued after the date of the enactment
of this Act [Oct. 24, 1992]."
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7108(e)(3), (n)(1) of Pub. L. 101-239
applicable, except as otherwise provided, to determinations under
section 42 of this title with respect to housing credit dollar
amounts allocated from State housing credit ceilings for calendar
years after 1989, see section 7108(r) of Pub. L. 101-239, set out
as a note under section 42 of this title.
Amendment by section 7816(s) of Pub. L. 101-239 effective, except
as otherwise provided, as if included in the provision of the
Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
to which such amendment relates, see section 7817 of Pub. L.
101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(1), (39) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6180(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending sections 142, 146, and 147 of this
title] shall apply to bonds issued after the date of enactment of
this Act [Nov. 10, 1988]."
NO INFERENCE WITH RESPECT TO OUTSTANDING BONDS FROM USE OF TERM
"PERSON"
Section 1608(b) of Pub. L. 104-188 provided that: "The use of the
term 'person' in section 142(f)(3) of the Internal Revenue Code of
1986, as added by subsection (a), shall not be construed to affect
the tax-exempt status of interest on any bonds issued before the
date of the enactment of this Act [Aug. 20, 1996]."
TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER ADMINISTRATION FACILITY
Section 1804 of Pub. L. 104-188 provided that: "Sections
142(f)(3) (as added by section 1608) and 147(d) of the Internal
Revenue Code of 1986 shall not apply in determining whether any
private activity bond issued after the date of the enactment of
this Act [Aug. 20, 1996] and used to finance the acquisition of the
Snettisham hydroelectric project from the Alaska Power
Administration is a qualified bond for purposes of such Code."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 141, 143, 144, 145,
146, 147, 148, 150, 168, 6652 of this title; title 7 section 1926;
title 12 sections 24, 1430b.
-End-
-CITE-
26 USC Sec. 143 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 143. Mortgage revenue bonds: qualified mortgage bond and
qualified veterans' mortgage bond
-STATUTE-
(a) Qualified mortgage bond
(1) Qualified mortgage bond defined
For purposes of this title, the term "qualified mortgage bond"
means a bond which is issued as part of a qualified mortgage
issue.
(2) Qualified mortgage issue defined
(A) Definition
For purposes of this title, the term "qualified mortgage
issue" means an issue by a State or political subdivision
thereof of 1 or more bonds, but only if -
(i) all proceeds of such issue (exclusive of issuance costs
and a reasonably required reserve) are to be used to finance
owner-occupied residences,
(ii) such issue meets the requirements of subsections (c),
(d), (e), (f), (g), (h), (i), and (m)(7),
(iii) such issue does not meet the private business tests
of paragraphs (1) and (2) of section 141(b), and
(iv) except as provided in subparagraph (D)(ii), repayments
of principal on financing provided by the issue are used not
later than the close of the 1st semiannual period beginning
after the date the prepayment (or complete repayment) is
received to redeem bonds which are part of such issue.
Clause (iv) shall not apply to amounts received within 10 years
after the date of issuance of the issue (or, in the case of
refunding bond, the date of issuance of the original bond).
(B) Good faith effort to comply with mortgage eligibility
requirements
An issue which fails to meet 1 or more of the requirements of
subsections (c), (d), (e), (f), and (i) shall be treated as
meeting such requirements if -
(i) the issuer in good faith attempted to meet all such
requirements before the mortgages were executed,
(ii) 95 percent or more of the proceeds devoted to
owner-financing was devoted to residences with respect to
which (at the time the mortgages were executed) all such
requirements were met, and
(iii) any failure to meet the requirements of such
subsections is corrected within a reasonable period after
such failure is first discovered.
(C) Good faith effort to comply with other requirements
An issue which fails to meet 1 or more of the requirements of
subsections (g), (h), and (m)(7) shall be treated as meeting
such requirements if -
(i) the issuer in good faith attempted to meet all such
requirements, and
(ii) any failure to meet such requirements is due to
inadvertent error after taking reasonable steps to comply
with such requirements.
(D) Proceeds must be used within 42 months of date of issuance
(i) In general
Except as otherwise provided in this subparagraph, an issue
shall not meet the requirement of subparagraph (A)(i) unless
-
(I) all proceeds of the issue required to be used to
finance owner-occupied residences are so used within the
42-month period beginning on the date of issuance of the
issue (or, in the case of a refunding bond, within the
42-month period beginning on the date of issuance of the
original bond) or, to the extent not so used within such
period, are used within such period to redeem bonds which
are part of such issue, and
(II) no portion of the proceeds of the issue are used to
make or finance any loan (other than a loan which is a
nonpurpose investment within the meaning of section
148(f)(6)(A)) after the close of such period.
(ii) Exception
Clause (i) (and clause (iv) of subparagraph (A)) shall not
be construed to require amounts of less than $250,000 to be
used to redeem bonds. The Secretary may by regulation treat
related issues as 1 issue for purposes of the preceding
sentence.
(b) Qualified veterans' mortgage bond defined
For purposes of this part, the term "qualified veterans' mortgage
bond" means any bond -
(1) which is issued as part of an issue 95 percent or more of
the net proceeds of which are to be used to provide residences
for veterans,
(2) the payment of the principal and interest on which is
secured by the general obligation of a State,
(3) which is part of an issue which meets the requirements of
subsections (c), (g), (i)(1), and (l), and
(4) which is part of an issue which does not meet the private
business tests of paragraphs (1) and (2) of section 141(b).
Rules similar to the rules of subparagraphs (B) and (C) of
subsection (a)(2) shall apply to the requirements specified in
paragraph (3) of this subsection.
(c) Residence requirements
(1) For a residence
A residence meets the requirements of this subsection only if -
(A) it is a single-family residence which can reasonably be
expected to become the principal residence of the mortgagor
within a reasonable time after the financing is provided, and
(B) it is located within the jurisdiction of the authority
issuing the bond.
(2) For an issue
An issue meets the requirements of this subsection only if all
of the residences for which owner-financing is provided under the
issue meet the requirements of paragraph (1).
(d) 3-year requirement
(1) In general
An issue meets the requirements of this subsection only if 95
percent or more of the net proceeds of such issue are used to
finance the residences of mortgagors who had no present ownership
interest in their principal residences at any time during the
3-year period ending on the date their mortgage is executed.
(2) Exceptions
For purposes of paragraph (1), the proceeds of an issue which
are used to provide -
(A) financing with respect to targeted area residences,
(B) qualified home improvement loans and qualified
rehabilitation loans, and
(C) financing with respect to land described in subsection
(i)(1)(C) and the construction of any residence thereon,
shall be treated as used as described in paragraph (1).
(3) Mortgagor's interest in residence being financed
For purposes of paragraph (1), a mortgagor's interest in the
residence with respect to which the financing is being provided
shall not be taken into account.
(e) Purchase price requirement
(1) In general
An issue meets the requirements of this subsection only if the
acquisition cost of each residence the owner-financing of which
is provided under the issue does not exceed 90 percent of the
average area purchase price applicable to such residence.
(2) Average area purchase price
For purposes of paragraph (1), the term "average area purchase
price" means, with respect to any residence, the average purchase
price of single family residences (in the statistical area in
which the residence is located) which were purchased during the
most recent 12-month period for which sufficient statistical
information is available. The determination under the preceding
sentence shall be made as of the date on which the commitment to
provide the financing is made (or, if earlier, the date of the
purchase of the residence).
(3) Separate application to new residences and old residences
For purposes of this subsection, the determination of average
area purchase price shall be made separately with respect to -
(A) residences which have not been previously occupied, and
(B) residences which have been previously occupied.
(4) Special rule for 2 to 4 family residences
For purposes of this subsection, to the extent provided in
regulations, the determination of average area purchase price
shall be made separately with respect to 1 family, 2 family, 3
family, and 4 family residences.
(5) Special rule for targeted area residences
In the case of a targeted area residence, paragraph (1) shall
be applied by substituting "110 percent" for "90 percent".
(6) Exception for qualified home improvement loans
Paragraph (1) shall not apply with respect to any qualified
home improvement loan.
(f) Income requirements
(1) In general
An issue meets the requirements of this subsection only if all
owner-financing provided under the issue is provided for
mortgagors whose family income is 115 percent or less of the
applicable median family income.
(2) Determination of family income
For purposes of this subsection, the family income of
mortgagors, and area median gross income, shall be determined by
the Secretary after taking into account the regulations
prescribed under section 8 of the United States Housing Act of
1937 (or, if such program is terminated, under such program as in
effect immediately before such termination).
(3) Special rule for applying paragraph (1) in the case of
targeted area residences
In the case of any financing provided under any issue for
targeted area residences -
(A) 1/3 of the amount of such financing may be provided
without regard to paragraph (1), and
(B) paragraph (1) shall be treated as satisfied with respect
to the remainder of the owner financing if the family income of
the mortgagor is 140 percent or less of the applicable median
family income.
(4) Applicable median family income
For purposes of this subsection, the term "applicable median
family income" means, with respect to a residence, whichever of
the following is the greater:
(A) the area median gross income for the area in which such
residence is located, or
(B) the statewide median gross income for the State in which
such residence is located.
(5) Adjustment of income requirement based on relation of high
housing costs to income
(A) In general
If the residence (for which financing is provided under the
issue) is located in a high housing cost area and the
limitation determined under this paragraph is greater than the
limitation otherwise applicable under paragraph (1), there
shall be substituted for the income limitation in paragraph
(1), a limitation equal to the percentage determined under
subparagraph (B) of the area median gross income for such area.
(B) Income requirements for residences in high housing cost
area
The percentage determined under this subparagraph for a
residence located in a high housing cost area is the percentage
(not greater than 140 percent) equal to the product of -
(I) 115 percent, and
(II) the amount by which the housing cost/income ratio for
such area exceeds 0.2.
(C) High housing cost areas
For purposes of this paragraph, the term "high housing cost
area" means any statistical area for which the housing
cost/income ratio is greater than 1.2.
(D) Housing cost/income ratio
For purposes of this paragraph -
(i) In general
The term "housing cost/income ratio" means, with respect to
any statistical area, the number determined by dividing -
(I) the applicable housing price ratio for such area, by
(II) the ratio which the area median gross income for
such area bears to the median gross income for the United
States.
(ii) Applicable housing price ratio
For purposes of clause (i), the applicable housing price
ratio for any area is the new housing price ratio or the
existing housing price ratio, whichever results in the
housing cost/income ratio being closer to 1.
(iii) New housing price ratio
The new housing price ratio for any area is the ratio which
-
(I) the average area purchase price (as defined in
subsection (e)(2)) for residences described in subsection
(e)(3)(A) which are located in such area bears to
(II) the average purchase price (determined in accordance
with the principles of subsection (e)(2)) for residences so
described which are located in the United States.
(iv) Existing housing price ratio
The existing housing price ratio for any area is the ratio
determined in accordance with clause (iii) but with respect
to residences described in subsection (e)(3)(B).
(6) Adjustment to income requirements based on family size
In the case of a mortgagor having a family of fewer than 3
individuals, the preceding provisions of this subsection shall be
applied by substituting -
(A) "100 percent" for "115 percent" each place it appears,
and
(B) "120 percent" for "140 percent" each place it appears.
(g) Requirements related to arbitrage
(1) In general
An issue meets the requirements of this subsection only if such
issue meets the requirements of paragraph (2) of this subsection
and, in the case of an issue described in subsection (b)(1), such
issue also meets the requirements of paragraph (3) of this
subsection. Such requirements shall be in addition to the
requirements of section 148.
(2) Effective rate of mortgage interest cannot exceed bond yield
by more than 1.125 percentage points
(A) In general
An issue shall be treated as meeting the requirements of this
paragraph only if the excess of -
(i) the effective rate of interest on the mortgages
provided under the issue, over
(ii) the yield on the issue,
is not greater than 1.125 percentage points.
(B) Effective rate of mortgage interest
(i) In general
In determining the effective rate of interest on any
mortgage for purposes of this paragraph, there shall be taken
into account all fees, charges, and other amounts borne by
the mortgagor which are attributable to the mortgage or to
the bond issue.
(ii) Specification of some of the amounts to be treated as
borne by the mortgagor
For purposes of clause (i), the following items (among
others) shall be treated as borne by the mortgagor:
(I) all points or similar charges paid by the seller of
the property, and
(II) the excess of the amounts received from any person
other than the mortgagor by any person in connection with
the acquisition of the mortgagor's interest in the property
over the usual and reasonable acquisition costs of a person
acquiring like property where owner-financing is not
provided through the use of qualified mortgage bonds or
qualified veterans' mortgage bonds.
(iii) Specification of some of the amounts to be treated as
not borne by the mortgagor
For purposes of clause (i), the following items shall not
be taken into account:
(I) any expected rebate of arbitrage profits, and
(II) any application fee, survey fee, credit report fee,
insurance charge, or similar amount to the extent such
amount does not exceed amounts charged in such area in
cases where owner-financing is not provided through the use
of qualified mortgage bonds or qualified veterans' mortgage
bonds.
Subclause (II) shall not apply to origination fees, points,
or similar amounts.
(iv) Prepayment assumptions
In determining the effective rate of interest -
(I) it shall be assumed that the mortgage prepayment rate
will be the rate set forth in the most recent applicable
mortgage maturity experience table published by the Federal
Housing Administration, and
(II) prepayments of principal shall be treated as
received on the last day of the month in which the issuer
reasonably expects to receive such prepayments.
The Secretary may by regulation adjust the mortgage
prepayment rate otherwise used in determining the effective
rate of interest to the extent the Secretary determines that
such an adjustment is appropriate by reason of the impact of
subsection (m).
(C) Yield on the issue
For purposes of this subsection, the yield on an issue shall
be determined on the basis of -
(i) the issue price (within the meaning of sections 1273
and 1274), and
(ii) an expected maturity for the bonds which is consistent
with the assumptions required under subparagraph (B)(iv).
(3) Arbitrage and investment gains to be used to reduce costs of
owner-financing
(A) In general
An issue shall be treated as meeting the requirements of this
paragraph only if an amount equal to the sum of -
(i) the excess of -
(I) the amount earned on all nonpurpose investments
(other than investments attributable to an excess described
in this clause), over
(II) the amount which would have been earned if such
investments were invested at a rate equal to the yield on
the issue, plus
(ii) any income attributable to the excess described in
clause (i),
is paid or credited to the mortgagors as rapidly as may be
practicable.
(B) Investment gains and losses
For purposes of subparagraph (A), in determining the amount
earned on all nonpurpose investments, any gain or loss on the
disposition of such investments shall be taken into account.
(C) Reduction where issuer does not use full 1.125 percentage
points under paragraph (2)
(i) In general
The amount required to be paid or credited to mortgagors
under subparagraph (A) (determined under this paragraph
without regard to this subparagraph) shall be reduced by the
unused paragraph (2) amount.
(ii) Unused paragraph (2) amount
For purposes of clause (i), the unused paragraph (2) amount
is the amount which (if it were treated as an interest
payment made by mortgagors) would result in the excess
referred to in paragraph (2)(A) being equal to 1.125
percentage points. Such amount shall be fixed and determined
as of the yield determination date.
(D) Election to pay United States
Subparagraph (A) shall be satisfied with respect to any issue
if the issuer elects before issuing the bonds to pay over to
the United States -
(i) not less frequently than once each 5 years after the
date of issue, an amount equal to 90 percent of the aggregate
amount which would be required to be paid or credited to
mortgagors under subparagraph (A) (and not theretofore paid
to the United States), and
(ii) not later than 60 days after the redemption of the
last bond, 100 percent of such aggregate amount not
theretofore paid to the United States.
(E) Simplified accounting
The Secretary shall permit any simplified system of
accounting for purposes of this paragraph which the issuer
establishes to the satisfaction of the Secretary will assure
that the purposes of this paragraph are carried out.
(F) Nonpurpose investment
For purposes of this paragraph, the term "nonpurpose
investment" has the meaning given such term by section
148(f)(6)(A).
(h) Portion of loans required to be placed in targeted areas
(1) In general
An issue meets the requirements of this subsection only if at
least 20 percent of the proceeds of the issue which are devoted
to providing owner-financing is made available (with reasonable
diligence) for owner-financing of targeted area residences for at
least 1 year after the date on which owner-financing is first
made available with respect to targeted area residences.
(2) Limitation
Nothing in paragraph (1) shall be treated as requiring the
making available of an amount which exceeds 40 percent of the
average annual aggregate principal amount of mortgages executed
during the immediately preceding 3 calendar years for
single-family, owner-occupied residences located in targeted
areas within the jurisdiction of the issuing authority.
(i) Other requirements
(1) Mortgages must be new mortgages
(A) In general
An issue meets the requirements of this subsection only if no
part of the proceeds of such issue is used to acquire or
replace existing mortgages.
(B) Exceptions
Under regulations prescribed by the Secretary, the
replacement of -
(i) construction period loans,
(ii) bridge loans or similar temporary initial financing,
and
(iii) in the case of a qualified rehabilitation, an
existing mortgage,
shall not be treated as the acquisition or replacement of an
existing mortgage for purposes of subparagraph (A).
(C) Exception for certain contract for deed agreements
(i) In general
In the case of land possessed under a contract for deed by
a mortgagor -
(I) whose principal residence (within the meaning of
section 121) is located on such land, and
(II) whose family income (as defined in subsection
(f)(2)) is not more than 50 percent of applicable median
family income (as defined in subsection (f)(4)),
the contract for deed shall not be treated as an existing
mortgage for purposes of subparagraph (A).
(ii) Contract for deed defined
For purposes of this subparagraph, the term "contract for
deed" means a seller-financed contract for the conveyance of
land under which -
(I) legal title does not pass to the purchaser until the
consideration under the contract is fully paid to the
seller, and
(II) the seller's remedy for nonpayment is forfeiture
rather than judicial or nonjudicial foreclosure.
(2) Certain requirements must be met where mortgage is assumed
An issue meets the requirements of this subsection only if each
mortgage with respect to which owner-financing has been provided
under such issue may be assumed only if the requirements of
subsections (c), (d), and (e), and the requirements of paragraph
(1) or (3)(B) of subsection (f) (whichever applies), are met with
respect to such assumption.
(j) Targeted area residences
(1) In general
For purposes of this section, the term "targeted area
residence" means a residence in an area which is either -
(A) a qualified census tract, or
(B) an area of chronic economic distress.
(2) Qualified census tract
(A) In general
For purposes of paragraph (1), the term "qualified census
tract" means a census tract in which 70 percent or more of the
families have income which is 80 percent or less of the
statewide median family income.
(B) Data used
The determination under subparagraph (A) shall be made on the
basis of the most recent decennial census for which data are
available.
(3) Area of chronic economic distress
(A) In general
For purposes of paragraph (1), the term "area of chronic
economic distress" means an area of chronic economic distress -
(i) designated by the State as meeting the standards
established by the State for purposes of this subsection, and
(ii) the designation of which has been approved by the
Secretary and the Secretary of Housing and Urban Development.
(B) Criteria to be used in approving State designations
The criteria used by the Secretary and the Secretary of
Housing and Urban Development in evaluating any proposed
designation of an area for purposes of this subsection shall be
-
(i) the condition of the housing stock, including the age
of the housing and the number of abandoned and substandard
residential units,
(ii) the need of area residents for owner-financing under
this section, as indicated by low per capita income, a high
percentage of families in poverty, a high number of welfare
recipients, and high unemployment rates,
(iii) the potential for use of owner-financing under this
section to improve housing conditions in the area, and
(iv) the existence of a housing assistance plan which
provides a displacement program and a public improvements and
services program.
(k) Other definitions and special rules
For purposes of this section -
(1) Mortgage
The term "mortgage" means any owner-financing.
(2) Statistical area
(A) In general
The term "statistical area" means -
(i) a metropolitan statistical area, and
(ii) any county (or the portion thereof) which is not
within a metropolitan statistical area.
(B) Metropolitan statistical area
The term "metropolitan statistical area" includes the area
defined as such by the Secretary of Commerce.
(C) Designation where adequate statistical information not
available
For purposes of this paragraph, if there is insufficient
recent statistical information with respect to a county (or
portion thereof) described in subparagraph (A)(ii), the
Secretary may substitute for such county (or portion thereof)
another area for which there is sufficient recent statistical
information.
(D) Designation where no county
In the case of any portion of a State which is not within a
county, subparagraphs (A)(ii) and (C) shall be applied by
substituting for "county" an area designated by the Secretary
which is the equivalent of a county.
(3) Acquisition cost
(A) In general
The term "acquisition cost" means the cost of acquiring the
residence as a completed residential unit.
(B) Exceptions
The term "acquisition cost" does not include -
(i) usual and reasonable settlement or financing costs,
(ii) the value of services performed by the mortgagor or
members of his family in completing the residence, and
(iii) the cost of land (other than land described in
subsection (i)(1)(C)(i)) which has been owned by the
mortgagor for at least 2 years before the date on which
construction of the residence begins.
(C) Special rule for qualified rehabilitation loans
In the case of a qualified rehabilitation loan, for purposes
of subsection (e), the term "acquisition cost" includes the
cost of the rehabilitation.
(4) Qualified home improvement loan
The term "qualified home improvement loan" means the financing
(in an amount which does not exceed $15,000) -
(A) of alterations, repairs, and improvements on or in
connection with an existing residence by the owner thereof, but
(B) only of such items as substantially protect or improve
the basic livability or energy efficiency of the property.
(5) Qualified rehabilitation loan
(A) In general
The term "qualified rehabilitation loan" means any
owner-financing provided in connection with -
(i) a qualified rehabilitation, or
(ii) the acquisition of a residence with respect to which
there has been a qualified rehabilitation,
but only if the mortgagor to whom such financing is provided is
the first resident of the residence after the completion of the
rehabilitation.
(B) Qualified rehabilitation
For purposes of subparagraph (A), the term "qualified
rehabilitation" means any rehabilitation of a building if -
(i) there is a period of at least 20 years between the date
on which the building was first used and the date on which
the physical work on such rehabilitation begins,
(ii) in the rehabilitation process -
(I) 50 percent or more of the existing external walls of
such building are retained in place as external walls,
(II) 75 percent or more of the existing external walls of
such building are retained in place as internal or external
walls, and
(III) 75 percent or more of the existing internal
structural framework of such building is retained in place,
and
(iii) the expenditures for such rehabilitation are 25
percent or more of the mortgagor's adjusted basis in the
residence.
For purposes of clause (iii), the mortgagor's adjusted basis
shall be determined as of the completion of the rehabilitation
or, if later, the date on which the mortgagor acquires the
residence.
(6) Determinations on actuarial basis
All determinations of yield, effective interest rates, and
amounts required to be paid or credited to mortgagors or paid to
the United States under subsection (g) shall be made on an
actuarial basis taking into account the present value of money.
(7) Single-family and owner-occupied residences include certain
residences with 2 to 4 units
Except for purposes of subsection (h)(2), the terms
"single-family" and "owner-occupied", when used with respect to
residences, include 2, 3, or 4 family residences -
(A) one unit of which is occupied by the owner of the units,
and
(B) which were first occupied at least 5 years before the
mortgage is executed.
Subparagraph (B) shall not apply to any 2-family residence if the
residence is a targeted area residence and the family income of
the mortgagor meets the requirement of subsection (f)(3)(B).
(8) Cooperative housing corporations
(A) In general
In the case of any cooperative housing corporation -
(i) each dwelling unit shall be treated as if it were
actually owned by the person entitled to occupy such dwelling
unit by reason of his ownership of stock in the corporation,
and
(ii) any indebtedness of the corporation allocable to the
dwelling unit shall be treated as if it were indebtedness of
the shareholder entitled to occupy the dwelling unit.
(B) Adjustment to targeted area requirement
In the case of any issue to provide financing to a
cooperative housing corporation with respect to cooperative
housing not located in a targeted area, to the extent provided
in regulations, such issue may be combined with 1 or more other
issues for purposes of determining whether the requirements of
subsection (h) are met.
(C) Cooperative housing corporation
The term "cooperative housing corporation" has the meaning
given to such term by section 216(b)(1).
(9) Treatment of limited equity cooperative housing
(A) Treatment as residential rental property
Except as provided in subparagraph (B), for purposes of this
part -
(i) any limited equity cooperative housing shall be treated
as residential rental property and not as owner-occupied
housing, and
(ii) bonds issued to provide such housing shall be subject
to the same requirements and limitations as bonds the
proceeds of which are to be used to provide qualified
residential rental projects (as defined in section 142(d)).
(B) Bonds subject to qualified mortgage bond termination date
Subparagraph (A) shall not apply to any bond issued after the
date specified in subsection (a)(1)(B).
(C) Limited equity cooperative housing
For purposes of this paragraph, the term "limited equity
cooperative housing" means any dwelling unit which a person is
entitled to occupy by reason of his ownership of stock in a
qualified cooperative housing corporation.
(D) Qualified cooperative housing corporation
For purposes of this paragraph, the term "qualified
cooperative housing corporation" means any cooperative housing
corporation (as defined in section 216(b)(1)) if -
(i) the consideration paid for stock held by any
stockholder entitled to occupy any house or apartment in a
building owned or leased by the corporation may not exceed
the sum of -
(I) the consideration paid for such stock by the first
such stockholder, as adjusted by a cost-of-living
adjustment determined by the Secretary,
(II) payments made by any stockholder for improvements to
such house or apartment, and
(III) payments (other than amounts taken into account
under subclause (I) or (II)) attributable to any
stockholder to amortize the principal of the corporation's
indebtedness arising from the acquisition or development of
real property, including improvements thereof,
(ii) the value of the corporation's assets (reduced by any
corporate liabilities), to the extent such value exceeds the
combined transfer values of the outstanding corporate stock,
shall be used only for public benefit or charitable purposes,
or directly to benefit the corporation itself, and shall not
be used directly to benefit any stockholder, and
(iii) at the time of issuance of the issue, such
corporation makes an election under this paragraph.
(E) Effect of election
If a cooperative housing corporation makes an election under
this paragraph, section 216 shall not apply with respect to
such corporation (or any successor thereof) during the
qualified project period (as defined in section 142(d)(2)).
(F) Corporation must continue to be qualified cooperative
Subparagraph (A)(i) shall not apply to limited equity
cooperative housing unless the cooperative housing corporation
continues to be a qualified cooperative housing corporation at
all times during the qualified project period (as defined in
section 142(d)(2)).
(G) Election irrevocable
Any election under this paragraph, once made, shall be
irrevocable.
(10) Treatment of resale price control and subsidy lien programs
(A) In general
In the case of a residence which is located in a high housing
cost area (as defined in section 143(f)(5)), the interest of a
governmental unit in such residence by reason of financing
provided under any qualified program shall not be taken into
account under this section (other than subsection (m)), and the
acquisition cost of the residence which is taken into account
under subsection (e) shall be such cost reduced by the amount
of such financing.
(B) Qualified program
For purposes of subparagraph (A), the term "qualified
program" means any governmental program providing mortgage
loans (other than 1st mortgage loans) or grants -
(i) which restricts (throughout the 9-year period beginning
on the date the financing is provided) the resale of the
residence to a purchaser qualifying under this section and to
a price determined by an index that reflects less than the
full amount of any appreciation in the residence's value, or
(ii) which provides for deferred or reduced interest
payments on such financing and grants the governmental unit a
share in the appreciation of the residence,
but only if such financing is not provided directly or
indirectly through the use of any tax-exempt private activity
bond.
(11) Special rules for residences located in disaster areas
In the case of a residence located in an area determined by the
President to warrant assistance from the Federal Government under
the Robert T. Stafford Disaster Relief and Emergency Assistance
Act (as in effect on the date of the enactment of the Taxpayer
Relief Act of 1997), this section shall be applied with the
following modifications to financing provided with respect to
such residence within 2 years after the date of the disaster
declaration:
(A) Subsection (d) (relating to 3-year requirement) shall not
apply.
(B) Subsections (e) and (f) (relating to purchase price
requirement and income requirement) shall be applied as if such
residence were a targeted area residence.
The preceding sentence shall apply only with respect to bonds
issued after December 31, 1996, and before January 1, 1999.
(l) Additional requirements for qualified veterans' mortgage bonds
An issue meets the requirements of this subsection only if it
meets the requirements of paragraphs (1), (2), and (3).
(1) Veterans to whom financing may be provided
An issue meets the requirements of this paragraph only if each
mortgagor to whom financing is provided under the issue is a
qualified veteran.
(2) Requirement that State program be in effect before June 22,
1984
An issue meets the requirements of this paragraph only if it is
a general obligation of a State which issued qualified veterans'
mortgage bonds before June 22, 1984.
(3) Volume limitation
(A) In general
An issue meets the requirements of this paragraph only if the
aggregate amount of bonds issued pursuant thereto (when added
to the aggregate amount of qualified veterans' mortgage bonds
previously issued by the State during the calendar year) does
not exceed the State veterans limit for such calendar year.
(B) State veterans limit
A State veterans limit for any calendar year is the amount
equal to -
(i) the aggregate amount of qualified veterans bonds issued
by such State during the period beginning on January 1, 1979,
and ending on June 22, 1984 (not including the amount of any
qualified veterans bond issued by such State during the
calendar year (or portion thereof) in such period for which
the amount of such bonds so issued was the lowest), divided
by
(ii) the number (not to exceed 5) of calendar years after
1979 and before 1985 during which the State issued qualified
veterans bonds (determined by only taking into account bonds
issued on or before June 22, 1984).
(C) Treatment of refunding issues
(i) In general
For purposes of subparagraph (A), the term "qualified
veterans' mortgage bond" shall not include any bond issued to
refund another bond but only if the maturity date of the
refunding bond is not later than the later of -
(I) the maturity date of the bond to be refunded, or
(II) the date 32 years after the date on which the
refunded bond was issued (or in the case of a series of
refundings, the date on which the original bond was
issued).
The preceding sentence shall apply only to the extent that
the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond.
(ii) Exception for advance refunding
Clause (i) shall not apply to any bond issued to advance
refund another bond.
(4) Qualified veteran
For purposes of this subsection, the term "qualified veteran"
means any veteran -
(A) who served on active duty at some time before January 1,
1977, and
(B) who applied for the financing before the later of -
(i) the date 30 years after the last date on which such
veteran left active service, or
(ii) January 31, 1985.
(5) Special rule for certain short-term bonds
In the case of any bond -
(A) which has a term of 1 year or less,
(B) which is authorized to be issued under O.R.S. 407.435 (as
in effect on the date of the enactment of this subsection), to
provide financing for property taxes, and
(C) which is redeemed at the end of such term,
the amount taken into account under this subsection with respect
to such bond shall be 1/15 of its principal amount.
(m) Recapture of portion of Federal subsidy from use of qualified
mortgage bonds and mortgage credit certificates
(1) In general
If, during the taxable year, any taxpayer disposes of an
interest in a residence with respect to which there is or was any
federally-subsidized indebtedness for the payment of which the
taxpayer was liable in whole or part, then the taxpayer's tax
imposed by this chapter for such taxable year shall be increased
by the lesser of -
(A) the recapture amount with respect to such indebtedness,
or
(B) 50 percent of the gain (if any) on the disposition of
such interest.
(2) Exceptions
Paragraph (1) shall not apply to -
(A) any disposition by reason of death, and
(B) any disposition which is more than 9 years after the
testing date.
(3) Federally-subsidized indebtedness
For purposes of this subsection -
(A) In general
The term "federally-subsidized indebtedness" means any
indebtedness if -
(i) financing for the indebtedness was provided in whole or
part from the proceeds of any tax-exempt qualified mortgage
bond, or
(ii) any credit was allowed under section 25 (relating to
interest on certain home mortgages) to the taxpayer for
interest paid or incurred on such indebtedness.
(B) Exception for home improvement loans
Such term shall not include any indebtedness to the extent
such indebtedness is federally-subsidized indebtedness solely
by reason of being a qualified home improvement loan (as
defined in subsection (k)(4)).
(4) Recapture amount
For purposes of this subsection -
(A) In general
The recapture amount with respect to any indebtedness is the
amount equal to the product of -
(i) the federally-subsidized amount with respect to the
indebtedness,
(ii) the holding period percentage, and
(iii) the income percentage.
(B) Federally-subsidized amount
The federally-subsidized amount with respect to any
indebtedness is the amount equal to 6.25 percent of the highest
principal amount of the indebtedness for which the taxpayer was
liable.
(C) Holding period percentage
(i) In general
The term "holding period percentage" means the percentage
determined in accordance with the following table:
If the disposition occurs
during a year after the The holding
period
testing date which is: percentage is:
The 1st such year 20
The 2d such year 40
The 3d such year 60
The 4th such year 80
The 5th such year 100
The 6th such year 80
The 7th such year 60
The 8th such year 40
The 9th such year 20.
(ii) Retirements of indebtedness
If the federally-subsidized indebtedness is completely
repaid during any year of the 4-year period beginning on the
testing date, the holding period percentage for succeeding
years shall be determined by reducing ratably to zero over
the succeeding 5 years the holding period percentage which
would have been determined under this subparagraph had the
taxpayer disposed of his interest in the residence on the
date of the repayment.
(D) Testing date
The term "testing date" means the earliest date on which all
of the following requirements are met:
(i) The indebtedness is federally-subsidized indebtedness.
(ii) The taxpayer is liable in whole or part for payment of
the indebtedness.
(E) Income percentage
The term "income percentage" means the percentage (but not
greater than 100 percent) which -
(i) the excess of -
(I) the modified adjusted gross income of the taxpayer
for the taxable year in which the disposition occurs, over
(II) the adjusted qualifying income for such taxable
year, bears to
(ii) $5,000.
The percentage determined under the preceding sentence shall be
rounded to the nearest whole percentage point (or, if it
includes a half of a percentage point, shall be increased to
the nearest whole percentage point).
(5) Adjusted qualifying income; modified adjusted gross income
(A) Adjusted qualifying income
For purposes of paragraph (4), the term "adjusted qualifying
income" means the product of -
(i) the highest family income which (as of the date the
financing was provided) would have met the requirements of
subsection (f) with respect to the residents, and
(ii) 1.05 to the nth power where "n" equals the number of
full years during the period beginning on the date the
financing was provided and ending on the date of the
disposition.
For purposes of clause (i), highest family income shall be
determined without regard to subsection (f)(3)(A) and on the
basis of the number of members of the taxpayer's family as of
the date of the disposition.
(B) Modified adjusted gross income
For purposes of paragraph (4), the term "modified adjusted
gross income" means adjusted gross income -
(i) increased by the amount of interest received or accrued
by the taxpayer during the taxable year which is excluded
from gross income under section 103, and
(ii) decreased by the amount of gain (if any) included in
gross income of the taxpayer by reason of the disposition to
which this subsection applies.
(6) Special rules relating to limitation on recapture amount
based on gain realized
(A) In general
For purposes of paragraph (1), gain shall be taken into
account whether or not recognized, and the adjusted basis of
the taxpayer's interest in the residence shall be determined
without regard to sections 1033(b) and 1034(e) (as in effect on
the day before the date of the enactment of the Taxpayer Relief
Act of 1997) for purposes of determining gain.
(B) Dispositions other than sales, exchanges, and involuntary
conversions
In the case of a disposition other than a sale, exchange, or
involuntary conversion, gain shall be determined as if the
interest had been sold for its fair market value.
(C) Involuntary conversions resulting from casualties
In the case of property which (as a result of its destruction
in whole or in part by fire, storm, or other casualty) is
compulsorily or involuntarily converted, paragraph (1) shall
not apply to such conversion if the taxpayer purchases (during
the period specified in section 1033(a)(2)(B)) property for use
as his principal residence on the site of the converted
property. For purposes of subparagraph (A), the adjusted basis
of the taxpayer in the residence shall not be adjusted for any
gain or loss on a conversion to which this subparagraph
applies.
(7) Issuer to inform mortgagor of federally-subsidized amount and
family income limits
The issuer of the issue which provided the federally-subsidized
indebtedness to the mortgagor shall -
(A) at the time of settlement, provide a written statement
informing the mortgagor of the potential recapture under this
subsection, and
(B) not later than 90 days after the date such indebtedness
is provided, provide a written statement to the mortgagor
specifying -
(i) the federally-subsidized amount with respect to such
indebtedness, and
(ii) the adjusted qualifying income (as defined in
paragraph (5)) for each category of family size for each year
of the 9-year period beginning on the date the financing was
provided.
(8) Special rules
(A) No basis adjustment
No adjustment shall be made to the basis of any property for
the increase in tax under this subsection.
(B) Special rule where 2 or more persons hold interests in
residence
Except as provided in subparagraph (C) and in regulations
prescribed by the Secretary, if 2 or more persons hold
interests in any residence and are jointly liable for the
federally-subsidized indebtedness, the recapture amount shall
be determined separately with respect to their respective
interests in the residence.
(C) Transfers to spouses and former spouses
Paragraph (1) shall not apply to any transfer on which no
gain or loss is recognized under section 1041. In any such
case, the transferee shall be treated under this subsection in
the same manner as the transferor would have been treated had
such transfer not occurred.
(D) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out this subsection,
including regulations dealing with dispositions of partial
interests in a residence.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2610; amended Pub. L. 100-647, title I, Sec. 1013(a)(2), (3),
title IV, Sec. 4005(a)(1), (b)-(d)(1), (e)-(g)(2), (6), Nov. 10,
1988, 102 Stat. 3537, 3645-3651; Pub. L. 101-239, title VII, Sec.
7104(a), Dec. 19, 1989, 103 Stat. 2305; Pub. L. 101-508, title XI,
Sec. 11408(a), (c), Nov. 5, 1990, 104 Stat. 1388-477; Pub. L.
102-227, title I, Sec. 108(a), Dec. 11, 1991, 105 Stat. 1688; Pub.
L. 103-66, title XIII, Sec. 13141(a), (c)-(e), Aug. 10, 1993, 107
Stat. 436, 437; Pub. L. 104-188, title I, Secs. 1702(d)(2),
1703(n)(3), Aug. 20, 1996, 110 Stat. 1870, 1877; Pub. L. 105-34,
title III, Sec. 312(d)(1), (3), title IX, Sec. 914, Aug. 5, 1997,
111 Stat. 839, 840, 878.)
-REFTEXT-
REFERENCES IN TEXT
Section 8 of the United States Housing Act of 1937, referred to
in subsec. (f)(2), is classified to section 1437f of Title 42, The
Public Health and Welfare.
The Robert T. Stafford Disaster Relief and Emergency Assistance
Act, referred to in subsec. (k)(11), is Pub. L. 93-288, May 22,
1974, 88 Stat. 143, as in effect on the date of enactment of Pub.
L. 105-34, which was approved Aug. 5, 1997. The Act is classified
principally to chapter 68 (Sec. 5121 et seq.) of Title 42, The
Public Health and Welfare. For complete classification of this Act
to the Code, see Short Title note set out under section 5121 of
Title 42 and Tables.
The date of the enactment of this subsection, referred to in
subsec. (l)(5)(B), is the date of enactment of Pub. L. 99-514,
which was approved Oct. 22, 1986.
Section 1034(e) (as in effect on the day before the date of the
enactment of the Taxpayer Relief Act of 1997), referred to in
subsec. (m)(6)(A), means section 1034(e) of this title as in effect
on the day before the date of enactment of Pub. L. 105-34, which
was approved Aug. 5, 1997. Section 1034 was repealed by Pub. L.
105-34, title III, Sec. 312(b), Aug. 5, 1997, 111 Stat. 839.
-MISC1-
PRIOR PROVISIONS
A prior section 143, acts Aug. 16, 1954, ch. 736, 68A Stat. 41;
Dec. 30, 1969, Pub. L. 91-172, title VIII, Sec. 802(b), 83 Stat.
677; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1901(a)(22), 90
Stat. 1767; May 23, 1977, Pub. L. 95-30, title I, Sec. 101(d)(4),
91 Stat. 133; July 18, 1984, Pub. L. 98-369, div. A, title IV, Sec.
423(c)(1), 98 Stat. 800, related to determination of marital
status, prior to the general revision of this part by Pub. L.
99-514. See section 7703 of this title.
Provisions similar to this section were contained in section 103A
of this title prior to repeal by Pub. L. 99-514.
AMENDMENTS
1997 - Subsec. (i)(1)(C)(i)(I). Pub. L. 105-34, Sec. 312(d)(1),
substituted "section 121" for "section 1034".
Subsec. (k)(11). Pub. L. 105-34, Sec. 914, added par. (11).
Subsec. (m)(6)(A). Pub. L. 105-34, Sec. 312(d)(3), inserted "(as
in effect on the day before the date of the enactment of the
Taxpayer Relief Act of 1997)" after "1034(e)".
1996 - Subsec. (d)(2)(C). Pub. L. 104-188, Sec. 1703(n)(3),
substituted "thereon," for "thereon.".
Subsec. (m)(4)(C)(ii). Pub. L. 104-188, Sec. 1702(d)(2),
substituted "any year of the 4-year period" for "any month of the
10-year period", "succeeding years" for "succeeding months", and
"to zero over the succeeding 5 years" for "over the remainder of
such period (or, if lesser, over 5 years)".
1993 - Subsec. (a)(1). Pub. L. 103-66, Sec. 13141(a), amended
heading and text of par. (1) generally. Prior to amendment, text
read as follows:
"(A) In general. - For purposes of this title, the term
'qualified mortgage bond' means a bond which is issued as part of a
qualified mortgage issue.
"(B) Termination on June 30, 1992. - No bond issued after June
30, 1992, may be treated as a qualified mortgage bond."
Subsec. (d)(2)(C). Pub. L. 103-66, Sec. 13141(d)(1), added
subpar. (C).
Subsec. (i)(1)(C). Pub. L. 103-66, Sec. 13141(d)(2), added
subpar. (C).
Subsec. (k)(3)(B)(iii). Pub. L. 103-66, Sec. 13141(d)(3),
inserted "(other than land described in subsection (i)(1)(C)(i))"
after "cost of land".
Subsec. (k)(7). Pub. L. 103-66, Sec. 13141(e), inserted at end
"Subparagraph (B) shall not apply to any 2-family residence if the
residence is a targeted area residence and the family income of the
mortgagor meets the requirement of subsection (f)(3)(B)."
Subsec. (k)(10). Pub. L. 103-66, Sec. 13141(c), added par. (10).
1991 - Subsec. (a)(1)(B). Pub. L. 102-227 substituted "June 30,
1992" for "December 31, 1991" in heading and text.
1990 - Subsec. (a)(1)(B). Pub. L. 101-508, Sec. 11408(a),
substituted "December 31, 1991" for "September 30, 1990" in heading
and text.
Subsec. (m)(1). Pub. L. 101-508, Sec. 11408(c)(3)(A), substituted
"increased by the lesser of - " and subpars. (A) and (B) for
"increased by the recapture amount with respect to such
indebtedness."
Subsec. (m)(2)(B). Pub. L. 101-508, Sec. 11408(c)(1)(C),
substituted "9 years" for "10 years".
Subsec. (m)(4)(A)(iii). Pub. L. 101-508, Sec. 11408(c)(2)(A),
added cl. (iii).
Subsec. (m)(4)(C)(i). Pub. L. 101-508, Sec. 11408(c)(1)(A),
substituted heading for one which read: "Dispositions during 1st 5
years" and amended text generally. Prior to amendment, text read as
follows: "If the disposition of the taxpayer's interest in the
residence occurs during the 5-year period beginning on the testing
date, the holding period percentage is the percentage determined by
dividing the number of full months during which the requirements of
subparagraph (D) were met by 60."
Subsec. (m)(4)(C)(ii), (iii). Pub. L. 101-508, Sec.
11408(c)(1)(B), redesignated cl. (iii) as (ii) and struck out
former cl. (ii) "Dispositions during 2d 5 years" which read as
follows: "If the disposition of the taxpayer's interest in the
residence occurs during the 5-year period following the 5-year
period described in clause (i), the holding period percentage is
the percentage determined by dividing -
"(I) the excess of 120 over the number of full months during
which such requirements were met by
"(II) 60."
Subsec. (m)(4)(E). Pub. L. 101-508, Sec. 11408(c)(2)(B), added
subpar. (E).
Subsec. (m)(5). Pub. L. 101-508, Sec. 11408(c)(2)(C)(i), added
heading and struck out former heading which read: "Reduction of
recapture amount if taxpayer meets certain income limitations".
Subsec. (m)(5)(A). Pub. L. 101-508, Sec. 11408(c)(2)(C)(i), added
subpar. (A) and struck out former subpar. (A) "In general" which
read as follows: "The recapture amount which would (but for this
paragraph) apply with respect to any disposition during a taxable
year shall be reduced (but not below zero) by 2 percent of such
amount for each $100 by which adjusted qualifying income exceeds
the modified adjusted gross income of the taxpayer for such year."
Subsec. (m)(5)(B), (C). Pub. L. 101-508, Sec. 11408(c)(2)(C),
redesignated subpar. (C) as (B), substituted "paragraph (4)" for
"this paragraph" in introductory provisions, and struck out former
subpar. (B) "Adjusted qualifying income" which read as follows:
"For purposes of this paragraph, the term 'adjusted qualifying
income' means the amount equal to the sum of -
"(i) $5,000, plus
"(ii) the product of -
"(I) the highest family income which (as of the date the
financing was provided) would have met the requirement of
subsection (f) with respect to the residence, and
"(II) the percentage equal to the sum of 100 percent plus 5
percent for each full year during the period beginning on such
date and ending on the date of the disposition.
For purposes of clause (ii)(I), highest family income shall be
determined without regard to subsection (f)(3)(A) and on the basis
of the number of members of the taxpayer's family as of the date of
the disposition."
Subsec. (m)(6). Pub. L. 101-508, Sec. 11408(c)(3)(B)(i),
substituted "Special rules relating to limitation" for "Limitation"
in heading.
Subsec. (m)(6)(A). Pub. L. 101-508, Sec. 11408(c)(3)(B)(ii),
(iii), struck out at beginning "In no event shall the recapture
amount of the taxpayer with respect to any indebtedness exceed 50
percent of the gain (if any) on the disposition of the taxpayer's
interest in the residence." and substituted "paragraph (1)" for
"the preceding sentence".
Subsec. (m)(7)(B)(ii). Pub. L. 101-508, Sec. 11408(c)(3)(C),
amended cl. (ii) generally. Prior to amendment, cl. (ii) read as
follows: "the amounts described in paragraph (5)(B)(ii) for each
category of family size for each year of the 10-year period
beginning on the date the financing was provided."
1989 - Subsec. (a)(1)(B). Pub. L. 101-239 substituted "September
30, 1990" for "December 31, 1989" in heading and in text.
1988 - Subsec. (a)(1)(B). Pub. L. 100-647, Sec. 4005(a)(1),
substituted "1989" for "1988" in heading and in text.
Subsec. (a)(2)(A). Pub. L. 100-647, Sec. 4005(f), inserted
sentence at end relating to application of cl. (iv).
Subsec. (a)(2)(A)(ii). Pub. L. 100-647, Sec. 4005(g)(1),
substituted "(i), and (m)(7)" for "and (i)".
Subsec. (a)(2)(A)(iii). Pub. L. 100-647, Sec. 1013(a)(2),
substituted "such issue does not meet" for "no bond which is part
of such issue meets".
Subsec. (a)(2)(A)(iv). Pub. L. 100-647, Sec. 4005(f), added cl.
(iv).
Subsec. (a)(2)(C). Pub. L. 100-647, Sec. 4005(g)(2)(B),
substituted ", (h), and (m)(7)" for "and (h)" in introductory text.
Subsec. (a)(2)(D). Pub. L. 100-647, Sec. 4005(e), added subpar.
(D).
Subsec. (b)(4). Pub. L. 100-647, Sec. 1013(a)(3), inserted "is
part of an issue which" after "which".
Subsec. (f)(5). Pub. L. 100-647, Sec. 4005(b), added par. (5).
Subsec. (f)(6). Pub. L. 100-647, Sec. 4005(c), added par. (6).
Subsec. (g)(1). Pub. L. 100-647, Sec. 4005(d)(1), substituted
"paragraph (2) of this subsection and, in the case of an issue
described in subsection (b)(1), such issue also meets the
requirements of paragraph (3) of this subsection" for "paragraphs
(2) and (3) of this subsection" and struck out "(other than
subsection (f) thereof)" before period at end.
Subsec. (g)(2)(B)(iv). Pub. L. 100-647, Sec. 4005(g)(6), inserted
at end "The Secretary may by regulation adjust the mortgage
prepayment rate otherwise used in determining the effective rate of
interest to the extent the Secretary determines that such an
adjustment is appropriate by reason of the impact of subsection
(m)."
Subsec. (m). Pub. L. 100-647, Sec. 4005(g)(1), added subsec. (m).
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(1), (3) of Pub. L. 105-34 applicable
to sales and exchanges after May 6, 1997, with certain exceptions,
see section 312(d) of Pub. L. 105-34, set out as a note under
section 121 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1702(d)(2) of Pub. L. 104-188 effective,
except as otherwise expressly provided, as if included in the
provision of the Revenue Reconciliation Act of 1990, Pub. L.
101-508, title XI, to which such amendment relates, see section
1702(i) of Pub. L. 104-188, set out as a note under section 38 of
this title.
Amendment by section 1703(n)(3) of Pub. L. 104-188 effective as
if included in the provision of the Revenue Reconciliation Act of
1993, Pub. L. 103-66, Secs. 13001-13444, to which such amendment
relates, see section 1703(o) of Pub. L. 104-188, set out as a note
under section 39 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13141(f)(1) of Pub. L. 103-66 provided that: "The
amendment made by subsection (a) [amending this section] shall
apply to bonds issued after June 30, 1992."
Section 13141(f)(3) of Pub. L. 103-66 provided that: "The
amendments made by subsections (c) and (e) [amending this section]
shall apply to qualified mortgage bonds issued and mortgage credit
certificates provided on or after the date of enactment of this Act
[Aug. 10, 1993]."
Section 13141(f)(4) of Pub. L. 103-66 provided that: "The
amendments made by subsection (d) [amending this section] shall
apply to loans originated and credit certificates provided after
the date of the enactment of this Act [Aug. 10, 1993]."
EFFECTIVE DATE OF 1991 AMENDMENT
Section 108(c)(1) of Pub. L. 102-227 provided that: "The
amendment made by subsection (a) [amending this section] shall
apply to bonds issued after December 31, 1991."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11408(d) of Pub. L. 101-508 provided that:
"(1) Bonds. - The amendment made by subsection (a) [amending this
section] shall apply to bonds issued after September 30, 1990.
"(2) Certificates. - The amendment made by subsection (b)
[amending section 25 of this title] shall apply to elections for
periods after September 30, 1990.
"(3) Simplification. - The amendment made by subsection (c)
[amending this section] shall take effect as if included in the
amendments made by section 4005 of the Technical and Miscellaneous
Revenue Act of 1988 [Pub. L. 100-647]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(2), (3) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 4005(h) of Pub. L. 100-647 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 25, 26, 148, 6045, and 6654 of this title]
shall apply to bonds issued, and nonissued bond amounts elected,
after December 31, 1988.
"(2) Special rules relating to certain requirements and refunding
bonds. - In the case of a bond issued to refund (or which is part
of a series of bonds issued to refund) a bond issued before January
1, 1989 -
"(A) the amendments made by subsections (b) and (c) [amending
this section] shall apply to financing provided after the date of
issuance of the refunding issue, and
"(B) the amendment made by subsection (f) [amending this
section] shall apply to payments (including on loans made before
such date of issuance) received on or after such date of
issuance.
"(3) Subsection (g). -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by subsection (g) [amending this section and
sections 25, 26, 6045, and 6654 of this title] shall apply to
financing provided, and mortgage credit certificates issued,
after December 31, 1990.
"(B) Exception. - The amendments made by subsection (g) shall
not apply to financing provided pursuant to a binding contract
(entered into before June 23, 1988) with a homebuilder, lender,
or mortgagor if the bonds (the proceeds of which are used to
provide such financing) are issued -
"(i) before June 23, 1988, or
"(ii) before August 1, 1988, pursuant to a written
application (made before July 1, 1988) for State bond volume
authority."
TERMINATION DATE FOR OBLIGATIONS TREATED AS QUALIFIED MORTGAGE
BONDS UNDER FORMER SECTION 103A
Section 1013(a)(27) of Pub. L. 100-647 provided that: "The date
contained in [former] section 143(a)(1)(B) of the 1986 Code shall
be treated as contained in section 103A(c)(1)(B) of the Internal
Revenue Code of 1954, as in effect on the day before the date of
the enactment of the Reform Act [Oct. 22, 1986], for purposes of
any bond issued to refund a bond to which such [section] 103A(c)(1)
applies."
STUDY OF RECAPTURE PROVISIONS
Section 4005(i) of Pub. L. 100-647 provided that: "The
Comptroller General of the United States shall conduct a study of
section 143(m) of the 1986 Code (as added by this section) and of
alternatives to accomplish the purposes of such section. A report
of such study shall be submitted not later than July 1, 1990, to
the Committee on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25, 26, 42, 142, 149,
1392, 1393, 1400E, 6045, 6654 of this title; title 12 sections
1430b, 1441a, 1831q; title 15 section 632; title 42 sections 604,
12852.
-End-
-CITE-
26 USC Sec. 144 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 144. Qualified small issue bond; qualified student loan bond;
qualified redevelopment bond
-STATUTE-
(a) Qualified small issue bond
(1) In general
For purposes of this part, the term "qualified small issue
bond" means any bond issued as part of an issue the aggregate
authorized face amount of which is $1,000,000 or less and 95
percent or more of the net proceeds of which are to be used -
(A) for the acquisition, construction, reconstruction, or
improvement of land or property of a character subject to the
allowance for depreciation, or
(B) to redeem part or all of a prior issue which was issued
for purposes described in subparagraph (A) or this
subparagraph.
(2) Certain prior issues taken into account
If -
(A) the proceeds of 2 or more issues of bonds (whether or not
the issuer of each such issue is the same) are or will be used
primarily with respect to facilities located in the same
incorporated municipality or located in the same county (but
not in any incorporated municipality),
(B) the principal user of such facilities is or will be the
same person or 2 or more related persons, and
(C) but for this paragraph, paragraph (1) (or the
corresponding provision of prior law) would apply to each such
issue,
then, for purposes of paragraph (1), in determining the aggregate
face amount of any later issue there shall be taken into account
the aggregate face amount of tax-exempt bonds issued under all
prior such issues and outstanding at the time of such later issue
(not including as outstanding any bond which is to be redeemed
(other than in an advance refunding) from the net proceeds of the
later issue).
(3) Related persons
For purposes of this subsection, a person is a related person
to another person if -
(A) the relationship between such persons would result in a
disallowance of losses under section 267 or 707(b), or
(B) such persons are members of the same controlled group of
corporations (as defined in section 1563(a), except that "more
than 50 percent" shall be substituted for "at least 80 percent"
each place it appears therein).
(4) $10,000,000 limit in certain cases
(A) In general
At the election of the issuer with respect to any issue, this
subsection shall be applied -
(i) by substituting "$10,000,000" for "$1,000,000" in
paragraph (1), and
(ii) in determining the aggregate face amount of such
issue, by taking into account not only the amount described
in paragraph (2), but also the aggregate amount of capital
expenditures with respect to facilities described in
subparagraph (B) paid or incurred during the 6-year period
beginning 3 years before the date of such issue and ending 3
years after such date (and financed otherwise than out of the
proceeds of outstanding tax-exempt issues to which paragraph
(1) (or the corresponding provision of prior law) applied),
as if the aggregate amount of such capital expenditures
constituted the face amount of a prior outstanding issue
described in paragraph (2).
(B) Facilities taken into account
For purposes of subparagraph (A)(ii), the facilities
described in this subparagraph are facilities -
(i) located in the same incorporated municipality or
located in the same county (but not in any incorporated
municipality), and
(ii) the principal user of which is or will be the same
person or 2 or more related persons.
For purposes of clause (i), the determination of whether or not
facilities are located in the same governmental unit shall be
made as of the date of issue of the issue in question.
(C) Certain capital expenditures not taken into account
For purposes of subparagraph (A)(ii), any capital expenditure
-
(i) to replace property destroyed or damaged by fire,
storm, or other casualty, to the extent of the fair market
value of the property replaced,
(ii) required by a change made after the date of issue of
the issue in question in a Federal or State law or local
ordinance of general application or required by a change made
after such date in rules and regulations of general
application issued under such a law or ordinance,
(iii) required by circumstances which could not be
reasonably foreseen on such date of issue or arising out of a
mistake of law or fact (but the aggregate amount of
expenditures not taken into account under this clause with
respect to any issue shall not exceed $1,000,000), or
(iv) described in clause (i) or (ii) of section 41(b)(2)(A)
for which a deduction was allowed under section 174(a),
shall not be taken into account.
(D) Limitation on loss of tax exemption
In applying subparagraph (A)(ii) with respect to capital
expenditures made after the date of any issue, no bond issued
as a part of such issue shall cease to be treated as a
qualified small issue bond by reason of any such expenditure
for any period before the date on which such expenditure is
paid or incurred.
(E) Certain refinancing issues
In the case of any issue described in paragraph (1)(B), an
election may be made under subparagraph (A) of this paragraph
only if all of the prior issues being redeemed are issues to
which paragraph (1) (or the corresponding provision of prior
law) applied. In applying subparagraph (A)(ii) with respect to
such a refinancing issue, capital expenditures shall be taken
into account only for purposes of determining whether the prior
issues being redeemed qualified (and would have continued to
qualify) under paragraph (1) (or the corresponding provision of
prior law).
(F) Aggregate amount of capital expenditures where there is
urban development action grant
In the case of any issue 95 percent or more of the net
proceeds of which are to be used to provide facilities with
respect to which an urban development action grant has been
made under section 119 of the Housing and Community Development
Act of 1974, capital expenditures of not to exceed $10,000,000
shall not be taken into account for purposes of applying
subparagraph (A)(ii).
(5) Issues for residential purposes
This subsection shall not apply to any bond issued as part of
an issue 5 percent or more of the net proceeds of which are to be
used directly or indirectly to provide residential real property
for family units.
(6) Limitations on treatment of bonds as part of the same issue
(A) In general
For purposes of this subsection, separate lots of bonds which
(but for this subparagraph) would be treated as part of the
same issue shall be treated as separate issues unless the
proceeds of such lots are to be used with respect to 2 or more
facilities -
(i) which are located in more than 1 State, or
(ii) which have, or will have, as the same principal user
the same person or related persons.
(B) Franchises
For purposes of subparagraph (A), a person (other than a
governmental unit) shall be considered a principal user of a
facility if such person (or a group of related persons which
includes such person) -
(i) guarantees, arranges, participates in, or assists with
the issuance (or pays any portion of the cost of issuance) of
any bond the proceeds of which are to be used to finance or
refinance such facility, and
(ii) provides any property, or any franchise, trademark, or
trade name (within the meaning of section 1253), which is to
be used in connection with such facility.
(7) Subsection not to apply if bonds issued with certain other
tax-exempt bonds
This subsection shall not apply to any bond issued as part of
an issue (other than an issue to which paragraph (4) applies) if
the interest on any other bond which is part of such issue is
excluded from gross income under any provision of law other than
this subsection.
(8) Restrictions on financing certain facilities
This subsection shall not apply to an issue if -
(A) more than 25 percent of the net proceeds of the issue are
to be used to provide a facility the primary purpose of which
is one of the following: retail food and beverage services,
automobile sales or service, or the provision of recreation or
entertainment; or
(B) any portion of the proceeds of the issue is to be used to
provide the following: any private or commercial golf course,
country club, massage parlor, tennis club, skating facility
(including roller skating, skateboard, and ice skating),
racquet sports facility (including any handball or racquetball
court), hot tub facility, suntan facility, or racetrack.
(9) Aggregation of issues with respect to single project
For purposes of this subsection, 2 or more issues part or all
of the net proceeds of which are to be used with respect to a
single building, an enclosed shopping mall, or a strip of
offices, stores, or warehouses using substantial common
facilities shall be treated as 1 issue (and any person who is a
principal user with respect to any of such issues shall be
treated as a principal user with respect to the aggregated
issue).
(10) Aggregate limit per taxpayer
(A) In general
This subsection shall not apply to any issue if the aggregate
authorized face amount of such issue allocated to any
test-period beneficiary (when increased by the outstanding
tax-exempt facility-related bonds of such beneficiary) exceeds
$40,000,000.
(B) Outstanding tax-exempt facility-related bonds
(i) In general
For purposes of applying subparagraph (A) with respect to
any issue, the outstanding tax-exempt facility-related bonds
of any person who is a test-period beneficiary with respect
to such issue is the aggregate amount of tax-exempt bonds
referred to in clause (ii) -
(I) which are allocated to such beneficiary, and
(II) which are outstanding at the time of such later
issue (not including as outstanding any bond which is to be
redeemed (other than in an advance refunding) from the net
proceeds of the later issue).
(ii) Bonds taken into account
For purposes of clause (i), the bonds referred to in this
clause are -
(I) exempt facility bonds, qualified small issue bonds,
and qualified redevelopment bonds, and
(II) industrial development bonds (as defined in section
103(b)(2), as in effect on the day before the date of the
enactment of the Tax Reform Act of 1986) to which section
141(a) does not apply.
(C) Allocation of face amount of issue
(i) In general
Except as otherwise provided in regulations, the portion of
the face amount of an issue allocated to any test-period
beneficiary of a facility financed by the proceeds of such
issue (other than an owner of such facility) is an amount
which bears the same relationship to the entire face amount
of such issue as the portion of such facility used by such
beneficiary bears to the entire facility.
(ii) Owners
Except as otherwise provided in regulations, the portion of
the face amount of an issue allocated to any test-period
beneficiary who is an owner of a facility financed by the
proceeds of such issue is an amount which bears the same
relationship to the entire face amount of such issue as the
portion of such facility owned by such beneficiary bears to
the entire facility.
(D) Test-period beneficiary
For purposes of this paragraph, except as provided in
regulations, the term "test-period beneficiary" means any
person who is an owner or a principal user of facilities being
financed by the issue at any time during the 3-year period
beginning on the later of -
(i) the date such facilities were placed in service, or
(ii) the date of issue.
(E) Treatment of related persons
For purposes of this paragraph, all persons who are related
(within the meaning of paragraph (3)) to each other shall be
treated as 1 person.
(11) Limitation on acquisition of depreciable farm property
(A) In general
This subsection shall not apply to any issue if more than
$250,000 of the net proceeds of such issue are to be used to
provide depreciable farm property with respect to which the
principal user is or will be the same person or 2 or more
related persons.
(B) Depreciable farm property
For purposes of this paragraph, the term "depreciable farm
property" means property of a character subject to the
allowance for depreciation which is to be used in a trade or
business of farming.
(C) Prior issues taken into account
In determining the amount of proceeds of an issue to be used
as described in subparagraph (A), there shall be taken into
account the aggregate amount of each prior issue to which
paragraph (1) (or the corresponding provisions of prior law)
applied which were or will be so used.
(12) Termination dates
(A) In general
This subsection shall not apply to -
(i) any bond (other than a bond described in clause (ii))
issued after December 31, 1986, or
(ii) any bond (or series of bonds) issued to refund a bond
issued on or before such date unless -
(I) the average maturity date of the issue of which the
refunding bond is a part is not later than the average
maturity date of the bonds to be refunded by such issue,
(II) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(III) the net proceeds of the refunding bond are used to
redeem the refunded bond not later than 90 days after the
date of the issuance of the refunding bond.
For purposes of clause (ii)(I), average maturity shall be
determined in accordance with section 147(b)(2)(A).
(B) Bonds issued to finance manufacturing facilities and farm
property
Subparagraph (A) shall not apply to any bond issued as part
of an issue 95 percent or more of the net proceeds of which are
to be used to provide -
(i) any manufacturing facility, or
(ii) any land or property in accordance with section
147(c)(2).
(C) Manufacturing facility
For purposes of this paragraph, the term "manufacturing
facility" means any facility which is used in the manufacturing
or production of tangible personal property (including the
processing resulting in a change in the condition of such
property). A rule similar to the rule of section 142(b)(2)
shall apply for purposes of the preceding sentence. For
purposes of the 1st sentence of this subparagraph, the term
"manufacturing facility" includes facilities which are directly
related and ancillary to a manufacturing facility (determined
without regard to this sentence) if -
(i) such facilities are located on the same site as the
manufacturing facility, and
(ii) not more than 25 percent of the net proceeds of the
issue are used to provide such facilities.
(b) Qualified student loan bond
For purposes of this part -
(1) In general
The term "qualified student loan bond" means any bond issued as
part of an issue the applicable percentage or more of the net
proceeds of which are to be used directly or indirectly to make
or finance student loans under -
(A) a program of general application to which the Higher
Education Act of 1965 applies if -
(i) limitations are imposed under the program on -
(I) the maximum amount of loans outstanding to any
student, and
(II) the maximum rate of interest payable on any loan,
(ii) the loans are directly or indirectly guaranteed by the
Federal Government,
(iii) the financing of loans under the program is not
limited by Federal law to the proceeds of tax-exempt bonds,
and
(iv) special allowance payments under section 438 of the
Higher Education Act of 1965 -
(I) are authorized to be paid with respect to loans made
under the program, or
(II) would be authorized to be made with respect to loans
under the program if such loans were not financed with the
proceeds of tax-exempt bonds, or
(B) a program of general application approved by the State if
no loan under such program exceeds the difference between the
total cost of attendance and other forms of student assistance
(not including loans pursuant to section 428B(a)(1) of the
Higher Education Act of 1965 (relating to parent loans) or
subpart I (!1) of part C of title VII of the Public Health
Service Act (relating to student assistance)) for which the
student borrower may be eligible. A program shall not be
treated as described in this subparagraph if such program is
described in subparagraph (A).
A bond shall not be treated as a qualified student loan bond if
the issue of which such bond is a part meets the private business
tests of paragraphs (1) and (2) of section 141(b) (determined by
treating 501(c)(3) organizations as governmental units with
respect to their activities which do not constitute unrelated
trades or businesses, determined by applying section 513(a)).
(2) Applicable percentage
For purposes of paragraph (1), the term "applicable percentage"
means -
(A) 90 percent in the case of the program described in
paragraph (1)(A), and
(B) 95 percent in the case of the program described in
paragraph (1)(B).
(3) Student borrowers must be residents of issuing State, etc.
A student loan shall be treated as being made or financed under
a program described in paragraph (1) with respect to an issue
only if the student is -
(A) a resident of the State from which the volume cap under
section 146 for such loan was derived, or
(B) enrolled at an educational institution located in such
State.
(4) Discrimination on basis of school location not permitted
A program shall not be treated as described in paragraph (1)(A)
if such program discriminates on the basis of the location (in
the United States) of the educational institution in which the
student is enrolled.
(c) Qualified redevelopment bond
For purposes of this part -
(1) In general
The term "qualified redevelopment bond" means any bond issued
as part of an issue 95 percent or more of the net proceeds of
which are to be used for 1 or more redevelopment purposes in any
designated blighted area.
(2) Additional requirements
A bond shall not be treated as a qualified redevelopment bond
unless -
(A) the issue described in paragraph (1) is issued pursuant
to -
(i) a State law which authorizes the issuance of such bonds
for redevelopment purposes in blighted areas, and
(ii) a redevelopment plan which is adopted before such
issuance by the governing body described in paragraph (4)(A)
with respect to the designated blighted area,
(B)(i) the payment of the principal and interest on such
issue is primarily secured by taxes of general applicability
imposed by a general purpose governmental unit, or
(ii) any increase in real property tax revenues (attributable
to increases in assessed value) by reason of the carrying out
of such purposes in such area is reserved exclusively for debt
service on such issue (and similar issues) to the extent such
increase does not exceed such debt service,
(C) each interest in real property located in such area -
(i) which is acquired by a governmental unit with the
proceeds of the issue, and
(ii) which is transferred to a person other than a
governmental unit,
is transferred for fair market value,
(D) the financed area with respect to such issue meets the no
additional charge requirements of paragraph (5), and
(E) the use of the proceeds of the issue meets the
requirements of paragraph (6).
(3) Redevelopment purposes
For purposes of paragraph (1) -
(A) In general
The term "redevelopment purposes" means, with respect to any
designated blighted area -
(i) the acquisition (by a governmental unit having the
power to exercise eminent domain) of real property located in
such area,
(ii) the clearing and preparation for redevelopment of land
in such area which was acquired by such governmental unit,
(iii) the rehabilitation of real property located in such
area which was acquired by such governmental unit, and
(iv) the relocation of occupants of such real property.
(B) New construction not permitted
The term "redevelopment purposes" does not include the
construction (other than the rehabilitation) of any property or
the enlargement of an existing building.
(4) Designated blighted area
For purposes of this subsection -
(A) In general
The term "designated blighted area" means any blighted area
designated by the governing body of a local general purpose
governmental unit in the jurisdiction of which such area is
located.
(B) Blighted area
The term "blighted area" means any area which the governing
body described in subparagraph (A) determines to be a blighted
area on the basis of the substantial presence of factors such
as excessive vacant land on which structures were previously
located, abandoned or vacant buildings, substandard structures,
vacancies, and delinquencies in payment of real property taxes.
(C) Designated areas may not exceed 20 percent of total
assessed value of real property in government's jurisdiction
(i) In general
An area may be designated by a governmental unit as a
blighted area only if the designation percentage with respect
to such area, when added to the designation percentages of
all other designated blighted areas within the jurisdiction
of such governmental unit, does not exceed 20 percent.
(ii) Designation percentage
For purposes of this subparagraph, the term "designation
percentage" means, with respect to any area, the percentage
(determined at the time such area is designated) which the
assessed value of real property located in such area is of
the total assessed value of all real property located within
the jurisdiction of the governmental unit which designated
such area.
(iii) Exception where bonds not outstanding
The designation percentage of a previously designated
blighted area shall not be taken into account under clause
(i) if no qualified redevelopment bond (or similar bond) is
or will be outstanding with respect to such area.
(D) Minimum designated area
(i) In general
Except as provided in clause (ii), an area shall not be
treated as a designated blighted area for purposes of this
subsection unless such area is contiguous and compact and its
area equals or exceeds 100 acres.
(ii) 10-acre minimum in certain cases
Clause (i) shall be applied by substituting "10 acres" for
"100 acres" if not more than 25 percent of the financed area
is to be provided (pursuant to the issue and all other such
issues) to 1 person. For purposes of the preceding sentence,
all related persons (as defined in subsection (a)(3)) shall
be treated as 1 person. For purposes of this clause, an area
provided to a developer on a short-term interim basis shall
not be treated as provided to such developer.
(5) No additional charge requirements
The financed area with respect to any issue meets the
requirements of this paragraph if, while any bond which is part
of such issue is outstanding -
(A) no owner or user of property located in the financed area
is subject to a charge or fee which similarly situated owners
or users of comparable property located outside such area are
not subject, and
(B) the assessment method or rate of real property taxes with
respect to property located in the financed area does not
differ from the assessment method or rate of real property
taxes with respect to comparable property located outside such
area.
For purposes of the preceding sentence, the term "comparable
property" means property which is of the same type as the
property to which it is being compared and which is located
within the jurisdiction of the designating governmental unit.
(6) Use of proceeds requirements
The use of the proceeds of an issue meets the requirements of
this paragraph if -
(A) not more than 25 percent of the net proceeds of such
issue are to be used to provide (including the provision of
land for) facilities described in subsection (a)(8) or section
147(e), and
(B) no portion of the proceeds of such issue is to be used to
provide (including the provision of land for) any private or
commercial golf course, country club, massage parlor, hot tub
facility, suntan facility, racetrack or other facility used for
gambling, or any store the principal business of which is the
sale of alcoholic beverages for consumption off premises.
(7) Financed area
For purposes of this subsection, the term "financed area"
means, with respect to any issue, the portion of the designated
blighted area with respect to which the proceeds of such issue
are to be used.
(8) Restriction on acquisition of land not to apply
Section 147(c) (other than paragraphs (1)(B) and (2) thereof)
shall not apply to any qualified redevelopment bond.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2621; amended Pub. L. 100-647, title I, Sec. 1013(a)(4)(A),
(B)(i), (ii), (C), (5), title VI, Sec. 6176(a), Nov. 10, 1988, 102
Stat. 3537, 3538, 3726; Pub. L. 101-239, title VII, Sec. 7105, Dec.
19, 1989, 103 Stat. 2306; Pub. L. 101-508, title XI, Sec. 11409(a),
Nov. 5, 1990, 104 Stat. 1388-478; Pub. L. 102-227, title I, Sec.
109(a), Dec. 11, 1991, 105 Stat. 1688; Pub. L. 103-66, title XIII,
Sec. 13122(a), Aug. 10, 1993, 107 Stat. 432.)
-REFTEXT-
REFERENCES IN TEXT
Section 119 of the Housing and Community Development Act of 1974,
referred to in subsec. (a)(4)(F), is classified to section 5318 of
Title 42, The Public Health and Welfare.
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (a)(10)(B)(ii)(II), is the date of enactment of Pub.
L. 99-514, which was approved Oct. 22, 1986.
The Higher Education Act of 1965, referred to in subsec. (b)(1),
is Pub. L. 89-329, Nov. 8, 1965, 79 Stat. 1219, as amended, which
is classified principally to chapter 28 (Sec. 1001 et seq.) of
Title 20, Education. Section 428B(a) of that Act as enacted in the
general amendment of part B of title IV of that Act by Pub. L.
99-498, title IV, Sec. 402(a), Oct. 17, 1986, 100 Stat. 1386, which
is classified to section 1078-2 of Title 20, does not contain a
par. (1). Section 438 of that Act is classified to section 1087-1
of Title 20. For complete classification of this Act to the Code,
see Short Title note set out under section 1001 of Title 20 and
Tables.
The Public Health Service Act, referred to in subsec. (b)(1)(B),
is act July 1, 1944, ch. 373, 58 Stat. 682, as amended. Subpart I
of part C of title VII of the Act was classified generally to
subpart I (Sec. 294 et seq.) of part C of subchapter V of chapter
6A of Title 42, The Public Health and Welfare, prior to the general
revision of subchapter V of chapter 6A by Pub. L. 102-408, title I,
Sec. 102, Oct. 13, 1992, 106 Stat. 1994. See subpart I (Sec. 292 et
seq.) of part A of revised subchapter V of chapter 6A of Title 42.
For complete classification of this Act to the Code, see Short
Title note set out under section 201 of Title 42 and Tables.
-MISC1-
PRIOR PROVISIONS
A prior section 144, acts Aug. 16, 1954, ch. 736, 68A Stat. 41;
Feb. 26, 1964, Pub. L. 88-272, title I, Sec. 112(c), title II, Sec.
232(c), 78 Stat. 24, 110; Dec. 10, 1971, Pub. L. 92-178, title II,
Sec. 206, title III, Sec. 301(c), 85 Stat. 511, 520; Oct. 4, 1976,
Pub. L. 94-455, title V, Sec. 501(b)(3)-(5), title XIX, Sec.
1906(b)(13)(A), 90 Stat. 1558, 1559, 1834, related to method for
electing to take standard deduction, prior to repeal by Pub. L.
95-30, title I, Sec. 101(d)(1), May 23, 1977, 91 Stat. 133,
applicable to taxable years beginning after Dec. 31, 1976.
AMENDMENTS
1993 - Subsec. (a)(12)(B). Pub. L. 103-66 amended heading and
text of subpar. (B) generally. Prior to amendment, text read as
follows: "In the case of any bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide -
"(i) any manufacturing facility, or
"(ii) any land or property in accordance with section
147(c)(2),
subparagraph (A) shall be applied by substituting 'June 30, 1992'
for 'December 31, 1986'."
1991 - Subsec. (a)(12)(B). Pub. L. 102-227 substituted "June 30,
1992" for "December 31, 1991".
1990 - Subsec. (a)(12)(B). Pub. L. 101-508 substituted "December
31, 1991" for "September 30, 1990".
1989 - Subsec. (a)(12)(B). Pub. L. 101-239 substituted "by
substituting 'September 30, 1990' for 'December 31, 1986' " for "by
substituting '1989' for '1986' ".
1988 - Subsec. (a)(12)(A). Pub. L. 100-647, Sec.
1013(a)(4)(B)(ii), inserted sentence at end that for purposes of
cl. (ii)(I), average maturity be determined in accordance with
section 147(b)(2)(A).
Subsec. (a)(12)(A)(ii). Pub. L. 100-647, Sec. 1013(a)(4)(A),
inserted "(or series of bonds)" before "issued to refund" in
introductory text.
Subsec. (a)(12)(A)(ii)(I). Pub. L. 100-647, Sec.
1013(a)(4)(B)(i), amended subcl. (I) generally. Prior to amendment,
subcl. (I) read as follows: "the refunding bond has a maturity date
not later than the maturity date of the refunded bond,".
Subsec. (a)(12)(A)(ii)(III), (IV). Pub. L. 100-647, Sec.
1013(a)(4)(C), redesignated subcl. (IV) as (III) and struck out
former subcl. (III) which provided that this subsection apply when
the interest rate on the refunding bond is lower than the interest
rate on the refunded bond.
Subsec. (a)(12)(C). Pub. L. 100-647, Sec. 6176(a), inserted
sentence at end defining "manufacturing facility".
Subsec. (b)(1). Pub. L. 100-647, Sec. 1013(a)(5), in subpar. (B)
struck out "to which part B of title IV of the Higher Education Act
of 1965 (relating to guaranteed student loans) does not apply"
after "by the State", substituted "of the Higher Education Act of
1965" for "of such Act", amended last sentence generally, and
inserted a new flush sentence at end of par. (1). Prior to
amendment, last sentence of subpar. (B) read as follows: "A bond
issued as part of an issue shall be treated as a qualified student
loan bond only if no bond which is part of such issue meets the
private business tests of paragraphs (1) and (2) of section
141(b)."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13122(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to bonds
issued after June 30, 1992."
EFFECTIVE DATE OF 1991 AMENDMENT
Section 109(b) of Pub. L. 102-227 provided that: "The amendment
made by this section [amending this section] shall apply to bonds
issued after December 31, 1991."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11409(b) of Pub. L. 101-508 provided that: "The amendment
made by this section [amending this section] shall apply to bonds
issued after September 30, 1990."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(4)(A), (B)(i), (ii), (C), (5) of
Pub. L. 100-647 effective, except as otherwise provided, as if
included in the provision of the Tax Reform Act of 1986, Pub. L.
99-514, to which such amendment relates, see section 1019(a) of
Pub. L. 100-647, set out as a note under section 1 of this title.
Section 6176(b) of Pub. L. 100-647 provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to bonds issued after the date of the
enactment of this Act [Nov. 10, 1988].
"(2) Refundings. - The amendment made by subsection (a) shall not
apply to any bond issued to refund (or which is part of a series of
bonds issued to refund) a bond issued on or before the date of the
enactment of this Act if -
"(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue, and
"(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b) of the 1986 Code."
APPLICATION OF SUBSECTION (A)(12)(A)(II)(I) TO REFUNDING BONDS
ISSUED BEFORE JULY 1, 1987
Section 1013(a)(4)(B)(iii) of Pub. L. 100-647 provided that: "A
refunding bond issued before July 1, 1987, shall be treated as
meeting the requirement of subclause (I) of section
144(a)(12)(A)(ii) of the 1986 Code if such bond met the requirement
of such subclause as in effect before the amendments made by this
subparagraph [amending this section]."
TERMINATION DATE FOR EXEMPTION FOR CERTAIN SMALL ISSUES UNDER
SECTION 103(B)(6)
Section 1013(c)(12)(B) of Pub. L. 100-647 provided that: "The
date applicable under section 144(a)(12)(B) of the 1986 Code shall
be treated as contained in section 103(b)(6)(N)(iii) of the
Internal Revenue Code of 1954, as in effect on the day before the
date of the enactment of the Reform Act [Oct. 22, 1986], for
purposes of any bond issued to refund a bond to which such section
103(b)(6)(N)(iii) applies."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25, 142, 145, 147, 149,
269A, 414, 1394, 1396, 1397C, 4988, 7871 of this title; title 7
section 1929.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 145 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 145. Qualified 501(c)(3) bond
-STATUTE-
(a) In general
For purposes of this part, except as otherwise provided in this
section, the term "qualified 501(c)(3) bond" means any private
activity bond issued as part of an issue if -
(1) all property which is to be provided by the net proceeds of
the issue is to be owned by a 501(c)(3) organization or a
governmental unit, and
(2) such bond would not be a private activity bond if -
(A) 501(c)(3) organizations were treated as governmental
units with respect to their activities which do not constitute
unrelated trades or businesses, determined by applying section
513(a), and
(B) paragraphs (1) and (2) of section 141(b) were applied by
substituting "5 percent" for "10 percent" each place it appears
and by substituting "net proceeds" for "proceeds" each place it
appears.
(b) $150,000,000 limitation on bonds other than hospital bonds
(1) In general
A bond (other than a qualified hospital bond) shall not be
treated as a qualified 501(c)(3) bond if the aggregate authorized
face amount of the issue (of which such bond is a part) allocated
to any 501(c)(3) organization which is a test-period beneficiary
(when increased by the outstanding tax-exempt nonhospital bonds
of such organization) exceeds $150,000,000.
(2) Outstanding tax-exempt nonhospital bonds
(A) In general
For purposes of applying paragraph (1) with respect to any
issue, the outstanding tax-exempt nonhospital bonds of any
organization which is a test-period beneficiary with respect to
such issue is the aggregate amount of tax-exempt bonds referred
to in subparagraph (B) -
(i) which are allocated to such organization, and
(ii) which are outstanding at the time of such later issue
(not including as outstanding any bond which is to be
redeemed (other than in an advance refunding) from the net
proceeds of the later issue).
(B) Bonds taken into account
For purposes of subparagraph (A), the bonds referred to in
this subparagraph are -
(i) any qualified 501(c)(3) bond other than a qualified
hospital bond, and
(ii) any bond to which section 141(a) does not apply if -
(I) such bond would have been an industrial development
bond (as defined in section 103(b)(2), as in effect on the
day before the date of the enactment of the Tax Reform Act
of 1986) if 501(c)(3) organizations were not exempt
persons, and
(II) such bond was not described in paragraph (4), (5),
or (6) of such section 103(b) (as in effect on the date
such bond was issued).
(C) Only nonhospital portion of bonds taken into account
(i) In general
A bond shall be taken into account under subparagraph (B)
only to the extent that the proceeds of the issue of which
such bond is a part are not used with respect to a hospital.
(ii) Special rule
If 90 percent or more of the net proceeds of an issue are
used with respect to a hospital, no bond which is part of
such issue shall be taken into account under subparagraph
(B)(ii).
(3) Aggregation rule
For purposes of this subsection, 2 or more organizations under
common management or control shall be treated as 1 organization.
(4) Allocation of face amount of issue; test-period beneficiary
Rules similar to the rules of subparagraphs (C), (D), and (E)
of section 144(a)(10) shall apply for purposes of this
subsection.
(5) Termination of limitation
This subsection shall not apply with respect to bonds issued
after the date of the enactment of this paragraph as part of an
issue 95 percent or more of the net proceeds of which are to be
used to finance capital expenditures incurred after such date.
(c) Qualified hospital bond
For purposes of this section, the term "qualified hospital bond"
means any bond issued as part of an issue 95 percent or more of the
net proceeds of which are to be used with respect to a hospital.
(d) Restrictions on bonds used to provide residential rental
housing for family units
(1) In general
Except as otherwise provided in this subsection, a bond which
is part of an issue shall not be a qualified 501(c)(3) bond if
any portion of the net proceeds of the issue are to be used
directly or indirectly to provide residential rental property for
family units.
(2) Exception for bonds used to provide qualified residential
rental projects
Paragraph (1) shall not apply to any bond issued as part of an
issue if the portion of such issue which is to be used as
described in paragraph (1) is to be used to provide -
(A) a residential rental property for family units if the
first use of such property is pursuant to such issue,
(B) qualified residential rental projects (as defined in
section 142(d)), or
(C) property which is to be substantially rehabilitated in a
rehabilitation beginning within the 2-year period ending 1 year
after the date of the acquisition of such property.
(3) Certain property treated as new property
Solely for purposes of determining under paragraph (2)(A)
whether the 1st use of property is pursuant to tax-exempt
financing -
(A) In general
If -
(i) the 1st use of property is pursuant to taxable
financing,
(ii) there was a reasonable expectation (at the time such
taxable financing was provided) that such financing would be
replaced by tax-exempt financing, and
(iii) the taxable financing is in fact so replaced within a
reasonable period after the taxable financing was provided,
then the 1st use of such property shall be treated as being
pursuant to the tax-exempt financing.
(B) Special rule where no operating State or local program for
tax-exempt financing
If, at the time of the 1st use of property, there was no
operating State or local program for tax-exempt financing of
the property, the 1st use of the property shall be treated as
pursuant to the 1st tax-exempt financing of the property.
(C) Definitions
For purposes of this paragraph -
(i) Tax-exempt financing
The term "tax-exempt financing" means financing provided by
tax-exempt bonds.
(ii) Taxable financing
The term "taxable financing" means financing which is not
tax-exempt financing.
(4) Substantial rehabilitation
(A) In general
Except as provided in subparagraph (B), rules similar to the
rules of section 47(c)(1)(C) shall apply in determining for
purposes of paragraph (2)(C) whether property is substantially
rehabilitated.
(B) Exception
For purposes of subparagraph (A), clause (ii) of section
47(c)(1)(C) shall not apply, but the Secretary may extend the
24-month period in section 47(c)(1)(C)(i) where appropriate due
to circumstances not within the control of the owner.
(e) Election out
This section shall not apply to an issue if -
(1) the issuer elects not to have this section apply to such
issue, and
(2) such issue is an issue of exempt facility bonds, or
qualified redevelopment bonds, to which section 146 applies.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2629; amended Pub. L. 100-647, title I, Sec. 1013(a)(6)-(8),
title V, Sec. 5053(a), Nov. 10, 1988, 102 Stat. 3538, 3677; Pub. L.
101-239, title VII, Sec. 7815(f), Dec. 19, 1989, 103 Stat. 2419;
Pub. L. 101-508, title XI, Sec. 11813(b)(7), Nov. 5, 1990, 104
Stat. 1388-551; Pub. L. 105-34, title II, Sec. 222, Aug. 5, 1997,
111 Stat. 818.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (b)(2)(B)(ii)(I), is the date of enactment of Pub. L.
99-514, which was approved Oct. 22, 1986.
The date of the enactment of this paragraph, referred to in
subsec. (b)(5), is the date of enactment of Pub. L. 105-34, which
was approved Aug. 5, 1997.
-MISC1-
PRIOR PROVISIONS
A prior section 145, act Aug. 16, 1954, ch. 736, 68A Stat. 42,
made a cross reference to section 36 of this title, prior to repeal
by Pub. L. 95-30, title I, Sec. 101(d)(1), May 23, 1977, 91 Stat.
133, applicable to taxable years beginning after Dec. 31, 1976.
AMENDMENTS
1997 - Subsec. (b)(5). Pub. L. 105-34 added par. (5).
1990 - Subsec. (d)(4). Pub. L. 101-508 substituted "section
47(c)(1)(C)" for "section 48(g)(1)(C)" wherever appearing and
"section 47(c)(1)(C)(i)" for "section 48(g)(1)(C)(i)".
1989 - Subsec. (d)(3), (4). Pub. L. 101-239 added par. (3) and
redesignated former par. (3) as (4).
1988 - Subsec. (b)(2)(B)(ii)(I). Pub. L. 100-647, Sec.
1013(a)(6), substituted "section 103(b)(2)" for "section 103(b)".
Subsec. (b)(2)(C)(i). Pub. L. 100-647, Sec. 1013(a)(7),
substituted "subparagraph (B)" for "subparagraph (B)(ii)".
Subsec. (b)(4). Pub. L. 100-647, Sec. 1013(a)(8), substituted
"subparagraphs (C), (D), and (E)" for "subparagraphs (C) and (D)".
Subsecs. (d), (e). Pub. L. 100-647, Sec. 5053(a), added subsec.
(d) and redesignated former subsec. (d) as (e).
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to property placed in
service after Dec. 31, 1990, but not applicable to any transition
property (as defined in section 49(e) of this title), any property
with respect to which qualified progress expenditures were
previously taken into account under section 46(d) of this title,
and any property described in section 46(b)(2)(C) of this title, as
such sections were in effect on Nov. 4, 1990, see section 11813(c)
of Pub. L. 101-508, set out as a note under section 29 of this
title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(6)-(8) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 5053(c) of Pub. L. 100-647 provided that:
"(1) In general. - The amendments made by this section [amending
this section and section 148 of this title] shall apply to
obligations issued after October 21, 1988.
"(2) Exception for construction or binding agreement. -
"(A) The amendments made by this section shall not apply to
bonds (other than refunding bonds) with respect to a facility -
"(i)(I) the original use of which begins with the taxpayer,
and the construction, reconstruction, or rehabilitation of
which began before July 14, 1988, and was completed on or after
such date, or
"(II) the original use of which begins with the taxpayer and
with respect to which a binding contract to incur significant
expenditures for construction, reconstruction, or
rehabilitation was entered into before July 14, 1988, and some
of such expenditures are incurred on or after such date, and
"(ii) described in an inducement resolution or other
comparable preliminary approval adopted by an issuing authority
(or by a voter referendum) before July 14, 1988.
For purposes of the preceding sentence, the term 'significant
expenditures' means expenditures greater than 10 percent of the
reasonably anticipated cost of the construction, reconstruction,
or rehabilitation of the facility involved.
"(B) Subparagraph (A) shall not apply to any bond issued after
December 31, 1989, and shall not apply unless it is reasonably
expected (at the time of issuance of the bond) that the facility
will be placed in service before January 1, 1990.
"(3) Refundings. - The amendments made by this section shall not
apply to any bond issued to refund (or which is part of a series of
bonds issued to refund) a bond issued before July 15, 1988, if -
"(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue,
"(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
"(C) the proceeds of the refunding bond are used to redeem the
refunded bond not later than 90 days after the date of the
issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b) of the 1986 Code."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 57, 265, 1400L of this
title.
-End-
-CITE-
26 USC Sec. 146 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 146. Volume cap
-STATUTE-
(a) General rule
A private activity bond issued as part of an issue meets the
requirements of this section if the aggregate face amount of the
private activity bonds issued pursuant to such issue, when added to
the aggregate face amount of tax-exempt private activity bonds
previously issued by the issuing authority during the calendar
year, does not exceed such authority's volume cap for such calendar
year.
(b) Volume cap for State agencies
For purposes of this section -
(1) In general
The volume cap for any agency of the State authorized to issue
tax-exempt private activity bonds for any calendar year shall be
50 percent of the State ceiling for such calendar year.
(2) Special rule where State has more than 1 agency
If more than 1 agency of the State is authorized to issue
tax-exempt private activity bonds, all such agencies shall be
treated as a single agency.
(c) Volume cap for other issuers
For purposes of this section -
(1) In general
The volume cap for any issuing authority (other than a State
agency) for any calendar year shall be an amount which bears the
same ratio to 50 percent of the State ceiling for such calendar
year as -
(A) the population of the jurisdiction of such issuing
authority, bears to
(B) the population of the entire State.
(2) Overlapping jurisdictions
For purposes of paragraph (1)(A), if an area is within the
jurisdiction of 2 or more governmental units, such area shall be
treated as only within the jurisdiction of the unit having
jurisdiction over the smallest geographical area unless such unit
agrees to surrender all or part of such jurisdiction for such
calendar year to the unit with overlapping jurisdiction which has
the next smallest geographical area.
(d) State ceiling
For purposes of this section -
(1) In general
The State ceiling applicable to any State for any calendar year
shall be the greater of -
(A) an amount equal to $75 ($62.50 in the case of calendar
year 2001) multiplied by the State population, or
(B) $225,000,000 ($187,500,000 in the case of calendar year
2001).
(2) Cost-of-living adjustment
In the case of a calendar year after 2002, each of the dollar
amounts contained in paragraph (1) shall be increased by an
amount equal to -
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section
1(f)(3) for such calendar year by substituting "calendar year
2001" for "calendar year 1992" in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a
multiple of $5 ($5,000 in the case of the dollar amount in
paragraph (1)(B)), such increase shall be rounded to the nearest
multiple thereof.
(3) Special rule for States with constitutional home rule cities
For purposes of this section -
(A) In general
The volume cap for any constitutional home rule city for any
calendar year shall be determined under paragraph (1) of
subsection (c) by substituting "100 percent" for "50 percent".
(B) Coordination with other allocations
In the case of any State which contains 1 or more
constitutional home rule cities, for purposes of applying
subsections (b) and (c) with respect to issuing authorities in
such State other than constitutional home rule cities, the
State ceiling for any calendar year shall be reduced by the
aggregate volume caps determined for such year for all
constitutional home rule cities in such State.
(C) Constitutional home rule city
For purposes of this section, the term "constitutional home
rule city" means, with respect to any calendar year, any
political subdivision of a State which, under a State
constitution which was adopted in 1970 and effective on July 1,
1971, had home rule powers on the 1st day of the calendar year.
(4) Special rule for possessions with populations of less than
the population of the least populous State
(A) In general
If the population of any possession of the United States for
any calendar year is less than the population of the least
populous State (other than a possession) for such calendar
year, the limitation under paragraph (1)(A) shall not be less
than the amount determined under subparagraph (B) for such
calendar year.
(B) Limitation
The limitation determined under this subparagraph, with
respect to a possession, for any calendar year is an amount
equal to the product of -
(i) the fraction -
(I) the numerator of which is the amount applicable under
paragraph (1)(B) for such calendar year, and
(II) the denominator of which is the State population of
the least populous State (other than a possession) for such
calendar year, and
(ii) the population of such possession for such calendar
year.
(e) State may provide for different allocation
For purposes of this section -
(1) In general
Except as provided in paragraph (3), a State may, by law
provide a different formula for allocating the State ceiling
among the governmental units (or other authorities) in such State
having authority to issue tax-exempt private activity bonds.
(2) Interim authority for Governor
(A) In general
Except as otherwise provided in paragraph (3), the Governor
of any State may proclaim a different formula for allocating
the State ceiling among the governmental units (or other
authorities) in such State having authority to issue private
activity bonds.
(B) Termination of authority
The authority provided in subparagraph (A) shall not apply to
bonds issued after the earlier of -
(i) the last day of the 1st calendar year after 1986 during
which the legislature of the State met in regular session, or
(ii) the effective date of any State legislation with
respect to the allocation of the State ceiling.
(3) State may not alter allocation to constitutional home rule
cities
Except as otherwise provided in a State constitutional
amendment (or law changing the home rule provision adopted in the
manner provided by the State constitution), the authority
provided in this subsection shall not apply to that portion of
the State ceiling which is allocated to any constitutional home
rule city in the State unless such city agrees to such different
allocation.
(f) Elective carryforward of unused limitation for specified
purpose
(1) In general
If -
(A) an issuing authority's volume cap for any calendar year
after 1985, exceeds
(B) the aggregate amount of tax-exempt private activity bonds
issued during such calendar year by such authority,
such authority may elect to treat all (or any portion) of such
excess as a carryforward for 1 or more carryforward purposes.
(2) Election must identify purpose
In any election under paragraph (1), the issuing authority
shall -
(A) identify the purpose for which the carryforward is
elected, and
(B) specify the portion of the excess described in paragraph
(1) which is to be a carryforward for each such purpose.
(3) Use of carryforward
(A) In general
If any issuing authority elects a carryforward under
paragraph (1) with respect to any carryforward purpose, any
private activity bonds issued by such authority with respect to
such purpose during the 3 calendar years following the calendar
year in which the carryforward arose shall not be taken into
account under subsection (a) to the extent the amount of such
bonds does not exceed the amount of the carryforward elected
for such purpose.
(B) Order in which carryforward used
Carryforwards elected with respect to any purpose shall be
used in the order of the calendar years in which they arose.
(4) Election
Any election under this paragraph (and any identification or
specification contained therein), once made, shall be
irrevocable.
(5) Carryforward purpose
The term "carryforward purpose" means -
(A) the purpose of issuing exempt facility bonds described in
1 of the paragraphs of section 142(a),
(B) the purpose of issuing qualified mortgage bonds or
mortgage credit certificates,
(C) the purpose of issuing qualified student loan bonds, and
(D) the purpose of issuing qualified redevelopment bonds.
(g) Exception for certain bonds
Only for purposes of this section, the term "private activity
bond" shall not include -
(1) any qualified veterans' mortgage bond,
(2) any qualified 501(c)(3) bond,
(3) any exempt facility bond issued as part of an issue
described in paragraph (1), (2), (12), or (13) of section 142(a)
(relating to airports, docks and wharves, environmental
enhancements of hydroelectric generating facilities, and
qualified public educational facilities), and
(4) 75 percent of any exempt facility bond issued as part of an
issue described in paragraph (11) of section 142(a) (relating to
high-speed intercity rail facilities).
Paragraph (4) shall be applied without regard to "75 percent of" if
all of the property to be financed by the net proceeds of the issue
is to be owned by a governmental unit (within the meaning of
section 142(b)(1)).
(h) Exception for government-owned solid waste disposal facilities
(1) In general
Only for purposes of this section, the term "private activity
bond" shall not include any exempt facility bond described in
section 142(a)(6) which is issued as part of an issue if all of
the property to be financed by the net proceeds of such issue is
to be owned by a governmental unit.
(2) Safe harbor for determination of government ownership
In determining ownership for purposes of paragraph (1), section
142(b)(1)(B) shall apply, except that a lease term shall be
treated as satisfying clause (ii) thereof if it is not more than
20 years.
(i) Treatment of refunding issues
For purposes of the volume cap imposed by this section -
(1) In general
The term "private activity bond" shall not include any bond
which is issued to refund another bond to the extent that the
amount of such bond does not exceed the outstanding amount of the
refunded bond.
(2) Special rules for student loan bonds
In the case of any qualified student loan bond, paragraph (1)
shall apply only if the maturity date of the refunding bond is
not later than the later of -
(A) the average maturity date of the qualified student loan
bonds to be refunded by the issue of which the refunding bond
is a part, or
(B) the date 17 years after the date on which the refunded
bond was issued (or in the case of a series of refundings, the
date on which the original bond was issued).
(3) Special rules for qualified mortgage bonds
In the case of any qualified mortgage bond, paragraph (1) shall
apply only if the maturity date of the refunding bond is not
later than the later of -
(A) the average maturity date of the qualified mortgage bonds
to be refunded by the issue of which the refunding bond is a
part, or
(B) the date 32 years after the date on which the refunded
bond was issued (or in the case of a series of refundings, the
date on which the original bond was issued).
(4) Average maturity
For purposes of paragraphs (2) and (3), average maturity shall
be determined in accordance with section 147(b)(2)(A).
(5) Exception for advance refunding
This subsection shall not apply to any bond issued to advance
refund another bond.
(j) Population
For purposes of this section, determinations of the population of
any State (or issuing authority) shall be made with respect to any
calendar year on the basis of the most recent census estimate of
the resident population of such State (or issuing authority)
released by the Bureau of Census before the beginning of such
calendar year.
(k) Facility must be located within State
(1) In general
Except as provided in paragraphs (2) and (3), no portion of the
State ceiling applicable to any State for any calendar year may
be used with respect to financing for a facility located outside
such State.
(2) Exception for certain facilities where State will get
proportionate share of benefits
Paragraph (1) shall not apply to any exempt facility bond
described in paragraph (4), (5), (6), or (10) of section 142(a)
if the issuer establishes that the State's share of the use of
the facility (or its output) will equal or exceed the State's
share of the private activity bonds issued to finance the
facility.
(3) Treatment of governmental bonds to which volume cap allocated
Paragraph (1) shall not apply to any bond to which volume cap
is allocated under section 141(b)(5) -
(A) for an output facility, or
(B) for a facility of a type described in paragraph (4), (5),
(6), or (10) of section 142(a),
if the issuer establishes that the State's share of the private
business use (as defined by section 141(b)(6)) of the facility
will equal or exceed the State's share of the volume cap
allocated with respect to bonds issued to finance the facility.
(l) Issuer of qualified scholarship funding bonds
In the case of a qualified scholarship funding bond, such bond
shall be treated for purposes of this section as issued by a State
or local issuing authority (whichever is appropriate).
(m) Treatment of amounts allocated to private activity portion of
government use bonds
(1) In general
The volume cap of an issuer shall be reduced by the amount
allocated by the issuer to an issue under section 141(b)(5).
(2) Advance refundings
Except as otherwise provided by the Secretary, any advance
refunding of any part of an issue to which an amount was
allocated under section 141(b)(5) (or would have been allocated
if such section applied to such issue) shall be taken into
account under this section to the extent of the amount of the
volume cap which was (or would have been) so allocated.
(n) Reduction for mortgage credit certificates, etc.
The volume cap of any issuing authority for any calendar year
shall be reduced by the sum of -
(1) the amount of qualified mortgage bonds which such authority
elects not to issue under section 25(c)(2)(A)(ii) during such
year, plus
(2) the amount of any reduction in such ceiling under section
25(f) applicable to such authority for such year.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2630; amended Pub. L. 100-203, title X, Sec. 10631(b), Dec.
22, 1987, 101 Stat. 1330-455; Pub. L. 100-647, title I, Sec.
1013(a)(9), (10), (28), (40), title VI, Sec. 6180(b)(3), Nov. 10,
1988, 102 Stat. 3538, 3543, 3544, 3728; Pub. L. 101-239, title VII,
Sec. 7816(s)(2), Dec. 19, 1989, 103 Stat. 2423; Pub. L. 102-486,
title XIX, Sec. 1921(b)(3), Oct. 24, 1992, 106 Stat. 3028; Pub. L.
103-66, title XIII, Sec. 13121(a), Aug. 10, 1993, 107 Stat. 432;
Pub. L. 105-277, div. J, title II, Sec. 2021(a), Oct. 21, 1998, 112
Stat. 2681-903; Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
161(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A-624; Pub. L. 107-16,
title IV, Sec. 422(c), June 7, 2001, 115 Stat. 66.)
-STATAMEND-
ADJUSTMENT OF STATE CEILING FOR PRIVATE ACTIVITY BOND VOLUME CAP
FOR CALENDAR YEAR 2004
For inflation adjustment of amounts in subsection (d)(1) of this
section used to calculate the State ceiling for volume cap for
private activity bonds for calendar year 2004, see section 3.15 of
Revenue Procedure 2003-85, set out as a note under section 1 of
this title.
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2001 - Subsec. (g)(3). Pub. L. 107-16, Secs. 422(c), 901,
temporarily substituted "(12), or (13)" for "or (12)" and
"environmental enhancements of hydroelectric generating facilities,
and qualified public educational facilities" for "and environmental
enhancements of hydroelectric generating facilities". See Effective
and Termination Dates of 2001 Amendment note below.
2000 - Subsec. (d)(1), (2). Pub. L. 106-554 amended pars. (1) and
(2) generally. Prior to amendment, pars. (1) and (2) provided for
State ceilings based on the per capita limits and aggregate limits
set out in an included table.
1998 - Subsec. (d)(1). Pub. L. 105-277 added par. (1) and struck
out heading and text of former par. (1). Text read as follows: "The
State ceiling applicable to any State for any calendar year shall
be the greater of -
"(A) an amount equal to $75 multiplied by the State population,
or
"(B) $250,000,000.
Subparagraph (B) shall not apply to any possession of the United
States."
Subsec. (d)(2). Pub. L. 105-277 added par. (2) and struck out
heading and text of former par. (2). Text read as follows: "In the
case of calendar years after 1987, paragraph (1) shall be applied
by substituting -
"(A) '$50' for '$75', and
"(B) '$150,000,000' for '$250,000,000'."
1993 - Subsec. (g). Pub. L. 103-66, which directed the amendment
of par. (4) by adding at the end thereof the following flush
sentence: "Paragraph (4) shall be applied without regard to '75
percent of' if all of the property to be financed by the net
proceeds of the issue is to be owned by a governmental unit (within
the meaning of section 142(b)(1)).", was executed by inserting the
sentence at the end of subsec. (g), to reflect the probable intent
of Congress.
1992 - Subsec. (g)(3). Pub. L. 102-486 substituted ", (2), or
(12)" for "or (2)" and ", docks and wharves, and environmental
enhancements of hydroelectric generating facilities" for "and docks
and wharves".
1989 - Subsec. (g)(3), (4). Pub. L. 101-239 redesignated par.
(3), relating to exempt facility bonds issued as part of an issue
described in par. (11) of section 142(a), as (4).
1988 - Subsec. (d)(4)(B). Pub. L. 100-647, Sec. 1013(a)(40),
substituted "respect to a" for "respect a".
Subsec. (f)(5)(A). Pub. L. 100-647, Sec. 1013(a)(9), amended
subpar. (A) generally, as in effect before amendment by Pub. L.
100-203. Before amendment by Pub. L. 100-203, subpar. (A) read as
follows: "the purpose of issuing bonds referred to in one of the
clauses of section 141(d)(1)(A),".
Subsec. (g)(3). Pub. L. 100-647, Sec. 6180(b)(3), added par. (3)
relating to exempt facility bonds issued as part of an issue
described in par. (11) of section 142(a).
Subsec. (i)(2)(A). Pub. L. 100-647, Sec. 1013(a)(28)(A), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "the maturity date of the bond to be refunded, or".
Subsec. (i)(3)(A). Pub. L. 100-647, Sec. 1013(a)(28)(B), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "the maturity date of the bond to be refunded, or".
Subsec. (i)(4), (5). Pub. L. 100-647, Sec. 1013(a)(28)(C), added
par. (4) and redesignated former par. (4) as (5).
Subsec. (k)(1). Pub. L. 100-647, Sec. 1013(a)(10)(A), substituted
"paragraphs (2) and (3)" for "paragraph (2)".
Subsec. (k)(3). Pub. L. 100-647, Sec. 1013(a)(10)(B), added par.
(3).
1987 - Subsec. (f)(5)(A). Pub. L. 100-203 amended subpar. (A)
generally, as amended by Pub. L. 100-647, Sec. 1013(a)(9),
restating it without change. See 1988 Amendment note above.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to bonds issued after Dec.
31, 2001, see section 422(f) of Pub. L. 107-16, set out as a note
under section 142 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 161(b)], Dec. 21,
2000, 114 Stat. 2763, 2763A-624, provided that: "The amendment made
by this section [amending this section] shall apply to calendar
years after 2000."
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-277, div. J, title II, Sec. 2021(b), Oct. 21, 1998,
112 Stat. 2681-903, provided that: "The amendment made by this
section [amending this section] shall apply to calendar years after
1998."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13121(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to bonds
issued after December 31, 1993."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-486 applicable to bonds issued after
Oct. 24, 1992, see section 1921(c) of Pub. L. 102-486, set out as a
note under section 142 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(9), (10), (28), (40) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 6180(b)(3) of Pub. L. 100-647 applicable to
bonds issued after Nov. 10, 1988, see section 6180(c) of Pub. L.
100-647, set out as a note under section 142 of this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable, with certain exceptions,
to bonds issued after Oct. 13, 1987 (other than bonds issued to
refund bonds issued on or before such date), see section 10631(c)
of Pub. L. 100-203, set out as a note under section 141 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25, 42, 141, 142, 144,
145, 149, 1394, 1400L, 7871 of this title.
-End-
-CITE-
26 USC Sec. 147 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart A - Private Activity Bonds
-HEAD-
Sec. 147. Other requirements applicable to certain private activity
bonds
-STATUTE-
(a) Substantial user requirement
(1) In general
Except as provided in subsection (h), a private activity bond
shall not be a qualified bond for any period during which it is
held by a person who is a substantial user of the facilities or
by a related person of such a substantial user.
(2) Related person
For purposes of paragraph (1), the following shall be treated
as related persons -
(A) 2 or more persons if the relationship between such
persons would result in a disallowance of losses under section
267 or 707(b),
(B) 2 or more persons which are members of the same
controlled group of corporations (as defined in section
1563(a), except that "more than 50 percent" shall be
substituted for "at least 80 percent" each place it appears
therein),
(C) a partnership and each of its partners (and their spouses
and minor children), and
(D) an S corporation and each of its shareholders (and their
spouses and minor children).
(b) Maturity may not exceed 120 percent of economic life
(1) General rule
Except as provided in subsection (h), a private activity bond
shall not be a qualified bond if it is issued as part of an issue
and -
(A) the average maturity of the bonds issued as part of such
issue, exceeds
(B) 120 percent of the average reasonably expected economic
life of the facilities being financed with the net proceeds of
such issue.
(2) Determination of averages
For purposes of paragraph (1) -
(A) the average maturity of any issue shall be determined by
taking into account the respective issue prices of the bonds
issued as part of such issue, and
(B) the average reasonably expected economic life of the
facilities being financed with any issue shall be determined by
taking into account the respective cost of such facilities.
(3) Special rules
(A) Determination of economic life
For purposes of this subsection, the reasonably expected
economic life of any facility shall be determined as of the
later of -
(i) the date on which the bonds are issued, or
(ii) the date on which the facility is placed in service
(or expected to be placed in service).
(B) Treatment of land
(i) Land not taken into account
Except as provided in clause (ii), land shall not be taken
into account under paragraph (1)(B).
(ii) Issues where 25 percent or more of proceeds used to
finance land
If 25 percent or more of the net proceeds of any issue is
to be used to finance land, such land shall be taken into
account under paragraph (1)(B) and shall be treated as having
an economic life of 30 years.
(4) Special rule for pooled financing of 501(c)(3) organization
(A) In general
At the election of the issuer, a qualified 501(c)(3) bond
shall be treated as meeting the requirements of paragraph (1)
if such bond meets the requirements of subparagraph (B).
(B) Requirements
A qualified 501(c)(3) bond meets the requirements of this
subparagraph if -
(i) 95 percent or more of the net proceeds of the issue of
which such bond is a part are to be used to make or finance
loans to 2 or more 501(c)(3) organizations or governmental
units for acquisition of property to be used by such
organizations,
(ii) each loan described in clause (i) satisfies the
requirements of paragraph (1) (determined by treating each
loan as a separate issue),
(iii) before such bond is issued, a demand survey was
conducted which shows a demand for financing greater than an
amount equal to 120 percent of the lendable proceeds of such
issue, and
(iv) 95 percent or more of the net proceeds of such issue
are to be loaned to 501(c)(3) organizations or governmental
units within 1 year of issuance and, to the extent there are
any unspent proceeds after such 1-year period, bonds issued
as part of such issue are to be redeemed as soon as possible
thereafter (and in no event later than 18 months after
issuance).
A bond shall not meet the requirements of this subparagraph if
the maturity date of any bond issued as part of such issue is
more than 30 years after the date on which the bond was issued
(or, in the case of a refunding or series of refundings, the
date on which the original bond was issued).
(5) Special rule for certain FHA insured loans
Paragraph (1) shall not apply to any bond issued as part of an
issue 95 percent or more of the net proceeds of which are to be
used to finance mortgage loans insured under FHA 242 or under a
similar Federal Housing Administration program (as in effect on
the date of the enactment of the Tax Reform Act of 1986) where
the loan term approved by such Administration plus the maximum
maturity of debentures which could be issued by such
Administration in satisfaction of its obligations exceeds the
term permitted under paragraph (1).
(c) Limitation on use for land acquisition
(1) In general
Except as provided in subsection (h), a private activity bond
shall not be a qualified bond if -
(A) it is issued as part of an issue and 25 percent or more
of the net proceeds of such issue are to be used (directly or
indirectly) for the acquisition of land (or an interest
therein), or
(B) any portion of the proceeds of such issue is to be used
(directly or indirectly) for the acquisition of land (or an
interest therein) to be used for farming purposes.
(2) Exception for first-time farmers
(A) In general
If the requirements of subparagraph (B) are met with respect
to any land, paragraph (1) shall not apply to such land, and
subsection (d) shall not apply to property to be used thereon
for farming purposes, but only to the extent of expenditures
(financed with the proceeds of the issue) not in excess of
$250,000.
(B) Acquisition by first-time farmers
The requirements of this subparagraph are met with respect to
any land if -
(i) such land is to be used for farming purposes, and
(ii) such land is to be acquired by an individual who is a
first-time farmer, who will be the principal user of such
land, and who will materially and substantially participate
on the farm of which such land is a part in the operation of
such farm.
(C) First-time farmer
For purposes of this paragraph -
(i) In general
The term "first-time farmer" means any individual if such
individual -
(I) has not at any time had any direct or indirect
ownership interest in substantial farmland in the operation
of which such individual materially participated, and
(II) has not received financing under this paragraph in
an amount which, when added to the financing to be provided
under this paragraph, exceeds $250,000.
(ii) Aggregation rules
Any ownership or material participation, or financing
received, by an individual's spouse or minor child shall be
treated as ownership and material participation, or financing
received, by the individual.
(iii) Insolvent farmer
For purposes of clause (i), farmland which was previously
owned by the individual and was disposed of while such
individual was insolvent shall be disregarded if section 108
applied to indebtedness with respect to such farmland.
(D) Farm
For purposes of this paragraph, the term "farm" has the
meaning given such term by section 6420(c)(2).
(E) Substantial farmland
For purposes of this paragraph, the term "substantial
farmland" means any parcel of land unless -
(i) such parcel is smaller than 30 percent of the median
size of a farm in the county in which such parcel is located,
and
(ii) the fair market value of the land does not at any time
while held by the individual exceed $125,000.
(F) Used equipment limitation
For purposes of this paragraph, in no event may the amount of
financing provided by reason of this paragraph to a first-time
farmer for personal property -
(i) of a character subject to the allowance for
depreciation,
(ii) the original use of which does not begin with such
farmer, and
(iii) which is to be used for farming purposes,
exceed $62,500. A rule similar to the rule of subparagraph
(C)(ii) shall apply for purposes of the preceding sentence.
(G) Acquisition from related person
For purposes of this paragraph and section 144(a), the
acquisition by a first-time farmer of land or personal property
from a related person (within the meaning of section 144(a)(3))
shall not be treated as an acquisition from a related person,
if -
(i) the acquisition price is for the fair market value of
such land or property, and
(ii) subsequent to such acquisition, the related person
does not have a financial interest in the farming operation
with respect to which the bond proceeds are to be used.
(3) Exception for certain land acquired for environmental
purposes, etc.
Any land acquired by a governmental unit (or issuing authority)
in connection with an airport, mass commuting facility,
high-speed intercity rail facility, dock, or wharf shall not be
taken into account under paragraph (1) if -
(A) such land is acquired for noise abatement or wetland
preservation, or for future use as an airport, mass commuting
facility, high-speed intercity rail facility, dock, or wharf,
and
(B) there is not other significant use of such land.
(d) Acquisition of existing property not permitted
(1) In general
Except as provided in subsection (h), a private activity bond
shall not be a qualified bond if issued as part of an issue and
any portion of the net proceeds of such issue is to be used for
the acquisition of any property (or an interest therein) unless
the 1st use of such property is pursuant to such acquisition.
(2) Exception for certain rehabilitations
Paragraph (1) shall not apply with respect to any building (and
the equipment therefor) if -
(A) the rehabilitation expenditures with respect to such
building, equal or exceed
(B) 15 percent of the portion of the cost of acquiring such
building (and equipment) financed with the net proceeds of the
issue.
A rule similar to the rule of the preceding sentence shall apply
in the case of structures other than a building except that
subparagraph (B) shall be applied by substituting "100 percent"
for "15 percent".
(3) Rehabilitation expenditures
For purposes of this subsection -
(A) In general
Except as provided in this paragraph, the term
"rehabilitation expenditures" means any amount properly
chargeable to capital account which is incurred by the person
acquiring the building for property (or additions or
improvements to property) in connection with the rehabilitation
of a building. In the case of an integrated operation contained
in a building before its acquisition, such term includes
rehabilitating existing equipment in such building or replacing
it with equipment having substantially the same function. For
purposes of this subparagraph, any amount incurred by a
successor to the person acquiring the building or by the seller
under a sales contract with such person shall be treated as
incurred by such person.
(B) Certain expenditures not included
The term "rehabilitation expenditures" does not include any
expenditure described in section 47(c)(2)(B).
(C) Period during which expenditures must be incurred
The term "rehabilitation expenditures" shall not include any
amount which is incurred after the date 2 years after the later
of -
(i) the date on which the building was acquired, or
(ii) the date on which the bond was issued.
(4) Special rule for certain projects
In the case of a project involving 2 or more buildings, this
subsection shall be applied on a project basis.
(e) No portion of bonds may be issued for skyboxes, airplanes,
gambling establishments, etc.
A private activity bond shall not be a qualified bond if issued
as part of an issue and any portion of the proceeds of such issue
is to be used to provide any airplane, skybox or other private
luxury box, health club facility, facility primarily used for
gambling, or store the principal business of which is the sale of
alcoholic beverages for consumption off premises.
(f) Public approval required for private activity bonds
(1) In general
A private activity bond shall not be a qualified bond unless
such bond satisfies the requirements of paragraph (2).
(2) Public approval requirement
(A) In general
A bond shall satisfy the requirements of this paragraph if
such bond is issued as a part of an issue which has been
approved by -
(i) the governmental unit -
(I) which issued such bond, or
(II) on behalf of which such bond was issued, and
(ii) each governmental unit having jurisdiction over the
area in which any facility, with respect to which financing
is to be provided from the net proceeds of such issue, is
located (except that if more than 1 governmental unit within
a State has jurisdiction over the entire area within such
State in which such facility is located, only 1 such unit
need approve such issue).
(B) Approval by a governmental unit
For purposes of subparagraph (A), an issue shall be treated
as having been approved by any governmental unit if such issue
is approved -
(i) by the applicable elected representative of such
governmental unit after a public hearing following reasonable
public notice, or
(ii) by voter referendum of such governmental unit.
(C) Special rules for approval of facility
If there has been public approval under subparagraph (A) of
the plan for financing a facility, such approval shall
constitute approval under subparagraph (A) for any issue -
(i) which is issued pursuant to such plan within 3 years
after the date of the 1st issue pursuant to the approval, and
(ii) all or substantially all of the proceeds of which are
to be used to finance such facility or to refund previous
financing under such plan.
(D) Refunding bonds
No approval under subparagraph (A) shall be necessary with
respect to any bond which is issued to refund (other than to
advance refund) a bond approved under subparagraph (A) (or
treated as approved under subparagraph (C)) unless the average
maturity date of the issue of which the refunding bond is a
part is later than the average maturity date of the bonds to be
refunded by such issue. For purposes of the preceding sentence,
average maturity shall be determined in accordance with
subsection (b)(2)(A).
(E) Applicable elected representative
For purposes of this paragraph -
(i) In general
The term "applicable elected representative" means with
respect to any governmental unit -
(I) an elected legislative body of such unit, or
(II) the chief elected executive officer, the chief
elected State legal officer of the executive branch, or any
other elected official of such unit designated for purposes
of this paragraph by such chief elected executive officer
or by State law.
If the office of any elected official described in subclause
(II) is vacated and an individual is appointed by the chief
elected executive officer of the governmental unit and
confirmed by the elected legislative body of such unit (if
any) to serve the remaining term of the elected official, the
individual so appointed shall be treated as the elected
official for such remaining term.
(ii) No applicable elected representative
If (but for this clause) a governmental unit has no
applicable elected representative, the applicable elected
representative for purposes of clause (i) shall be the
applicable elected representative of the governmental unit -
(I) which is the next higher governmental unit with such
a representative, and
(II) from which the authority of the governmental unit
with no such representative is derived.
(3) Special rule for approval of airports or high-speed intercity
rail facilities
If -
(A) the proceeds of an issue are to be used to finance a
facility or facilities located at an airport or high-speed
intercity rail facilities, and
(B) the governmental unit issuing such bonds is the owner or
operator of such airport or high-speed intercity rail
facilities,
such governmental unit shall be deemed to be the only
governmental unit having jurisdiction over such airport or
high-speed intercity rail facilities for purposes of this
subsection.
(4) Special rules for scholarship funding bond issues and
volunteer fire department bond issues
(A) Scholarship funding bonds
In the case of a qualified scholarship funding bond, any
governmental unit which made a request described in section
150(d)(2)(B) with respect to the issuer of such bond shall be
treated for purposes of paragraph (2) of this subsection as the
governmental unit on behalf of which such bond was issued.
Where more than one governmental unit within a State has made a
request described in section 150(d)(2)(B), the State may also
be treated for purposes of paragraph (2) of this subsection as
the governmental unit on behalf of which such bond was issued.
(B) Volunteer fire department bonds
In the case of a bond of a volunteer fire department which
meets the requirements of section 150(e), the political
subdivision described in section 150(e)(2)(B) with respect to
such department shall be treated for purposes of paragraph (2)
of this subsection as the governmental unit on behalf of which
such bond was issued.
(g) Restriction on issuance costs financed by issue
(1) In general
A private activity bond shall not be a qualified bond if the
issuance costs financed by the issue (of which such bond is a
part) exceed 2 percent of the proceeds of the issue.
(2) Special rule for small mortgage revenue bond issues
In the case of an issue of qualified mortgage bonds or
qualified veterans' mortgage bonds, paragraph (1) shall be
applied by substituting "3.5 percent" for "2 percent" if the
proceeds of the issue do not exceed $20,000,000.
(h) Certain rules not to apply to certain bonds
(1) Mortgage revenue bonds and qualified student loan bonds
Subsections (a), (b), (c), and (d) shall not apply to any
qualified mortgage bond, qualified veterans' mortgage bond, or
qualified student loan bond.
(2) Qualified 501(c)(3) bonds
Subsections (a), (c), and (d) shall not apply to any qualified
501(c)(3) bond and subsection (e) shall be applied as if it did
not contain "health club facility" with respect to such a bond.
(3) Exempt facility bonds for qualified public-private schools
Subsection (c) shall not apply to any exempt facility bond
issued as part of an issue described in section 142(a)(13)
(relating to qualified public educational facilities).
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2635; amended Pub. L. 100-647, title I, Sec.
1013(a)(11)-(13)(B), (29), (36), title VI, Sec. 6180(b)(4), (5),
Nov. 10, 1988, 102 Stat. 3539, 3543, 3544, 3728; Pub. L. 101-239,
title VII, Sec. 7816(s)(3), Dec. 19, 1989, 103 Stat. 2423; Pub. L.
101-508, title XI, Sec. 11813(b)(8), Nov. 5, 1990, 104 Stat.
1388-552; Pub. L. 104-188, title I, Sec. 1117(a), (b), Aug. 20,
1996, 110 Stat. 1764; Pub. L. 107-16, title IV, Sec. 422(d), (e),
June 7, 2001, 115 Stat. 66.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (b)(5), is the date of enactment of Pub. L. 99-514,
which was approved Oct. 22, 1986.
-MISC1-
AMENDMENTS
2001 - Subsec. (h). Pub. L. 107-16, Secs. 422(e), 901,
temporarily substituted "certain bonds" for "mortgage revenue
bonds, qualified student loan bonds, and qualified 501(c)(3) bonds"
in heading. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (h)(3). Pub. L. 107-16, Secs. 422(d), 901, temporarily
added par. (3). See Effective and Termination Dates of 2001
Amendment note below.
1996 - Subsec. (c)(2)(E)(i). Pub. L. 104-188, Sec. 1117(b),
substituted "30 percent" for "15 percent".
Subsec. (c)(2)(G). Pub. L. 104-188, Sec. 1117(a), added subpar.
(G).
1990 - Subsec. (d)(3)(B). Pub. L. 101-508 substituted "section
47(c)(2)(B)" for "section 48(g)(2)(B)".
1989 - Subsec. (c)(3). Pub. L. 101-239 inserted a comma after
"mass commuting facility" in introductory provisions and in subpar.
(A).
1988 - Subsec. (c)(3). Pub. L. 100-647, Sec. 6180(b)(4), inserted
"high-speed intercity rail facility" after "mass commuting
facility" in introductory text and in subpar. (A).
Subsec. (e). Pub. L. 100-647, Sec. 1013(a)(11), struck out
"treated as" after "shall not be".
Subsec. (f)(2)(D). Pub. L. 100-647, Sec. 1013(a)(29), substituted
"the average maturity date of the issue of which the refunding bond
is a part is later than the average maturity date of the bonds to
be refunded by such issue. For purposes of the preceding sentence,
average maturity shall be determined in accordance with subsection
(b)(2)(A)" for "the maturity date of such bond is later than the
maturity date of the bond to be refunded".
Subsec. (f)(2)(E)(i). Pub. L. 100-647, Sec. 1013(a)(36), inserted
sentence at end relating to treatment of an individual appointed to
fill a vacancy in the office of an elected official.
Subsec. (f)(3). Pub. L. 100-647, Sec. 6180(b)(5), inserted "or
high-speed intercity rail facilities" after "airports" in heading
and after "airport" in subpars. (A) and (B) and in last sentence.
Subsec. (f)(4). Pub. L. 100-647, Sec. 1013(a)(12), added par.
(4).
Subsec. (g)(1). Pub. L. 100-647, Sec. 1013(a)(13)(A), substituted
"proceeds" for "aggregate face amount".
Subsec. (g)(2). Pub. L. 100-647, Sec. 1013(a)(13)(B), substituted
"proceeds" for "aggregate authorized face amount" and "do" for
"does".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to bonds issued after Dec.
31, 2001, see section 422(f) of Pub. L. 107-16, set out as a note
under section 142 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1117(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to bonds
issued after the date of the enactment of this Act [Aug. 20,
1996]."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to property placed in
service after Dec. 31, 1990, but not applicable to any transition
property (as defined in section 49(e) of this title), any property
with respect to which qualified progress expenditures were
previously taken into account under section 46(d) of this title,
and any property described in section 46(b)(2)(C) of this title, as
such sections were in effect on Nov. 4, 1990, see section 11813(c)
of Pub. L. 101-508, set out as a note under section 29 of this
title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1013(a)(13)(C) of Pub. L. 100-647 provided that: "The
amendments made by this paragraph [amending this section] shall
apply to bonds issued after June 30, 1987."
Amendment by section 1013(a)(11), (12), (29), (36) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 6180(b)(4), (5) of Pub. L. 100-647
applicable to bonds issued after Nov. 10, 1988, see section 6180(c)
of Pub. L. 100-647, set out as a note under section 142 of this
title.
EFFECTIVE DATE
Subsec. (f) applicable to bonds issued after Dec. 31, 1986, see
section 1311(d) of Pub. L. 99-514, as amended, set out as an
Effective Date; Transitional Rules note under section 141 of this
title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 141, 142, 144, 146,
148, 150, 265, 1394, 1400I, 1400L of this title.
-End-
-CITE-
26 USC Subpart B - Requirements Applicable to All State
and Local Bonds 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart B - Requirements Applicable to All State and Local Bonds
-HEAD-
SUBPART B - REQUIREMENTS APPLICABLE TO ALL STATE AND LOCAL BONDS
-MISC1-
Sec.
148. Arbitrage.
149. Bonds must be registered to be tax exempt; other
requirements.
-End-
-CITE-
26 USC Sec. 148 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart B - Requirements Applicable to All State and Local Bonds
-HEAD-
Sec. 148. Arbitrage
-STATUTE-
(a) Arbitrage bond defined
For purposes of section 103, the term "arbitrage bond" means any
bond issued as part of an issue any portion of the proceeds of
which are reasonably expected (at the time of issuance of the bond)
to be used directly or indirectly -
(1) to acquire higher yielding investments, or
(2) to replace funds which were used directly or indirectly to
acquire higher yielding investments.
For purposes of this subsection, a bond shall be treated as an
arbitrage bond if the issuer intentionally uses any portion of the
proceeds of the issue of which such bond is a part in a manner
described in paragraph (1) or (2).
(b) Higher yielding investments
For purposes of this section -
(1) In general
The term "higher yielding investments" means any investment
property which produces a yield over the term of the issue which
is materially higher than the yield on the issue.
(2) Investment property
The term "investment property" means -
(A) any security (within the meaning of section 165(g)(2)(A)
or (B)),
(B) any obligation,
(C) any annuity contract,
(D) any investment-type property, or
(E) in the case of a bond other than a private activity bond,
any residential rental property for family units which is not
located within the jurisdiction of the issuer and which is not
acquired to implement a court ordered or approved housing
desegregation plan.
(3) Alternative minimum tax bonds treated as investment property
in certain cases
(A) In general
Except as provided in subparagraph (B), the term "investment
property" does not include any tax-exempt bond.
(B) Exception
With respect to an issue other than an issue a part of which
is a specified private activity bond (as defined in section
57(a)(5)(C)), the term "investment property" includes a
specified private activity bond (as so defined).
(c) Temporary period exception
(1) In general
For purposes of subsection (a), a bond shall not be treated as
an arbitrage bond solely by reason of the fact that the proceeds
of the issue of which such bond is a part may be invested in
higher yielding investments for a reasonable temporary period
until such proceeds are needed for the purpose for which such
issue was issued.
(2) Limitation on temporary period for pooled financings
(A) In general
The temporary period referred to in paragraph (1) shall not
exceed 6 months with respect to the proceeds of an issue which
are to be used to make or finance loans (other than nonpurpose
investments) to 2 or more persons.
(B) Shorter temporary period for loan repayments, etc.
Subparagraph (A) shall be applied by substituting "3 months"
for "6 months" with respect to the proceeds from the sale or
repayment of any loan which are to be used to make or finance
any loan. For purposes of the preceding sentence, a nonpurpose
investment shall not be treated as a loan.
(C) Bonds used to provide construction financing
In the case of an issue described in subparagraph (A) any
portion of which is used to make or finance loans for
construction expenditures (within the meaning of subsection
(f)(4)(C)(iv)) -
(i) rules similar to the rules of subsection (f)(4)(C)(v)
shall apply, and
(ii) subparagraph (A) shall be applied with respect to such
portion by substituting "2 years" for "6 months".
(D) Exception for mortgage revenue bonds
This paragraph shall not apply to any qualified mortgage bond
or qualified veterans' mortgage bond.
(d) Special rules for reasonably required reserve or replacement
fund
(1) In general
For purposes of subsection (a), a bond shall not be treated as
an arbitrage bond solely by reason of the fact that an amount of
the proceeds of the issue of which such bond is a part may be
invested in higher yielding investments which are part of a
reasonably required reserve or replacement fund. The amount
referred to in the preceding sentence shall not exceed 10 percent
of the proceeds of such issue unless the issuer establishes to
the satisfaction of the Secretary that a higher amount is
necessary.
(2) Limitation on amount in reserve or replacement fund which may
be financed by issue
A bond issued as part of an issue shall be treated as an
arbitrage bond if the amount of the proceeds from the sale of
such issue which is part of any reserve or replacement fund
exceeds 10 percent of the proceeds of the issue (or such higher
amount which the issuer establishes is necessary to the
satisfaction of the Secretary).
(e) Minor portion may be invested in higher yielding investments
Notwithstanding subsections (a), (c), and (d), a bond issued as
part of an issue shall not be treated as an arbitrage bond solely
by reason of the fact that an amount of the proceeds of such issue
(in addition to the amounts under subsections (c) and (d)) is
invested in higher yielding investments if such amount does not
exceed the lesser of -
(1) 5 percent of the proceeds of the issue, or
(2) $100,000.
(f) Required rebate to the United States
(1) In general
A bond which is part of an issue shall be treated as an
arbitrage bond if the requirements of paragraphs (2) and (3) are
not met with respect to such issue. The preceding sentence shall
not apply to any qualified veterans' mortgage bond.
(2) Rebate to United States
An issue shall be treated as meeting the requirements of this
paragraph only if an amount equal to the sum of -
(A) the excess of -
(i) the amount earned on all nonpurpose investments (other
than investments attributable to an excess described in this
subparagraph), over
(ii) the amount which would have been earned if such
nonpurpose investments were invested at a rate equal to the
yield on the issue, plus
(B) any income attributable to the excess described in
subparagraph (A),
is paid to the United States by the issuer in accordance with the
requirements of paragraph (3).
(3) Due date of payments under paragraph (2)
Except to the extent provided by the Secretary, the amount
which is required to be paid to the United States by the issuer
shall be paid in installments which are made at least once every
5 years. Each installment shall be in an amount which ensures
that 90 percent of the amount described in paragraph (2) with
respect to the issue at the time payment of such installment is
required will have been paid to the United States. The last
installment shall be made no later than 60 days after the day on
which the last bond of the issue is redeemed and shall be in an
amount sufficient to pay the remaining balance of the amount
described in paragraph (2) with respect to such issue. A series
of issues which are redeemed during a 6-month period (or such
longer period as the Secretary may prescribe) shall be treated
(at the election of the issuer) as 1 issue for purposes of the
preceding sentence if no bond which is part of any issue in such
series has a maturity of more than 270 days or is a private
activity bond. In the case of a tax and revenue anticipation
bond, the last installment shall not be required to be made
before the date 8 months after the date of issuance of the issue
of which the bond is a part.
(4) Special rules for applying paragraph (2)
(A) In general
In determining the aggregate amount earned on nonpurpose
investments for purposes of paragraph (2) -
(i) any gain or loss on the disposition of a nonpurpose
investment shall be taken into account, and
(ii) any amount earned on a bona fide debt service fund
shall not be taken into account if the gross earnings on such
fund for the bond year is less than $100,000.
In the case of an issue no bond of which is a private activity
bond, clause (ii) shall be applied without regard to the dollar
limitation therein if the average maturity of the issue
(determined in accordance with section 147(b)(2)(A)) is at
least 5 years and the rates of interest on bonds which are part
of the issue do not vary during the term of the issue.
(B) Temporary investments
Under regulations prescribed by the Secretary -
(i) In general
An issue shall, for purposes of this subsection, be treated
as meeting the requirements of paragraph (2) if -
(I) the gross proceeds of such issue are expended for the
governmental purposes for which the issue was issued no
later than the day which is 6 months after the date of
issuance of the issue, and
(II) the requirements of paragraph (2) are met with
respect to amounts not required to be spent as provided in
subclause (I) (other than earnings on amounts in any bona
fide debt service fund).
Gross proceeds which are held in a bona fide debt service
fund or a reasonably required reserve or replacement fund,
and gross proceeds which arise after such 6 months and which
were not reasonably anticipated as of the date of issuance,
shall not be considered gross proceeds for purposes of
subclause (I) only.
(ii) Additional period for certain bonds
(I) In general
In the case of an issue described in subclause (II),
clause (i) shall be applied by substituting "1 year" for "6
months" each place it appears with respect to the portion
of the proceeds of the issue which are not expended in
accordance with clause (i) if such portion does not exceed
5 percent of the proceeds of the issue.
(II) Issues to which subclause (I) applies
An issue is described in this subclause if no bond which
is part of such issue is a private activity bond (other
than a qualified 501(c)(3) bond) or a tax or revenue
anticipation bond.
(iii) Safe harbor for determining when proceeds of tax and
revenue anticipation bonds are expended
(I) In general
For purposes of clause (i), in the case of an issue of
tax or revenue anticipation bonds, the net proceeds of such
issue (including earnings thereon) shall be treated as
expended for the governmental purpose of the issue on the
1st day after the date of issuance that the cumulative cash
flow deficit to be financed by such issue exceeds 90
percent of the proceeds of such issue.
(II) Cumulative cash flow deficit
For purposes of subclause (I), the term "cumulative cash
flow deficit" means, as of the date of computation, the
excess of the expenses paid during the period described in
subclause (III) which would ordinarily be paid out of or
financed by anticipated tax or other revenues over the
aggregate amount available (other than from the proceeds of
the issue) during such period for the payment of such
expenses.
(III) Period involved
For purposes of subclause (II), the period described in
this subclause is the period beginning on the date of
issuance of the issue and ending on the earlier of the date
6 months after such date of issuance or the date of the
computation of cumulative cash flow deficit.
(iv) Payments of principal not to affect requirements
For purposes of this subparagraph, payments of principal on
the bonds which are part of an issue shall not be treated as
expended for the governmental purposes of the issue.
(C) Exception from rebate for certain proceeds to be used to
finance construction expenditures
(i) In general
In the case of a construction issue, paragraph (2) shall
not apply to the available construction proceeds of such
issue if the spending requirements of clause (ii) are met.
(ii) Spending requirements
The spending requirements of this clause are met if at
least -
(I) 10 percent of the available construction proceeds of
the construction issue are spent for the governmental
purposes of the issue within the 6-month period beginning
on the date the bonds are issued,
(II) 45 percent of such proceeds are spent for such
purposes within the 1-year period beginning on such date,
(III) 75 percent of such proceeds are spent for such
purposes within the 18-month period beginning on such date,
and
(IV) 100 percent of such proceeds are spent for such
purposes within the 2-year period beginning on such date.
(iii) Exception for reasonable retainage
The spending requirement of clause (ii)(IV) shall be
treated as met if -
(I) such requirement would be met at the close of such
2-year period but for a reasonable retainage (not exceeding
5 percent of the available construction proceeds of the
construction issue), and
(II) 100 percent of the available construction proceeds
of the construction issue are spent for the governmental
purposes of the issue within the 3-year period beginning on
the date the bonds are issued.
(iv) Construction issue
For purposes of this subparagraph, the term "construction
issue" means any issue if -
(I) at least 75 percent of the available construction
proceeds of such issue are to be used for construction
expenditures with respect to property which is to be owned
by a governmental unit or a 501(c)(3) organization, and
(II) all of the bonds which are part of such issue are
qualified 501(c)(3) bonds, bonds which are not private
activity bonds, or private activity bonds issued to finance
property to be owned by a governmental unit or a 501(c)(3)
organization.
For purposes of this subparagraph, the term "construction"
includes reconstruction and rehabilitation, and rules similar
to the rules of section 142(b)(1)(B) shall apply.
(v) Portions of issues used for construction
If -
(I) all of the construction expenditures to be financed
by an issue are to be financed from a portion thereof, and
(II) the issuer elects to treat such portion as a
construction issue for purposes of this subparagraph,
then, for purposes of this subparagraph and subparagraph (B),
such portion shall be treated as a separate issue.
(vi) Available construction proceeds
For purposes of this subparagraph -
(I) In general
The term "available construction proceeds" means the
amount equal to the issue price (within the meaning of
sections 1273 and 1274) of the construction issue,
increased by earnings on the issue price, earnings on
amounts in any reasonably required reserve or replacement
fund not funded from the issue, and earnings on all of the
foregoing earnings, and reduced by the amount of the issue
price in any reasonably required reserve or replacement
fund and the issuance costs financed by the issue.
(II) Earnings on reserve included only for certain periods
The term "available construction proceeds" shall not
include amounts earned on any reasonably required reserve
or replacement fund after the earlier of the close of the
2-year period described in clause (ii) or the date the
construction is substantially completed.
(III) Payments on acquired purpose obligations excluded
The term "available construction proceeds" shall not
include payments on any obligation acquired to carry out
the governmental purposes of the issue and shall not
include earnings on such payments.
(IV) Election to rebate on earnings on reserve
At the election of the issuer, the term "available
construction proceeds" shall not include earnings on any
reasonably required reserve or replacement fund.
(vii) Election to pay penalty in lieu of rebate
(I) In general
At the election of the issuer, paragraph (2) shall not
apply to available construction proceeds which do not meet
the spending requirements of clause (ii) if the issuer pays
a penalty, with respect to each 6-month period after the
date the bonds were issued, equal to 1 1/2 percent of the
amount of the available construction proceeds of the issue
which, as of the close of such 6-month period, is not spent
as required by clause (ii).
(II) Termination
The penalty imposed by this clause shall cease to apply
only as provided in clause (viii) or after the latest
maturity date of any bond in the issue (including any
refunding bond with respect thereto).
(viii) Election to terminate 1 1/2 percent penalty
At the election of the issuer (made not later than 90 days
after the earlier of the end of the initial temporary period
or the date the construction is substantially completed), the
penalty under clause (vii) shall not apply to any 6-month
period after the initial temporary period under subsection
(c) if the requirements of subclauses (I), (II), and (III)
are met.
(I) 3 percent penalty
The requirement of this subclause is met if the issuer
pays a penalty equal to 3 percent of the amount of
available construction proceeds of the issue which is not
spent for the governmental purposes of the issue as of the
close of such initial temporary period multiplied by the
number of years (including fractions thereof) in the
initial temporary period.
(II) Yield restriction at close of temporary period
The requirement of this subclause is met if the amount of
the available construction proceeds of the issue which is
not spent for the governmental purposes of the issue as of
the close of such initial temporary period is invested at a
yield not exceeding the yield on the issue or which is
invested in any tax-exempt bond which is not investment
property.
(III) Redemption of bonds at earliest call date
The requirement of this subclause is met if the amount of
the available construction proceeds of the issue which is
not spent for the governmental purposes of the issue as of
the earliest date on which bonds may be redeemed is used to
redeem bonds on such date.
(ix) Election to terminate 1 1/2 percent penalty before end
of temporary period
If -
(I) the construction to be financed by a construction
issue is substantially completed before the end of the
initial temporary period,
(II) the issuer identifies an amount of available
construction proceeds which will not be spent for the
governmental purposes of the issue,
(III) the issuer has made the election under clause
(viii), and
(IV) the issuer makes an election under this clause
before the close of the initial temporary period and not
later than 90 days after the date the construction is
substantially completed,
then clauses (vii) and (viii) shall be applied to the
available construction proceeds so identified as if the
initial temporary period ended as of the date the election is
made.
(x) Failure to pay penalties
In the case of a failure (which is not due to willful
neglect) to pay any penalty required to be paid under clause
(vii) or (viii) in the amount or at the time prescribed
therefor, the Secretary may treat such failure as not
occurring if, in addition to paying such penalty, the issuer
pays a penalty equal to the sum of -
(I) 50 percent of the amount which was not paid in
accordance with clauses (vii) and (viii), plus
(II) interest (at the underpayment rate established under
section 6621) on the portion of the amount which was not
paid on the date required for the period beginning on such
date.
The Secretary may waive all or any portion of the penalty
under this clause. Bonds which are part of an issue with
respect to which there is a failure to pay the amount
required under this clause (and any refunding bond with
respect thereto) shall be treated as not being, and as never
having been, tax-exempt bonds.
(xi) Election for pooled financing bonds
At the election of the issuer of an issue the proceeds of
which are to be used to make or finance loans (other than
nonpurpose investments) to 2 or more persons, the periods
described in clauses (ii) and (iii) shall begin on -
(I) the date the loan is made, in the case of loans made
within the 1-year period after the date the bonds are
issued, and
(II) the date following such 1-year period, in the case
of loans made after such 1-year period.
If such an election applies to an issue, the requirements of
paragraph (2) shall apply to amounts earned before the
beginning of the periods determined under the preceding
sentence.
(xii) Payments of principal not to affect requirements
For purposes of this subparagraph, payments of principal on
the bonds which are part of the construction issue shall not
be treated as an expenditure of the available construction
proceeds of the issue.
(xiii) Refunding bonds
(I) In general
Except as provided in this clause, clause (vii)(II), and
the last sentence of clause (x), this subparagraph shall
not apply to any refunding bond and no proceeds of a
refunded bond shall be treated for purposes of this
subparagraph as proceeds of a refunding bond.
(II) Determination of construction portion of issue
For purposes of clause (v), any portion of an issue which
is used to refund any issue (or portion thereof) shall be
treated as a separate issue.
(III) Coordination with rebate requirement on refunding
bonds
The requirements of paragraph (2) shall be treated as met
with respect to earnings for any period if a penalty is
paid under clause (vii) or (viii) with respect to such
earnings for such period.
(xiv) Determination of initial temporary period
For purposes of this subpargraph,(!1) the end of the
initial temporary period shall be determined without regard
to section 149(d)(3)(A)(iv).
(xv) Elections
Any election under this subparagraph (other than clauses
(viii) and (ix)) shall be made on or before the date the
bonds are issued; and, once made, shall be irrevocable.
(xvi) Time for payment of penalties
Any penalty under this subparagraph shall be paid to the
United States not later than 90 days after the period to
which the penalty relates.
(xvii) Treatment of bona fide debt service funds
If the spending requirements of clause (ii) are met with
respect to the available construction proceeds of a
construction issue, then paragraph (2) shall not apply to
earnings on a bona fide debt service fund for such issue.
(D) Exception for governmental units issuing $5,000,000 or less
of bonds
(i) In general
An issue shall, for purposes of this subsection, be treated
as meeting the requirements of paragraphs (2) and (3) if -
(I) the issue is issued by a governmental unit with
general taxing powers,
(II) no bond which is part of such issue is a private
activity bond,
(III) 95 percent or more of the net proceeds of such
issue are to be used for local governmental activities of
the issuer (or of a governmental unit the jurisdiction of
which is entirely within the jurisdiction of the issuer),
and
(IV) the aggregate face amount of all tax-exempt bonds
(other than private activity bonds) issued by such unit
during the calendar year in which such issue is issued is
not reasonably expected to exceed $5,000,000.
(ii) Aggregation of issuers
For purposes of subclause (IV) of clause (i) -
(I) an issuer and all entities which issue bonds on
behalf of such issuer shall be treated as 1 issuer,
(II) all bonds issued by a governmental unit to make
loans to other governmental units with general taxing
powers not subordinate to such unit shall, for purposes of
applying such subclause to such unit, be treated as not
issued by such unit.
(III) all bonds issued by a subordinate entity shall, for
purposes of applying such subclause to each other entity to
which such entity is subordinate, be treated as issued by
such other entity, and
(IV) an entity formed (or, to the extent provided by the
Secretary, availed of) to avoid the purposes of such
subclause (IV) and all other entities benefiting thereby
shall be treated as 1 issuer.
(iii) Certain refunding bonds not taken into account in
determining small issuer status
There shall not be taken into account under subclause (IV)
of clause (i) any bond issued to refund (other than to
advance refund) any bond to the extent the amount of the
refunding bond does not exceed the outstanding amount of the
refunded bond.
(iv) Certain issues issued by subordinate governmental units,
etc., exempt from rebate requirement
An issue issued by a subordinate entity of a governmental
unit with general taxing powers shall be treated as described
in clause (i)(I) if the aggregate face amount of such issue
does not exceed the lesser of -
(I) $5,000,000, or
(II) the amount which, when added to the aggregate face
amount of other issues issued by such entity, does not
exceed the portion of the $5,000,000 limitation under
clause (i)(IV) which such governmental unit allocates to
such entity.
For purposes of the preceding sentence, an entity which
issues bonds on behalf of a governmental unit with general
taxing powers shall be treated as a subordinate entity of
such unit. An allocation shall be taken into account under
subclause (II) only if it is irrevocable and made before the
issuance date of such issue and only to the extent that the
limitation so allocated bears a reasonable relationship to
the benefits received by such governmental unit from issues
issued by such entity.
(v) Determination of whether refunding bonds eligible for
exception from rebate requirement
If any portion of an issue is issued to refund other bonds,
such portion shall be treated as a separate issue which does
not meet the requirements of paragraphs (2) and (3) by reason
of this subparagraph unless -
(I) the aggregate face amount of such issue does not
exceed $5,000,000,
(II) each refunded bond was issued as part of an issue
which was treated as meeting the requirements of paragraphs
(2) and (3) by reason of this subparagraph,
(III) the average maturity date of the refunding bonds
issued as part of such issue is not later than the average
maturity date of the bonds to be refunded by such issue,
and
(IV) no refunding bond has a maturity date which is later
than the date which is 30 years after the date the original
bond was issued.
Subclause (III) shall not apply if the average maturity of
the issue of which the original bond was a part (and of the
issue of which the bonds to be refunded are a part) is 3
years or less. For purposes of this clause, average maturity
shall be determined in accordance with section 147(b)(2)(A).
(vi) Refundings of bonds issued under law prior to Tax Reform
Act of 1986
If section 141(a) did not apply to any refunded bond, the
issue of which such refunded bond was a part shall be treated
as meeting the requirements of subclause (II) of clause (v)
if -
(I) such issue was issued by a governmental unit with
general taxing powers,
(II) no bond issued as part of such issue was an
industrial development bond (as defined in section
103(b)(2), but without regard to subparagraph (B) of
section 103(b)(3)) or a private loan bond (as defined in
section 103(o)(2)(A), but without regard to any exception
from such definition other than section 103(o)(2)(C)), and
(III) the aggregate face amount of all tax-exempt bonds
(other than bonds described in subclause (II)) issued by
such unit during the calendar year in which such issue was
issued did not exceed $5,000,000.
References in subclause (II) to section 103 shall be to such
section as in effect on the day before the date of the
enactment of the Tax Reform Act of 1986. Rules similar to the
rules of clauses (ii) and (iii) shall apply for purposes of
subclause (III). For purposes of subclause (II) of clause
(i), bonds described in subclause (II) of this clause to
which section 141(a) does not apply shall not be treated as
private activity bonds.
(vii) Increase in exception for bonds financing public school
capital expenditures
Each of the $5,000,000 amounts in the preceding provisions
of this subparagraph shall be increased by the lesser of
$10,000,000 or so much of the aggregate face amount of the
bonds as are attributable to financing the construction
(within the meaning of subparagraph (C)(iv)) of public school
facilities.
(5) Exemption from gross income of sum rebated
Gross income shall not include the sum described in paragraph
(2). Notwithstanding any other provision of this title, no
deduction shall be allowed for any amount paid to the United
States under paragraph (2).
(6) Definitions
For purposes of this subsection and subsections (c) and (d) -
(A) Nonpurpose investment
The term "nonpurpose investment" means any investment
property which -
(i) is acquired with the gross proceeds of an issue, and
(ii) is not acquired in order to carry out the governmental
purpose of the issue.
(B) Gross proceeds
Except as otherwise provided by the Secretary, the gross
proceeds of an issue include -
(i) amounts received (including repayments of principal) as
a result of investing the original proceeds of the issue, and
(ii) amounts to be used to pay debt service on the issue.
(7) Penalty in lieu of loss of tax exemption
In the case of an issue which would (but for this paragraph)
fail to meet the requirements of paragraph (2) or (3), the
Secretary may treat such issue as not failing to meet such
requirements if -
(A) no bond which is part of such issue is a private activity
bond (other than a qualified 501(c)(3) bond),
(B) the failure to meet such requirements is not due to
willful neglect, and
(C) the issuer pays to the United States a penalty in an
amount equal to the sum of -
(i) 50 percent of the amount which was not paid in
accordance with paragraphs (2) and (3), plus
(ii) interest (at the underpayment rate established under
section 6621) on the portion of the amount which was not paid
on the date required under paragraph (3) for the period
beginning on such date.
The Secretary may waive all or any portion of the penalty under
this paragraph.
(g) Student loan incentive payments
Except to the extent otherwise provided in regulations, payments
made by the Secretary of Education pursuant to section 438 of the
Higher Education Act of 1965 are not to be taken into account, for
purposes of subsection (a)(1), in determining yields on student
loan notes.
(h) Determinations of yield
For purposes of this section, the yield on an issue shall be
determined on the basis of the issue price (within the meaning of
sections 1273 and 1274).
(i) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2641; amended Pub. L. 100-647, title I, Sec.
1013(a)(14)-(16)(A), (17)(A), (B), (18), (19), (43)(A), (B), title
IV, Sec. 4005(d)(2), title V, Sec. 5053(b), title VI, Secs.
6177(a), (b), 6181(a), (b), 6183(a), Nov. 10, 1988, 102 Stat. 3539,
3540, 3542, 3545, 3646, 3678, 3726, 3727, 3729; Pub. L. 101-239,
title VII, Secs. 7652(a)-(d), 7814(c)(2), 7816(r), (t), Dec. 19,
1989, 103 Stat. 2385-2387, 2413, 2423; Pub. L. 101-508, title XI,
Sec. 11701(j)(1)-(6), Nov. 5, 1990, 104 Stat. 1388-508 to 1388-513;
Pub. L. 105-34, title II, Sec. 223(a), title XIV, Secs. 1441-1444,
Aug. 5, 1997, 111 Stat. 818, 1053, 1054; Pub. L. 107-16, title IV,
Sec. 421(a), June 7, 2001, 115 Stat. 64.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (f)(4)(C)(vi), is the date of enactment of Pub. L.
99-514, which was approved Oct. 22, 1986.
Section 438 of the Higher Education Act of 1965, referred to in
subsec. (g), is classified to section 1087-1 of Title 20,
Education.
-MISC1-
AMENDMENTS
2001 - Subsec. (f)(4)(D)(vii). Pub. L. 107-16, Secs. 421(a), 901,
temporarily substituted "the lesser of $10,000,000" for "the lesser
of $5,000,000". See Effective and Termination Dates of 2001
Amendment note below.
1997 - Subsec. (c)(2)(B) to (E). Pub. L. 105-34, Sec. 1444(a),
redesignated subpars. (C) to (E) as (B) to (D), respectively, and
struck out heading and text of former subpar. (B). Text read as
follows: "In the case of the proceeds of an issue to be used to
make or finance loans under a program described in section
144(b)(1)(A), subparagraph (A) shall be applied by substituting '18
months' for '6 months'. The preceding sentence shall not apply to
any bond issued after December 31, 1988."
Subsec. (d)(3). Pub. L. 105-34, Sec. 1443, struck out par. (3)
which related to limitations on investment in nonpurpose
investments.
Subsec. (f)(4)(B)(ii)(I). Pub. L. 105-34, Sec. 1441, substituted
"5 percent of the proceeds of the issue" for "the lesser of 5
percent of the proceeds of the issue or $100,000".
Subsec. (f)(4)(C)(xvii). Pub. L. 105-34, Sec. 1442, added cl.
(xvii).
Subsec. (f)(4)(D)(vii). Pub. L. 105-34, Sec. 223(a), added cl.
(vii).
Subsec. (f)(4)(E). Pub. L. 105-34, Sec. 1444(b), struck out
subpar. (E) which related to exception for certain qualified
student loan bonds.
1990 - Subsec. (c)(2)(D). Pub. L. 101-508, Sec. 11701(j)(5),
substituted "subsection (f)(4)(C)(iv)" for "subsection
(f)(4)(B)(iv)(IV)" in introductory provisions and "subsection
(f)(4)(C)(v)" for "subsection (f)(4)(B)(iv)(VIII)" in cl. (i).
Subsec. (c)(2)(D), (E). Pub. L. 101-508, Sec. 11701(j)(6), made
technical amendment to Pub. L. 101-239, Sec. 7652(c). See 1989
Amendment note below.
Subsec. (f)(4)(B)(i). Pub. L. 101-508, Sec. 11701(j)(2),
substituted in last sentence "replacement fund, and gross proceeds
which arise after such 6 months and which were not reasonably
anticipated as of the date of issuance, shall not be considered
gross proceeds for purposes of subclause (I) only" for "replacement
fund shall not be considered gross proceeds for purposes of this
subparagraph only" in concluding provisions.
Subsec. (f)(4)(B)(i)(II). Pub. L. 101-508, Sec. 11701(j)(1),
amended subcl. (II) generally. Prior to amendment, subcl. (II) read
as follows: "the requirements of paragraph (2) are met after such 6
months with respect to earnings on amounts in any reasonably
required reserve or replacement fund."
Subsec. (f)(4)(B)(iv). Pub. L. 101-508, Sec. 11701(j)(4), amended
cl. (iv) generally, substituting present provisions for provisions
which provided for a special rule to be applied during a 2-year
period for certain construction bonds from issues in which at least
75 percent of the net proceeds of the issue were to be used for
construction expenditures with respect to property which was owned
by a governmental unit or a 501(c)(3) organization.
Subsec. (f)(4)(C) to (E). Pub. L. 101-508, Sec. 11701(j)(3)(A),
(B), added subpar. (C) and redesignated former subpars. (C) and (D)
as (D) and (E), respectively.
1989 - Subsec. (c)(2)(D), (E). Pub. L. 101-239, Sec. 7652(c), as
amended by Pub. L. 101-508, Sec. 11701(j)(6), added subpar. (D) and
redesignated former subpar. (D) as (E).
Subsec. (d)(3)(E)(ii). Pub. L. 101-239, Sec. 7814(c)(2), struck
out "a qualified mortgage bond or" after "in the case of".
Subsec. (f)(4)(B)(i). Pub. L. 101-239, Sec. 7652(a), amended cl.
(i) generally. Prior to amendment, cl. (i) read as follows: "An
issue shall, for purposes of this subsection, be treated as meeting
the requirements of paragraph (2) if the gross proceeds of such
issue are expended for the governmental purpose for which the issue
was issued by no later than the day which is 6 months after the
date of issuance of such issue. Gross proceeds which are held in a
bona fide debt service fund shall not be considered gross proceeds
for purposes of this subparagraph only."
Subsec. (f)(4)(B)(ii)(I). Pub. L. 101-239, Sec. 7652(d), inserted
"each place it appears" after " '6 months' ".
Subsec. (f)(4)(B)(iii)(III). Pub. L. 101-239, Sec. 7816(r),
substituted "such date of issuance or the date" for "such date of
issuance. or the date".
Subsec. (f)(4)(B)(iv). Pub. L. 101-239, Sec. 7652(b), added cl.
(iv).
Subsec. (f)(4)(C)(ii)(II). Pub. L. 101-239, Sec. 7816(t),
substituted "to make loans to" for "on behalf of".
1988 - Subsec. (b)(2). Pub. L. 100-647, Sec. 1013(a)(43)(B),
struck out at end "Such term shall not include any tax-exempt
bond."
Subsec. (b)(2)(E). Pub. L. 100-647, Sec. 5053(b), added subpar.
(E).
Subsec. (b)(3). Pub. L. 100-647, Sec. 1013(a)(43)(A), added par.
(3).
Subsec. (d)(2). Pub. L. 100-647, Sec. 1013(a)(14), substituted
"any reserve or replacement fund" for "any fund described in
paragraph (1)".
Subsec. (f)(1). Pub. L. 100-647, Sec. 4005(d)(2), struck out
"qualified mortgage bond or" after "apply to any".
Subsec. (f)(3). Pub. L. 100-647, Sec. 6177(b), inserted at end
"In the case of a tax and revenue anticipation bond, the last
installment shall not be required to be made before the date 8
months after the date of issuance of the issue of which the bond is
a part."
Pub. L. 100-647, Sec. 1013(a)(15), inserted "A series of issues
which are redeemed during a 6-month period (or such longer period
as the Secretary may prescribe) shall be treated (at the election
of the issuer) as 1 issue for purposes of the preceding sentence if
no bond which is part of any issue in such series has a maturity of
more than 270 days or is a private activity bond."
Subsec. (f)(4)(A). Pub. L. 100-647, Sec. 6181(a), (b), struck out
"unless the issuer otherwise elects," before "any amount earned" in
cl. (ii) and inserted at end of subpar. (A) "In the case of an
issue no bond of which is a private activity bond, clause (ii)
shall be applied without regard to the dollar limitation therein if
the average maturity of the issue (determined in accordance with
section 147(b)(2)(A)) is at least 5 years and the rates of interest
on bonds which are part of the issue do not vary during the term of
the issue."
Subsec. (f)(4)(B)(iii)(I). Pub. L. 100-647, Sec. 1013(a)(16)(A),
substituted "proceeds" for "aggregate face amount".
Subsec. (f)(4)(B)(iii)(III). Pub. L. 100-647, Sec. 6177(a),
substituted "the earlier of the date 6 months after such date of
issuance." for "the earliest of the maturity date of the issue, the
date 6 months after such date of issuance,".
Subsec. (f)(4)(C). Pub. L. 100-647, Sec. 1013(a)(17)(A), in
heading substituted "governmental units issuing $5,000,000 or less
of bonds" for "small governmental units", designated existing
provision as cl. (i), inserted heading "In general", redesignated
existing cls. (i) to (iv) as subcls. (I) to (IV) and realigned
their margins, struck out last sentence providing that cl. (iv) not
take into account any bond which is not outstanding at the time of
a later issue or which is redeemed, other than in an advance
refunding, from the net proceeds of the later issue, and added cls.
(ii) to (vi).
Subsec. (f)(4)(C)(i)(IV). Pub. L. 100-647, Sec. 1013(a)(17)(B),
struck out "(and all subordinate entities thereof)" after "such
unit".
Subsec. (f)(4)(C)(ii). Pub. L. 100-647, Sec. 6183(a), added
subcl. (II) and redesignated former subcls. (II) and (III) as (III)
and (IV), respectively.
Subsec. (f)(4)(D)(i). Pub. L. 100-647, Sec. 1013(a)(18), inserted
"for a program" before "described in section 144(b)(1)(A)" in
introductory text, substituted "such program" for "such a program"
in subcl. (I), and inserted at end "Amounts designated as interest
on student loans shall not be taken into account in determining
whether the issuer is reimbursed for such costs. Except as
otherwise hereafter provided in regulations prescribed by the
Secretary, costs described in subclause (I) paid from amounts
earned as described in the first sentence of this clause may also
be taken into account in determining the yield on the student loans
under a program described in section 144(b)(1)(A)."
Subsec. (f)(7)(B). Pub. L. 100-647, Sec. 1013(a)(19), substituted
"not due" for "due to reasonable cause and not".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title IV, Sec. 421(b), June 7, 2001, 115 Stat.
65, provided that: "The amendment made by subsection (a) [amending
this section] shall apply to obligations issued in calendar years
beginning after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 223(b) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to bonds
issued after December 31, 1997."
Section 1445 of title XIV of Pub. L. 105-34 provided that: "The
amendments made by this subtitle [subtitle B (Secs. 1441-1445) of
title XIV of Pub. L. 105-34, amending this section] shall apply to
bonds issued after the date of the enactment of this Act [Aug. 5,
1997]."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective, except as otherwise
provided, as if included in the provision of the Revenue
Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which
such amendment relates, see section 11701(n) of Pub. L. 101-508,
set out as a note under section 42 of this title.
Section 11701(j)(8) of Pub. L. 101-508 provided that: "Section
148(f)(4)(C)(xiii)(II) of such Code (as added by this subsection)
shall apply only to refunding bonds issued after August 3, 1990."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7652(e) of Pub. L. 101-239 provided that: "The amendments
made by this section [amending this section] shall apply to bonds
issued after the date of the enactment of this Act [Dec. 19,
1989]."
Amendment by sections 7814(c)(2) and 7816(r), (t) of Pub. L.
101-239 effective, except as otherwise provided, as if included in
the provision of the Technical and Miscellaneous Revenue Act of
1988, Pub. L. 100-647, to which such amendment relates, see section
7817 of Pub. L. 101-239, set out as a note under section 1 of this
title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1013(a)(16)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to bonds issued after June 30, 1987."
Section 1013(a)(17)(C) of Pub. L. 100-647 provided that:
"(i) Except as provided in clause (ii), the amendments made by
this paragraph [amending this section] shall apply to bonds issued
after June 30, 1987.
"(ii) At the election of an issuer (made at such time and in such
manner as the Secretary of the Treasury or his delegate may
prescribe), the amendments made by this paragraph shall apply to
such issuer as if included in the amendments made by section
1301(a) of the Tax Reform Act of 1986 [amending section 103 of this
title]."
Section 1013(a)(43)(C) of Pub. L. 100-647 provided that: "The
amendments made by this paragraph [amending this section] shall
apply to obligations issued after March 31, 1988."
Amendment by section 1013(a)(14), (15), (18), (19) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 4005(d)(2) of Pub. L. 100-647 applicable to
bonds issued, and nonissued bond amounts elected, after Dec. 31,
1988, see section 4005(h)(1) of Pub. L. 100-647, set out as a note
under section 143 of this title.
Amendment by section 5053(b) of Pub. L. 100-647 applicable, with
certain exceptions, to obligations issued after Oct. 21, 1988, see
section 5053(c) of Pub. L. 100-647, set out as a note under section
145 of this title.
Section 6177(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section] shall apply to bonds
issued after the date of the enactment of this Act [Nov. 10,
1988]."
Section 6181(c) of Pub. L. 100-647 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to bonds issued after the date of the
enactment of this Act [Nov. 10, 1988].
"(2) Election for outstanding bonds. - Any issue of bonds other
than private activity bonds outstanding as of the date of the
enactment of this Act shall be allowed a 1-time election to apply
the amendments made by subsection (b) [amending this section] to
amounts deposited after such date in bona fide debt service funds
of such bonds.
"(3) Definition of private activity bond. - For purposes of this
section and the last sentence of section 148(f)(4)(A) of the 1986
Code (as added by subsection (b)), the term 'private activity bond'
shall include any qualified 501(c)(3) bond (as defined under
section 145 of the 1986 Code)."
Section 6183(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to bonds
issued after December 31, 1988."
EFFECTIVE DATE
Subpart applicable to bonds issued after Aug. 15, 1986, except as
otherwise provided, see sections 1311 to 1318 of Pub. L. 99-514,
set out as an Effective Date; Transitional Rules note under section
141 of this title.
EXTENSION OF PERIOD TO ELECT TO TERMINATE PERCENT PENALTY FOR BONDS
ISSUED BEFORE NOVEMBER 5, 1990
Section 11701(j)(7) of Pub. L. 101-508 provided that: "In the
case of a bond issued before the date of the enactment of this Act
[Nov. 5, 1990], the period for making the election under section
148(f)(4)(C)(viii) of the Internal Revenue Code of 1986 (as added
by this subsection) shall not expire before the date which is 180
days after such date of enactment."
AMENDMENT TO ARBITRAGE REGULATIONS
Section 1301(c) of Pub. L. 99-514 provided that: "The provision
in the Federal income tax regulations relating to the arbitrage
requirements which permits a higher yield on acquired obligations
if the issuer elects to waive the benefits of the temporary period
provisions shall not apply to bonds issued after August 31, 1986."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 103, 141, 143, 149, 1400L
of this title.
-FOOTNOTE-
(!1) So in original. Probably should be "subparagraph,".
-End-
-CITE-
26 USC Sec. 149 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart B - Requirements Applicable to All State and Local Bonds
-HEAD-
Sec. 149. Bonds must be registered to be tax exempt; other
requirements
-STATUTE-
(a) Bonds must be registered to be tax exempt
(1) General rule
Nothing in section 103(a) or in any other provision of law
shall be construed to provide an exemption from Federal income
tax for interest on any registration-required bond unless such
bond is in registered form.
(2) Registration-required bond
For purposes of paragraph (1), the term "registration-required
bond" means any bond other than a bond which -
(A) is not of a type offered to the public,
(B) has a maturity (at issue) of not more than 1 year, or
(C) is described in section 163(f)(2)(B).
(3) Special rules
(A) Book entries permitted
For purposes of paragraph (1), a book entry bond shall be
treated as in registered form if the right to the principal of,
and stated interest on, such bond may be transferred only
through a book entry consistent with regulations prescribed by
the Secretary.
(B) Nominees
The Secretary shall prescribe such regulations as may be
necessary to carry out the purpose of paragraph (1) where there
is a nominee or chain of nominees.
(b) Federally guaranteed bond is not tax exempt
(1) In general
Section 103(a) shall not apply to any State or local bond if
such bond is federally guaranteed.
(2) Federally guaranteed defined
For purposes of paragraph (1), a bond is federally guaranteed
if -
(A) the payment of principal or interest with respect to such
bond is guaranteed (in whole or in part) by the United States
(or any agency or instrumentality thereof),
(B) such bond is issued as part of an issue and 5 percent or
more of the proceeds of such issue is to be -
(i) used in making loans the payment of principal or
interest with respect to which are to be guaranteed (in whole
or in part) by the United States (or any agency or
instrumentality thereof), or
(ii) invested (directly or indirectly) in federally insured
deposits or accounts, or
(C) the payment of principal or interest on such bond is
otherwise indirectly guaranteed (in whole or in part) by the
United States (or an agency or instrumentality thereof).
(3) Exceptions
(A) Certain insurance programs
A bond shall not be treated as federally guaranteed by reason
of -
(i) any guarantee by the Federal Housing Administration,
the Veterans' Administration, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, or
the Government National Mortgage Association,
(ii) any guarantee of student loans and any guarantee by
the Student Loan Marketing Association to finance student
loans, or
(iii) any guarantee by the Bonneville Power Authority
pursuant to the Northwest Power Act (16 U.S.C. 839d) as in
effect on the date of the enactment of the Tax Reform Act of
1984.
(B) Debt service, etc.
Paragraph (1) shall not apply to -
(i) proceeds of the issue invested for an initial temporary
period until such proceeds are needed for the purpose for
which such issue was issued,
(ii) investments of a bona fide debt service fund,
(iii) investments of a reserve which meet the requirements
of section 148(d),
(iv) investments in bonds issued by the United States
Treasury, or
(v) other investments permitted under regulations.
(C) Exception for housing programs
(i) In general
Except as provided in clause (ii), paragraph (1) shall not
apply to -
(I) a private activity bond for a qualified residential
rental project or a housing program obligation under
section 11(b) of the United States Housing Act of 1937,
(II) a qualified mortgage bond, or
(III) a qualified veterans' mortgage bond.
(ii) Exception not to apply where bond invested in federally
insured deposits or accounts
Clause (i) shall not apply to any bond which is federally
guaranteed within the meaning of paragraph (2)(B)(ii).
(D) Loans to, or guarantees by, financial institutions
Except as provided in paragraph (2)(B)(ii), a bond which is
issued as part of an issue shall not be treated as federally
guaranteed merely by reason of the fact that the proceeds of
such issue are used in making loans to a financial institution
or there is a guarantee by a financial institution unless such
guarantee constitutes a federally insured deposit or account.
(4) Definitions
For purposes of this subsection -
(A) Treatment of certain entities with authority to borrow from
United States
To the extent provided in regulations prescribed by the
Secretary, any entity with statutory authority to borrow from
the United States shall be treated as an instrumentality of the
United States. Except in the case of an exempt facility bond, a
qualified small issue bond, and a qualified student loan bond,
nothing in the preceding sentence shall be construed as
treating the District of Columbia or any possession of the
United States as an instrumentality of the United States.
(B) Federally insured deposit or account
The term "federally insured deposit or account" means any
deposit or account in a financial institution to the extent
such deposit or account is insured under Federal law by the
Federal Deposit Insurance Corporation, the Federal Savings and
Loan Insurance Corporation, the National Credit Union
Administration, or any similar federally chartered corporation.
(c) Tax exemption must be derived from this title
(1) General rule
Except as provided in paragraph (2), no interest on any bond
shall be exempt from taxation under this title unless such
interest is exempt from tax under this title without regard to
any provision of law which is not contained in this title and
which is not contained in a revenue Act.
(2) Certain prior exemptions
(A) Prior exemptions continued
For purposes of this title, notwithstanding any provision of
this part, any bond the interest on which is exempt from
taxation under this title by reason of any provision of law
(other than a provision of this title) which is in effect on
January 6, 1983, shall be treated as a bond described in
section 103(a).
(B) Additional requirements for bonds issued after 1983
Subparagraph (A) shall not apply to a bond (not described in
subparagraph (C)) issued after 1983 if the appropriate
requirements of this part (or the corresponding provisions of
prior law) are not met with respect to such bond.
(C) Description of bond
A bond is described in this subparagraph (and treated as
described in subparagraph (A)) if -
(i) such bond is issued pursuant to the Northwest Power Act
(16 U.S.C. 839d), as in effect on July 18, 1984;
(ii) such bond is issued pursuant to section 608(a)(6)(A)
of Public Law 97-468, as in effect on the date of the
enactment of the Tax Reform Act of 1986; or
(iii) such bond is issued before June 19, 1984 under
section 11(b) of the United States Housing Act of 1937.
(d) Advance refundings
(1) In general
Nothing in section 103(a) or in any other provision of law
shall be construed to provide an exemption from Federal income
tax for interest on any bond issued as part of an issue described
in paragraph (2), (3), or (4).
(2) Certain private activity bonds
An issue is described in this paragraph if any bond (issued as
part of such issue) is issued to advance refund a private
activity bond (other than a qualified 501(c)(3) bond).
(3) Other bonds
(A) In general
An issue is described in this paragraph if any bond (issued
as part of such issue), hereinafter in this paragraph referred
to as the "refunding bond", is issued to advance refund a bond
unless -
(i) the refunding bond is only -
(I) the 1st advance refunding of the original bond if the
original bond is issued after 1985, or
(II) the 1st or 2nd advance refunding of the original
bond if the original bond was issued before 1986,
(ii) in the case of refunded bonds issued before 1986, the
refunded bond is redeemed not later than the earliest date on
which such bond may be redeemed at par or at a premium of 3
percent or less,
(iii) in the case of refunded bonds issued after 1985, the
refunded bond is redeemed not later than the earliest date on
which such bond may be redeemed,
(iv) the initial temporary period under section 148(c) ends
-
(I) with respect to the proceeds of the refunding bond
not later than 30 days after the date of issue of such
bond, and
(II) with respect to the proceeds of the refunded bond on
the date of issue of the refunding bond, and
(v) in the case of refunded bonds to which section 148(e)
did not apply, on and after the date of issue of the
refunding bond, the amount of proceeds of the refunded bond
invested in higher yielding investments (as defined in
section 148(b)) which are nonpurpose investments (as defined
in section 148(f)(6)(A)) does not exceed -
(I) the amount so invested as part of a reasonably
required reserve or replacement fund or during an allowable
temporary period, and
(II) the amount which is equal to the lesser of 5 percent
of the proceeds of the issue of which the refunded bond is
a part or $100,000 (to the extent such amount is allocable
to the refunded bond).
(B) Special rules for redemptions
(i) Issuer must redeem only if debt service savings
Clause (ii) and (iii) of subparagraph (A) shall apply only
if the issuer may realize present value debt service savings
(determined without regard to administrative expenses) in
connection with the issue of which the refunding bond is a
part.
(ii) Redemptions not required before 90th day
For purposes of clauses (ii) and (iii) of subparagraph (A),
the earliest date referred to in such clauses shall not be
earlier than the 90th day after the date of issuance of the
refunding bond.
(4) Abusive transactions prohibited
An issue is described in this paragraph if any bond (issued as
part of such issue) is issued to advance refund another bond and
a device is employed in connection with the issuance of such
issue to obtain a material financial advantage (based on
arbitrage) apart from savings attributable to lower interest
rates.
(5) Advance refunding
For purposes of this part, a bond shall be treated as issued to
advance refund another bond if it is issued more than 90 days
before the redemption of the refunded bond.
(6) Special rules for purposes of paragraph (3)
For purposes of paragraph (3), bonds issued before the date of
the enactment of this subsection shall be taken into account
under subparagraph (A)(i) thereof except -
(A) a refunding which occurred before 1986 shall be treated
as an advance refunding only if the refunding bond was issued
more than 180 days before the redemption of the refunded bond,
and
(B) a bond issued before 1986, shall be treated as advance
refunded no more than once before March 15, 1986.
(7) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection.
(e) Information reporting
(1) In general
Nothing in section 103(a) or any other provision of law shall
be construed to provide an exemption from Federal income tax for
interest on any bond unless such bond satisfies the requirements
of paragraph (2).
(2) Information reporting requirements
A bond satisfies the requirements of this paragraph if the
issuer submits to the Secretary, not later than the 15th day of
the 2d calendar month after the close of the calendar quarter in
which the bond is issued (or such later time as the Secretary may
prescribe with respect to any portion of the statement), a
statement concerning the issue of which the bond is a part which
contains -
(A) the name and address of the issuer,
(B) the date of issue, the amount of net proceeds of the
issue, the stated interest rate, term, and face amount of each
bond which is part of the issue, the amount of issuance costs
of the issue, and the amount of reserves of the issue,
(C) where required, the name of the applicable elected
representative who approved the issue, or a description of the
voter referendum by which the issue was approved,
(D) the name, address, and employer identification number of
-
(i) each initial principal user of any facility provided
with the proceeds of the issue,
(ii) the common parent of any affiliated group of
corporations (within the meaning of section 1504(a)) of which
such initial principal user is a member, and
(iii) if the issue is treated as a separate issue under
section 144(a)(6)(A), any person treated as a principal user
under section 144(a)(6)(B),
(E) a description of any property to be financed from the
proceeds of the issue,
(F) a certification by a State official designated by State
law (or, where there is no such official, the Governor) that
the bond meets the requirements of section 146 (relating to cap
on private activity bonds), if applicable, and
(G) such other information as the Secretary may require.
Subparagraphs (C) and (D) shall not apply to any bond which is
not a private activity bond. The Secretary may provide that
certain information specified in the 1st sentence need not be
included in the statement with respect to an issue where the
inclusion of such information is not necessary to carry out the
purposes of this subsection.
(3) Extension of time
The Secretary may grant an extension of time for the filing of
any statement required under paragraph (2) if the failure to file
in a timely fashion is not due to willful neglect.
(f) Treatment of certain pooled financing bonds
(1) In general
Section 103(a) shall not apply to any pooled financing bond
unless, with respect to the issue of which such bond is a part,
the requirements of paragraphs (2) and (3) are met.
(2) Reasonable expectation requirement
(A) In general
The requirements of this paragraph are met with respect to an
issue if the issuer reasonably expects that as of the close of
the 3-year period beginning on the date of issuance of the
issue, at least 95 percent of the net proceeds of the issue (as
of the close of such period) will have been used directly or
indirectly to make or finance loans to ultimate borrowers.
(B) Certain factors may not be taken into account in
determining expectations
Expectations as to changes in interest rates or in the
provisions of this title (or in the regulations or rulings
thereunder) may not be taken into account in determining
whether expectations are reasonable for purposes of this
paragraph.
(C) Net proceeds
For purposes of subparagraph (A), the term "net proceeds" has
the meaning given such term by section 150 but shall not
include proceeds used to finance issuance costs and shall not
include proceeds necessary to pay interest (during such period)
on the bonds which are part of the issue.
(D) Refunding bonds
For purposes of subparagraph (A), in the case of a refunding
bond, the date of issuance taken into account is the date of
issuance of the original bond.
(3) Cost of issuance payment requirements
The requirements of this paragraph are met with respect to an
issue if -
(A) the payment of legal and underwriting costs associated
with the issuance of the issue is not contingent, and
(B) at least 95 percent of the reasonably expected legal and
underwriting costs associated with the issuance of the issue
are paid not later than the 180th day after the date of the
issuance of the issue.
(4) Pooled financing bond
For purposes of this subsection -
(A) In general
The term "pooled financing bond" means any bond issued as
part of an issue more than $5,000,000 of the proceeds of which
are reasonably expected (at the time of the issuance of the
bonds) to be used (or are intentionally used) directly or
indirectly to make or finance loans to 2 or more ultimate
borrowers.
(B) Exceptions
Such term shall not include any bond if -
(i) section 146 applies to the issue of which such bond is
a part (other than by reason of section 141(b)(5)) or would
apply but for section 146(i), or
(ii) section 143(l)(3) applies to such issue.
(5) Definition of loan; treatment of mixed use issues
(A) Loan
For purposes of this subsection, the term "loan" does not
include -
(i) any loan which is a nonpurpose investment (within the
meaning of section 148(f)(6)(A), determined without regard to
section 148(b)(3)), and
(ii) any use of proceeds by an agency of the issuer unless
such agency is a political subdivision or instrumentality of
the issuer.
(B) Portion of issue to be used for loans treated as separate
issue
If only a portion of the proceeds of an issue is reasonably
expected (at the time of issuance of the bond) to be used (or
is intentionally used) as described in paragraph (4)(A), such
portion and the other portion of such issue shall be treated as
separate issues for purposes of determining whether such
portion meets the requirements of this subsection.
(g) Treatment of hedge bonds
(1) In general
Section 103(a) shall not apply to any hedge bond unless, with
respect to the issue of which such bond is a part -
(A) the requirement of paragraph (2) is met, and
(B) the requirement of subsection (f)(3) is met.
(2) Reasonable expectations as to when proceeds will be spent
An issue meets the requirement of this paragraph if the issuer
reasonably expects that -
(A) 10 percent of the spendable proceeds of the issue will be
spent for the governmental purposes of the issue within the
1-year period beginning on the date the bonds are issued,
(B) 30 percent of the spendable proceeds of the issue will be
spent for such purposes within the 2-year period beginning on
such date,
(C) 60 percent of the spendable proceeds of the issue will be
spent for such purposes within the 3-year period beginning on
such date, and
(D) 85 percent of the spendable proceeds of the issue will be
spent for such purposes within the 5-year period beginning on
such date.
(3) Hedge bond
(A) In general
For purposes of this subsection, the term "hedge bond" means
any bond issued as part of an issue unless -
(i) the issuer reasonably expects that 85 percent of the
spendable proceeds of the issue will be used to carry out the
governmental purposes of the issue within the 3-year period
beginning on the date the bonds are issued, and
(ii) not more than 50 percent of the proceeds of the issue
are invested in nonpurpose investments (as defined in section
148(f)(6)(A)) having a substantially guaranteed yield for 4
years or more.
(B) Exception for investment in tax-exempt bonds not subject to
minimum tax
(i) In general
Such term shall not include any bond issued as part of an
issue 95 percent of the net proceeds of which are invested in
bonds -
(I) the interest on which is not includible in gross
income under section 103, and
(II) which are not specified private activity bonds (as
defined in section 57(a)(5)(C)).
(ii) Amounts in bona fide debt service fund
Amounts in a bona fide debt service fund shall be treated
as invested in bonds described in clause (i).
(iii) Amounts held pending reinvestment or redemption
Amounts held for not more than 30 days pending reinvestment
or bond redemption shall be treated as invested in bonds
described in clause (i).
(C) Exception for refunding bonds
(i) In general
A refunding bond shall be treated as meeting the
requirements of this subsection only if the original bond met
such requirements.
(ii) General rule for refunding of pre-effective date bonds
A refunding bond shall be treated as meeting the
requirements of this subsection if -
(I) this subsection does not apply to the original bond,
(II) the average maturity date of the issue of which the
refunding bond is a part is not later than the average
maturity date of the bonds to be refunded by such issue,
and
(III) the amount of the refunding bond does not exceed
the outstanding amount of the refunded bond.
(iii) Refunding of pre-effective date bonds entitled to
5-year temporary period
A refunding bond shall be treated as meeting the
requirements of this subsection if -
(I) this subsection does not apply to the original bond,
(II) the issuer reasonably expected that 85 percent of
the spendable proceeds of the issue of which the original
bond is a part would be used to carry out the governmental
purposes of the issue within the 5-year period beginning on
the date the original bonds were issued but did not
reasonably expect that 85 percent of such proceeds would be
so spent within the 3-year period beginning on such date,
and
(III) at least 85 percent of the spendable proceeds of
the original issue (and all other prior original issues
issued to finance the governmental purposes of such issue)
were spent before the date the refunding bonds are issued.
(4) Special rules
For purposes of this subsection -
(A) Construction period in excess of 5 years
The Secretary may, at the request of any issuer, provide that
the requirement of paragraph (2) shall be treated as met with
respect to the portion of the spendable proceeds of an issue
which is to be used for any construction project having a
construction period in excess of 5 years if it is reasonably
expected that such proceeds will be spent over a reasonable
construction schedule specified in such request.
(B) Rules for determining expectations
The rules of subsection (f)(2)(B) shall apply.
(5) Regulations
The Secretary may prescribe regulations to prevent the
avoidance of the rules of this subsection, including through the
aggregation of projects within a single issue.
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2646; amended Pub. L. 100-647, title I, Sec.
1013(a)(20)-(22), title V, Sec. 5051(a), Nov. 10, 1988, 102 Stat.
3542, 3676; Pub. L. 101-239, title VII, Sec. 7651(a), Dec. 19,
1989, 103 Stat. 2383; Pub. L. 104-188, title I, Sec. 1704(b)(1),
Aug. 20, 1996, 110 Stat. 1878.)
-REFTEXT-
REFERENCES IN TEXT
The Northwest Power Act, referred to in subsecs. (b)(3)(A)(iii)
and (c)(2)(C)(i), probably means the Pacific Northwest Electric
Power Planning and Conservation Act, Pub. L. 96-501, Dec. 5, 1980,
94 Stat 2697, which is classified principally to chapter 12H (Sec.
839 et seq.) of Title 16, Conservation. For complete classification
of this Act to the Code, see Short Title note set out under section
839 of Title 16 and Tables.
The date of the enactment of the Tax Reform Act of 1984, referred
to in subsec. (b)(3)(A)(iii), is the date of enactment of Pub. L.
98-369, div. A, which was approved July 18, 1984.
Section 11(b) of the United States Housing Act of 1937, referred
to in subsecs. (b)(3)(C)(i)(I) and (c)(2)(C)(iii), is classified to
section 1473i(b) of Title 42, The Public Health and Welfare.
Section 608(a)(6)(A) of Pub. L. 97-468, referred to in subsec.
(c)(2)(C)(ii), is classified to section 1207(a)(6)(A) of Title 45,
Railroads.
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (c)(2)(C)(ii), is the date of enactment of Pub. L.
99-514, which was approved Oct. 22, 1986.
The date of the enactment of this subsection, referred to in
subsec. (d)(6), is the date of enactment of Pub. L. 99-514, which
was approved Oct. 22, 1986.
-MISC1-
AMENDMENTS
1996 - Subsec. (g)(3)(B)(iii). Pub. L. 104-188 amended cl. (iii)
generally. Prior to amendment, cl. (iii) read as follows:
"Investment earnings held pending reinvestment. - Investment
earnings held for not more than 30 days pending reinvestment shall
be treated as invested in bonds described in clause (i)."
1989 - Subsec. (g). Pub. L. 101-239 added subsec. (g).
1988 - Subsec. (b)(3)(A)(iii). Pub. L. 100-647, Sec. 1013(a)(20),
struck out "with respect to any bond issued before July 1, 1989"
after "1984".
Subsec. (b)(4)(A). Pub. L. 100-647, Sec. 1013(a)(21), substituted
"and a qualified student loan bond" for "a qualified student loan
bond, and a qualified redevelopment bond".
Subsec. (e)(3). Pub. L. 100-647, Sec. 1013(a)(22), substituted
"the failure to file in a timely fashion is not due to willful
neglect" for "there is reasonable cause for the failure to file
such statement in a timely fashion".
Subsec. (f). Pub. L. 100-647, Sec. 5051(a), added subsec. (f).
-CHANGE-
CHANGE OF NAME
Reference to Veterans' Administration deemed to refer to
Department of Veterans Affairs pursuant to section 10 of Pub. L.
100-527, set out as a Department of Veterans Affairs Act note under
section 301 of Title 38, Veterans' Benefits.
-MISC2-
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1704(b)(2) of Pub. L. 104-188 provided that: "The
amendment made by paragraph (1) [amending this section] shall take
effect as if included in the amendments made by section 7651 of the
Omnibus Budget Reconciliation Act of 1989 [Pub. L. 101-239]."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7651(b) of Pub. L. 101-239 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendment made by subsection (a) [amending this
section] shall apply to bonds issued after September 14, 1989.
"(2) Bonds sold before september 15, 1989. - The amendment made
by subsection (a) shall not apply to any bond sold before September
15, 1989, and issued before October 15, 1989.
"(3) Bonds with respect to which preliminary offering materials
mailed. - The amendment made by subsection (a) shall not apply to
any issue issued after the date of the enactment of this Act [Dec.
19, 1989] if the preliminary offering materials with respect to
such issue were mailed (or otherwise delivered) to members of the
underwriting syndicate before September 15, 1989.
"(4) Certain other bonds. - In the case of a bond issued before
January 1, 1991, with respect to which official action was taken
(or a series of official actions were taken), or other comparable
preliminary approval was given, before November 18, 1989,
demonstrating an intent to issue such bonds in a maximum specified
amount for such issue or with a maximum specified amount of net
proceeds of such issue, the issuer may elect to apply section
149(g)(2) of the Internal Revenue Code of 1986 (as added by this
section) by substituting '15 percent' for '10 percent' in
subparagraph (A) and '50 percent' for '60 percent' in subparagraph
(C).
"(5) Bonds issued to finance self-insurance funds. - The
amendment made by subsection (a) shall not apply to any bonds
issued before July 1, 1990, to finance a self-insurance fund if
official action was taken (or a series of official actions were
taken), or other comparable preliminary approval was given, before
September 15, 1989, demonstrating an intent to issue such bonds in
a maximum specified amount for such issue or with a maximum
specified amount of net proceeds of such issue."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1013(a)(20)-(22) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 5051(b) of Pub. L. 100-647 provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to bonds issued after October 21, 1988.
"(2) Special rule for refunding bonds. - In the case of a bond
issued to refund a bond issued before October 22, 1988 -
"(A) if the 3-year period described in section 149(f)(2)(A) of
the 1986 Code would (but for this paragraph) expire on or before
October 22, 1989, such period shall expire on October 21, 1990,
and
"(B) if such period expires after October 22, 1989, the portion
of the proceeds of the issue of which the refunded bond is a part
which is available (on the date of issuance of the refunding
issue) to provide loans shall be treated as proceeds of a
separate issue (issued after October 21, 1988) for purposes of
applying section 149(f) of the 1986 Code."
EFFECTIVE DATE
Subsec. (e) applicable to bonds issued after Dec. 31, 1986, see
section 1311(d) of Pub. L. 99-514, as amended, set out as an
Effective Date; Transitional Rules note under section 141 of this
title.
-TRANS-
TRANSFER OF FUNCTIONS
Federal Savings and Loan Insurance Corporation abolished and its
functions transferred, see sections 401 to 406 of Pub. L. 101-73
set out as a note under section 1437 of Title 12, Banks and
Banking.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 103, 148, 150, 163, 265,
1400L, 4701 of this title.
-End-
-CITE-
26 USC Subpart C - Definitions and Special Rules 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart C - Definitions and Special Rules
-HEAD-
SUBPART C - DEFINITIONS AND SPECIAL RULES
-MISC1-
Sec.
150. Definitions and special rules.
-End-
-CITE-
26 USC Sec. 150 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IV - TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS
Subpart C - Definitions and Special Rules
-HEAD-
Sec. 150. Definitions and special rules
-STATUTE-
(a) General rule
For purposes of this part -
(1) Bond
The term "bond" includes any obligation.
(2) Governmental unit not to include Federal Government
The term "governmental unit" does not include the United States
or any agency or instrumentality thereof.
(3) Net proceeds
The term "net proceeds" means, with respect to any issue, the
proceeds of such issue reduced by amounts in a reasonably
required reserve or replacement fund.
(4) 501(c)(3) organization
The term "501(c)(3) organization" means any organization
described in section 501(c)(3) and exempt from tax under section
501(a).
(5) Ownership of property
Property shall be treated as owned by a governmental unit if it
is owned on behalf of such unit.
(6) Tax-exempt bond
The term "tax-exempt" means, with respect to any bond (or
issue), that the interest on such bond (or on the bonds issued as
part of such issue) is excluded from gross income.
(b) Change in use of facilities financed with tax-exempt private
activity bonds
(1) Mortgage revenue bonds
(A) In general
In the case of any residence with respect to which financing
is provided from the proceeds of a tax-exempt qualified
mortgage bond or qualified veterans' mortgage bond, if there is
a continuous period of at least 1 year during which such
residence is not the principal residence of at least 1 of the
mortgagors who received such financing, then no deduction shall
be allowed under this chapter for interest on such financing
which accrues on or after the date such period began and before
the date such residence is again the principal residence of at
least 1 of the mortgagors who received such financing.
(B) Exception
Subparagraph (A) shall not apply to the extent the Secretary
determines that its application would result in undue hardship
and that the failure to meet the requirements of subparagraph
(A) resulted from circumstances beyond the mortgagor's control.
(2) Qualified residential rental projects
In the case of any project for residential rental property -
(A) with respect to which financing is provided from the
proceeds of any private activity bond which, when issued,
purported to be a tax-exempt bond described in paragraph (7) of
section 142(a), and
(B) which does not meet the requirements of section 142(d),
no deduction shall be allowed under this chapter for interest on
such financing which accrues during the period beginning on the
1st day of the taxable year in which such project fails to meet
such requirements and ending on the date such project meets such
requirements. If the provisions of prior law corresponding to
section 142(d) apply to a refunded bond, such provisions shall
apply (in lieu of section 142(d)) to the refunding bond.
(3) Qualified 501(c)(3) bonds
(A) In general
In the case of any facility with respect to which financing
is provided from the proceeds of any private activity bond
which, when issued, purported to be a tax-exempt qualified
501(c)(3) bond, if any portion of such facility -
(i) is used in a trade or business of any person other than
a 501(c)(3) organization or a governmental unit, but
(ii) continues to be owned by a 501(c)(3) organization,
then the owner of such portion shall be treated for purposes of
this title as engaged in an unrelated trade or business (as
defined in section 513) with respect to such portion. The
amount of gross income attributable to such portion for any
period shall not be less than the fair rental value of such
portion for such period.
(B) Denial of deduction for interest
No deduction shall be allowed under this chapter for interest
on financing described in subparagraph (A) which accrues during
the period beginning on the date such facility is used as
described in subparagraph (A)(i) and ending on the date such
facility is not so used.
(4) Certain exempt facility bonds and small issue bonds
(A) In general
In the case of any facility with respect to which financing
is provided from the proceeds of any private activity bond to
which this paragraph applies, if such facility is not used for
a purpose for which a tax-exempt bond could be issued on the
date of such issue, no deduction shall be allowed under this
chapter for interest on such financing which accrues during the
period beginning on the date such facility is not so used and
ending on the date such facility is so used.
(B) Bonds to which paragraph applies
This paragraph applies to any private activity bond which,
when issued, purported to be a tax-exempt exempt facility bond
described in a paragraph (other than paragraph (7)) of section
142(a) or a qualified small issue bond.
(5) Facilities required to be owned by governmental units or
501(c)(3) organizations
If -
(A) financing is provided with respect to any facility from
the proceeds of any private activity bond which, when issued,
purported to be a tax-exempt bond,
(B) such facility is required to be owned by a governmental
unit or a 501(c)(3) organization as a condition of such tax
exemption, and
(C) such facility is not so owned,
then no deduction shall be allowed under this chapter for
interest on such financing which accrues during the period
beginning on the date such facility is not so owned and ending on
the date such facility is so owned.
(6) Small issue bonds which exceed capital expenditure limitation
In the case of any financing provided from the proceeds of any
bond which, when issued, purported to be a qualified small issue
bond, no deduction shall be allowed under this chapter for
interest on such financing which accrues during the period such
bond is not a qualified small issue bond.
(c) Exception and special rules for purposes of subsection (b)
For purposes of subsection (b) -
(1) Exception
Any use with respect to facilities financed with proceeds of an
issue which are not required to be used for the exempt purpose of
such issue shall not be taken into account.
(2) Treatment of amounts other than interest
If the amounts payable for the use of a facility are not
interest, subsection (b) shall apply to such amounts as if they
were interest but only to the extent such amounts for any period
do not exceed the amount of interest accrued on the bond
financing for such period.
(3) Use of portion of facility
In the case of any person which uses only a portion of the
facility, only the interest accruing on the financing allocable
to such portion shall be taken into account by such person.
(4) Cessation with respect to portion of facility
In the case of any facility where part but not all of the
facility is not used for an exempt purpose, only the interest
accruing on the financing allocable to such part shall be taken
into account.
(5) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection and subsection (b).
(d) Qualified scholarship funding bond
For purposes of this part and section 103 -
(1) Treatment as State or local bond
A qualified scholarship funding bond shall be treated as a
State or local bond.
(2) Qualified scholarship funding bond defined
The term "qualified scholarship funding bond" means a bond
issued by a corporation which -
(A) is a corporation not for profit established and operated
exclusively for the purpose of acquiring student loan notes
incurred under the Higher Education Act of 1965, and
(B) is organized at the request of the State or 1 or more
political subdivisions thereof or is requested to exercise such
power by 1 or more political subdivisions and required by its
corporate charter and bylaws, or required by State law, to
devote any income (after payment of expenses, debt service, and
the creation of reserves for the same) to the purchase of
additional student loan notes or to pay over any income to the
United States.
(3) Election to cease status as qualified scholarship funding
corporation
(A) In general
Any qualified scholarship funding bond, and qualified student
loan bond, outstanding on the date of the issuer's election
under this paragraph (and any bond (or series of bonds) issued
to refund such a bond) shall not fail to be a tax-exempt bond
solely because the issuer ceases to be described in
subparagraphs (A) and (B) of paragraph (2) if the issuer meets
the requirements of subparagraphs (B) and (C) of this
paragraph.
(B) Assets and liabilities of issuer transferred to taxable
subsidiary
The requirements of this subparagraph are met by an issuer if
-
(i) all of the student loan notes of the issuer and other
assets pledged to secure the repayment of qualified
scholarship funding bond indebtedness of the issuer are
transferred to another corporation within a reasonable period
after the election is made under this paragraph;
(ii) such transferee corporation assumes or otherwise
provides for the payment of all of the qualified scholarship
funding bond indebtedness of the issuer within a reasonable
period after the election is made under this paragraph;
(iii) to the extent permitted by law, such transferee
corporation assumes all of the responsibilities, and succeeds
to all of the rights, of the issuer under the issuer's
agreements with the Secretary of Education in respect of
student loans;
(iv) immediately after such transfer, the issuer, together
with any other issuer which has made an election under this
paragraph in respect of such transferee, hold all of the
senior stock in such transferee corporation; and
(v) such transferee corporation is not exempt from tax
under this chapter.
(C) Issuer to operate as independent organization described in
section 501(c)(3)
The requirements of this subparagraph are met by an issuer
if, within a reasonable period after the transfer referred to
in subparagraph (B) -
(i) the issuer is described in section 501(c)(3) and exempt
from tax under section 501(a);
(ii) the issuer no longer is described in subparagraphs (A)
and (B) of paragraph (2); and
(iii) at least 80 percent of the members of the board of
directors of the issuer are independent members.
(D) Senior stock
For purposes of this paragraph, the term "senior stock" means
stock -
(i) which participates pro rata and fully in the equity
value of the corporation with all other common stock of the
corporation but which has the right to payment of liquidation
proceeds prior to payment of liquidation proceeds in respect
of other common stock of the corporation;
(ii) which has a fixed right upon liquidation and upon
redemption to an amount equal to the greater of -
(I) the fair market value of such stock on the date of
liquidation or redemption (whichever is applicable); or
(II) the fair market value of all assets transferred in
exchange for such stock and reduced by the amount of all
liabilities of the corporation which has made an election
under this paragraph assumed by the transferee corporation
in such transfer;
(iii) the holder of which has the right to require the
transferee corporation to redeem on a date that is not later
than 10 years after the date on which an election under this
paragraph was made and pursuant to such election such stock
was issued; and
(iv) in respect of which, during the time such stock is
outstanding, there is not outstanding any equity interest in
the corporation having any liquidation, redemption or
dividend rights in the corporation which are superior to
those of such stock.
(E) Independent member
The term "independent member" means a member of the board of
directors of the issuer who (except for services as a member of
such board) receives no compensation directly or indirectly -
(i) for services performed in connection with such
transferee corporation, or
(ii) for services as a member of the board of directors or
as an officer of such transferee corporation.
For purposes of clause (ii), the term "officer" includes any
individual having powers or responsibilities similar to those
of officers.
(F) Coordination with certain private foundation taxes
For purposes of sections 4942 (relating to the excise tax on
a failure to distribute income) and 4943 (relating to the
excise tax on excess business holdings), the transferee
corporation referred to in subparagraph (B) shall be treated as
a functionally related business (within the meaning of section
4942(j)(4)) with respect to the issuer during the period
commencing with the date on which an election is made under
this paragraph and ending on the date that is the earlier of -
(i) the last day of the last taxable year for which more
than 50 percent of the gross income of such transferee
corporation is derived from, or more than 50 percent of the
assets (by value) of such transferee corporation consists of,
student loan notes incurred under the Higher Education Act of
1965; or
(ii) the last day of the taxable year of the issuer during
which occurs the date which is 10 years after the date on
which the election under this paragraph is made.
(G) Election
An election under this paragraph may be revoked only with the
consent of the Secretary.
(e) Bonds of certain volunteer fire departments
For purposes of this part and section 103 -
(1) In general
A bond of a volunteer fire department shall be treated as a
bond of a political subdivision of a State if -
(A) such department is a qualified volunteer fire department
with respect to an area within the jurisdiction of such
political subdivision, and
(B) such bond is issued as part of an issue 95 percent or
more of the net proceeds of which are to be used for the
acquisition, construction, reconstruction, or improvement of a
firehouse (including land which is functionally related and
subordinate thereto) or firetruck used or to be used by such
department.
(2) Qualified volunteer fire department
For purposes of this subsection, the term "qualified volunteer
fire department" means, with respect to a political subdivision
of a State, any organization -
(A) which is organized and operated to provide firefighting
or emergency medical services for persons in an area (within
the jurisdiction of such political subdivision) which is not
provided with any other firefighting services, and
(B) which is required (by written agreement) by the political
subdivision to furnish firefighting services in such area.
For purposes of subparagraph (A), other firefighting services
provided in an area shall be disregarded in determining whether
an organization is a qualified volunteer fire department if such
other firefighting services are provided by a qualified volunteer
fire department (determined with the application of this
sentence) and such organization and the provider of such other
services have been continuously providing firefighting services
to such area since January 1, 1981.
(3) Treatment as private activity bonds only for certain purposes
Bonds which are part of an issue which meets the requirements
of paragraph (1) shall not be treated as private activity bonds
except for purposes of sections 147(f) and 149(d).
-SOURCE-
(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100
Stat. 2651; amended Pub. L. 100-647, title I, Sec. 1013(a)(23),
(24)(A), (30)-(33), title VI, Sec. 6182(a), (b), Nov. 10, 1988, 102
Stat. 3542, 3543, 3729; Pub. L. 104-188, title I, Sec. 1614(a),
Aug. 20, 1996, 110 Stat. 1851.)
-REFTEXT-
REFERENCES IN TEXT
The Higher Education Act of 1965, referred to in subsec.
(d)(2)(A), (3)(F)(i), is Pub. L. 89-329, Nov. 8, 1965, 79 Stat.
1219, as amended, which is classified principally to chapter 28
(Sec. 1001 et seq.) of Title 20, Education. For complete
classification of this Act to the Code, see Short Title note set
out under section 1001 of Title 20 and Tables.
-MISC1-
AMENDMENTS
1996 - Subsec. (d)(3). Pub. L. 104-188 added par. (3).
1988 - Subsec. (b)(1)(A). Pub. L. 100-647, Sec. 1013(a)(23)(C),
inserted "tax-exempt" before "qualified mortgage bond".
Pub. L. 100-647, Sec. 1013(a)(30), inserted before period at end
"and before the date such residence is again the principal
residence of at least 1 of the mortgagors who received such
financing".
Subsec. (b)(2). Pub. L. 100-647, Sec. 1013(a)(32), inserted at
end "If the provisions of prior law corresponding to section 142(d)
apply to a refunded bond, such provisions shall apply (in lieu of
section 142(d)) to the refunding bond."
Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 1013(a)(31), substituted
"described in paragraph" for "described paragraph".
Subsec. (b)(4). Pub. L. 100-647, Sec. 1013(a)(23)(A), (B),
inserted "and small issue bonds" after "bonds" in heading, and "or
a qualified small issue bond" before period at end of subpar. (B).
Subsec. (b)(6). Pub. L. 100-647, Sec. 1013(a)(33), added par.
(6).
Subsec. (e)(1)(B). Pub. L. 100-647, Sec. 6182(b), inserted
"(including land which is functionally related and subordinate
thereto)" after "a firehouse".
Subsec. (e)(2). Pub. L. 100-647, Sec. 6182(a), inserted at end
"For purposes of subparagraph (A), other firefighting services
provided in an area shall be disregarded in determining whether an
organization is a qualified volunteer fire department if such other
firefighting services are provided by a qualified volunteer fire
department (determined with the application of this sentence) and
such organization and the provider of such other services have been
continuously providing firefighting services to such area since
January 1, 1981."
Subsec. (e)(3). Pub. L. 100-647, Sec. 1013(a)(24)(A), added par.
(3).
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1614(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall take effect on
the date of the enactment of this Act [Aug. 20, 1996]."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1013(a)(24)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to bonds issued after October 21, 1988."
Amendment by section 1013(a)(23), (30)-(33) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6182(c) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section] shall apply to bonds
issued after the date of the enactment of this Act [Nov. 10,
1988]."
EFFECTIVE DATE
Section applicable to bonds issued after Aug. 15, 1986, except as
otherwise provided, with subsec. (b) applicable to changes in use
(and ownership) after Aug. 15, 1986, but only with respect to
financing (including refinancings) provided after such date, and
with subsec. (d) applicable to payments made after Aug. 15, 1986,
see sections 1311 to 1318 of Pub. L. 99-514, as amended, set out as
an Effective Date; Transitional Rules note under section 141 of
this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 142, 147, 1394, 1400L,
7871 of this title.
-End-
-CITE-
26 USC PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS
-HEAD-
PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS
-MISC1-
Sec.
151. Allowance of deductions for personal exemptions.
152. Dependent defined.
153. Cross references.
AMENDMENTS
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(7)(A)(ii), Oct. 4,
1976, 90 Stat. 1794, redesignated item 154 as 153 and struck out
former item 153 "Determination of marital status".
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 7703 of this title.
-End-
-CITE-
26 USC Sec. 151 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS
-HEAD-
Sec. 151. Allowance of deductions for personal exemptions
-STATUTE-
(a) Allowance of deductions
In the case of an individual, the exemptions provided by this
section shall be allowed as deductions in computing taxable income.
(b) Taxpayer and spouse
An exemption of the exemption amount for the taxpayer; and an
additional exemption of the exemption amount for the spouse of the
taxpayer if a joint return is not made by the taxpayer and his
spouse, and if the spouse, for the calendar year in which the
taxable year of the taxpayer begins, has no gross income and is not
the dependent of another taxpayer.
(c) Additional exemption for dependents
(1) In general
An exemption of the exemption amount for each dependent (as
defined in section 152) -
(A) whose gross income for the calendar year in which the
taxable year of the taxpayer begins is less than the exemption
amount, or
(B) who is a child of the taxpayer and who (i) has not
attained the age of 19 at the close of the calendar year in
which the taxable year of the taxpayer begins, or (ii) is a
student who has not attained the age of 24 at the close of such
calendar year.
(2) Exemption denied in case of certain married dependents
No exemption shall be allowed under this subsection for any
dependent who has made a joint return with his spouse under
section 6013 for the taxable year beginning in the calendar year
in which the taxable year of the taxpayer begins.
(3) Child defined
For purposes of paragraph (1)(B), the term "child" means an
individual who (within the meaning of section 152) is a son,
stepson, daughter, or stepdaughter of the taxpayer.
(4) Student defined
For purposes of paragraph (1)(B)(ii), the term "student" means
an individual who during each of 5 calendar months during the
calendar year in which the taxable year of the taxpayer begins -
(A) is a full-time student at an educational organization
described in section 170(b)(1)(A)(ii); or
(B) is pursuing a full-time course of institutional on-farm
training under the supervision of an accredited agent of an
educational organization described in section 170(b)(1)(A)(ii)
or of a State or political subdivision of a State.
(5) Certain income of handicapped dependents not taken into
account
(A) In general
For purposes of paragraph (1)(A), the gross income of an
individual who is permanently and totally disabled shall not
include income attributable to services performed by the
individual at a sheltered workshop if -
(i) the availability of medical care at such workshop is
the principal reason for his presence there, and
(ii) the income arises solely from activities at such
workshop which are incident to such medical care.
(B) Sheltered workshop defined
For purposes of subparagraph (A), the term "sheltered
workshop" means a school -
(i) which provides special instruction or training designed
to alleviate the disability of the individual, and
(ii) which is operated by -
(I) an organization described in section 501(c)(3) and
exempt from tax under section 501(a), or
(II) a State, a possession of the United States, any
political subdivision of any of the foregoing, the United
States, or the District of Columbia.
(C) Permanent and total disability defined
An individual shall be treated as permanently and totally
disabled for purposes of this paragraph if such individual
would be so treated under paragraph (3) of section 22(e).
(6) Treatment of missing children
(A) In general
Solely for the purposes referred to in subparagraph (B), a
child of the taxpayer -
(i) who is presumed by law enforcement authorities to have
been kidnapped by someone who is not a member of the family
of such child or the taxpayer, and
(ii) who was (without regard to this paragraph) the
dependent of the taxpayer for the portion of the taxable year
before the date of the kidnapping,
shall be treated as a dependent of the taxpayer for all taxable
years ending during the period that the child is kidnapped.
(B) Purposes
Subparagraph (A) shall apply solely for purposes of
determining -
(i) the deduction under this section,
(ii) the credit under section 24 (relating to child tax
credit), and
(iii) whether an individual is a surviving spouse or a head
of a household (as such terms are defined in section 2).
(C) Comparable treatment for principal place of abode
requirements
An individual -
(i) who is presumed by law enforcement authorities to have
been kidnapped by someone who is not a member of the family
of such individual or the taxpayer, and
(ii) who had, for the taxable year in which the kidnapping
occurred, the same principal place of abode as the taxpayer
for more than one-half of the portion of such year before the
date of the kidnapping,
shall be treated as meeting the principal place of abode
requirements of section 2(a)(1)(B), section 2(b)(1)(A), and
section 32(c)(3)(A)(ii) with respect to a taxpayer for all
taxable years ending during the period that the individual is
kidnapped.
(D) Termination of treatment
Subparagraphs (A) and (C) shall cease to apply as of the
first taxable year of the taxpayer beginning after the calendar
year in which there is a determination that the child is dead
(or, if earlier, in which the child would have attained age
18).
(d) Exemption amount
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the term
"exemption amount" means $2,000.
(2) Exemption amount disallowed in case of certain dependents
In the case of an individual with respect to whom a deduction
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's
taxable year begins, the exemption amount applicable to such
individual for such individual's taxable year shall be zero.
(3) Phaseout
(A) In general
In the case of any taxpayer whose adjusted gross income for
the taxable year exceeds the threshold amount, the exemption
amount shall be reduced by the applicable percentage.
(B) Applicable percentage
For purposes of subparagraph (A), the term "applicable
percentage" means 2 percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's adjusted gross income
for the taxable year exceeds the threshold amount. In the case
of a married individual filing a separate return, the preceding
sentence shall be applied by substituting "$1,250" for
"$2,500". In no event shall the applicable percentage exceed
100 percent.
(C) Threshold amount
For purposes of this paragraph, the term "threshold amount"
means -
(i) $150,000 in the case of a joint return or a surviving
spouse (as defined in section 2(a)),
(ii) $125,000 in the case of a head of a household (as
defined in section 2(b),(!1)
(iii) $100,000 in the case of an individual who is not
married and who is not a surviving spouse or head of a
household, and
(iv) $75,000 in the case of a married individual filing a
separate return.
For purposes of this paragraph, marital status shall be
determined under section 7703.
(D) Coordination with other provisions
The provisions of this paragraph shall not apply for purposes
of determining whether a deduction under this section with
respect to any individual is allowable to another taxpayer for
any taxable year.
(4) Inflation adjustments
(A) Adjustment to basic amount of exemption
In the case of any taxable year beginning in a calendar year
after 1989, the dollar amount contained in paragraph (1) shall
be increased by an amount equal to -
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting "calendar year 1988" for "calendar
year 1992" in subparagraph (B) thereof.
(B) Adjustment to threshold amounts for years after 1991
In the case of any taxable year beginning in a calendar year
after 1991, each dollar amount contained in paragraph (3)(C)
shall be increased by an amount equal to -
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting "calendar year 1990" for "calendar
year 1992" in subparagraph (B) thereof.
(e) Identifying information required
No exemption shall be allowed under this section with respect to
any individual unless the TIN of such individual is included on the
return claiming the exemption.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 42; Pub. L. 91-172, title VIII,
Sec. 801(a)(1), (b)(1), (c)(1), (d)(1), title IX, Sec. 941(b), Dec.
30, 1969, 83 Stat. 675, 676, 726; Pub. L. 92-178, title II, Sec.
201(a)(1), (b)(1), (c), Dec. 10, 1971, 85 Stat. 510, 511; Pub. L.
94-455, title XIX, Sec. 1901(a)(23), Oct. 4, 1976, 90 Stat. 1767;
Pub. L. 95-600, title I, Sec. 102(a), Nov. 6, 1978, 92 Stat. 2771;
Pub. L. 97-34, title I, Sec. 104(c), Aug. 13, 1981, 95 Stat. 189;
Pub. L. 98-369, div. A, title IV, Sec. 426(a), July 18, 1984, 98
Stat. 804; Pub. L. 99-514, title I, Sec. 103, title XVIII, Sec.
1847(b)(3), Oct. 22, 1986, 100 Stat. 2102, 2856; Pub. L. 100-647,
title VI, Sec. 6010(a), Nov. 10, 1988, 102 Stat. 3691; Pub. L.
101-508, title XI, Secs. 11101(d)(1)(F), 11104(a), Nov. 5, 1990,
104 Stat. 1388-405, 1388-407; Pub. L. 102-318, title V, Sec. 511,
July 3, 1992, 106 Stat. 300; Pub. L. 103-66, title XIII, Secs.
13201(b)(3)(G), 13205, Aug. 10, 1993, 107 Stat. 459, 462; Pub. L.
104-188, title I, Secs. 1615(a)(1), 1702(a)(2), Aug. 20, 1996, 110
Stat. 1853, 1868; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.
306(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A-634; Pub. L. 107-16,
title I, Sec. 102(a), June 7, 2001, 115 Stat. 44; Pub. L. 107-147,
title IV, Secs. 412(b), 417(6), Mar. 9, 2002, 116 Stat. 53, 56.)
-STATAMEND-
PERSONAL EXEMPTION ADJUSTMENT FOR TAXABLE YEARS BEGINNING IN 2004
For adjustment and phaseout of personal exemption under
subsection (d) of this section for taxable years beginning in 2004,
see section 3.16 of Revenue Procedure 2003-85, set out as a note
under section 1 of this title.
AMENDMENT OF SUBSECTION (D)(3)
Pub. L. 107-16, title I, Sec. 102, title IX, Sec. 901, June 7,
2001, 115 Stat. 44, 150, provided that, applicable to taxable years
beginning after Dec. 31, 2005, subsection (d)(3) of this section is
temporarily amended by adding subparagraphs (E) and (F) at end to
read as follows:
(E) Reduction of phaseout
(i) In general
In the case of taxable years beginning after December 31,
2005, and before January 1, 2010, the reduction under
subparagraph (A) shall be equal to the applicable fraction of
the amount which would (but for this subparagraph) be the
amount of such reduction.
(ii) Applicable fraction
For purposes of clause (i), the applicable fraction shall
be determined in accordance with the following table:
For taxable years beginning 3The applicable
in calendar year - fraction is -
--------------------------------------------------------------------
2006 and 2007 (!2/3)
2008 and 2009 1/3 .
--------------------------------------------------------------------
(F) Termination
This paragraph shall not apply to any taxable year beginning
after December 31, 2009.
See Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2002 - Subsec. (c)(6)(B)(iii). Pub. L. 107-147, Sec. 417(6),
inserted "as" before "such terms".
Subsec. (c)(6)(C). Pub. L. 107-147, Sec. 412(b), substituted "for
principal place of abode requirements" for "for earned income
credit" in heading, "An" for "For purposes of section 32, an" in
introductory provisions, and "principal place of abode requirements
of section 2(a)(1)(B), section 2(b)(1)(A), and section
32(c)(3)(A)(ii)" for "requirement of section 32(c)(3)(A)(ii)" in
concluding provisions.
2000 - Subsec. (c)(6). Pub. L. 106-554 added par. (6).
1996 - Subsec. (d)(3)(C)(i). Pub. L. 104-188, Sec. 1702(a)(2),
substituted "joint return" for "joint of a return".
Subsec. (e). Pub. L. 104-188, Sec. 1615(a)(1), added subsec. (e).
1993 - Subsec. (d)(3)(E). Pub. L. 103-66, Sec. 13205, struck out
heading and text of subpar. (E). Text read as follows: "This
paragraph shall not apply to any taxable year beginning after
December 31, 1996."
Subsec. (d)(4)(A)(ii), (B)(ii). Pub. L. 103-66, Sec.
13201(b)(3)(G), substituted "1992" for "1989".
1992 - Subsec. (d)(3)(E). Pub. L. 102-318 substituted "1996" for
"1995".
1990 - Subsec. (d). Pub. L. 101-508, Sec. 11104(a), amended
subsec. (d) generally. Prior to amendment, subsec. (d) read as
follows: "For purposes of this section -
"(1) In general. - Except as provided in paragraph (2), the term
'exemption amount' means -
"(A) $1,900 for taxable years beginning during 1987,
"(B) $1,950 for taxable years beginning during 1988, and
"(C) $2,000 for taxable years beginning after December 31,
1988.
"(2) Exemption amount disallowed in the case of certain
dependents. - In the case of an individual with respect to whom a
deduction under this section is allowable to another taxpayer for a
taxable year beginning in the calendar year in which the
individual's taxable year begins, the exemption amount applicable
to such individual for such individual's taxable year shall be
zero.
"(3) Inflation adjustment for years after 1989. - In the case of
any taxable year beginning in a calendar year after 1989, the
dollar amount contained in paragraph (1)(C) shall be increased by
an amount equal to -
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section
1(f)(3), for the calendar year in which the taxable year begins,
by substituting 'calendar year 1988' for 'calendar year 1987' in
subparagraph (B) thereof."
Subsec. (d)(3)(B). Pub. L. 101-508, Sec. 11101(d)(1)(F),
substituted "1989" for "1987".
1988 - Subsec. (c)(1)(B)(ii). Pub. L. 100-647 inserted "who has
not attained the age of 24 at the close of such calendar year"
after "student".
1986 - Subsec. (c). Pub. L. 99-514, Sec. 103(b), redesignated
subsec. (e) as (c) and struck out former subsec. (c) which provided
for an additional exemption for taxpayer or spouse aged 65 or more.
Subsec. (d). Pub. L. 99-514, Sec. 103(b), redesignated subsec.
(f) as (d) and struck out former subsec. (d) which provided for an
additional exemption for blindness of taxpayer or spouse.
Subsec. (e). Pub. L. 99-514, Sec. 103(b), redesignated subsec.
(e) as (c).
Pub. L. 99-514, Sec. 1847(b)(3), substituted "section 22(e)" for
"section 37(e)" in par. (5)(C).
Subsec. (f). Pub. L. 99-514, Sec. 103(b), redesignated subsec.
(f) as (d).
Pub. L. 99-514, Sec. 103(a), amended subsec. (f) generally. Prior
to amendment, subsec. (f) read as follows: "For purposes of this
section, the term 'exemption amount' means, with respect to any
taxable year, $1,000 increased by an amount equal to $1,000
multiplied by the cost-of-living adjustment (as defined in section
1(f)(3)) for the calendar year in which the taxable year begins. If
the amount determined under the preceding sentence is not a
multiple of $10, such amount shall be rounded to the nearest
multiple of $10 (or if such amount is a multiple of $5, such amount
shall be increased to the next highest multiple of $10)."
1984 - Subsec. (e)(5). Pub. L. 98-369 added par. (5).
1981 - Subsecs. (b), (c), (d)(1), (2), (e)(1). Pub. L. 97-34,
Sec. 104(c)(1), substituted "the exemption amount" for "$1,000"
wherever appearing.
Subsec. (f). Pub. L. 97-34, Sec. 104(c)(2), added subsec. (f).
1978 - Pub. L. 95-600 increased exemption from $750 to $1,000
with respect to taxable years beginning after Dec. 31, 1978.
1976 - Subsec. (e)(4). Pub. L. 94-455 struck out "and educational
institution" after "Student" in heading, substituted in subpars.
(A) and (B) "organization described in section 170(b)(1)(A)(ii)"
for "institution", and struck out provisions following subpar. (B)
defining educational institution.
1971 - Pub. L. 92-178 increased exemption from $650 to $675 with
respect to taxable years beginning after Dec. 31, 1970, and before
Jan. 1, 1972, and from $675 to $750 with respect to taxable years
beginning after Dec. 31, 1971.
1969 - Pub. L. 91-172, Sec. 801(a)(1), (b)(1), (c)(1), (d)(1),
increased exemption from $600 to $625 with respect to taxable years
beginning after Dec. 31, 1969, and before Jan. 1, 1971, from $625
to $650 for taxable years beginning after Dec. 31, 1970, and before
Jan. 1, 1972, from $650 to $700 for taxable years beginning after
Dec. 31, 1971, and before Jan. 1, 1973, and from $700 to $750 for
taxable years beginning after Dec. 31, 1972.
Subsecs. (b), (c), Pub. L. 91-172, Sec. 941(b), substituted "if a
joint return is not made by the taxpayer and his spouse" for "if a
separate return is made by the taxpayer".
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-147, title IV, Sec. 412(e), Mar. 9, 2002, 116 Stat.
54, provided that: "The amendments made by this section [amending
this section and sections 358, 469, 1091, 1233, 1234A, and 1234B of
this title] shall take effect as if included in the provisions of
the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted
by section 1(a)(7) of Pub. L. 106-554, Dec. 21, 2000, 114 Stat.
2763, 2763A-587] to which they relate."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title I, Sec. 102(b), June 7, 2001, 115 Stat. 44,
provided that: "The amendment made by this section [amending this
section] shall apply to taxable years beginning after December 31,
2005."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 306(b)], Dec. 21,
2000, 114 Stat. 2763, 2763A-635, provided that: "The amendment made
by this section [amending this section] shall apply to taxable
years ending after the date of the enactment of this Act [Dec. 21,
2000]."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1615(a)(1) of Pub. L. 104-188 applicable
with respect to returns the due date for which, without regard to
extensions, is on or after the 30th day after Aug. 20, 1996, with
special rule for 1995 and 1996, see section 1615(d) of Pub. L.
104-188, set out as a note under section 21 of this title.
Amendment by section 1702(a)(2) of Pub. L. 104-188 effective,
except as otherwise expressly provided, as if included in the
provision of the Revenue Reconciliation Act of 1990, Pub. L.
101-508, title XI, to which such amendment relates, see section
1702(i) of Pub. L. 104-188, set out as a note under section 38 of
this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by section 13201(b)(3)(G) of Pub. L. 103-66 applicable
to taxable years beginning after Dec. 31, 1992, see section
13201(c) of Pub. L. 103-66, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11101(d)(1)(F) of Pub. L. 101-508 applicable
to taxable years beginning after Dec. 31, 1990, see section
11101(e) of Pub. L. 101-508, set out as a note under section 1 of
this title.
Amendment by section 11104(a) of Pub. L. 101-508 applicable to
taxable years beginning after Dec. 31, 1990, see section 11104(c)
of Pub. L. 101-508, set out as a note under section 1 of this
title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6010(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1988."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 103 of Pub. L. 99-514 applicable to taxable
years beginning after Dec. 31, 1986, see section 151(a) of Pub. L.
99-514, set out as a note under section 1 of this title.
Amendment by section 1847(b)(3) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 426(b) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1984."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1984, see section 104(e) of Pub. L. 97-34, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 102(d)(1) of Pub. L. 95-600 provided that: "The
amendments made by subsections (a) and (b) [amending this section
and sections 6012 and 6013 of this title] shall apply to taxable
years beginning after December 31, 1978."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Section 201(a), (b) of Pub. L. 92-178 provided in part that the
increase in exemption from $650 to $675 was effective with respect
to taxable years beginning after Dec. 31, 1970, and before Jan. 1,
1972, and from $675 to $750 was effective with respect to taxable
years beginning after Dec. 31, 1971.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 801(a)(1) of Pub. L. 91-172 provided in part that the
increase in exemption from $600 to $625 is effective with respect
to taxable years beginning after Dec. 31, 1969, and before Jan. 1,
1971.
Section 801(b)(1) of Pub. L. 91-172 provided in part that the
increase in the exemption from $625 to $650 is effective with
respect to taxable years beginning after Dec. 31, 1970, and before
Jan. 1, 1972.
Section 941(c) of Pub. L. 91-172 provided that: "The amendments
made by subsections (a) [amending section 6012 of this title] and
(b) [amending this section] shall apply to taxable years beginning
after December 31, 1969."
REPEALS
Section 801(c)(1), (d)(1) of Pub. L. 91-172 provided for an
increase in the personal exemption to $700, effective with respect
to taxable years beginning after Dec. 31, 1971, and before Jan. 1,
1973, and to $750, effective with respect to taxable years
beginning after Dec. 31, 1972, prior to repeal by section 201(c) of
Pub. L. 92-178.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 2, 21, 24, 25A, 25B,
32, 35, 56, 63, 72, 129, 132, 135, 152, 153, 172, 220, 221, 222,
223, 443, 642, 703, 773, 873, 874, 891, 904, 931, 933, 1212, 1402,
2032A, 3402, 6012, 6013, 6213, 6334, 6428, 7703 of this title;
title 29 section 2918.
-FOOTNOTE-
(!1) So in original. A closing parenthesis probably should
precede the comma.
-End-
-CITE-
26 USC Sec. 152 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS
-HEAD-
Sec. 152. Dependent defined
-STATUTE-
(a) General definition
For purposes of this subtitle, the term "dependent" means any of
the following individuals over half of whose support, for the
calendar year in which the taxable year of the taxpayer begins, was
received from the taxpayer (or is treated under subsection (c) or
(e) as received from the taxpayer):
(1) A son or daughter of the taxpayer, or a descendant of
either,
(2) A stepson or stepdaughter of the taxpayer,
(3) A brother, sister, stepbrother, or stepsister of the
taxpayer,
(4) The father or mother of the taxpayer, or an ancestor of
either,
(5) A stepfather or stepmother of the taxpayer,
(6) A son or daughter of a brother or sister of the taxpayer,
(7) A brother or sister of the father or mother of the
taxpayer,
(8) A son-in-law, daughter-in-law, father-in-law,
mother-in-law, brother-in-law, or sister-in-law of the taxpayer,
or
(9) An individual (other than an individual who at any time
during the taxable year was the spouse, determined without regard
to section 7703, of the taxpayer) who, for the taxable year of
the taxpayer, has as his principal place of abode the home of the
taxpayer and is a member of the taxpayer's household.
(b) Rules relating to general definition
For purposes of this section -
(1) The terms "brother" and "sister" include a brother or
sister by the halfblood.
(2) In determining whether any of the relationships specified
in subsection (a) or paragraph (1) of this subsection exists, a
legally adopted child of an individual (and a child who is a
member of an individual's household, if placed with such
individual by an authorized placement agency for legal adoption
by such individual), or a foster child of an individual (if such
child satisfies the requirements of subsection (a)(9) with
respect to such individual), shall be treated as a child of such
individual by blood.
(3) The term "dependent" does not include any individual who is
not a citizen or national of the United States unless such
individual is a resident of the United States or of a country
contiguous to the United States. The preceding sentence shall not
exclude from the definition of "dependent" any child of the
taxpayer legally adopted by him, if, for the taxable year of the
taxpayer, the child has as his principal place of abode the home
of the taxpayer and is a member of the taxpayer's household, and
if the taxpayer is a citizen or national of the United States.
(4) A payment to a wife which is includible in the gross income
of the wife under section 71 or 682 shall not be treated as a
payment by her husband for the support of any dependent.
(5) An individual is not a member of the taxpayer's household
if at any time during the taxable year of the taxpayer the
relationship between such individual and the taxpayer is in
violation of local law.
(c) Multiple support agreements
For purposes of subsection (a), over half of the support of an
individual for a calendar year shall be treated as received from
the taxpayer if -
(1) no one person contributed over half of such support;
(2) over half of such support was received from persons each of
whom, but for the fact that he did not contribute over half of
such support, would have been entitled to claim such individual
as a dependent for a taxable year beginning in such calendar
year;
(3) the taxpayer contributed over 10 percent of such support;
and
(4) each person described in paragraph (2) (other than the
taxpayer) who contributed over 10 percent of such support files a
written declaration (in such manner and form as the Secretary may
by regulations prescribe) that he will not claim such individual
as a dependent for any taxable year beginning in such calendar
year.
(d) Special support test in case of students
For purposes of subsection (a), in the case of any individual who
is -
(1) a son, stepson, daughter, or stepdaughter of the taxpayer
(within the meaning of this section), and
(2) a student (within the meaning of section 151(c)(4)),
amounts received as scholarships for study at an educational
organization described in section 170(b)(1)(A)(ii) shall not be
taken into account in determining whether such individual received
more than half of his support from the taxpayer.
(e) Support test in case of child of divorced parents, etc.
(1) Custodial parent gets exemption
Except as otherwise provided in this subsection, if -
(A) a child (as defined in section 151(c)(3)) receives over
half of his support during the calendar year from his parents -
(i) who are divorced or legally separated under a decree of
divorce or separate maintenance,
(ii) who are separated under a written separation
agreement, or
(iii) who live apart at all times during the last 6 months
of the calendar year, and
(B) such child is in the custody of one or both of his
parents for more than one-half of the calendar year,
such child shall be treated, for purposes of subsection (a), as
receiving over half of his support during the calendar year from
the parent having custody for a greater portion of the calendar
year (hereinafter in this subsection referred to as the
"custodial parent").
(2) Exception where custodial parent releases claim to exemption
for the year
A child of parents described in paragraph (1) shall be treated
as having received over half of his support during a calendar
year from the noncustodial parent if -
(A) the custodial parent signs a written declaration (in such
manner and form as the Secretary may by regulations prescribe)
that such custodial parent will not claim such child as a
dependent for any taxable year beginning in such calendar year,
and
(B) the noncustodial parent attaches such written declaration
to the noncustodial parent's return for the taxable year
beginning during such calendar year.
For purposes of this subsection, the term "noncustodial parent"
means the parent who is not the custodial parent.
(3) Exception for multiple-support agreement
This subsection shall not apply in any case where over half of
the support of the child is treated as having been received from
a taxpayer under the provisions of subsection (c).
(4) Exception for certain pre-1985 instruments
(A) In general
A child of parents described in paragraph (1) shall be
treated as having received over half his support during a
calendar year from the noncustodial parent if -
(i) a qualified pre-1985 instrument between the parents
applicable to the taxable year beginning in such calendar
year provides that the noncustodial parent shall be entitled
to any deduction allowable under section 151 for such child,
and
(ii) the noncustodial parent provides at least $600 for the
support of such child during such calendar year.
For purposes of this subparagraph, amounts expended for the
support of a child or children shall be treated as received
from the noncustodial parent to the extent that such parent
provided amounts for such support.
(B) Qualified pre-1985 instrument
For purposes of this paragraph, the term "qualified pre-1985
instrument" means any decree of divorce or separate maintenance
or written agreement -
(i) which is executed before January 1, 1985,
(ii) which on such date contains the provision described in
subparagraph (A)(i), and
(iii) which is not modified on or after such date in a
modification which expressly provides that this paragraph
shall not apply to such decree or agreement.
(5) Special rule for support received from new spouse of parent
For purposes of this subsection, in the case of the remarriage
of a parent, support of a child received from the parent's spouse
shall be treated as received from the parent.
(6) Cross reference
For provision treating child as dependent of both parents for
purposes of medical expense deduction, see section 213(d)(5).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 43; Aug. 9, 1955, ch. 693, Sec.
2, 69 Stat. 626; Pub. L. 85-866, title I, Sec. 4(a)-(c), Sept. 2,
1958, 72 Stat. 1607; Pub. L. 86-376, Sec. 1(a), Sept. 23, 1959, 73
Stat. 699; Pub. L. 90-78, Sec. 1, Aug. 31, 1967, 81 Stat. 191; Pub.
L. 91-172, title IX, Sec. 912(a), Dec. 30, 1969, 83 Stat. 722; Pub.
L. 92-580, Sec. 1(a), Oct. 27, 1972, 86 Stat. 1276; Pub. L. 94-455,
title XIX, Secs. 1901(a)(24), (b)(7)(B), (8)(A), 1906(b)(13)(A),
title XXI, Sec. 2139(a), Oct. 4, 1976, 90 Stat. 1767, 1794, 1834,
1932; Pub. L. 98-369, div. A, title IV, Secs. 423(a), 482(b)(2),
July 18, 1984, 98 Stat. 799, 848; Pub. L. 99-514, title I, Sec.
104(b)(1)(B), (3), title XIII, Sec. 1301(j)(8), Oct. 22, 1986, 100
Stat. 2104, 2105, 2658.)
-MISC1-
AMENDMENTS
1986 - Subsec. (a)(9). Pub. L. 99-514, Sec. 1301(j)(8),
substituted "section 7703" for "section 143".
Subsec. (d)(2). Pub. L. 99-514, Sec. 104(b)(3), substituted
"section 151(c)(4)" for "section 151(e)(4)".
Subsec. (e)(1)(A). Pub. L. 99-514, Sec. 104(b)(1)(B), substituted
"section 151(c)(3)" for "section 151(e)(3)".
1984 - Subsec. (e). Pub. L. 98-369, Sec. 423(a), amended subsec.
(e) generally, and in substantially revising support test
provisions, enacted par. (1) custodial parent exemption, former
par. (1) declaring the general rule that where a child received
over one-half of his calendar year support from parents who were
divorced or legally separated under a decree of divorce or separate
maintenance, or were separated under a written separation agreement
and the child was in the custody of one or both parents for more
than one-half of the calendar year, the child would be treated as
receiving over half of his support from the parent having custody
for a greater portion of the calendar year unless treated under
special rule provision as having received over half of his support
from the parent not having custody; enacted par. (2) release of
custodial parent exemption for the year, former par. (2) declaring
the special rule that parent without custody would be deemed as
furnishing over half of the support where the decree of divorce or
separate maintenance, or written agreement, covering the taxable
year, provided that parent without custody should be entitled to
the section 151 deduction for the child and such parent provided at
least $600 calendar year support, or alternatively, such parent
without custody provided $1,200 or more calendar year support and
the parent with custody did not establish more support of the child
than the parent without custody; redesignated as par. (3) former
par. (4) provision respecting exception for multiple-support
agreement, deleting former par. (3) respecting requirement of an
itemized statement of expenditures to resolve more support claims;
added par. (4) respecting exception for certain pre-1985
instruments; added par. (5) enunciating special rule for support
received from new spouse of parent, deleting former par. (5)
regulations prescription provision; and added par. (6) cross
reference provision.
Subsec. (e)(6). Pub. L. 98-369, Sec. 482(b)(2), substituted
"section 213(d)(5)" for "section 213(d)(4)".
1976 - Subsec. (a)(9). Pub. L. 94-455, Sec. 1901(b)(7)(B),
substituted "section 143" for "section 153".
Subsec. (a)(10). Pub. L. 94-455, Sec. 1901(a)(24)(A), struck out
par. (10) relating to descendents of a taxpayer, who were members
of taxpayer's household, before receiving institutional care.
Subsec. (b)(3). Pub. L. 94-455, Sec. 1901(a)(24)(B), among other
changes struck out "of the Canal Zone, or of the Republic of
Panama" after "country contiguous to the United States," and
provisions relating to children born or adopted in Philippines.
Subsec. (c)(4). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (d). Pub. L. 94-455, Sec. 1901(b)(8)(A), substituted
"organization described in section 170(b)(1)(A)(ii)" for
"institution (as defined in section 151(e)(4))".
Subsec. (e)(2)(B)(i). Pub. L. 94-455, Sec. 2139(a), substituted
"each" for "all".
Subsec. (e)(3), (5). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
1972 - Subsec. (b)(3). Pub. L. 92-580 substituted "citizen or
national of the United States" for "citizen of the United States"
in two places.
1969 - Subsec. (b)(2). Pub. L. 91-172 inserted reference to
foster children who satisfy requirements of subsec. (a)(9) of this
section.
1967 - Subsec. (a). Pub. L. 90-78, Sec. 1(b), inserted "or (e)"
after "subsection (c)".
Subsec. (e). Pub. L. 90-78, Sec. 1(a), added subsec. (e).
1959 - Subsec. (b)(2). Pub. L. 86-376 provided that a child who
is a member of an individual's household if placed with such
individual by an authorized placement agency for legal adoption by
such individual shall be treated as a child by blood.
1958 - Subsec. (a)(9). Pub. L. 85-866, Sec. 4(a), inserted
"(other than an individual who at any time during the taxable year
was the spouse, determined without regard to section 153, of the
taxpayer)".
Subsec. (b)(3). Pub. L. 85-866, Sec. 4(b), among other changes,
struck out provision that "dependent" does not include any
individual who is not a United States citizen unless such
individual is a resident of United States or of a contiguous
country, or of Canal Zone or Panama, and inserted provision barring
exclusion from definition of "dependent" any child of taxpayer,
legally adopted by him, if, for taxable year of taxpayer, child's
principal place of abode is taxpayer's home and child is member of
taxpayer's household, if taxpayer is United States citizen.
Subsec. (b)(5). Pub. L. 85-866, Sec. 4(c), added par. (5).
1955 - Subsec. (b)(3). Act Aug. 9, 1955, substituted "January 1,
1956" for "July 5, 1946".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 104(b)(1)(B), (3) of Pub. L. 99-514
applicable to taxable years beginning after Dec. 31, 1986, see
section 151(a) of Pub. L. 99-514, set out as a note under section 1
of this title.
Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 423(a) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1984, see section 423(d) of
Pub. L. 98-369, set out as a note under section 2 of this title.
Amendment by section 482(b)(2) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 482(c) of
Pub. L. 98-369, set out as a note under section 213 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(24), (b)(7)(B), (8)(A) of Pub. L.
94-455 applicable with respect to taxable years beginning after
Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a
note under section 2 of this title.
Section 2139(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after the date of the enactment of this Act [Oct.
4, 1976]."
EFFECTIVE DATE OF 1972 AMENDMENT
Section 1(c) of Pub. L. 92-580 provided that: "The amendments
made by subsections (a) [amending this section] and (b) [amending
section 873 of this title] shall apply to taxable years beginning
after December 31, 1971."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 912(b) of Pub. L. 91-172 provided that: "The amendment
made by subsection (a) of this section [amending this section]
shall apply to taxable years beginning after December 31, 1969."
EFFECTIVE DATE OF 1967 AMENDMENT
Section 2 of Pub. L. 90-78 provided that: "The amendments made by
the first section of this Act [amending this section] shall apply
with respect to taxable years beginning after December 31, 1966."
EFFECTIVE DATE OF 1959 AMENDMENT
Section 1(b) of Pub. L. 86-376 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years beginning after December 31, 1958."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by section 4(a), (c) of Pub. L. 85-866 applicable to
taxable years beginning after Dec. 31, 1953, and ending after Aug.
16, 1954, see section 1(c)(1) of Pub. L. 85-866, set out as a note
under section 165 of this title.
Section 4(d) of Pub. L. 85-866 provided that: "The amendment made
by subsection (b) [amending this section] shall apply with respect
to taxable years beginning after December 31, 1957."
EFFECTIVE DATE OF 1955 AMENDMENT
Section 3(b) of act Aug. 9, 1955, provided that: "The amendment
made by section 2 of this Act [amending this section] shall apply
with respect to taxable years beginning after December 31, 1953,
and ending after August 16, 1954."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 2, 21, 24, 32, 35, 42,
51, 72, 105, 120, 125, 132, 151, 153, 170, 213, 220, 221, 223, 529,
2057, 7701, 7702B, 7703 of this title; title 5 section 7342; title
20 section 1232g; title 29 section 2918; title 30 section 28f;
title 33 section 909; title 43 section 390bb.
-End-
-CITE-
26 USC Sec. 153 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART V - DEDUCTIONS FOR PERSONAL EXEMPTIONS
-HEAD-
Sec. 153. Cross references
-STATUTE-
(1) For definitions of "husband" and "wife", as used in
section 152(b)(4), see section 7701(a)(17).
(2) For deductions of estates and trusts, in lieu of the
exemptions under section 151, see section 642(b).
(3) For exemptions of nonresident aliens, see section
873(b)(3).
(4) For determination of marital status, see section 7703.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 45, Sec. 154; Pub. L. 89-809,
title I, Sec. 103(c)(2), Nov. 13, 1966, 80 Stat. 1551; renumbered
Sec. 153 and amended Pub. L. 94-455, title XIX, Sec.
1901(b)(7)(A)(i), (C), Oct. 4, 1976, 90 Stat. 1794; Pub. L. 99-514,
title XII, Sec. 1272(d)(7), title XIII, Sec. 1301(j)(8), Oct. 22,
1986, 100 Stat. 2594, 2658.)
-MISC1-
PRIOR PROVISIONS
A prior section 153, act Aug. 16, 1954, ch. 736, 68A Stat. 45,
related to determination of marital status, prior to repeal by Pub.
L. 94-455, title XIX, Sec. 1901(b)(7)(A)(i), (d), Oct. 4, 1976, 90
Stat. 1794, 1803, applicable with respect to taxable years
beginning after Dec. 31, 1976. See section 143 of this title.
AMENDMENTS
1986 - Par. (4). Pub. L. 99-514, Sec. 1272(d)(7), redesignated
par. (5) as (4) and struck out former par. (4) which read as
follows: "For exemptions of citizens deriving income mainly from
sources within possessions of the United States, see section
931(e)."
Par. (5). Pub. L. 99-514, Sec. 1272(d)(7), redesignated par. (5)
as (4).
Pub. L. 99-514, Sec. 1301(j)(8), substituted "section 7703" for
"section 143".
1976 - Par. (5). Pub. L. 94-455, Sec. 1901(b)(7)(C), added par.
(5).
1966 - Par. (3). Pub. L. 89-809 substituted "873(b)(3)" for
"873(d)".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1272(d)(7) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1277 of Pub. L. 99-514,
set out as a note under section 931 of this title.
Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to taxable
years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub.
L. 89-809, set out as a note under section 871 of this title.
-End-
-CITE-
26 USC PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND
CORPORATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-MISC1-
Sec.
161. Allowance of deductions.
162. Trade or business expenses.
163. Interest.
164. Taxes.
165. Losses.
166. Bad debts.
167. Depreciation.
168. Accelerated cost recovery system.
169. Amortization of pollution control facilities.
170. Charitable, etc., contributions and gifts.
171. Amortizable bond premium.
172. Net operating loss deduction.
173. Circulation expenditures.
174. Research and experimental expenditures.
175. Soil and water conservation expenditures.
176. Payments with respect to employees of certain foreign
corporations.
[177. Repealed.]
178. Amortization of cost of acquiring a lease.
179. Election to expense certain depreciable business
assets.
179A. Deduction for clean-fuel vehicles and certain
refueling property.
180. Expenditures by farmers for fertilizer, etc.
[181, 182. Repealed.]
183. Activities not engaged in for profit.
[184, 185. Repealed.]
186. Recoveries of damages for antitrust violations, etc.
[187 to 189. Repealed.]
190. Expenditures to remove architectural and
transportation barriers to the handicapped and
elderly.
191. Amortization of certain rehabilitation expenditures
for certified historic structures.(!1)
192. Contributions to black lung benefit trust.
193. Tertiary injectants.
194. Amortization of reforestation expenditures.
194A. Contributions to employer liability trusts.
195. Start-up expenditures.
196. Deduction for certain unused business credits.
197. Amortization of goodwill and certain other
intangibles.
198. Expensing of environmental remediation costs.
AMENDMENTS
1997 - Pub. L. 105-34, title IX, Sec. 941(b), Aug. 5, 1997, 111
Stat. 885, added item 198.
1993 - Pub. L. 103-66, title XIII, Sec. 13261(f)(6), Aug. 10,
1993, 107 Stat. 539, added item 197.
1992 - Pub. L. 102-486, title XIX, Sec. 1913(a)(3)(B), Oct. 24,
1992, 106 Stat. 3019, added item 179A.
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(3), Nov. 5, 1990,
104 Stat. 1388-522, struck out item 184 "Amortization of certain
railroad rolling stock" and item 188 "Amortization of certain
expenditures for child care facilities".
1986 - Pub. L. 99-514, title II, Secs. 201(d)(2)(B), 241(b)(3),
242(b)(3), title IV, Sec. 402(b)(3), title VIII, Sec. 803(c)(2),
Oct. 22, 1986, 100 Stat. 2139, 2181, 2221, 2356, substituted
"Amortization of cost of acquiring a lease" for "Depreciation or
amortization of improvements made by lessee on lessor's property"
in item 178, and struck out items 177 "Trademark and trade name
expenditures", 182 "Expenditures by farmers for clearing land", 185
"Amortization of railroad grading and tunnel bores", and 189
"Amortization of real property construction period interest and
taxes".
1984 - Pub. L. 98-369, div. A, title I, Sec. 94(b), title IV,
Sec. 474(r)(8)(B), July 18, 1984, 98 Stat. 615, 841, reenacted item
195 without change, and substituted "business credits" for
"investment credits" in item 196.
1983 - Pub. L. 97-448, title III, Sec. 305(b)(2), Jan. 12, 1983,
96 Stat. 2399, redesignated item 194 (relating to contributions to
employer liability trusts) as 194A.
1982 - Pub. L. 97-248, title II, Sec. 205(a)(5)(C), Sept. 3,
1982, 96 Stat. 430, added item 196.
1981 - Pub. L. 97-34, title II, Secs. 201(d), 202(d)(3), Aug. 13,
1981, 95 Stat. 219, 221, added item 168 and substituted "Election
to expense certain depreciable business assets" for "Additional
first-year depreciation allowance for small business" in item 179.
1980 - Pub. L. 96-605, title I, Sec. 102(b), Dec. 28, 1980, 94
Stat. 3522, added item 195.
Pub. L. 96-451, title III, Sec. 301(c)(2), Oct. 14, 1980, 94
Stat. 1991, added item 194 relating to amortization of
reforestation expenditures.
Pub. L. 96-364, title II, Sec. 209(c)(2), Sept. 26, 1980, 94
Stat. 1291, added item 194 relating to contributions to employer
liability trusts.
Pub. L. 96-223, title II, Sec. 251(a)(2)(A), Apr. 2, 1980, 94
Stat. 287, added item 193.
1978 - Pub. L. 95-227, Sec. 4(b)(2), Feb. 10, 1978, 95 Stat. 17,
added item 192.
1977 - Pub. L. 95-30, title IV, Sec. 402(a)(4), May 23, 1977, 91
Stat. 155, struck out "on-the-job training and" after "certain
expenditures for" in item 188.
1976 - Pub. L. 94-455, title II, Sec. 201(b), title XIX, Secs.
1901(b)(11)(B), 1951(c)(2)(D), title XXI, Secs. 2122(b)(1),
2124(a)(3)(A), Oct. 4, 1976, 90 Stat. 1527, 1795, 1841, 1915, 1917,
struck out item 168 "Amortization of emergency facilities" and item
187 "Amortization of certain coal mine safety equipment" and added
items 189, 190, and 191.
1971 - Pub. L. 92-178, title III, Sec. 303(c)(6), Dec. 10, 1971,
85 Stat. 522, added item 188.
1969 - Pub. L. 91-172, title II, Sec. 213(c)(1), title VII, Secs.
704(b)(1), 705(b), 707(b), title IX, Sec. 904(b), Dec. 30, 1969, 83
Stat. 572, 669, 674, 675, 712, substituted reference to pollution
control facilities for reference to grain storage facilities in
item 169, and added items 183 to 187.
1964 - Pub. L. 88-272, title II, Sec. 203(a)(3)(D). Feb. 26,
1964, 78 Stat. 34, struck out item 181 "Deduction for certain
unused investment credit".
1962 - Pub. L. 87-834, Secs. 2(g)(3), 21(c), Oct. 16, 1962, 76
Stat. 973, 1064, added items 181, 182.
1960 - Pub. L. 86-779, Sec. 6(b), Sept. 14, 1960, 74 Stat. 1001,
added item 180.
1958 - Pub. L. 85-866, title I, Sec. 15(b), title II, Sec.
204(b), Sept. 2, 1958, 72 Stat. 1613, 1680, added items 178 and
179.
1956 - Act June 29, 1956, ch. 464, Sec. 4(b), 70 Stat. 406, added
item 177.
1954 - Act Sept. 1, 1954, ch. 1206, title II, Sec. 210(b), 68
Stat. 1097, added item 176.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 62, 241, 848 of this title.
-FOOTNOTE-
(!1) Section 191 was repealed by Pub. L. 97-34 without corresponding
amendment of part analysis.
-End-
-CITE-
26 USC Sec. 161 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 161. Allowance of deductions
-STATUTE-
In computing taxable income under section 63, there shall be
allowed as deductions the items specified in this part, subject to
the exceptions provided in part IX (sec. 261 and following,
relating to items not deductible).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 45; Pub. L. 95-30, title I, Sec.
102(b)(1), May 23, 1977, 91 Stat. 137.)
-MISC1-
AMENDMENTS
1977 - Pub. L. 95-30 substituted "section 63" for "section
63(a)".
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out
as a note under section 1 of this title.
-End-
-CITE-
26 USC Sec. 162 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 162. Trade or business expenses
-STATUTE-
(a) In general
There shall be allowed as a deduction all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including -
(1) a reasonable allowance for salaries or other compensation
for personal services actually rendered;
(2) traveling expenses (including amounts expended for meals
and lodging other than amounts which are lavish or extravagant
under the circumstances) while away from home in the pursuit of a
trade or business; and
(3) rentals or other payments required to be made as a
condition to the continued use or possession, for purposes of the
trade or business, of property to which the taxpayer has not
taken or is not taking title or in which he has no equity.
For purposes of the preceding sentence, the place of residence of a
Member of Congress (including any Delegate and Resident
Commissioner) within the State, congressional district, or
possession which he represents in Congress shall be considered his
home, but amounts expended by such Members within each taxable year
for living expenses shall not be deductible for income tax purposes
in excess of $3,000. For purposes of paragraph (2), the taxpayer
shall not be treated as being temporarily away from home during any
period of employment if such period exceeds 1 year. The preceding
sentence shall not apply to any Federal employee during any period
for which such employee is certified by the Attorney General (or
the designee thereof) as traveling on behalf of the United States
in temporary duty status to investigate or prosecute, or provide
support services for the investigation or prosecution of, a Federal
crime.
(b) Charitable contributions and gifts excepted
No deduction shall be allowed under subsection (a) for any
contribution or gift which would be allowable as a deduction under
section 170 were it not for the percentage limitations, the dollar
limitations, or the requirements as to the time of payment, set
forth in such section.
(c) Illegal bribes, kickbacks, and other payments
(1) Illegal payments to government officials or employees
No deduction shall be allowed under subsection (a) for any
payment made, directly or indirectly, to an official or employee
of any government, or of any agency or instrumentality of any
government, if the payment constitutes an illegal bribe or
kickback or, if the payment is to an official or employee of a
foreign government, the payment is unlawful under the Foreign
Corrupt Practices Act of 1977. The burden of proof in respect of
the issue, for the purposes of this paragraph, as to whether a
payment constitutes an illegal bribe or kickback (or is unlawful
under the Foreign Corrupt Practices Act of 1977) shall be upon
the Secretary to the same extent as he bears the burden of proof
under section 7454 (concerning the burden of proof when the issue
relates to fraud).
(2) Other illegal payments
No deduction shall be allowed under subsection (a) for any
payment (other than a payment described in paragraph (1)) made,
directly or indirectly, to any person, if the payment constitutes
an illegal bribe, illegal kickback, or other illegal payment
under any law of the United States, or under any law of a State
(but only if such State law is generally enforced), which
subjects the payor to a criminal penalty or the loss of license
or privilege to engage in a trade or business. For purposes of
this paragraph, a kickback includes a payment in consideration of
the referral of a client, patient, or customer. The burden of
proof in respect of the issue, for purposes of this paragraph, as
to whether a payment constitutes an illegal bribe, illegal
kickback, or other illegal payment shall be upon the Secretary to
the same extent as he bears the burden of proof under section
7454 (concerning the burden of proof when the issue relates to
fraud).
(3) Kickbacks, rebates, and bribes under medicare and medicaid
No deduction shall be allowed under subsection (a) for any
kickback, rebate, or bribe made by any provider of services,
supplier, physician, or other person who furnishes items or
services for which payment is or may be made under the Social
Security Act, or in whole or in part out of Federal funds under a
State plan approved under such Act, if such kickback, rebate, or
bribe is made in connection with the furnishing of such items or
services or the making or receipt of such payments. For purposes
of this paragraph, a kickback includes a payment in consideration
of the referral of a client, patient, or customer.
(d) Capital contributions to Federal National Mortgage Association
For purposes of this subtitle, whenever the amount of capital
contributions evidenced by a share of stock issued pursuant to
section 303(c) of the Federal National Mortgage Association Charter
Act (12 U.S.C., sec. 1718) exceeds the fair market value of the
stock as of the issue date of such stock, the initial holder of the
stock shall treat the excess as ordinary and necessary expenses
paid or incurred during the taxable year in carrying on a trade or
business.
(e) Denial of deduction for certain lobbying and political
expenditures
(1) In general
No deduction shall be allowed under subsection (a) for any
amount paid or incurred in connection with -
(A) influencing legislation,
(B) participation in, or intervention in, any political
campaign on behalf of (or in opposition to) any candidate for
public office,
(C) any attempt to influence the general public, or segments
thereof, with respect to elections, legislative matters, or
referendums, or
(D) any direct communication with a covered executive branch
official in an attempt to influence the official actions or
positions of such official.
(2) Exception for local legislation
In the case of any legislation of any local council or similar
governing body -
(A) paragraph (1)(A) shall not apply, and
(B) the deduction allowed by subsection (a) shall include all
ordinary and necessary expenses (including, but not limited to,
traveling expenses described in subsection (a)(2) and the cost
of preparing testimony) paid or incurred during the taxable
year in carrying on any trade or business -
(i) in direct connection with appearances before,
submission of statements to, or sending communications to the
committees, or individual members, of such council or body
with respect to legislation or proposed legislation of direct
interest to the taxpayer, or
(ii) in direct connection with communication of information
between the taxpayer and an organization of which the
taxpayer is a member with respect to any such legislation or
proposed legislation which is of direct interest to the
taxpayer and to such organization,
and that portion of the dues so paid or incurred with respect
to any organization of which the taxpayer is a member which is
attributable to the expenses of the activities described in
clauses (i) and (ii) carried on by such organization.
(3) Application to dues of tax-exempt organizations
No deduction shall be allowed under subsection (a) for the
portion of dues or other similar amounts paid by the taxpayer to
an organization which is exempt from tax under this subtitle
which the organization notifies the taxpayer under section
6033(e)(1)(A)(ii) is allocable to expenditures to which paragraph
(1) applies.
(4) Influencing legislation
For purposes of this subsection -
(A) In general
The term "influencing legislation" means any attempt to
influence any legislation through communication with any member
or employee of a legislative body, or with any government
official or employee who may participate in the formulation of
legislation.
(B) Legislation
The term "legislation" has the meaning given such term by
section 4911(e)(2).
(5) Other special rules
(A) Exception for certain taxpayers
In the case of any taxpayer engaged in the trade or business
of conducting activities described in paragraph (1), paragraph
(1) shall not apply to expenditures of the taxpayer in
conducting such activities directly on behalf of another person
(but shall apply to payments by such other person to the
taxpayer for conducting such activities).
(B) De minimis exception
(i) In general
Paragraph (1) shall not apply to any in-house expenditures
for any taxable year if such expenditures do not exceed
$2,000. In determining whether a taxpayer exceeds the $2,000
limit under this clause, there shall not be taken into
account overhead costs otherwise allocable to activities
described in paragraphs (1)(A) and (D).
(ii) In-house expenditures
For purposes of clause (i), the term "in-house
expenditures" means expenditures described in paragraphs
(1)(A) and (D) other than -
(I) payments by the taxpayer to a person engaged in the
trade or business of conducting activities described in
paragraph (1) for the conduct of such activities on behalf
of the taxpayer, or
(II) dues or other similar amounts paid or incurred by
the taxpayer which are allocable to activities described in
paragraph (1).
(C) Expenses incurred in connection with lobbying and political
activities
Any amount paid or incurred for research for, or preparation,
planning, or coordination of, any activity described in
paragraph (1) shall be treated as paid or incurred in
connection with such activity.
(6) Covered executive branch official
For purposes of this subsection, the term "covered executive
branch official" means -
(A) the President,
(B) the Vice President,
(C) any officer or employee of the White House Office of the
Executive Office of the President, and the 2 most senior level
officers of each of the other agencies in such Executive
Office, and
(D)(i) any individual serving in a position in level I of the
Executive Schedule under section 5312 of title 5, United States
Code, (ii) any other individual designated by the President as
having Cabinet level status, and (iii) any immediate deputy of
an individual described in clause (i) or (ii).
(7) Special rule for Indian tribal governments
For purposes of this subsection, an Indian tribal government
shall be treated in the same manner as a local council or similar
governing body.
(8) Cross reference
For reporting requirements and alternative taxes related to
this subsection, see section 6033(e).
(f) Fines and penalties
No deduction shall be allowed under subsection (a) for any fine
or similar penalty paid to a government for the violation of any
law.
(g) Treble damage payments under the antitrust laws
If in a criminal proceeding a taxpayer is convicted of a
violation of the antitrust laws, or his plea of guilty or nolo
contendere to an indictment or information charging such a
violation is entered or accepted in such a proceeding, no deduction
shall be allowed under subsection (a) for two-thirds of any amount
paid or incurred -
(1) on any judgment for damages entered against the taxpayer
under section 4 of the Act entitled "An Act to supplement
existing laws against unlawful restraints and monopolies, and for
other purposes", approved October 15, 1914 (commonly known as the
Clayton Act), on account of such violation or any related
violation of the antitrust laws which occurred prior to the date
of the final judgment of such conviction, or
(2) in settlement of any action brought under such section 4 on
account of such violation or related violation.
The preceding sentence shall not apply with respect to any
conviction or plea before January 1, 1970, or to any conviction or
plea on or after such date in a new trial following an appeal of a
conviction before such date.
(h) State legislators' travel expenses away from home
(1) In general
For purposes of subsection (a), in the case of any individual
who is a State legislator at any time during the taxable year and
who makes an election under this subsection for the taxable year
-
(A) the place of residence of such individual within the
legislative district which he represented shall be considered
his home,
(B) he shall be deemed to have expended for living expenses
(in connection with his trade or business as a legislator) an
amount equal to the sum of the amounts determined by
multiplying each legislative day of such individual during the
taxable year by the greater of -
(i) the amount generally allowable with respect to such day
to employees of the State of which he is a legislator for per
diem while away from home, to the extent such amount does not
exceed 110 percent of the amount described in clause (ii)
with respect to such day, or
(ii) the amount generally allowable with respect to such
day to employees of the executive branch of the Federal
Government for per diem while away from home but serving in
the United States, and
(C) he shall be deemed to be away from home in the pursuit of
a trade or business on each legislative day.
(2) Legislative days
For purposes of paragraph (1), a legislative day during any
taxable year for any individual shall be any day during such year
on which -
(A) the legislature was in session (including any day in
which the legislature was not in session for a period of 4
consecutive days or less), or
(B) the legislature was not in session but the physical
presence of the individual was formally recorded at a meeting
of a committee of such legislature.
(3) Election
An election under this subsection for any taxable year shall be
made at such time and in such manner as the Secretary shall by
regulations prescribe.
(4) Section not to apply to legislators who reside near capitol
For taxable years beginning after December 31, 1980, this
subsection shall not apply to any legislator whose place of
residence within the legislative district which he represents is
50 or fewer miles from the capitol building of the State.
[(i) Repealed. Pub. L. 101-239, title VI, Sec. 6202(b)(3)(A), Dec.
19, 1989, 103 Stat. 2233]
(j) Certain foreign advertising expenses
(1) In general
No deduction shall be allowed under subsection (a) for any
expenses of an advertisement carried by a foreign broadcast
undertaking and directed primarily to a market in the United
States. This paragraph shall apply only to foreign broadcast
undertakings located in a country which denies a similar
deduction for the cost of advertising directed primarily to a
market in the foreign country when placed with a United States
broadcast undertaking.
(2) Broadcast undertaking
For purposes of paragraph (1), the term "broadcast undertaking"
includes (but is not limited to) radio and television stations.
(k) Stock reacquisition expenses
(1) In general
Except as provided in paragraph (2), no deduction otherwise
allowable shall be allowed under this chapter for any amount paid
or incurred by a corporation in connection with the reacquisition
of its stock or of the stock of any related person (as defined in
section 465(b)(3)(C)).
(2) Exceptions
Paragraph (1) shall not apply to -
(A) Certain specific deductions
Any -
(i) deduction allowable under section 163 (relating to
interest),
(ii) deduction for amounts which are properly allocable to
indebtedness and amortized over the term of such
indebtedness, or
(iii) deduction for dividends paid (within the meaning of
section 561).
(B) Stock of certain regulated investment companies
Any amount paid or incurred in connection with the redemption
of any stock in a regulated investment company which issues
only stock which is redeemable upon the demand of the
shareholder.
(l) Special rules for health insurance costs of self-employed
individuals
(1) Allowance of deduction
(A) In general
In the case of an individual who is an employee within the
meaning of section 401(c)(1), there shall be allowed as a
deduction under this section an amount equal to the applicable
percentage of the amount paid during the taxable year for
insurance which constitutes medical care for the taxpayer, his
spouse, and dependents.
(B) Applicable percentage
For purposes of subparagraph (A), the applicable percentage
shall be determined under the following table:
For taxable years beginning 2The applicable
in calendar year - percentage is -
--------------------------------------------------------------------
1999 through 2001 60
2002 70
2003 and thereafter 100.
--------------------------------------------------------------------
(2) Limitations
(A) Dollar amount
No deduction shall be allowed under paragraph (1) to the
extent that the amount of such deduction exceeds the taxpayer's
earned income (within the meaning of section 401(c)) derived by
the taxpayer from the trade or business with respect to which
the plan providing the medical care coverage is established.
(B) Other coverage
Paragraph (1) shall not apply to any taxpayer for any
calendar month for which the taxpayer is eligible to
participate in any subsidized health plan maintained by any
employer of the taxpayer or of the spouse of the taxpayer. The
preceding sentence shall be applied separately with respect to
-
(i) plans which include coverage for qualified long-term
care services (as defined in section 7702B(c)) or are
qualified long-term care insurance contracts (as defined in
section 7702B(b)), and
(ii) plans which do not include such coverage and are not
such contracts.
(C) Long-term care premiums
In the case of a qualified long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-term care
premiums (as defined in section 213(d)(10)) shall be taken into
account under paragraph (1).
(3) Coordination with medical deduction
Any amount paid by a taxpayer for insurance to which paragraph
(1) applies shall not be taken into account in computing the
amount allowable to the taxpayer as a deduction under section
213(a).
(4) Deduction not allowed for self-employment tax purposes
The deduction allowable by reason of this subsection shall not
be taken into account in determining an individual's net earnings
from self-employment (within the meaning of section 1402(a)) for
purposes of chapter 2.
(5) Treatment of certain S corporation shareholders
This subsection shall apply in the case of any individual
treated as a partner under section 1372(a), except that -
(A) for purposes of this subsection, such individual's wages
(as defined in section 3121) from the S corporation shall be
treated as such individual's earned income (within the meaning
of section 401(c)(1)), and
(B) there shall be such adjustments in the application of
this subsection as the Secretary may by regulations prescribe.
(m) Certain excessive employee remuneration
(1) In general
In the case of any publicly held corporation, no deduction
shall be allowed under this chapter for applicable employee
remuneration with respect to any covered employee to the extent
that the amount of such remuneration for the taxable year with
respect to such employee exceeds $1,000,000.
(2) Publicly held corporation
For purposes of this subsection, the term "publicly held
corporation" means any corporation issuing any class of common
equity securities required to be registered under section 12 of
the Securities Exchange Act of 1934.
(3) Covered employee
For purposes of this subsection, the term "covered employee"
means any employee of the taxpayer if -
(A) as of the close of the taxable year, such employee is the
chief executive officer of the taxpayer or is an individual
acting in such a capacity, or
(B) the total compensation of such employee for the taxable
year is required to be reported to shareholders under the
Securities Exchange Act of 1934 by reason of such employee
being among the 4 highest compensated officers for the taxable
year (other than the chief executive officer).
(4) Applicable employee remuneration
For purposes of this subsection -
(A) In general
Except as otherwise provided in this paragraph, the term
"applicable employee remuneration" means, with respect to any
covered employee for any taxable year, the aggregate amount
allowable as a deduction under this chapter for such taxable
year (determined without regard to this subsection) for
remuneration for services performed by such employee (whether
or not during the taxable year).
(B) Exception for remuneration payable on commission basis
The term "applicable employee remuneration" shall not include
any remuneration payable on a commission basis solely on
account of income generated directly by the individual
performance of the individual to whom such remuneration is
payable.
(C) Other performance-based compensation
The term "applicable employee remuneration" shall not include
any remuneration payable solely on account of the attainment of
one or more performance goals, but only if -
(i) the performance goals are determined by a compensation
committee of the board of directors of the taxpayer which is
comprised solely of 2 or more outside directors,
(ii) the material terms under which the remuneration is to
be paid, including the performance goals, are disclosed to
shareholders and approved by a majority of the vote in a
separate shareholder vote before the payment of such
remuneration, and
(iii) before any payment of such remuneration, the
compensation committee referred to in clause (i) certifies
that the performance goals and any other material terms were
in fact satisfied.
(D) Exception for existing binding contracts
The term "applicable employee remuneration" shall not include
any remuneration payable under a written binding contract which
was in effect on February 17, 1993, and which was not modified
thereafter in any material respect before such remuneration is
paid.
(E) Remuneration
For purposes of this paragraph, the term "remuneration"
includes any remuneration (including benefits) in any medium
other than cash, but shall not include -
(i) any payment referred to in so much of section
3121(a)(5) as precedes subparagraph (E) thereof, and
(ii) any benefit provided to or on behalf of an employee if
at the time such benefit is provided it is reasonable to
believe that the employee will be able to exclude such
benefit from gross income under this chapter.
For purposes of clause (i), section 3121(a)(5) shall be applied
without regard to section 3121(v)(1).
(F) Coordination with disallowed golden parachute payments
The dollar limitation contained in paragraph (1) shall be
reduced (but not below zero) by the amount (if any) which would
have been included in the applicable employee remuneration of
the covered employee for the taxable year but for being
disallowed under section 280G.
(n) Special rule for certain group health plans
(1) In general
No deduction shall be allowed under this chapter to an employer
for any amount paid or incurred in connection with a group health
plan if the plan does not reimburse for inpatient hospital care
services provided in the State of New York -
(A) except as provided in subparagraphs (B) and (C), at the
same rate as licensed commercial insurers are required to
reimburse hospitals for such services when such reimbursement
is not through such a plan,
(B) in the case of any reimbursement through a health
maintenance organization, at the same rate as health
maintenance organizations are required to reimburse hospitals
for such services for individuals not covered by such a plan
(determined without regard to any government-supported
individuals exempt from such rate), or
(C) in the case of any reimbursement through any corporation
organized under Article 43 of the New York State Insurance Law,
at the same rate as any such corporation is required to
reimburse hospitals for such services for individuals not
covered by such a plan.
(2) State law exception
Paragraph (1) shall not apply to any group health plan which is
not required under the laws of the State of New York (determined
without regard to this subsection or other provisions of Federal
law) to reimburse at the rates provided in paragraph (1).
(3) Group health plan
For purposes of this subsection, the term "group health plan"
means a plan of, or contributed to by, an employer or employee
organization (including a self-insured plan) to provide health
care (directly or otherwise) to any employee, any former
employee, the employer, or any other individual associated or
formerly associated with the employer in a business relationship,
or any member of their family.
(o) Treatment of certain reimbursed expenses of rural mail carriers
(1) General rule
In the case of any employee of the United States Postal Service
who performs services involving the collection and delivery of
mail on a rural route and who receives qualified reimbursements
for the expenses incurred by such employee for the use of a
vehicle in performing such services -
(A) the amount allowable as a deduction under this chapter
for the use of a vehicle in performing such services shall be
equal to the amount of such qualified reimbursements; and
(B) such qualified reimbursements shall be treated as paid
under a reimbursement or other expense allowance arrangement
for purposes of section 62(a)(2)(A) (and section 62(c) shall
not apply to such qualified reimbursements).
(2) Definition of qualified reimbursements
For purposes of this subsection, the term "qualified
reimbursements" means the amounts paid by the United States
Postal Service to employees as an equipment maintenance allowance
under the 1991 collective bargaining agreement between the United
States Postal Service and the National Rural Letter Carriers'
Association. Amounts paid as an equipment maintenance allowance
by such Postal Service under later collective bargaining
agreements that supersede the 1991 agreement shall be considered
qualified reimbursements if such amounts do not exceed the
amounts that would have been paid under the 1991 agreement,
adjusted for changes in the Consumer Price Index (as defined in
section 1(f)(5)) since 1991.
(p) Treatment of expenses of members of reserve component of Armed
Forces of the United States
For purposes of subsection (a)(2), in the case of an individual
who performs services as a member of a reserve component of the
Armed Forces of the United States at any time during the taxable
year, such individual shall be deemed to be away from home in the
pursuit of a trade or business for any period during which such
individual is away from home in connection with such service.
(q) Cross reference
(1) For special rule relating to expenses in connection with
subdividing real property for sale, see section 1237.
(2) For special rule relating to the treatment of payments by
a transferee of a franchise, trademark, or trade name, see
section 1253.
(3) For special rules relating to -
(A) funded welfare benefit plans, see section 419, and
(B) deferred compensation and other deferred benefits, see
section 404.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 45; Pub. L. 85-866, title I,
Sec. 5(a), Sept. 2, 1958, 72 Stat. 1608; Pub. L. 86-779, Secs.
7(b), 8(a), Sept. 14, 1960, 74 Stat. 1002, 1003; Pub. L. 87-834,
Secs. 3(a), 4(b), Oct. 16, 1962, 76 Stat. 973, 976; Pub. L. 91-172,
title V, Sec. 516(c)(2)(A), title IX, Sec. 902(a), (b), Dec. 30,
1969, 83 Stat. 648, 710; Pub. L. 92-178, title III, Sec. 310(a),
Dec. 10, 1971, 85 Stat. 525; Pub. L. 94-455, title XIX, Secs.
1901(c)(4), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1803, 1834; Pub.
L. 97-34, title I, Sec. 127(a), Aug. 13, 1981, 95 Stat. 202; Pub.
L. 97-35, title XXI, Sec. 2146(b), Aug. 13, 1981, 95 Stat. 801;
Pub. L. 97-51, Sec. 139(b)(1), Oct. 1, 1981, 95 Stat. 967; Pub. L.
97-216, title II, Sec. 215(a), July 18, 1982, 96 Stat. 194; Pub. L.
97-248, title I, Sec. 128(b), title II, Sec. 288(a), Sept. 3, 1982,
96 Stat. 366, 571; Pub. L. 98-369, div. A, title V, Sec. 512(b),
div. B, title III, Sec. 2354(d), July 18, 1984, 98 Stat. 863, 1102;
Pub. L. 98-573, title II, Sec. 232(a), Oct. 30, 1984, 98 Stat.
2991; Pub. L. 99-272, title X, Sec. 10001(a), (c), (d), Apr. 7,
1986, 100 Stat. 222, 223, 227; Pub. L. 99-509, title IX, Secs.
9307(c)(2)(B), 9501(a)(1), (b)(1)(A), (2)(A), (c)(1), (d)(1), Oct.
21, 1986, 100 Stat. 1995, 2075-2077; Pub. L. 99-514, title VI, Sec.
613(a), title XI, Sec. 1161(a), title XVIII, Sec. 1895(d)(1)(A),
(2)(A), (3)(A), (4)(A), (5)(A), (6)(A), (7), Oct. 22, 1986, 100
Stat. 2251, 2509, 2936-2940; Pub. L. 100-647, title I, Secs.
1011B(b)(1)-(3), 1018(t)(7)(B), title III, Sec. 3011(b)(2), (3),
Nov. 10, 1988, 102 Stat. 3488, 3589, 3624, 3625; Pub. L. 101-140,
title II, Sec. 203(a)(4), Nov. 8, 1989, 103 Stat. 830; Pub. L.
101-239, title VI, Sec. 6202(b)(3)(A), title VII, Secs. 7107(a)(1),
(b), 7862(c)(3)(A), Dec. 19, 1989, 103 Stat. 2233, 2306, 2432; Pub.
L. 101-508, title XI, Secs. 11111(d)(2), 11410(a), Nov. 5, 1990,
104 Stat. 1388-413, 1388-479; Pub. L. 102-227, title I, Sec.
110(a)(1), Dec. 11, 1991, 105 Stat. 1688; Pub. L. 102-486, title
XIX, Sec. 1938(a), Oct. 24, 1992, 106 Stat. 3033; Pub. L. 103-66,
title XIII, Secs. 13131(d)(2), 13174(a)(1), (b)(1), 13211(a),
13222(a), 13442(a), Aug. 10, 1993, 107 Stat. 435, 457, 469, 477,
568; Pub. L. 104-7, Sec. 1(a), (b), Apr. 11, 1995, 109 Stat. 93;
Pub. L. 104-188, title I, Sec. 1704(p)(1)-(3), Aug. 20, 1996, 110
Stat. 1886; Pub. L. 104-191, title III, Secs. 311(a), 322(b)(2)(B),
Aug. 21, 1996, 110 Stat. 2053, 2060; Pub. L. 105-34, title IX, Sec.
934(a), title XII, Secs. 1203(a), 1204(a), title XVI, Sec. 1602(c),
Aug. 5, 1997, 111 Stat. 882, 994, 995, 1094; Pub. L. 105-206, title
VI, Sec. 6012(a), July 22, 1998, 112 Stat. 818; Pub. L. 105-277,
div. J, title II, Sec. 2002(a), Oct. 21, 1998, 112 Stat. 2681-901;
Pub. L. 108-121, title I, Sec. 109(a), Nov. 11, 2003, 117 Stat.
1341.)
-REFTEXT-
REFERENCES IN TEXT
The Foreign Corrupt Practices Act of 1977, referred to in subsec.
(c)(1), is title I of Pub. L. 95-213, Dec. 19, 1977, 91 Stat. 1494,
as amended, which enacted sections 78dd-1 to 78dd-3 of Title 15,
Commerce and Trade, and amended sections 78m and 78ff of Title 15.
For complete classification of this Act to the Code, see Short
Title of 1977 Amendment note set out under section 78a of Title 15
and Tables.
The Social Security Act, referred to in subsec. (c)(3), is act
Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended, which is
classified generally to chapter 7 (Sec. 301 et seq.) of Title 42,
The Public Health and Welfare. For complete classification of this
Act to the Code, see section 1305 of Title 42 and Tables.
The antitrust laws, referred to in subsec. (g), are classified
generally to section 1 et seq. of Title 15, Commerce and Trade.
Section 4 of the Clayton Act, referred to in subsec. (g)(1), is
classified to section 15 of Title 15.
The Securities Exchange Act of 1934, referred to in subsec.
(m)(2), (3)(B), is act June 6, 1934, ch. 404, 48 Stat. 881, as
amended, which is classified principally to chapter 2B (Sec. 78a et
seq.) of Title 15. Section 12 of the Act is classified to section
78l of Title 15. For complete classification of this Act to the
Code, see section 78a of Title 15 and Tables.
-MISC1-
AMENDMENTS
2003 - Subsecs. (p), (q). Pub. L. 108-121 added subsec. (p) and
redesignated former subsec. (p) as (q).
1998 - Subsec. (a). Pub. L. 105-206, in last sentence,
substituted "investigate or prosecute, or provide support services
for the investigation or prosecution of, a Federal crime." for
"investigate, or provide support services for the investigation of,
a Federal crime."
Subsec. (l)(1)(B). Pub. L. 105-277 amended table in subpar. (B)
generally. Prior to amendment, table read as follows:
"For taxable years beginning 2The applicable
in calendar year - percentage is -
--------------------------------------------------------------------
1997 40
1998 and 1999 45
2000 and 2001 50
2002 60
2003 through 2005 80
2006 90
2007 and thereafter 100."
--------------------------------------------------------------------
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1204(a), inserted at end
of concluding provisions "The preceding sentence shall not apply to
any Federal employee during any period for which such employee is
certified by the Attorney General (or the designee thereof) as
traveling on behalf of the United States in temporary duty status
to investigate, or provide support services for the investigation
of, a Federal crime."
Subsec. (l)(1)(B). Pub. L. 105-34, Sec. 934(a), amended table
generally. Prior to amendment, table read as follows:
"For taxable years beginning 2The applicable
in calendar year -
percentage is -
--------------------------------------------------------------------
1997 40 percent
1998 through 2002 45 percent
2003 50 percent
2004 60 percent
2005 70 percent
2006 or thereafter 80 percent."
--------------------------------------------------------------------
Subsec. (l)(2)(B). Pub. L. 105-34, Sec. 1602(c), inserted "The
preceding sentence shall be applied separately with respect to - "
at end and added cls. (i) and (ii).
Subsecs. (o), (p). Pub. L. 105-34, Sec. 1203(a), added subsec.
(o) and redesignated former subsec. (o) as (p).
1996 - Subsec. (k). Pub. L. 104-188, Sec. 1704(p)(3), substituted
"reaquisition" for "redemption" in heading.
Subsec. (k)(1). Pub. L. 104-188, Sec. 1704(p)(1), substituted
"the reacquisition of its stock or of the stock of any related
person (as defined in section 465(b)(3)(C))" for "the redemption of
its stock".
Subsec. (k)(2)(A). Pub. L. 104-188, Sec. 1704(p)(2), struck out
"or" at end of cl. (i), added cl. (ii), and redesignated former cl.
(ii) as (iii).
Subsec. (l)(1). Pub. L. 104-191, Sec. 311(a), amended par. (1)
generally. Prior to amendment, par. (1) read as follows:
"(1) In general. - In the case of an individual who is an
employee within the meaning of section 401(c)(1), there shall be
allowed as a deduction under this section an amount equal to 30
percent of the amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, his spouse, and
dependents."
Subsec. (l)(2)(C). Pub. L. 104-191, Sec. 322(b)(2)(B), added
subpar. (C).
1995 - Subsec. (l)(1). Pub. L. 104-7, Sec. 1(b), substituted "30
percent" for "25 percent".
Subsec. (l)(6). Pub. L. 104-7, Sec. 1(a), struck out par. (6)
"Termination" which read as follows: "This subsection shall not
apply to any taxable year beginning after December 31, 1993."
1993 - Subsec. (e). Pub. L. 103-66, Sec. 13222(a), amended
heading and text generally. Prior to amendment, text consisted of
pars. (1) and (2) relating to deduction of ordinary and necessary
expenses paid or incurred in connection with certain activities
relating to congressional, State, and local legislation.
Subsec. (l)(2)(B). Pub. L. 103-66, Sec. 13174(b)(1), amended
heading and text of subpar. (B) generally. Prior to amendment, text
read as follows: "Paragraph (1) shall not apply to any taxpayer who
is eligible to participate in any subsidized health plan maintained
by any employer of the taxpayer or of the spouse of the taxpayer."
Subsec. (l)(3). Pub. L. 103-66, Sec. 13131(d)(2), amended heading
and text of par. (3) generally. Prior to amendment, text read as
follows:
"(A) Medical deduction. - Any amount paid by a taxpayer for
insurance to which paragraph (1) applies shall not be taken into
account in computing the amount allowable to the taxpayer as a
deduction under section 213(a).
"(B) Health insurance credit. - The amount otherwise taken into
account under paragraph (1) as paid for insurance which constitutes
medical care shall be reduced by the amount (if any) of the health
insurance credit allowable to the taxpayer for the taxable year
under section 32."
Subsec. (l)(6). Pub. L. 103-66, Sec. 13174(a)(1), substituted
"December 31, 1993" for "June 30, 1992".
Subsec. (m). Pub. L. 103-66, Sec. 13211(a), added subsec. (m).
Former subsec. (m) redesignated (n).
Subsec. (n). Pub. L. 103-66, Sec. 13442(a), added subsec. (n).
Former subsec. (n) redesignated (o).
Pub. L. 103-66, Sec. 13211(a), redesignated subsec. (m) as (n).
Subsec. (o). Pub. L. 103-66, Sec. 13442(a), redesignated subsec.
(n) as (o).
1992 - Subsec. (a). Pub. L. 102-486 inserted at end "For purposes
of paragraph (2), the taxpayer shall not be treated as being
temporarily away from home during any period of employment if such
period exceeds 1 year."
1991 - Subsec. (l)(6). Pub. L. 102-227 substituted "June 30,
1992" for "December 31, 1991".
1990 - Subsec. (l)(3). Pub. L. 101-508, Sec. 11111(d)(2),
substituted heading for one which read: "Coordination with medical
deduction" and amended text generally. Prior to amendment, text
read as follows: "Any amount paid by a taxpayer for insurance to
which paragraph (1) applies shall not be taken into account in
computing the amount allowable to the taxpayer as a deduction under
section 213(a)."
Subsec. (l)(6). Pub. L. 101-508, Sec. 11410(a), substituted
"December 31, 1991" for "September 30, 1990".
1989 - Subsec. (i). Pub. L. 101-239, Sec. 6202(b)(3)(A), struck
out subsec. (i) which read as follows:
"(1) Coverage relating to end stage renal disease. - The expenses
paid or incurred by an employer for a group health plan shall not
be allowed as a deduction under this section if the plan
differentiates in the benefits it provides between individuals
having end stage renal disease and other individuals covered by
such plan on the basis of the existence of end stage renal disease,
the need for renal dialysis, or in any other manner.
"(2) Group health plan. - For purposes of this subsection the
term 'group health plan' means any plan of, or contributed to by,
an employer to provide medical care (as defined in section 213(d)
to his employees, former employees, or the families of such
employees or former employees, directly or through insurance,
reimbursement, or otherwise."
Subsec. (k)(2)(B)(iv). Pub. L. 101-239, Sec. 7862(c)(3)(A),
amended cl. (iv) as it existed prior to repeal of subsec. (k) by
Pub. L. 100-647, by substituting "entitlement" for "eligibility" in
heading and inserting "which does not contain any exclusion or
limitation with respect to any preexisting condition of such
beneficiary" after "or otherwise)" in subclause (I).
Subsec. (l)(2). Pub. L. 101-140 redesignated subpar. (C) as (B)
and struck out former subpar. (B) which read as follows: "Required
coverage. - Paragraph (1) shall not apply to any taxpayer for any
taxable year unless coverage is provided under 1 or more plans
meeting the requirements of section 89, treating such coverage as
an employer-provided benefit."
Subsec. (l)(5). Pub. L. 101-239, Sec. 7107(b), added par. (5).
Former par. (5) redesignated (6).
Pub. L. 101-239, Sec. 7107(a)(1), substituted "September 30,
1990" for "December 31, 1989".
Subsec. (l)(6). Pub. L. 101-239, Sec. 7107(b), redesignated
former par. (5) as (6).
1988 - Subsec. (i)(2), (3). Pub. L. 100-647, Sec. 3011(b)(2),
redesignated par. (3) as (2) and struck out former par. (2) which
required plans to provide continuation coverage to certain
individuals.
Subsec. (k). Pub. L. 100-647, Sec. 3011(b)(3), redesignated
subsec. (l), relating to stock redemption expenses, as (k) and
struck out former subsec. (k) which related to continuation
coverage requirements of group health plans.
Subsec. (k)(5)(B). Pub. L. 100-647, Sec. 1018(t)(7)(B), made
amendment identical to Pub. L. 99-509, Sec. 9307(c)(2)(B), which
amended directory language of Pub. L. 99-514, Sec. 1895(d)(5)(A),
by substituting "section 162(k)(5)" for "section 162(k)(2)". See
1986 Amendment note below.
Subsec . (l). Pub. L. 100-647, Sec. 3011(b)(3)(A), (B),
redesignated subsec. (m), relating to special rules for health
insurance costs of self-employed individuals, as (l). Former
subsec. (l), relating to stock redemption expenses, redesignated
(k).
Subsec. (m). Pub. L. 100-647, Sec. 3011(b)(3)(B), (C),
redesignated subsec. (n), relating to cross references, as (m).
Former subsec. (m), relating to special rules for health insurance
costs of self-employed individuals, redesignated (l).
Pub. L. 100-647, Sec. 1011B(b)(2), redesignated subsec. (m),
relating to cross references, as (n).
Subsec. (m)(2)(A). Pub. L. 100-647, Sec. 1011B(b)(3), inserted
"derived by the taxpayer from the trade or business with respect to
which the plan providing the medical care coverage is established"
after "401(c))".
Subsec. (m)(4), (5). Pub. L. 100-647, Sec. 1011B(b)(1), added
par. (4) and redesignated former par. (4) as (5).
Subsec. (n). Pub. L. 100-647, Sec. 3011(b)(3)(C), redesignated
subsec. (n) as (m).
Pub. L. 100-647, Sec. 1011B(b)(2), redesignated subsec. (m),
relating to cross references, as (n).
1986 - Subsec. (i)(1). Pub. L. 99-272, Sec. 10001(d), substituted
"Coverage relating to end stage renal disease" for "General rule"
in heading.
Subsec. (i)(2), (3). Pub. L. 99-272, Sec. 10001(a), added par.
(2) and redesignated former par. (2) as (3).
Subsec. (k). Pub. L. 99-272, Sec. 10001(c), added subsec. (k).
Former subsec. (k) redesignated (l).
Subsec. (k)(2)(A). Pub. L. 99-514, Sec. 1895(d)(1)(A), inserted
"If coverage under the plan is modified for any group of similarly
situated beneficiaries, the coverage shall also be modified in the
same manner for all individuals who are qualified beneficiaries
under the plan pursuant to this subsection in connection with such
group."
Subsec. (k)(2)(B)(i). Pub. L. 99-514, Sec. 1895(d)(2)(A),
substituted "Maximum required period" for "Maximum period" in
heading and amended text generally. Prior to amendment, text read
as follows: "In the case of -
"(I) a qualifying event described in paragraph (3)(B) (relating
to terminations and reduced hours), the date which is 18 months
after the date of the qualifying event, and
"(II) any qualifying event not described in subclause (I), the
date which is 36 months after the date of the qualifying event."
Subsec. (k)(2)(B)(i)(II). Pub. L. 99-509, Sec. 9501(b)(1)(A)(i),
inserted "(other than a qualifying event described in paragraph
(3)(F))".
Subsec. (k)(2)(B)(i)(III), (IV). Pub. L. 99-509, Sec.
9501(b)(1)(A)(ii)-(iv), added subcl. (III), redesignated former
subcl. (III) as (IV), and inserted "or (3)(F)".
Subsec. (k)(2)(B)(iii). Pub. L. 99-514, Sec. 1895(d)(3)(A),
inserted "The payment of any premium (other than any payment
referred to in the last sentence of subparagraph (C)) shall be
considered to be timely if made within 30 days after the date due
or within such longer period as applies to or under the plan."
Subsec. (k)(2)(B)(iv). Pub. L. 99-514, Sec. 1895(d)(4)(A)(iii),
substituted "Group health plan coverage" for "Reemployment" in
heading.
Subsec. (k)(2)(B)(iv)(I). Pub. L. 99-514, Sec. 1895(d)(4)(A)(ii),
substituted "covered under any other group health plan (as an
employee or otherwise)" for "a covered employee under any other
group health plan".
Subsec. (k)(2)(B)(iv)(II). Pub. L. 99-509, Sec. 9501(b)(2)(A),
inserted "in the case of a qualified beneficiary other than a
qualified beneficiary described in paragraph (7)(B)(iv),".
Subsec. (k)(2)(B)(v). Pub. L. 99-514, Sec. 1895(d)(4)(A)(i),
struck out cl. (v), remarriage of spouse, which read as follows:
"In the case of an individual who is a qualified beneficiary by
reason of being the spouse of a covered employee, the date on which
the beneficiary remarries and becomes covered under a group health
plan."
Subsec. (k)(3). Pub. L. 99-509, Sec. 9501(a)(1), added subpar.
(F) and concluding provisions.
Subsec. (k)(5)(B). Pub. L. 99-514, Sec. 1895(d)(5)(A), as amended
by Pub. L. 99-509, Sec. 9307(c)(2)(B), and Pub. L. 100-647, Sec.
1018(t)(7)(B), inserted "of continuation coverage" and "If there is
a choice among types of coverage under the plan, each qualified
beneficiary is entitled to make a separate selection among such
types of coverage." See 1988 Amendment note above.
Subsec. (k)(6)(B). Pub. L. 99-509, Sec. 9501(d)(1), substituted
"(D), or (F)" for "or (D)".
Subsec. (k)(6)(C). Pub. L. 99-514, Sec. 1895(d)(6)(A), inserted
"within 60 days after the date of the qualifying event".
Subsec. (k)(6)(D)(i). Pub. L. 99-509, Sec. 9501(d)(1),
substituted "(D), or (F)" for "or (D)".
Subsec. (k)(7)(B)(iii). Pub. L. 99-514, Sec. 1895(d)(7), added
cl. (iii).
Subsec. (k)(7)(B)(iv). Pub. L. 99-509, Sec. 9501(c)(1), added cl.
(iv).
Subsec. (l). Pub. L. 99-514, Sec. 613(a), added subsec. (l).
Former subsec. (l) redesignated (m).
Pub. L. 99-272, Sec. 10001(c), redesignated former subsec. (k),
relating to cross references, as (l).
Subsec. (m). Pub. L. 99-514, Sec. 1161(a), added subsec. (m)
relating to special rules for health insurance costs of
self-employed individuals, and further directed that this section
be amended "by redesignating subsection (n) as subsection (m)",
which directory language could not be executed because this section
does not contain a subsec. (n).
Pub. L. 99-514, Sec. 613(a), redesignated subsec. (l), relating
to cross references, as (m).
1984 - Subsec. (i)(2). Pub. L. 98-369, Sec. 2354(d), substituted
"section 213(d)" for "section 213(e)".
Subsec. (j). Pub. L. 98-573 added subsec. (j). Former subsec. (j)
redesignated (k).
Subsec. (j)(3). Pub. L. 98-369, Sec. 512(b), added par. (3).
Subsec. (k). Pub. L. 98-573 redesignated former subsec. (j) as
(k).
1982 - Subsec. (a). Pub. L. 97-216 inserted provisions under
which amounts expended by Members of Congress within each taxable
year for living expenses shall not be deductible for income tax
purposes in excess of $3,000.
Subsec. (c)(1). Pub. L. 97-248, Sec. 288(a), substituted "is
unlawful under the Foreign Corrupt Practices Act of 1977" for
"would be unlawful under the laws of the United States if such laws
were applicable to such payment and to such official or employee"
after "government, the payment", and "(or is unlawful under the
Foreign Corrupt Practices Act of 1977)" for "(or would be unlawful
under the laws of the United States)" before "shall be upon the
Secretary".
Subsec. (h). Pub. L. 97-248, Sec. 128(b)(2), redesignated subsec.
(i), relating to State legislators' travel expenses away from home,
as (h). Former subsec. (h), relating to group health plans,
redesignated (i).
Subsec. (i). Pub. L. 97-248, Sec. 128(b)(2), redesignated former
subsec. (h), relating to group health plans, as (i). Former subsec.
(i), relating to State legislators' travel expenses away from home,
redesignated (h). Former subsec. (i), relating to cross references,
redesignated (j).
Subsec. (j). Pub. L. 97-248, Sec. 128(b)(1), redesignated former
subsec. (i), relating to cross references, as (j).
1981 - Subsec. (a). Pub L. 97-51 struck out provisions under
which amounts expended by Members of Congress within each taxable
year for living expenses could not be deductible for income tax
purposes in excess of $3,000.
Subsec. (h). Pub. L. 97-35 added subsec. (h) relating to group
health plans. Former subsec. (h), as added by Pub. L. 97-34 and
relating to State legislators' travel expenses away from home,
redesignated (i). See 1982 Amendment note above.
Pub. L. 97-34 added subsec. (h) relating to State legislators'
travel expenses away from home. Former subsec. (h), relating to
cross references, redesignated (i). See 1982 Amendment note above.
Subsec. (i). Pub. L. 97-35 redesignated former subsec. (h), as
added by Pub. L. 97-34 and relating to State legislators' travel
expenses away from home, as (i). See 1982 Amendment note above.
Pub. L. 97-34 redesignated former subsec. (h), relating to cross
references, as (i). See 1982 Amendment note above.
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1901(c)(4), struck out
reference to Territory in provisions following par. (3).
Subsec. (c). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out in
pars. (1) and (2) "or his delegate" after "Secretary".
1971 - Subsec. (c). Pub. L. 92-178, Sec. 310(a)(2), substituted
"Illegal bribes, kickbacks, and other payments" for "Bribes and
illegal kickbacks" in heading.
Subsec. (c)(2). Pub. L. 92-178, Sec. 310(a)(1), substituted
provisions respecting "Other illegal payments" for former
provisions on "Other bribes or kickbacks" reading "If in a criminal
proceeding a taxpayer is convicted of making a payment (other than
a payment described in paragraph (1) which is an illegal bribe or
kickback, or his plea of guilty or nolo contendere to an indictment
or information charging the making of such a payment is entered or
accepted in such a proceeding, no deduction shall be allowed under
subsection (a) on account of such payment or any related payment
made prior to the date of the final judgment in such proceeding."
Subsec. (c)(3). Pub. L. 92-178, Sec. 310(a)(1), substituted
provisions respecting kickbacks, rebates, and bribes under medicare
and medicaid for former statute of limitations provisions.
1969 - Subsec. (c). Pub. L. 91-172, Sec. 902(b), designated
existing provisions as par. (1), extended the applicability of
nondeductible expenses for payments to any official or employee of
any government, or of any agency or instrumentality of any
government, and added pars. (2) and (3).
Subsecs. (f), (g). Pub. L. 91-172, Sec. 902(a), added subsecs.
(f) and (g). Former subsec. (f) redesignated (h).
Subsec. (h). Pub. L. 91-172, Secs. 516(c)(2)(A), 902(a),
redesignated former subsec. (f) as (h), substituted "(1) For" for
"For", and inserted reference to section 1253 for special rule
relating to the treatment of payments by a transferee of a
franchise, trademark, or trade name.
1962 - Subsec. (a)(2). Pub. L. 87-834, Sec. 4(b), substituted
"(including amounts expended for meals and lodging other than
amounts which are lavish or extravagant under the circumstances)"
for "including the entire amount expended for meals and lodging)".
Subsecs. (e), (f). Pub. L. 87-834, Sec. 3(a), added subsec. (e)
and redesignated former subsec. (e) as (f).
1960 - Subsec. (b). Pub. L. 86-779, Sec. 7(b), inserted "the
dollar limitations," after "the percentage limitations,".
Subsecs. (d), (e). Pub. L. 86-779, Sec. 8(a), added subsec. (d)
and redesignated former subsec. (d) as (e).
1958 - Subsecs. (c), (d). Pub. L. 85-866, Sec. 5(a), added
subsec. (c) and redesignated former subsec. (c) as (d).
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-121 applicable to amounts paid or
incurred in taxable years beginning after Dec. 31, 2002, see
section 109(c) of Pub. L. 108-121, set out as a note under section
62 of this title.
EFFECTIVE DATE OF 1998 AMENDMENTS
Pub. L. 105-277, div. J, title II, Sec. 2002(b), Oct. 21, 1998,
112 Stat. 2681-901, provided that: "The amendment made by this
section [amending this section] shall apply to taxable years
beginning after December 31, 1998."
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 934(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1996."
Section 1203(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section and repealing
provisions set out as a note below] shall apply to taxable years
beginning after December 31, 1997."
Section 1204(b) of Pub. L. 105-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts paid or incurred with respect to taxable years ending after
the date of the enactment of this Act [Aug. 5, 1997]."
Amendment by section 1602(c) of Pub. L. 105-34 effective as if
included in the provisions of the Health Insurance Portability and
Accountability Act of 1996, Pub. L. 104-191, to which such
amendment relates, see section 1602(i) of Pub. L. 105-34, set out
as a note under section 26 of this title.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by section 311(a) of Pub. L. 104-191 applicable to
taxable years beginning after Dec. 31, 1996, see section 311(c) of
Pub. L. 104-191, set out as a note under section 104 of this title.
Section 322(c) of Pub. L. 104-191 provided that: "The amendments
made by this section [amending this section and section 213 of this
title] shall apply to taxable years beginning after December 31,
1996."
Section 1704(p)(4) of Pub. L. 104-188 provided that:
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by this subsection [amending this section] shall
apply to amounts paid or incurred after September 13, 1995, in
taxable years ending after such date.
"(B) Paragraph (2). - The amendment made by paragraph (2)
[amending this section] shall take effect as if included in the
amendment made by section 613 of the Tax Reform Act of 1986 [Pub.
L. 99-514]."
EFFECTIVE DATE OF 1995 AMENDMENT
Section 1(c) of Pub. L. 104-7 provided that:
"(1) Extension. - The amendment made by subsection (a) [amending
this section] shall apply to taxable years beginning after December
31, 1993.
"(2) Increase. - The amendment made by subsection (b) [amending
this section] shall apply to taxable years beginning after December
31, 1994."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by section 13131(d)(2) of Pub. L. 103-66 applicable to
taxable years beginning after Dec. 31, 1993, see section 13131(e)
of Pub. L. 103-66, set out as a note under section 32 of this
title.
Section 13174(a)(3) of Pub. L. 103-66 provided that: "The
amendments made by this subsection [amending this section and
repealing provisions set out below] shall apply to taxable years
ending after June 30, 1992."
Section 13174(b)(2) of Pub. L. 103-66 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to taxable years beginning after December 31, 1992."
Section 13211(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts which would otherwise be deductible for taxable years
beginning on or after January 1, 1994."
Section 13222(e) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section and sections 170, 6033,
and 7871 of this title] shall apply to amounts paid or incurred
after December 31, 1993."
Section 13442(b) of Pub. L. 103-66, as amended by Pub. L. 104-7,
Sec. 5, Apr. 11, 1995, 109 Stat. 96, provided that: "The provisions
of this section [amending this section] shall apply to services
provided after February 2, 1993, and on or before December 31,
1995."
EFFECTIVE DATE OF 1992 AMENDMENT
Section 1938(b) of Pub. L. 102-486 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to costs
paid or incurred after December 31, 1992."
EFFECTIVE DATE OF 1991 AMENDMENT
Section 110(b) of Pub. L. 102-227 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1991."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11111(d)(2) of Pub. L. 101-508 applicable to
taxable years beginning after Dec. 31, 1990, see section 11111(f)
of Pub. L. 101-508, set out as a note under section 32 of this
title.
Section 11410(c) of Pub. L. 101-508 provided that: "The
amendments made by this section [amending this section and
repealing provisions set out below] shall apply to taxable years
beginning after December 31, 1989."
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 6202(b)(5) of Pub. L. 101-239 provided that: "The
amendments made by this subsection [amending this section, sections
4980B and 5000 of this title, sections 623 and 631 of Title 29,
Labor, and sections 1395p, 1395r, and 1395y of Title 42, The Public
Health and Welfare] shall apply to items and services furnished
after the date of the enactment of this Act [Dec. 19, 1989]."
Section 7107(c) of Pub. L. 101-239 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1989."
Section 7862(c)(3)(D) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section, section
4980B of this title, and section 1162 of Title 29, Labor] shall
apply to -
"(i) qualifying events occurring after December 31, 1989, and
"(ii) in the case of qualified beneficiaries who elected
continuation coverage after December 31, 1988, the period for
which the required premium was paid (or was attempted to be paid
but was rejected as such)."
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011B(b)(1)-(3) and 1018(t)(7)(B) of Pub.
L. 100-647 effective, except as otherwise provided, as if included
in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Section 3011(d) of Pub. L. 100-647 provided that: "The amendments
made by this section [enacting section 4980B of this title, and
amending this section, sections 106 and 414 of this title, section
1167 of Title 29, Labor, and section 300bb-8 of Title 42, The
Public Health and Welfare] shall apply to taxable years beginning
after December 31, 1988, but shall not apply to any plan for any
plan year to which section 162(k) of the Internal Revenue Code of
1986 (as in effect on the day before the date of the enactment of
this Act [Nov. 10, 1988]) did not apply by reason of section
10001(e)(2) of the Consolidated Omnibus Budget Reconciliation Act
of 1985 [section 10001(e)(2) of Pub. L. 99-272, set out as an
Effective Date of 1986 Amendment note under section 106 of this
title]."
EFFECTIVE DATE OF 1986 AMENDMENTS
Section 613(b) of Pub. L. 99-514 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to any
amount paid or incurred after February 28, 1986, in taxable years
ending after such date."
Section 1161(b) of Pub. L. 99-514 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to taxable years beginning after December
31, 1986.
"(2) Transitional rule. - In the case of any year to which
section 89 of the Internal Revenue Code of 1986 does not apply,
[former] section 162(m)(2)(B) of such Code shall be applied by
substituting any nondiscrimination requirements otherwise
applicable for the requirements of section 89 of such Code.
"(3) Assistance. - The Secretary of the Treasury or his delegate
shall provide guidance to self-employed individuals to assist them
in meeting the requirements of section 89 of the Internal Revenue
Code of 1986 with respect to coverage required by the amendments
made by this section [amending this section]."
Section 1895(d)(6)(D) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section, section
1166 of Title 29, Labor, and section 300bb-6 of Title 42, The
Public Health and Welfare] shall only apply with respect to
qualifying events occurring after the date of the enactment of this
Act [Oct. 22, 1986]."
Section 1895(e) of Pub. L. 99-514 provided that: "Except as
otherwise provided in this section, the amendments made by this
section [amending this section, section 3121 of this title,
sections 1162 and 1165 to 1167 of Title 29, sections 300bb-2,
300bb-5, 300bb-6, 410, 1301, 1320c-13, 1395p, 1395u, 1395cc,
1395dd, 1395mm, 1395ww, 1395yy, 1396a, 1396b, 1396d, and 1396s of
Title 42, enacting provisions set out as notes under this section,
section 3121 of this title, section 1167 of Title 29, and sections
1395u, 1395y, 1395ww, and 1395yy of Title 42, and amending
provisions set out as notes under sections 403, 1395u, 1395cc,
1395mm, 1395ww, 1395yy, and 1396b of Title 42] shall be effective
as if included in the enactment of the Consolidated Omnibus Budget
Reconciliation Act of 1985 [Pub. L. 99-272]."
Amendment by section 9307(c)(2)(B) of Pub. L. 99-509 effective as
if included in the enactment of Tax Reform Act of 1986, Pub. L.
99-514, see section 9307(c)(2) of Pub. L. 99-509, set out as a note
under section 1395u of Title 42.
Section 9501(e) of Pub. L. 99-509 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 1162, 1163, 1166, and 1167 of Title 29,
Labor] shall take effect as if included in title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 [sections
10001 to 10003 of Pub. L. 99-272].
"(2) Treatment of certain bankruptcy proceedings. -
Notwithstanding paragraph (1), section 10001(e) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 [set out as a note under
section 106 of this title], and section 10002(d) of such Act [set
out as a note under section 1161 of Title 29], the amendments made
by this section [amending this section and sections 1162, 1163,
1166, and 1167 of Title 29] and by sections 10001 and 10002 of such
Act [enacting sections 1161 to 1168 of Title 29, amending this
section, section 106 of this title, and section 1132 of Title 29,
and enacting provisions set out as notes under section 106 of this
title and sections 1161 and 1166 of Title 29] shall apply in the
case of plan years ending during the 12-month period beginning July
1, 1986, but only with respect to -
"(A) a qualifying event described in section 162(k)(3)(F) of
the Internal Revenue Code of 1986 or section 603(6) of the
Employee Retirement Income Security Act of 1974 [29 U.S.C.
1163(6)], and
"(B) a qualifying event described in section 162(k)(3)(A) of
the Internal Revenue Code of 1986 or section 603(1) of the
Employee Retirement Income Security Act of 1974 [29 U.S.C.
1163(1)] relating to the death of a retired employee occurring
after the date of the qualifying event described in subparagraph
(A).
"(3) Treatment of current retirees. - Section 162(k)(3)(F) of the
Internal Revenue Code of 1986 and section 603(6) of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1163(6)] apply to
covered employees who retired before, on, or after the date of the
enactment of this Act [Oct. 21, 1986].
"(4) Notice. - In the case of a qualifying event described in
section 603(6) of the Employee Retirement Income Security Act of
1974 [29 U.S.C. 1163(6)] that occurred before the date of the
enactment of this Act [Oct. 21, 1986], the notice required under
section 606(2) of such Act [29 U.S.C. 1166(2)] (and under section
162(k)(6)(B) of the Internal Revenue Code of 1986) with respect to
such event shall be provided no later than 30 days after the date
of the enactment of this Act [Oct. 21, 1986]."
Amendment by Pub. L. 99-272 applicable to plan years beginning on
or after July 1, 1986, with special rule for collective bargaining
agreements, see section 10001(e) of Pub. L. 99-272, set out as a
note under section 106 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Section 232(b) of Pub. L. 98-573 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after the date of the enactment of this Act
[Oct. 30, 1984]."
Amendment by section 512(b) of Pub. L. 98-369 applicable to
amounts paid or incurred after July 18, 1984, in taxable years
ending after such date, subject to an exception for certain
extended vacation pay plans, see section 512(c) of Pub. L. 98-369,
set out as a note under section 404 of this title.
Amendment by section 2354(d) of Pub. L. 98-369 effective July 18,
1984, but not to be construed as changing or affecting any right,
liability, status, or interpretation which existed (under the
provisions of law involved) before that date, see section 2354(e)
of Pub. L. 98-369, set out as a note under section 1320a-1 of Title
42, The Public Health and Welfare.
EFFECTIVE DATE OF 1982 AMENDMENTS
Section 288(c) of Pub. L. 97-248 provided that: "The amendments
made by this section [amending this section and sections 952 and
964 of this title] shall apply to payments made after the date of
the enactment of this Act [Sept. 3, 1982]."
Amendment by section 128(b) of Pub. L. 97-248 effective as if
such amendment had been originally included as part of this section
as this section was amended by the Omnibus Budget Reconciliation
Act of 1981, Pub. L. 97-35, see section 128(e)(2) of Pub. L.
97-248, set out as a note under section 1395x of Title 42, The
Public Health and Welfare.
Section 215(d) of Pub. L. 97-216 provided that: "The amendments
made by this section [amending this section and section 280A of
this title and repealing provisions set out as a note under this
section] shall apply to taxable years beginning after December 31,
1981."
EFFECTIVE DATE OF 1981 AMENDMENTS
Section 139(b)(3) of Pub. L. 97-51, as amended by Pub. L. 97-92,
Sec. 133a, Dec. 15, 1981, 95 Stat. 1199, provided that: "The
amendments made by this subsection [amending this section and
repealing section 31c of Title 2, The Congress] shall apply to
taxable years beginning after December 31, 1980."
Section 2146(c)(2) of Pub. L. 97-35 provided that: "The
amendments made by subsection (b) [amending this section] shall be
effective with respect to taxable years beginning on or after
January 1, 1982."
Section 127(b) of Pub. L. 97-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning on or after January 1, 1976."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(c)(4) of Pub. L. 94-455 applicable with
respect to taxable years beginning after Dec. 31, 1976, see section
1901(d) of Pub. L. 94-455, set out as a note under section 2 of
this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Section 310(b) of Pub. L. 92-178 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to payments after December 30, 1969, except that section
162(c)(3) of the Internal Revenue Act of 1954 (as added by
subsection (a)) shall apply only with respect to kickbacks,
rebates, and bribes payment of which is made on or after the date
of the enactment of this Act [Dec. 10, 1971]."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 902(c) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Section
162(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(as added by subsection (a)) shall apply to all taxable years to
which such Code applies. Section 162(g) of such Code (as added by
subsection (a)) shall apply with respect to amounts paid or
incurred after December 31, 1969. Section 162(c)(1) of such Code
(as amended by subsection (b)) shall apply to all taxable years to
which such Code applies. Sections 162(c)(2) and (3) of such Code
(as amended by subsection (b)) shall apply with respect to payments
made after the date of the enactment of this Act [Dec. 30, 1969]."
Amendment by section 516(c)(2)(A) of Pub. L. 91-172 applicable to
transfers after Dec. 31, 1969, see section 516(d)(3) of Pub. L.
91-172, set out as a note under section 1001 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Section 4(c) of Pub. L. 87-834 provided that: "The amendments
made by this section [amending this section and enacting section
274 of this title] shall apply with respect to taxable years ending
after December 31, 1962, but only in respect of periods after such
date."
Section 3(b) of Pub. L. 87-834 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1962."
EFFECTIVE DATE OF 1960 AMENDMENT
Section 7(c) of Pub. L. 86-779 provided that: "The amendments
made by subsections (a) and (b) [amending this section and section
170 of this title] shall apply with respect to taxable years
beginning after December 31, 1959."
Section 8(d) of Pub. L. 86-779 provided that: "The amendments
made by subsections (a), (b), and (c) [amending this section and
section 1054 of this title and amending table of sections for Part
IV by adding item 1054 and numbering former item 1054 as 1055]
shall apply with respect to taxable years beginning after December
31, 1959."
EFFECTIVE DATE OF 1958 AMENDMENT
Section 5(b) of Pub. L. 85-866 provided that: "The amendment made
by subsection (a) [amending this section] shall apply only with
respect to expenses paid or incurred after the date of the
enactment of this Act [Sept. 2, 1958]. The determination as to
whether any expense paid or incurred on or before the date of the
enactment of this Act shall be allowed as a deduction shall be made
as if this section had not been enacted and without inference drawn
from the fact that this section is not made applicable with respect
to expenses paid or incurred on or before the date of the enactment
of this Act."
DEDUCTION FOR SPECIAL ASSESSMENTS
Pub. L. 104-208, div. A, title II, Sec. 2711, Sept. 30, 1996, 110
Stat. 3009-498, provided that, for purposes of subtitle A of this
title, the amount allowed as a deduction under this section for a
taxable year would include any amount paid during that year by
reason of an assessment under section 2702 of Pub. L. 104-208, set
out as a note under section 1817 of Title 12, Banks and Banking,
and that section 172(f) of this title would not apply to that
deduction.
SPECIAL RULE FOR DEDUCTIONS UNDER SUBSECTION (L) FOR CERTAIN
TAXABLE YEARS
Section 110(a)(2) of Pub. L. 102-227 provided that, in the case
of any taxable year beginning in 1992 only amounts paid before July
1, 1992, by the individual for insurance coverage for periods
before July 1, 1992, would be taken into account in determining the
amount deductible under subsec. (l) of this section with respect to
such individual for such taxable year, and that for purposes of
subparagraph (A) of subsec. (l)(2) of this section, the amount of
the earned income described in such subparagraph taken into account
for such taxable year would be the amount which bears the same
ratio to the total amount of such earned income as the number of
months in such taxable year ending before July 1, 1992, bears to
the number of months in such taxable year, prior to repeal by Pub.
L. 103-66, title XIII, Sec. 13174(a)(2), Aug. 10, 1993, 107 Stat.
457.
Section 7107(a)(2) of Pub. L. 101-239 provided that, in the case
of any taxable year beginning in 1990 only amounts paid before Oct.
1, 1990, by the individual for insurance coverage for periods
before Oct. 1, 1990, would be taken into account in determining the
amount deductible under subsec. (l) of this section with respect to
such individual for such taxable year, and that for purposes of
subsec. (l)(2)(A) of this section, the amount of the earned income
described in such paragraph taken into account for such taxable
year would be the amount which bears the same ratio to the total
amount of such earned income as the number of months in such
taxable year ending before Oct. 1, 1990, bears to the number of
months in such taxable year, prior to repeal by Pub. L. 101-508,
title XI, Sec. 11410(b), Nov. 5, 1990, 104 Stat. 1388-479.
BUSINESS USE OF AUTOMOBILES BY RURAL MAIL CARRIERS
Section 6008 of Pub. L. 100-647 provided that in the case of any
employee of the United States Postal Service who performed services
involving the collection and delivery of mail on a rural route,
such employee was permitted to compute the amount allowable as a
deduction under this chapter for the use of an automobile in
performing such services by using a standard mileage rate for all
miles of such use equal to 150 percent of the basic standard rate,
prior to repeal by Pub. L. 105-34, title XII, Sec. 1203(b), Aug. 5,
1997, 111 Stat. 995. See subsec. (o) of this section.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
LIVING EXPENSES OF MEMBERS OF CONGRESS WHILE AWAY FROM HOME; SENSE
OF CONGRESS
Section 139(a) of Pub. L. 97-51, which expressed the sense of
Congress that the dollar limits on tax deductions for living
expenses of Members of Congress while away from home be the same as
such limits for businessmen and other private citizens, was
repealed by Pub. L. 97-216, title II, Sec. 215(c), July 18, 1982,
96 Stat. 194.
STATE LEGISLATORS' TRAVEL EXPENSES AWAY FROM HOME
Section 604 of Pub. L. 94-455, as amended by Pub. L. 95-30, title
III, Sec. 307, May 23, 1977, 91 Stat. 153; Pub. L. 95-258, Sec. 2,
Apr. 7, 1978, 92 Stat. 195; Pub. L. 96-167, Sec. 3, Dec. 29, 1979,
93 Stat. 1275; Pub. L. 96-178, Sec. 1, Jan. 2, 1980, 93 Stat. 1295;
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
"(a) In General. - For purposes of section 162(a) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954], in the case of any
individual who was a State legislator at any time during any
taxable year beginning before January 1, 1981, and who, for the
taxable year, elects the application of this section, for any
period during such a taxable year in which he was a State
legislator -
"(1) the place of residence of such individual within the
legislative district which he represented shall be considered his
home, and
"(2) he shall be deemed to have expended for living expenses
(in connection with his trade or business as a legislator) an
amount equal to the sum of the amounts determined by multiplying
each legislative day of such individual during the taxable year
by the amount generally allowable with respect to such day to
employees of the executive branch of the Federal Government for
per diem while away from home but serving in the United States.
"(b) Legislative Days. - For purposes of subsection (a), a
legislative day during any taxable year for any individual shall be
any day during such year on which (1) the legislature was in
session (including any day in which the legislature was not in
session for a period of 4 consecutive days or less), or (2) the
legislature was not in session but the physical presence of the
individual was formally recorded at a meeting of a committee of
such legislature.
"(c) Limitation. - The amount taken into account as living
expenses attributable to a trade or business as a State legislator
for any taxable year beginning before January 1, 1976, under an
election made under this section shall not exceed the amount
claimed for such purpose under a return (or amended return) filed
before May 21, 1976.
"(d) Making and Effect of Election. - An election under this
section shall be made at such time and in such manner as the
Secretary of the Treasury or his delegate shall by regulations
prescribe."
[Amendment by section 604 of Pub. L. 94-455 by section 1 of Pub.
L. 96-178, which purported to substitute "January 1, 1979" for
"January 1, 1978", was not executed because of the prior amendment
by section 3(a)(2), (b) of Pub. L. 96-167 which substituted
"January 1, 1981" for "January 1, 1978" in subsec. (a) and which
struck out the last sentence of subsec. (d).]
DENIAL OF DEDUCTION FOR AMOUNTS PAID OR INCURRED ON JUDGMENTS IN
SUITS BROUGHT TO RECOVER PRICE INCREASES IN PURCHASE OF NEW
PRINCIPAL RESIDENCE
No deductions to be allowed in computing taxable income for
two-thirds of any amount paid or incurred on a judgment entered
against any person in a suit brought under section 208(b) of Pub.
L. 94-12, see section 208(c) of Pub. L. 94-12, title II, Mar. 29,
1975, 89 Stat. 35, set out as a note under section 44 of this
title.
DEDUCTIBILITY OF ACCRUED VACATION PAY
Section 97 of Pub. L. 85-866, as amended by Pub. L. 86-496, Sec.
2, June 8, 1960, 74 Stat. 164; Pub. L. 88-153, Oct. 17, 1963, 77
Stat. 272; Pub. L. 88-554, Sec. 1, Aug. 31, 1964, 78 Stat. 761;
Pub. L. 89-692, Oct. 15, 1966, 80 Stat. 1025; Pub. L. 91-172, title
IX, Sec. 903, Dec. 30, 1969, 83 Stat. 711; Pub. L. 92-580, Sec. 3,
Oct. 27, 1972, 86 Stat. 1276, provided that deductions for accrued
vacation pay under this section would not be denied for any taxable
year ending before Jan. 1, 1973, so long as the employee at the
time of accrual of pay has performed the necessary qualifying
service under an appropriate plan.
INVESTIGATION OF, AND REPORTS ON, TREATMENT OF ENTERTAINMENT AND
CERTAIN OTHER EXPENSES
Pub. L. 86-564, title III, Sec. 301, June 30, 1960, 74 Stat. 291,
authorized the Joint Committee on Internal Revenue Taxation to
investigate and report on the use of entertainment and certain
other expense deductions to the 87th Congress and authorized the
Secretary of the Treasury to report to the 87th Congress on the
enforcement program of the Internal Revenue Service relating to
such deductions.
FILING OF CLAIMS FOR REFUNDS OF OVERPAYMENTS
Extension of time for filing of claims for refunds or credit of
overpayments of income tax resulting from application of this
section, see section 96 of Pub. L. 85-866, set out as a note under
section 6511 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 35, 62, 67, 83, 127, 132,
170, 172, 179, 192, 263, 274, 280A, 404, 421, 465, 527, 542, 543,
545, 556, 691, 707, 832, 911, 941, 952, 964, 988, 995, 1054, 1253,
1402, 6033 of this title; title 2 section 1610; title 15 section
78kkk; title 42 sections 300bb-8, 403, 411.
-End-
-CITE-
26 USC Sec. 163 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 163. Interest
-STATUTE-
(a) General rule
There shall be allowed as a deduction all interest paid or
accrued within the taxable year on indebtedness.
(b) Installment purchases where interest charge is not separately
stated
(1) General rule
If personal property or educational services are purchased
under a contract -
(A) which provides that payment of part or all of the
purchase price is to be made in installments, and
(B) in which carrying charges are separately stated but the
interest charge cannot be ascertained,
then the payments made during the taxable year under the contract
shall be treated for purposes of this section as if they included
interest equal to 6 percent of the average unpaid balance under
the contract during the taxable year. For purposes of the
preceding sentence, the average unpaid balance is the sum of the
unpaid balance outstanding on the first day of each month
beginning during the taxable year, divided by 12. For purposes of
this paragraph, the term "educational services" means any service
(including lodging) which is purchased from an educational
organization described in section 170(b)(1)(A)(ii) and which is
provided for a student of such organization.
(2) Limitation
In the case of any contract to which paragraph (1) applies, the
amount treated as interest for any taxable year shall not exceed
the aggregate carrying charges which are properly attributable to
such taxable year.
(c) Redeemable ground rents
For purposes of this subtitle, any annual or periodic rental
under a redeemable ground rent (excluding amounts in redemption
thereof) shall be treated as interest on an indebtedness secured by
a mortgage.
(d) Limitation on investment interest
(1) In general
In the case of a taxpayer other than a corporation, the amount
allowed as a deduction under this chapter for investment interest
for any taxable year shall not exceed the net investment income
of the taxpayer for the taxable year.
(2) Carryforward of disallowed interest
The amount not allowed as a deduction for any taxable year by
reason of paragraph (1) shall be treated as investment interest
paid or accrued by the taxpayer in the succeeding taxable year.
(3) Investment interest
For purposes of this subsection -
(A) In general
The term "investment interest" means any interest allowable
as a deduction under this chapter (determined without regard to
paragraph (1)) which is paid or accrued on indebtedness
properly allocable to property held for investment.
(B) Exceptions
The term "investment interest" shall not include -
(i) any qualified residence interest (as defined in
subsection (h)(3)), or
(ii) any interest which is taken into account under section
469 in computing income or loss from a passive activity of
the taxpayer.
(C) Personal property used in short sale
For purposes of this paragraph, the term "interest" includes
any amount allowable as a deduction in connection with personal
property used in a short sale.
(4) Net investment income
For purposes of this subsection -
(A) In general
The term "net investment income" means the excess of -
(i) investment income, over
(ii) investment expenses.
(B) Investment income
The term "investment income" means the sum of -
(i) gross income from property held for investment (other
than any gain taken into account under clause (ii)(I)),
(ii) the excess (if any) of -
(I) the net gain attributable to the disposition of
property held for investment, over
(II) the net capital gain determined by only taking into
account gains and losses from dispositions of property held
for investment, plus
(iii) so much of the net capital gain referred to in clause
(ii)(II) (or, if lesser, the net gain referred to in clause
(ii)(I)) as the taxpayer elects to take into account under
this clause.
Such term shall include qualified dividend income (as defined
in section 1(h)(11)(B)) only to the extent the taxpayer elects
to treat such income as investment income for purposes of this
subsection.
(C) Investment expenses
The term "investment expenses" means the deductions allowed
under this chapter (other than for interest) which are directly
connected with the production of investment income.
(D) Income and expenses from passive activities
Investment income and investment expenses shall not include
any income or expenses taken into account under section 469 in
computing income or loss from a passive activity.
(E) Reduction in investment income during phase-in of passive
loss rules
Investment income of the taxpayer for any taxable year shall
be reduced by the amount of the passive activity loss to which
section 469(a) does not apply for such taxable year by reason
of section 469(m). The preceding sentence shall not apply to
any portion of such passive activity loss which is attributable
to a rental real estate activity with respect to which the
taxpayer actively participates (within the meaning of section
469(i)(6)) during such taxable year.
(5) Property held for investment
For purposes of this subsection -
(A) In general
The term "property held for investment" shall include -
(i) any property which produces income of a type described
in section 469(e)(1), and
(ii) any interest held by a taxpayer in an activity
involving the conduct of a trade or business -
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not
materially participate.
(B) Investment expenses
In the case of property described in subparagraph (A)(i),
expenses shall be allocated to such property in the same manner
as under section 469.
(C) Terms
For purposes of this paragraph, the terms "activity",
"passive activity", and "materially participate" have the
meanings given such terms by section 469.
(6) Phase-in of disallowance
In the case of any taxable year beginning in calendar years
1987 through 1990 -
(A) In general
The amount of interest paid or accrued during any such
taxable year which is disallowed under this subsection shall
not exceed the sum of -
(i) the amount which would be disallowed under this
subsection if -
(I) paragraph (1) were applied by substituting "the sum
of the ceiling amount and the net investment income" for
"the net investment income", and
(II) paragraphs (4)(E) and (5)(A)(ii) did not apply, and
(ii) the applicable percentage of the excess of -
(I) the amount which (without regard to this paragraph)
is not allowable as a deduction under this subsection for
the taxable year, over
(II) the amount described in clause (i).
The preceding sentence shall not apply to any interest treated
as paid or accrued during the taxable year under paragraph (2).
(B) Applicable percentage
For purposes of this paragraph, the applicable percentage
shall be determined in accordance with the following table:
In the case of taxable 2The applicable
years beginning in:
percentage is:
--------------------------------------------------------------------
1987 35
1988 60
1989 80
1990 90.
--------------------------------------------------------------------
(C) Ceiling amount
For purposes of this paragraph, the term "ceiling amount"
means -
(i) $10,000 in the case of a taxpayer not described in
clause (ii) or (iii),
(ii) $5,000 in the case of a married individual filing a
separate return, and
(iii) zero in the case of a trust.
(e) Original issue discount
(1) In general
In the case of any debt instrument issued after July 1, 1982,
the portion of the original issue discount with respect to such
debt instrument which is allowable as a deduction to the issuer
for any taxable year shall be equal to the aggregate daily
portions of the original issue discount for days during such
taxable year.
(2) Definitions and special rules
For purposes of this subsection -
(A) Debt instrument
The term "debt instrument" has the meaning given such term by
section 1275(a)(1).
(B) Daily portions
The daily portion of the original issue discount for any day
shall be determined under section 1272(a) (without regard to
paragraph (7) thereof and without regard to section
1273(a)(3)).
(C) Short-term obligations
In the case of an obligor of a short-term obligation (as
defined in section 1283(a)(1)(A)) who uses the cash receipts
and disbursements method of accounting, the original issue
discount (and any other interest payable) on such obligation
shall be deductible only when paid.
(3) Special rule for original issue discount on obligation held
by related foreign person
(A) In general
If any debt instrument having original issue discount is held
by a related foreign person, any portion of such original issue
discount shall not be allowable as a deduction to the issuer
until paid. The preceding sentence shall not apply to the
extent that the original issue discount is effectively
connected with the conduct by such foreign related person of a
trade or business within the United States unless such original
issue discount is exempt from taxation (or is subject to a
reduced rate of tax) pursuant to a treaty obligation of the
United States.
(B) Related foreign person
For purposes of subparagraph (A), the term "related foreign
person" means any person -
(i) who is not a United States person, and
(ii) who is related (within the meaning of section 267(b))
to the issuer.
(4) Exceptions
This subsection shall not apply to any debt instrument
described in -
(A) subparagraph (D) of section 1272(a)(2) (relating to
obligations issued by natural persons before March 2, 1984),
and
(B) subparagraph (E) of section 1272(a)(2) (relating to loans
between natural persons).
(5) Special rules for original issue discount on certain high
yield obligations
(A) In general
In the case of an applicable high yield discount obligation
issued by a corporation -
(i) no deduction shall be allowed under this chapter for
the disqualified portion of the original issue discount on
such obligation, and
(ii) the remainder of such original issue discount shall
not be allowable as a deduction until paid.
For purposes of this paragraph, rules similar to the rules of
subsection (i)(3)(B) shall apply in determining the amount of
the original issue discount and when the original issue
discount is paid.
(B) Disqualified portion treated as stock distribution for
purposes of dividend received deduction
(i) In general
Solely for purposes of sections 243, 245, 246, and 246A,
the dividend equivalent portion of any amount includible in
gross income of a corporation under section 1272(a) in
respect of an applicable high yield discount obligation shall
be treated as a dividend received by such corporation from
the corporation issuing such obligation.
(ii) Dividend equivalent portion
For purposes of clause (i), the dividend equivalent portion
of any amount includible in gross income under section
1272(a) in respect of an applicable high yield discount
obligation is the portion of the amount so includible -
(I) which is attributable to the disqualified portion of
the original issue discount on such obligation, and
(II) which would have been treated as a dividend if it
had been a distribution made by the issuing corporation
with respect to stock in such corporation.
(C) Disqualified portion
(i) In general
For purposes of this paragraph, the disqualified portion of
the original issue discount on any applicable high yield
discount obligation is the lesser of -
(I) the amount of such original issue discount, or
(II) the portion of the total return on such obligation
which bears the same ratio to such total return as the
disqualified yield on such obligation bears to the yield to
maturity on such obligation.
(ii) Definitions
For purposes of clause (i), the term "disqualified yield"
means the excess of the yield to maturity on the obligation
over the sum referred to (!1) subsection (i)(1)(B) plus 1
percentage point, and the term "total return" is the amount
which would have been the original issue discount on the
obligation if interest described in the parenthetical in
section 1273(a)(2) were included in the stated redemption
price at maturity.
(D) Exception for S corporations
This paragraph shall not apply to any obligation issued by
any corporation for any period for which such corporation is an
S corporation.
(E) Effect on earnings and profits
This paragraph shall not apply for purposes of determining
earnings and profits; except that, for purposes of determining
the dividend equivalent portion of any amount includible in
gross income under section 1272(a) in respect of an applicable
high yield discount obligation, no reduction shall be made for
any amount attributable to the disqualified portion of any
original issue discount on such obligation.
(F) Cross reference
For definition of applicable high yield discount obligation,
see subsection (i).
(6) Cross references
For provision relating to deduction of original issue
discount on tax-exempt obligation, see section 1288.
For special rules in the case of the borrower under certain
loans for personal use, see section 1275(b).
(f) Denial of deduction for interest on certain obligations not in
registered form
(1) In general
Nothing in subsection (a) or in any other provision of law
shall be construed to provide a deduction for interest on any
registration-required obligation unless such obligation is in
registered form.
(2) Registration-required obligation
For purposes of this section -
(A) In general
The term "registration-required obligation" means any
obligation (including any obligation issued by a governmental
entity) other than an obligation which -
(i) is issued by a natural person,
(ii) is not of a type offered to the public,
(iii) has a maturity (at issue) of not more than 1 year, or
(iv) is described in subparagraph (B).
(B) Certain obligations not included
An obligation is described in this subparagraph if -
(i) there are arrangements reasonably designed to ensure
that such obligation will be sold (or resold in connection
with the original issue) only to a person who is not a United
States person, and
(ii) in the case of an obligation not in registered form -
(I) interest on such obligation is payable only outside
the United States and its possessions, and
(II) on the face of such obligation there is a statement
that any United States person who holds such obligation
will be subject to limitations under the United States
income tax laws.
(C) Authority to include other obligations
Clauses (ii) and (iii) of subparagraph (A), and subparagraph
(B), shall not apply to any obligation if -
(i) in the case of -
(I) subparagraph (A), such obligation is of a type which
the Secretary has determined by regulations to be used
frequently in avoiding Federal taxes, or
(II) subparagraph (B), such obligation is of a type
specified by the Secretary in regulations, and
(ii) such obligation is issued after the date on which the
regulations referred to in clause (i) take effect.
(3) Book entries permitted, etc.
For purposes of this subsection, rules similar to the rules of
section 149(a)(3) shall apply.
(g) Reduction of deduction where section 25 credit taken
The amount of the deduction under this section for interest paid
or accrued during any taxable year on indebtedness with respect to
which a mortgage credit certificate has been issued under section
25 shall be reduced by the amount of the credit allowable with
respect to such interest under section 25 (determined without
regard to section 26).
(h) Disallowance of deduction for personal interest
(1) In general
In the case of a taxpayer other than a corporation, no
deduction shall be allowed under this chapter for personal
interest paid or accrued during the taxable year.
(2) Personal interest
For purposes of this subsection, the term "personal interest"
means any interest allowable as a deduction under this chapter
other than -
(A) interest paid or accrued on indebtedness properly
allocable to a trade or business (other than the trade or
business of performing services as an employee),
(B) any investment interest (within the meaning of subsection
(d)),
(C) any interest which is taken into account under section
469 in computing income or loss from a passive activity of the
taxpayer,
(D) any qualified residence interest (within the meaning of
paragraph (3)),
(E) any interest payable under section 6601 on any unpaid
portion of the tax imposed by section 2001 for the period
during which an extension of time for payment of such tax is in
effect under section 6163, and
(F) any interest allowable as a deduction under section 221
(relating to interest on educational loans).
(3) Qualified residence interest
For purposes of this subsection -
(A) In general
The term "qualified residence interest" means any interest
which is paid or accrued during the taxable year on -
(i) acquisition indebtedness with respect to any qualified
residence of the taxpayer, or
(ii) home equity indebtedness with respect to any qualified
residence of the taxpayer.
For purposes of the preceding sentence, the determination of
whether any property is a qualified residence of the taxpayer
shall be made as of the time the interest is accrued.
(B) Acquisition indebtedness
(i) In general
The term "acquisition indebtedness" means any indebtedness
which -
(I) is incurred in acquiring, constructing, or
substantially improving any qualified residence of the
taxpayer, and
(II) is secured by such residence.
Such term also includes any indebtedness secured by such
residence resulting from the refinancing of indebtedness
meeting the requirements of the preceding sentence (or this
sentence); but only to the extent the amount of the
indebtedness resulting from such refinancing does not exceed
the amount of the refinanced indebtedness.
(ii) $1,000,000 limitation
The aggregate amount treated as acquisition indebtedness
for any period shall not exceed $1,000,000 ($500,000 in the
case of a married individual filing a separate return).
(C) Home equity indebtedness
(i) In general
The term "home equity indebtedness" means any indebtedness
(other than acquisition indebtedness) secured by a qualified
residence to the extent the aggregate amount of such
indebtedness does not exceed -
(I) the fair market value of such qualified residence,
reduced by
(II) the amount of acquisition indebtedness with respect
to such residence.
(ii) Limitation
The aggregate amount treated as home equity indebtedness
for any period shall not exceed $100,000 ($50,000 in the case
of a separate return by a married individual).
(D) Treatment of indebtedness incurred on or before October 13,
1987
(i) In general
In the case of any pre-October 13, 1987, indebtedness -
(I) such indebtedness shall be treated as acquisition
indebtedness, and
(II) the limitation of subparagraph (B)(ii) shall not
apply.
(ii) Reduction in $1,000,000 limitation
The limitation of subparagraph (B)(ii) shall be reduced
(but not below zero) by the aggregate amount of outstanding
pre-October 13, 1987, indebtedness.
(iii) Pre-October 13, 1987, indebtedness
The term "pre-October 13, 1987, indebtedness" means -
(I) any indebtedness which was incurred on or before
October 13, 1987, and which was secured by a qualified
residence on October 13, 1987, and at all times thereafter
before the interest is paid or accrued, or
(II) any indebtedness which is secured by the qualified
residence and was incurred after October 13, 1987, to
refinance indebtedness described in subclause (I) (or
refinanced indebtedness meeting the requirements of this
subclause) to the extent (immediately after the
refinancing) the principal amount of the indebtedness
resulting from the refinancing does not exceed the
principal amount of the refinanced indebtedness
(immediately before the refinancing).
(iv) Limitation on period of refinancing
Subclause (II) of clause (iii) shall not apply to any
indebtedness after -
(I) the expiration of the term of the indebtedness
described in clause (iii)(I), or
(II) if the principal of the indebtedness described in
clause (iii)(I) is not amortized over its term, the
expiration of the term of the 1st refinancing of such
indebtedness (or if earlier, the date which is 30 years
after the date of such 1st refinancing).
(4) Other definitions and special rules
For purposes of this subsection -
(A) Qualified residence
(i) In general
The term "qualified residence" means -
(I) the principal residence (within the meaning of
section 121) of the taxpayer, and
(II) 1 other residence of the taxpayer which is selected
by the taxpayer for purposes of this subsection for the
taxable year and which is used by the taxpayer as a
residence (within the meaning of section 280A(d)(1)).
(ii) Married individuals filing separate returns
If a married couple does not file a joint return for the
taxable year -
(I) such couple shall be treated as 1 taxpayer for
purposes of clause (i), and
(II) each individual shall be entitled to take into
account 1 residence unless both individuals consent in
writing to 1 individual taking into account the principal
residence and 1 other residence.
(iii) Residence not rented
For purposes of clause (i)(II), notwithstanding section
280A(d)(1), if the taxpayer does not rent a dwelling unit at
any time during a taxable year, such unit may be treated as a
residence for such taxable year.
(B) Special rule for cooperative housing corporations
Any indebtedness secured by stock held by the taxpayer as a
tenant-stockholder (as defined in section 216) in a cooperative
housing corporation (as so defined) shall be treated as secured
by the house or apartment which the taxpayer is entitled to
occupy as such a tenant-stockholder. If stock described in the
preceding sentence may not be used to secure indebtedness,
indebtedness shall be treated as so secured if the taxpayer
establishes to the satisfaction of the Secretary that such
indebtedness was incurred to acquire such stock.
(C) Unenforceable security interests
Indebtedness shall not fail to be treated as secured by any
property solely because, under any applicable State or local
homestead or other debtor protection law in effect on August
16, 1986, the security interest is ineffective or the
enforceability of the security interest is restricted.
(D) Special rules for estates and trusts
For purposes of determining whether any interest paid or
accrued by an estate or trust is qualified residence interest,
any residence held by such estate or trust shall be treated as
a qualified residence of such estate or trust if such estate or
trust establishes that such residence is a qualified residence
of a beneficiary who has a present interest in such estate or
trust or an interest in the residuary of such estate or trust.
(5) Phase-in of limitation
In the case of any taxable year beginning in calendar years
1987 through 1990, the amount of interest with respect to which a
deduction is disallowed under this subsection shall be equal to
the applicable percentage (within the meaning of subsection
(d)(6)(B)) of the amount which (but for this paragraph) would
have been so disallowed.
(i) Applicable high yield discount obligation
(1) In general
For purposes of this section, the term "applicable high yield
discount obligation" means any debt instrument if -
(A) the maturity date of such instrument is more than 5 years
from the date of issue,
(B) the yield to maturity on such instrument equals or
exceeds the sum of -
(i) the applicable Federal rate in effect under section
1274(d) for the calendar month in which the obligation is
issued, plus
(ii) 5 percentage points, and
(C) such instrument has significant original issue discount.
For purposes of subparagraph (B)(i), the Secretary may by
regulation permit a rate to be used with respect to any debt
instrument which is higher than the applicable Federal rate if
the taxpayer establishes to the satisfaction of the Secretary
that such higher rate is based on the same principles as the
applicable Federal rate and is appropriate for the term of the
instrument.
(2) Significant original issue discount
For purposes of paragraph (1)(C), a debt instrument shall be
treated as having significant original issue discount if -
(A) the aggregate amount which would be includible in gross
income with respect to such instrument for periods before the
close of any accrual period (as defined in section 1272(a)(5))
ending after the date 5 years after the date of issue, exceeds
-
(B) the sum of -
(i) the aggregate amount of interest to be paid under the
instrument before the close of such accrual period, and
(ii) the product of the issue price of such instrument (as
defined in sections 1273(b) and 1274(a)) and its yield to
maturity.
(3) Special rules
For purposes of determining whether a debt instrument is an
applicable high yield discount obligation -
(A) any payment under the instrument shall be assumed to be
made on the last day permitted under the instrument, and
(B) any payment to be made in the form of another obligation
of the issuer (or a related person within the meaning of
section 453(f)(1)) shall be assumed to be made when such
obligation is required to be paid in cash or in property other
than such obligation.
Except for purposes of paragraph (1)(B), any reference to an
obligation in subparagraph (B) of this paragraph shall be treated
as including a reference to stock.
(4) Debt instrument
For purposes of this subsection, the term "debt instrument"
means any instrument which is a debt instrument as defined in
section 1275(a).
(5) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this subsection and
subsection (e)(5), including -
(A) regulations providing for modifications to the provisions
of this subsection and subsection (e)(5) in the case of varying
rates of interest, put or call options, indefinite maturities,
contingent payments, assumptions of debt instruments,
conversion rights, or other circumstances where such
modifications are appropriate to carry out the purposes of this
subsection and subsection (e)(5), and
(B) regulations to prevent avoidance of the purposes of this
subsection and subsection (e)(5) through the use of issuers
other than C corporations, agreements to borrow amounts due
under the debt instrument, or other arrangements.
(j) Limitation on deduction for interest on certain indebtedness
(1) Limitation
(A) In general
If this subsection applies to any corporation for any taxable
year, no deduction shall be allowed under this chapter for
disqualified interest paid or accrued by such corporation
during such taxable year. The amount disallowed under the
preceding sentence shall not exceed the corporation's excess
interest expense for the taxable year.
(B) Disallowed amount carried to succeeding taxable year
Any amount disallowed under subparagraph (A) for any taxable
year shall be treated as disqualified interest paid or accrued
in the succeeding taxable year (and clause (ii) of paragraph
(2)(A) shall not apply for purposes of applying this subsection
to the amount so treated).
(2) Corporations to which subsection applies
(A) In general
This subsection shall apply to any corporation for any
taxable year if -
(i) such corporation has excess interest expense for such
taxable year, and
(ii) the ratio of debt to equity of such corporation as of
the close of such taxable year (or on any other day during
the taxable year as the Secretary may by regulations
prescribe) exceeds 1.5 to 1.
(B) Excess interest expense
(i) In general
For purposes of this subsection, the term "excess interest
expense" means the excess (if any) of -
(I) the corporation's net interest expense, over
(II) the sum of 50 percent of the adjusted taxable income
of the corporation plus any excess limitation carryforward
under clause (ii).
(ii) Excess limitation carryforward
If a corporation has an excess limitation for any taxable
year, the amount of such excess limitation shall be an excess
limitation carryforward to the 1st succeeding taxable year
and to the 2nd and 3rd succeeding taxable years to the extent
not previously taken into account under this clause. The
amount of such a carryforward taken into account for any such
succeeding taxable year shall not exceed the excess interest
expense for such succeeding taxable year (determined without
regard to the carryforward from the taxable year of such
excess limitation).
(iii) Excess limitation
For purposes of clause (ii), the term "excess limitation"
means the excess (if any) of -
(I) 50 percent of the adjusted taxable income of the
corporation, over
(II) the corporation's net interest expense.
(C) Ratio of debt to equity
For purposes of this paragraph, the term "ratio of debt to
equity" means the ratio which the total indebtedness of the
corporation bears to the sum of its money and all other assets
reduced (but not below zero) by such total indebtedness. For
purposes of the preceding sentence -
(i) the amount taken into account with respect to any asset
shall be the adjusted basis thereof for purposes of
determining gain,
(ii) the amount taken into account with respect to any
indebtedness with original issue discount shall be its issue
price plus the portion of the original issue discount
previously accrued as determined under the rules of section
1272 (determined without regard to subsection (a)(7) or
(b)(4) thereof), and
(iii) there shall be such other adjustments as the
Secretary may by regulations prescribe.
(3) Disqualified interest
For purposes of this subsection, the term "disqualified
interest" means -
(A) any interest paid or accrued by the taxpayer (directly or
indirectly) to a related person if no tax is imposed by this
subtitle with respect to such interest,
(B) any interest paid or accrued by the taxpayer with respect
to any indebtedness to a person who is not a related person if
-
(i) there is a disqualified guarantee of such indebtedness,
and
(ii) no gross basis tax is imposed by this subtitle with
respect to such interest, and
(C) any interest paid or accrued (directly or indirectly) by
a taxable REIT subsidiary (as defined in section 856(l)) of a
real estate investment trust to such trust.
(4) Related person
For purposes of this subsection -
(A) In general
Except as provided in subparagraph (B), the term "related
person" means any person who is related (within the meaning of
section 267(b) or 707(b)(1)) to the taxpayer.
(B) Special rule for certain partnerships
(i) In general
Any interest paid or accrued to a partnership which
(without regard to this subparagraph) is a related person
shall not be treated as paid or accrued to a related person
if less than 10 percent of the profits and capital interests
in such partnership are held by persons with respect to whom
no tax is imposed by this subtitle on such interest. The
preceding sentence shall not apply to any interest allocable
to any partner in such partnership who is a related person to
the taxpayer.
(ii) Special rule where treaty reduction
If any treaty between the United States and any foreign
country reduces the rate of tax imposed by this subtitle on a
partner's share of any interest paid or accrued to a
partnership, such partner's interests in such partnership
shall, for purposes of clause (i), be treated as held in part
by a tax-exempt person and in part by a taxable person under
rules similar to the rules of paragraph (5)(B).
(5) Special rules for determining whether interest is subject to
tax
(A) Treatment of pass-thru entities
In the case of any interest paid or accrued to a partnership,
the determination of whether any tax is imposed by this
subtitle on such interest shall be made at the partner level.
Rules similar to the rules of the preceding sentence shall
apply in the case of any pass-thru entity other than a
partnership and in the case of tiered partnerships and other
entities.
(B) Interest treated as tax-exempt to extent of treaty
reduction
If any treaty between the United States and any foreign
country reduces the rate of tax imposed by this subtitle on any
interest paid or accrued by the taxpayer, such interest shall
be treated as interest on which no tax is imposed by this
subtitle to the extent of the same proportion of such interest
as -
(i) the rate of tax imposed without regard to such treaty,
reduced by the rate of tax imposed under the treaty, bears to
(ii) the rate of tax imposed without regard to the treaty.
(6) Other definitions and special rules
For purposes of this subsection -
(A) Adjusted taxable income
The term "adjusted taxable income" means the taxable income
of the taxpayer -
(i) computed without regard to -
(I) any deduction allowable under this chapter for the
net interest expense,
(II) the amount of any net operating loss deduction under
section 172, and
(III) any deduction allowable for depreciation,
amortization, or depletion, and
(ii) computed with such other adjustments as the Secretary
may by regulations prescribe.
(B) Net interest expense
The term "net interest expense" means the excess (if any) of
-
(i) the interest paid or accrued by the taxpayer during the
taxable year, over
(ii) the amount of interest includible in the gross income
of such taxpayer for such taxable year.
The Secretary may by regulations provide for adjustments in
determining the amount of net interest expense.
(C) Treatment of affiliated group
All members of the same affiliated group (within the meaning
of section 1504(a)) shall be treated as 1 taxpayer.
(D) Disqualified guarantee
(i) In general
Except as provided in clause (ii), the term "disqualified
guarantee" means any guarantee by a related person which is -
(I) an organization exempt from taxation under this
subtitle, or
(II) a foreign person.
(ii) Exceptions
The term "disqualified guarantee" shall not include a
guarantee -
(I) in any circumstances identified by the Secretary by
regulation, where the interest on the indebtedness would
have been subject to a net basis tax if the interest had
been paid to the guarantor, or
(II) if the taxpayer owns a controlling interest in the
guarantor.
For purposes of subclause (II), except as provided in
regulations, the term "a controlling interest" means direct
or indirect ownership of at least 80 percent of the total
voting power and value of all classes of stock of a
corporation, or 80 percent of the profit and capital
interests in any other entity. For purposes of the preceding
sentence, the rules of paragraphs (1) and (5) of section
267(c) shall apply; except that such rules shall also apply
to interest in entities other than corporations.
(iii) Guarantee
Except as provided in regulations, the term "guarantee"
includes any arrangement under which a person (directly or
indirectly through an entity or otherwise) assures, on a
conditional or unconditional basis, the payment of another
person's obligation under any indebtedness.
(E) Gross basis and net basis taxation
(i) Gross basis tax
The term "gross basis tax" means any tax imposed by this
subtitle which is determined by reference to the gross amount
of any item of income without any reduction for any deduction
allowed by this subtitle.
(ii) Net basis tax
The term "net basis tax" means any tax imposed by this
subtitle which is not a gross basis tax.
(7) Coordination with passive loss rules, etc.
This subsection shall be applied before sections 465 and 469.
(8) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this subsection,
including -
(A) such regulations as may be appropriate to prevent the
avoidance of the purposes of this subsection,
(B) regulations providing such adjustments in the case of
corporations which are members of an affiliated group as may be
appropriate to carry out the purposes of this subsection, and
(C) regulations for the coordination of this subsection with
section 884.
(k) Section 6166 interest
No deduction shall be allowed under this section for any interest
payable under section 6601 on any unpaid portion of the tax imposed
by section 2001 for the period during which an extension of time
for payment of such tax is in effect under section 6166.
(l) Disallowance of deduction on certain debt instruments of
corporations
(1) In general
No deduction shall be allowed under this chapter for any
interest paid or accrued on a disqualified debt instrument.
(2) Disqualified debt instrument
For purposes of this subsection, the term "disqualified debt
instrument" means any indebtedness of a corporation which is
payable in equity of the issuer or a related party.
(3) Special rules for amounts payable in equity
For purposes of paragraph (2), indebtedness shall be treated as
payable in equity of the issuer or a related party only if -
(A) a substantial amount of the principal or interest is
required to be paid or converted, or at the option of the
issuer or a related party is payable in, or convertible into,
such equity,
(B) a substantial amount of the principal or interest is
required to be determined, or at the option of the issuer or a
related party is determined, by reference to the value of such
equity, or
(C) the indebtedness is part of an arrangement which is
reasonably expected to result in a transaction described in
subparagraph (A) or (B).
For purposes of this paragraph, principal or interest shall be
treated as required to be so paid, converted, or determined if it
may be required at the option of the holder or a related party
and there is a substantial certainty the option will be
exercised.
(4) Related party
For purposes of this subsection, a person is a related party
with respect to another person if such person bears a
relationship to such other person described in section 267(b) or
707(b).
(5) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection, including regulations preventing avoidance of this
subsection through the use of an issuer other than a corporation.
(m) Cross references
(1) For disallowance of certain amounts paid in connection
with insurance, endowment, or annuity contracts, see section
264.
(2) For disallowance of deduction for interest relating to
tax-exempt income, see section 265(a)(2).
(3) For disallowance of deduction for carrying charges
chargeable to capital account, see section 266.
(4) For disallowance of interest with respect to transactions
between related taxpayers, see section 267.
(5) For treatment of redeemable ground rents and real
property held subject to liabilities under redeemable ground
rents, see section 1055.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 46; Pub. L. 88-9, Sec. 1(a),
(c), Apr. 10, 1963, 77 Stat. 6, 7; Pub. L. 88-272, title II, Sec.
224(c), Feb. 26, 1964, 78 Stat. 79; Pub. L. 91-172, title II, Sec.
221(a), Dec. 30, 1969, 83 Stat. 574; Pub. L. 92-178, title III,
Sec. 304(a)(2), (b)(2), (d), Dec. 10, 1971, 85 Stat. 523, 524; Pub.
L. 94-455, title II, Secs. 205(c)(3), 209(a), title XIX, Secs.
1901(b)(3)(K), (8)(C), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1535,
1542, 1793, 1794, 1834; Pub. L. 97-248, title II, Sec. 231(b),
title III, Sec. 310(b)(2), Sept. 3, 1982, 96 Stat. 498, 596; Pub.
L. 97-354, Sec. 5(a)(18), Oct. 19, 1982, 96 Stat. 1693; Pub. L.
98-369, div. A, title I, Secs. 42(a)(3), 56(b), 127(f), 128(c),
title VI, Sec. 612(c), July 18, 1984, 98 Stat. 556, 574, 652, 654,
911; Pub. L. 99-514, title V, Sec. 511(a), (b), title IX, Sec.
902(e)(1), title XIII, Sec. 1301(j)(3), title XVIII, Secs.
1803(a)(4), 1810(e)(1), Oct. 22, 1986, 100 Stat. 2244, 2246, 2382,
2657, 2793, 2825; Pub. L. 100-203, title X, Secs. 10102(a), (b),
10212(b), Dec. 22, 1987, 101 Stat. 1330-384, 1330-386, 1330-406;
Pub. L. 100-647, title I, Secs. 1005(c)(1)-(9), (12), 1006(u)(1),
1009(b)(6), title II, Sec. 2004(b)(1), Nov. 10, 1988, 102 Stat.
3390-3392, 3427, 3449, 3598; Pub. L. 101-239, title VII, Secs.
7202(a), (b), 7210(a), Dec. 19, 1989, 103 Stat. 2330, 2331, 2339;
Pub. L. 101-508, title XI, Sec. 11701(b), (c), Nov. 5, 1990, 104
Stat. 1388-507; Pub. L. 103-66, title XIII, Secs. 13206(d)(1),
13228(a)-(c), Aug. 10, 1993, 107 Stat. 467, 494, 495; Pub. L.
104-188, title I, Secs. 1703(n)(4), 1704(f)(2)(A), (B), Aug. 20,
1996, 110 Stat. 1877, 1879; Pub. L. 105-34, title III, Sec.
312(d)(1), title V, Sec. 503(b)(2), title X, Sec. 1005(a), title
XVI, Sec. 1604(g)(1), Aug. 5, 1997, 111 Stat. 839, 853, 911, 1099;
Pub. L. 105-277, div. J, title IV, Sec. 4003(a)(1), Oct. 21, 1998,
112 Stat. 2681-908; Pub. L. 106-170, title V, Sec. 544, Dec. 17,
1999, 113 Stat. 1944; Pub. L. 108-27, title III, Sec. 302(b), May
28, 2003, 117 Stat. 762.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 303 of Pub. L. 108-27,
see Effective and Termination Dates of 2003 Amendment note below.
-MISC1-
AMENDMENTS
2003 - Subsec. (d)(4)(B). Pub. L. 108-27, Secs. 302(b), 303,
temporarily inserted at end "Such term shall include qualified
dividend income (as defined in section 1(h)(11)(B)) only to the
extent the taxpayer elects to treat such income as investment
income for purposes of this subsection." See Effective and
Termination Dates of 2003 Amendment note below.
1999 - Subsec. (j)(3)(C). Pub. L. 106-170 added subpar. (C).
1998 - Subsec. (h)(2)(F). Pub. L. 105-277 added subpar. (F).
1997 - Subsec. (h)(2)(E). Pub. L. 105-34, Sec. 503(b)(2)(B),
struck out "or 6166 or under section 6166A (as in effect before its
repeal by the Economic Recovery Tax Act of 1981)" after "section
6163".
Subsec. (h)(4)(A)(i)(I). Pub. L. 105-34, Sec. 312(d)(1),
substituted "section 121" for "section 1034".
Subsec. (j)(2)(B)(iii). Pub. L. 105-34, Sec. 1604(g)(1),
substituted "clause (ii)" for "clause (i)" in introductory
provisions.
Subsec. (k). Pub. L. 105-34, Sec. 503(b)(2)(A), added subsec.
(k). Former subsec. (k) redesignated (l).
Subsec. (l). Pub. L. 105-34, Sec. 1005(a), added subsec. (l).
Former subsec. (l) redesignated (m).
Pub. L. 105-34, Sec. 503(b)(2)(A), redesignated subsec. (k) as
(l).
Subsec. (m). Pub. L. 105-34, Sec. 1005(a), redesignated subsec.
(l) as (m).
1996 - Subsec. (j)(1)(B). Pub. L. 104-188, Sec. 1704(f)(2)(A),
inserted before period at end "(and clause (ii) of paragraph (2)(A)
shall not apply for purposes of applying this subsection to the
amount so treated)".
Subsec. (j)(6)(E)(ii). Pub. L. 104-188, Sec. 1703(n)(4), which
directed that cl. (ii) be amended by substituting "which is" for
"which is a", could not be executed, because "which is a" does not
appear.
Subsec. (j)(7), (8). Pub. L. 104-188, Sec. 1704(f)(2)(B), added
par. (7) and redesignated former par. (7) as (8).
1993 - Subsec. (d)(4)(B). Pub. L. 103-66, Sec. 13206(d)(1),
amended heading and text of subpar. (B) generally. Prior to
amendment, text read as follows: "The term 'investment income'
means the sum of -
"(i) gross income (other than gain taken into account under
clause (ii)) from property held for investment, and
"(ii) any net gain attributable to the disposition of property
held for investment."
Subsec. (j). Pub. L. 103-66, Sec. 13228(c)(2), substituted "for
interest on certain indebtedness" for "for certain interest paid by
corporation to related person" in heading.
Subsec. (j)(3). Pub. L. 103-66, Sec. 13228(a), amended heading
and text of par. (3) generally. Prior to amendment, text read as
follows: "For purposes of this subsection -
"(A) In general. - Except as provided in subparagraph (B), the
term 'disqualified interest' means any interest paid or accrued
by the taxpayer (directly or indirectly) to a related person if
no tax is imposed by this subtitle with respect to such interest.
"(B) Exception for certain existing indebtedness. - The term
'disqualified interest' does not include any interest paid or
accrued under indebtedness with a fixed term -
"(i) which was issued on or before July 10, 1989, or
"(ii) which was issued after such date pursuant to a written
binding contract in effect on such date and all times
thereafter before such indebtedness was issued."
Subsec. (j)(5)(B). Pub. L. 103-66, Sec. 13228(c)(1), struck out
"to a related person" after "by the taxpayer" in introductory
provisions.
Subsec. (j)(6)(D), (E). Pub. L. 103-66, Sec. 13228(b), added
subpars. (D) and (E).
1990 - Subsec. (e)(5)(A). Pub. L. 101-508, Sec. 11701(b)(1),
amended last sentence generally. Prior to amendment, last sentence
read as follows: "For purposes of clause (ii), rules similar to the
rules of subsection (i)(3)(B) shall apply in determining the time
when the original issue discount is paid."
Subsec. (i)(3). Pub. L. 101-508, Sec. 11701(b)(2)(B), inserted
sentence at end.
Subsec. (i)(3)(B). Pub. L. 101-508, Sec. 11701(b)(2)(A), struck
out "(or stock)" after "obligation" wherever appearing.
Subsec. (j)(2)(A)(ii). Pub. L. 101-508, Sec. 11701(c)(2),
substituted "or on any other day" for "and on such other days".
Subsec. (j)(2)(C). Pub. L. 101-508, Sec. 11701(c)(1), substituted
"reduced (but not below zero) by such" for "less such" in
introductory provisions.
1989 - Subsec. (e)(5), (6). Pub. L. 101-239, Sec. 7202(a), added
par. (5) and redesignated former par. (5) as (6).
Subsec. (i). Pub. L. 101-239, Sec. 7202(b), added subsec. (i).
Former subsec. (i) redesignated (j).
Subsec. (j). Pub. L. 101-239, Sec. 7210(a), added subsec. (j).
Former subsec. (j) redesignated (k).
Pub. L. 101-239, Sec. 7202(b), redesignated subsec. (i) as (j).
Subsec. (k). Pub. L. 101-239, Sec. 7210(a), redesignated subsec.
(j) as (k).
1988 - Subsec. (d)(3)(A). Pub. L. 100-647, Sec. 1005(c)(1),
substituted "properly allocable to" for "incurred or continued to
purchase or carry".
Subsec. (d)(4)(B). Pub. L. 100-647, Sec. 1005(c)(2), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "The term 'investment income' means the sum of -
"(i) gross income (other than gain described in clause (ii))
from property held for investment, and
"(ii) any net gain attributable to the disposition of property
held for investment,
but only to the extent such amounts are not derived from the
conduct of a trade or business."
Subsec. (d)(6)(A). Pub. L. 100-647, Sec. 1005(c)(3), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "The amount of interest disallowed under this subsection
for any such taxable year shall be equal to the sum of -
"(i) the applicable percentage of the amount which (without
regard to this paragraph) is not allowed as a deduction under
this subsection for the taxable year to the extent such amount
does not exceed the ceiling amount,
"(ii) the amount which (without regard to this paragraph) is
not allowed as a deduction under this subsection in excess of the
ceiling amount, plus
"(iii) the amount of any carryforward to such taxable year
under paragraph (2) with respect to which a deduction was
disallowed under this subsection for a preceding taxable year.
For purposes of this subparagraph, the amount under clause (i) or
(ii) shall be computed without regard to the amount described in
clause (iii)."
Subsec. (e)(2)(B). Pub. L. 100-647, Sec. 1006(u)(1), substituted
"paragraph (7)" for "paragraph (6)".
Subsec. (h)(2)(A). Pub. L. 100-647, Sec. 1005(c)(4), substituted
"properly allocable to" for "incurred or continued in connection
with the conduct of".
Subsec. (h)(2)(E). Pub. L. 100-647, Sec. 1005(c)(12), inserted
"or under section 6166A (as in effect before its repeal by the
Economic Recovery Tax Act of 1981)" before period at end.
Subsec. (h)(3)(C). Pub. L. 100-647, Sec. 1005(c)(5), effective as
if enacted immediately before enactment of Pub. L. 100-203 (see
1987 Amendment note below), amended subpar. (C) generally. Prior to
amendment, subpar. (C) read as follows: "The amount under
subparagraph (B)(ii)(I) at any time after August 16, 1986, shall
not be less than the outstanding aggregate principal amount (as of
such time) of indebtedness which was incurred on or before August
16, 1986, and which was secured by the qualified residence on
August 16, 1986."
Subsec. (h)(4). Pub. L. 100-647, Sec. 1005(c)(6)(A), effective as
if enacted immediately before enactment of Pub. L. 100-203
(redesignating par. (5) as (4), see 1987 Amendment note below),
amended heading by substituting "Other definitions and special
rules - For purposes of this subsection - " for "Other definitions
and special rules".
Subsec. (h)(4)(A). Pub. L. 100-647, Sec. 1005(c)(6)(B)(i), (7),
effective as if enacted immediately before enactment of Pub. L.
100-203 (redesignating par. (5) as (4), see 1987 Amendment note
below), amended subpar. (A) by striking out "For purposes of this
subsection - " after "Qualified residence" in introductory
provisions, "used or" after "Residence not" in cl. (iii) heading,
and "or use" after "does not rent" in cl. (iii) text.
Subsec. (h)(4)(B). Pub. L. 100-647, Sec. 1005(c)(6)(B)(ii),
effective as if enacted immediately before enactment of Pub. L.
100-203 (redesignating par. (5) as (4), see 1987 Amendment note
below), amended subpar. (B) by substituting "Any" for "For purposes
of this paragraph, any".
Subsec. (h)(4)(C), (D). Pub. L. 100-647, Sec. 1005(c)(8),
effective as if enacted immediately before enactment of Pub. L.
100-203 (redesignating par. (5) as (4), see 1987 Amendment note
below), par. (4) added subpars. (C) and (D).
Subsec. (h)(5). Pub. L. 100-647, Sec. 2004(b)(1), redesignated
par. (6) as (5).
Subsec. (h)(6). Pub. L. 100-647, Sec. 2004(b)(1), redesignated
par. (6) as (5).
Pub. L. 100-647, Sec. 1005(c)(9), substituted "but for this
paragraph" for "but for this subsection".
Subsec. (i)(2). Pub. L. 100-647, Sec. 1009(b)(6), made technical
correction to directory language of Pub. L. 99-514, Sec. 902(e)(1),
see 1986 Amendment note below.
1987 - Subsec. (d)(4)(E). Pub. L. 100-203, Sec. 10212(b),
substituted "section 469(m)" for "section 469(l)".
Subsec. (h)(3). Pub. L. 100-203, Sec. 10102(a), amended par. (3)
generally. Prior to amendment (see 1988 Amendment note above), par.
(3) read as follows: "For purposes of this subsection -
"(A) In general. - The term 'qualified residence interest'
means interest which is paid or accrued during the taxable year
on indebtedness which is secured by any property which (at the
time such interest is paid or accrued) is a qualified residence
of the taxpayer.
"(B) Limitation on amount of interest. - The term 'qualified
residence interest' shall not include any interest paid or
accrued on indebtedness secured by any qualified residence which
is allocable to that portion of the principal amount of such
indebtedness which, when added to the outstanding aggregate
principal amount of all other indebtedness previously incurred
and secured by such qualified residence, exceeds the lesser of -
"(i) the fair market value of such qualified residence, or
"(ii) the sum of -
"(I) the taxpayer's basis in such qualified residence
(adjusted only by the cost of any improvements to such
residence), plus
"(II) the aggregate amount of qualified indebtedness of the
taxpayer with respect to such qualified residence.
"(C) Cost not less than balance of indebtedness incurred on or
before august 16, 1986. -
"(i) In general. - The amount under subparagraph (B)(ii)(I)
at any time after August 16, 1986, shall not be less than the
outstanding principal amount (as of such time) of indebtedness
-
"(I) which was incurred on or before August 16, 1986, and
which was secured by the qualified residence on August 16,
1986, or
"(II) which is secured by the qualified residence and was
incurred after August 16, 1986, to refinance indebtedness
described in subclause (I) (or refinanced indebtedness
meeting the requirements of this subclause) to the extent
(immediately after the refinancing) the principal amount of
the indebtedness resulting from the refinancing does not
exceed the principal amount of the refinanced indebtedness
(immediately before the refinancing).
"(ii) Limitation on period of refinancing. - Subclause (II)
of clause (i) shall not apply to any indebtedness after -
"(I) the expiration of the term of the indebtedness
described in clause (i)(I), or
"(II) if the principal of the indebtedness described in
clause (i)(I) is not amortized over its term, the expiration
of the term of the 1st refinancing of such indebtedness (or
if earlier, the date which is 30 years after the date of such
refinancing).
"(D) Time for determination. - Except as provided in
regulations, any determination under subparagraph (B) shall be
made as of the time the indebtedness is incurred."
Subsec. (h)(4), (5). Pub. L. 100-203, Sec. 10102(b), redesignated
par. (5) as (4) and struck out former par. (4) which defined
"qualified indebtedness" for purposes of this subsection.
1986 - Subsec. (d). Pub. L. 99-514, Sec. 511(a), substituted
"Limitation on investment interest" for "Limitation on interest on
investment indebtedness" in heading, and amended text generally,
revising and restating as pars. (1) to (6) provisions of former
pars. (1) to (7).
Subsec. (e)(2)(C). Pub. L. 99-514, Sec. 1803(a)(4), added subpar.
(C).
Subsec. (e)(3)(A). Pub. L. 99-514, Sec. 1810(e)(1)(A), inserted
"The preceding sentence shall not apply to the extent that the
original issue discount is effectively connected with the conduct
by such foreign related person of a trade or business within the
United States unless such original issue discount is exempt from
taxation (or is subject to a reduced rate of tax) pursuant to a
treaty obligation of the United States."
Subsec. (e)(5). Pub. L. 99-514, Sec. 1810(e)(1)(B), redesignated
par. (4), relating to cross references, as (5).
Subsec. (f)(3). Pub. L. 99-514, Sec. 1301(j)(3), substituted
"section 149(a)(3)" for "section 103(j)(3)".
Subsec. (h). Pub. L. 99-514, Sec. 511(b), added subsec. (h).
Former subsec. (h) redesignated (i).
Subsec. (i)(2). Pub. L. 99-514, Sec. 902(e)(1), as amended by
Pub. L. 100-647, Sec. 1009(b)(6), substituted "section 265(a)(2)"
for "section 265(2)".
Pub. L. 99-514, Sec. 511(b), redesignated former subsec. (h) as
(i).
1984 - Subsec. (d)(3)(D). Pub. L. 98-369, Sec. 56(b), designated
existing provisions as cl. (i) and added cl. (ii).
Subsec. (e)(1). Pub. L. 98-369, Sec. 42(a)(3), substituted "debt
instrument" for "bond" in two places and struck out "by an issuer
(other than a natural person)" before ", the portion of the
original issue".
Subsec. (e)(2). Pub. L. 98-369, Sec. 42(a)(3), substituted
provisions relating to debt instruments for provisions relating to
bonds.
Subsec. (e)(3). Pub. L. 98-369, Sec. 128(c), added par. (3)
relating to special rule for original issue discount on obligation
held by related foreign person. Former par. (3), relating to
exceptions, redesignated (4).
Pub. L. 98-369, Sec. 42(a)(3), added par. (3) relating to
exceptions.
Subsec. (e)(4). Pub. L. 98-369, Sec. 128(c), redesignated par.
(3), relating to exceptions, as (4).
Pub. L. 98-369, Sec. 42(a)(3), added par. (4) relating to cross
references.
Subsec. (f)(2)(C)(i). Pub. L. 98-369, Sec. 127(f), redesignated
existing provision as subcl. (I), and in subcl. (I) as so
redesignated, inserted reference to subpar. (A) and substituted
"or" for "and", and added subcl. (II).
Subsecs. (g), (h). Pub. L. 98-369, Sec. 612(c), added subsec. (g)
and redesignated former subsec. (g) as (h).
1982 - Subsec. (d)(4). Pub. L. 97-354 redesignated subpar. (D) as
(B). Former subpars. (B) and (C), relating to partnerships and
shareholders of electing small business corporations, respectively,
were struck out.
Subsec. (e). Pub. L. 97-248, Sec. 231(b), added subsec. (e)
relating to original issue discount. Former subsec. (e), setting
forth cross references, redesignated (f).
Pub. L. 97-248, Sec. 231(b), redesignated former subsec. (e),
setting forth cross references, as (f).
Subsec. (f). Pub. L. 97-248, Sec. 310(b)(2), added subsec. (f)
relating to the requirement that obligations be in registered form
to be tax-exempt. Former subsec. (f), setting forth cross
references, redesignated (g).
Subsec. (g). Pub. L. 97-248, Sec. 310(b)(2), redesignated former
subsec. (f), setting forth cross references, as (g).
1976 - Subsec. (b)(1). Pub. L. 94-455, Sec. 1901(b)(8)(C),
substituted "organization described in section 170(b)(1)(A)(ii) and
which is provided for a student of such organization" for
"institution (as defined in section 151(e)(4)) and which is
provided for a student of such institution".
Subsec. (d)(1). Pub. L. 94-455, Sec. 209(a)(1), among other
changes, substituted in subpar. (A) "$10,000" for "$25,000" and
"$5,000" for "$12,500", struck out subpar. (C) relating to the
excess of net long-term capital gain over short-term capital loss
and subpar. (D) relating to the excess of investment interest over
amounts in subpar. (A), and in provisions following lettered
paragraphs substituted "$10,000" for "$25,000" and struck out
provisions relating to the determination of the amount referred to
in subpar. (C).
Subsec. (d)(2). Pub. L. 94-455, Sec. 209(a)(1), among other
changes, struck out provisions relating to the limitation on the
amount of interest allowable by this par. and to reduction of
disallowed investment interest for capital gain deduction purposes.
Subsec. (d)(3)(A). Pub. L. 94-455, Sec. 209(a)(2), inserted
provision relating to determination of the amount of net investment
income where taxpayer has investment interest for taxable year to
which this subsection applies.
Subsec. (d)(3)(B)(iii). Pub. L. 94-455, Secs. 205(c)(3),
1901(b)(3)(K), substituted "1250, and 1254" for "and 1250", and
"ordinary income" for "gain from the sale or exchange of property
which is neither a capital asset nor property described in section
1231". Section 205(c)(3) of Pub. L. 94-455, which directed the
amendment of subsec. (d)(3)(A)(iii), was executed by amending
subsec. (d)(3)(B)(iii) to reflect the probable intent of Congress.
Subsec. (d)(3)(E). Pub. L. 94-455, Sec. 209(a)(3), substituted
"limitation in paragraph (1)" for "limitations in paragraphs (1)
and (2)(A)".
Subsec. (d)(4)(B), (C). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (d)(5). Pub. L. 94-455, Sec. 209(a)(4), (5), redesignated
par. (6) as (5) and inserted provision relating to the application
of this paragraph after Dec. 31, 1975, on an allocation basis
rather than a specific item basis. Former par. (5), relating to
capital gains treatment of investment interest, was struck out.
Pub. L. 94-455, Sec. 1901(b)(3)(K), directed the amendment of
par. (5) by substituting "ordinary income" for "gain from the sale
or exchange of property which is neither a capital asset nor
property described in section 1231", such par. (5) having been
struck out by Pub. L. 94-455, Sec. 209(a)(4).
Subsec. (d)(6). Pub. L. 94-455, Secs. 209(a)(4), 1906(b)(13)(A),
redesignated par. (7) as (6) and struck out in provision following
subpar. (B) "or his delegate" after "Secretary". Former par. (6)
redesignated (5).
Subsec. (d)(7). Pub. L. 94-455, Sec. 209(a)(6), added par. (7).
Former par. (7) redesignated (6).
1971 - Subsec. (d)(1)(B). Pub. L. 92-178, Sec. 304(b)(2),
inserted "the amount (if any) by which the deductions allowable
under this section (determined without regard to this subsection)
and sections 162, 164(a)(1) or (2), or 212 attributable to property
of the taxpayer subject to a net lease exceeds the rental income
produced by such property for the property year, plus" after
"plus".
Subsec. (d)(3)(C). Pub. L. 92-178, Sec. 304(d), inserted
reference to section 162.
Subsec. (d)(4)(A)(i). Pub. L. 92-178, Sec. 304(a)(2)(A), inserted
"of the lessor" after "deductions" and "(other than rents and
reimbursed amounts with respect to such property)" after "section
162".
Subsec. (d)(7). Pub. L. 92-178, Sec. 304(a)(2)(B), added par.
(7).
1969 - Subsecs. (d), (e). Pub. L. 91-172 added subsec. (d).
Former subsec. (d) redesignated (e).
1964 - Subsec. (b)(1). Pub. L. 88-272 included the purchase of
educational services, and defined "educational services".
1963 - Subsecs. (c), (d). Pub. L. 88-9, Sec. 1(a), (c), added
subsec. (c), redesignated former subsec. (c) as (d) and added par.
(5).
EFFECTIVE AND TERMINATION DATES OF 2003 AMENDMENT
Amendment by Pub. L. 108-27 applicable, except as otherwise
provided, to taxable years beginning after Dec. 31, 2002, see
section 302(f) of Pub. L. 108-27, set out as a note under section 1
of this title.
Amendment by Pub. L. 108-27 inapplicable to taxable years
beginning after Dec. 31, 2008, and the Internal Revenue Code of
1986 to be applied and administered to such years as if such
amendment had never been enacted, see section 303 of Pub. L.
108-27, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to taxable years
beginning after Dec. 31, 2000, see section 546(a) of Pub. L.
106-170, set out as a note under section 856 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-277 effective as if included in the
provision of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 4003(l) of Pub. L.
105-277, set out as a note under section 86 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(1) of Pub. L. 105-34 applicable to
sales and exchanges after May 6, 1997, with certain exceptions, see
section 312(d) of Pub. L. 105-34, set out as a note under section
121 of this title.
Section 503(d) of Pub. L. 105-34 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 2053, 6166, and 6601 of this title] shall
apply to estates of decedents dying after December 31, 1997.
"(2) Election. - In the case of the estate of any decedent dying
before January 1, 1998, with respect to which there is an election
under section 6166 of the Internal Revenue Code of 1986, the
executor of the estate may elect to have the amendments made by
this section apply with respect to installments due after the
effective date of the election; except that the 2-percent portion
of such installments shall be equal to the amount which would be
the 4-percent portion of such installments without regard to such
election. Such an election shall be made before January 1, 1999 in
the manner prescribed by the Secretary of the Treasury and, once
made, is irrevocable."
Section 1005(b) of Pub. L. 105-34 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to disqualified debt instruments issued
after June 8, 1997.
"(2) Transition rule. - The amendment made by this section shall
not apply to any instrument issued after June 8, 1997, if such
instrument is -
"(A) issued pursuant to a written agreement which was binding
on such date and at all times thereafter,
"(B) described in a ruling request submitted to the Internal
Revenue Service on or before such date, or
"(C) described on or before such date in a public announcement
or in a filing with the Securities and Exchange Commission
required solely by reason of the issuance."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1703(n)(4) of Pub. L. 104-188 effective as
if included in the provision of the Revenue Reconciliation Act of
1993, Pub. L. 103-66, Secs. 13001-13444, to which such amendment
relates, see section 1703(o) of Pub. L. 104-188, set out as a note
under section 39 of this title.
Section 1704(f)(2)(C) of Pub. L. 104-188 provided that: "The
amendments made by this paragraph [amending this section] shall
apply as if included in the amendments made by section 7210(a) of
the Revenue Reconciliation Act of 1989 [Pub. L. 101-239]."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by section 13206(d)(1) of Pub. L. 103-66 applicable to
taxable years beginning after Dec. 31, 1992, see section
13206(d)(3) of Pub. L. 103-66 set out as a note under section 1 of
this title.
Section 13228(d) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section] shall apply to
interest paid or accrued in taxable years beginning after December
31, 1993."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective, except as otherwise
provided, as if included in the provision of the Revenue
Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which
such amendment relates, see section 11701(n) of Pub. L. 101-508,
set out as a note under section 42 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7202(c) of Pub. L. 101-239 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to instruments issued after July 10, 1989.
"(2) Exceptions. -
"(A) The amendments made by this section shall not apply to any
instrument if -
"(i) such instrument is issued in connection with an
acquisition -
"(I) which is made on or before July 10, 1989,
"(II) for which there was a written binding contract in
effect on July 10, 1989, and at all times thereafter before
such acquisition, or
"(III) for which a tender offer was filed with the
Securities and Exchange Commission on or before July 10,
1989,
"(ii) the term of such instrument is not greater than -
"(I) the term specified in the written documents described
in clause (iii), or
"(II) if no term is determined under subclause (I), 10
years, and
"(iii) the use of such instrument in connection with such
acquisition (and the maximum amount of proceeds from such
instrument) was determined on or before July 10, 1989, and such
determination is evidenced by written documents -
"(I) which were transmitted on or before July 10, 1989,
between the issuer and any governmental regulatory bodies or
prospective parties to the issuance or acquisition, and
"(II) which are customarily used for the type of
acquisition or financing involved.
"(B) The amendments made by this section shall not apply to any
instrument issued pursuant to the terms of a debt instrument
issued on or before July 10, 1989, or described in subparagraph
(A) or (D).
"(C) The amendments made by this section shall not apply to any
instrument issued to refinance an original issue discount debt
instrument to which the amendments made by this section do not
apply if -
"(i) the maturity date of the refinancing instrument is not
later than the maturity date of the refinanced instrument,
"(ii) the issue price of the refinancing instrument does not
exceed the adjusted issue price of the refinanced instrument,
"(iii) the stated redemption price at maturity of the
refinancing instrument is not greater than the stated
redemption price at maturity of the refinanced instrument, and
"(iv) the interest payments required under the refinancing
instrument before maturity are not less than (and are paid not
later than) the interest payments required under the refinanced
instrument.
"(D) The amendments made by this section shall not apply to
instruments issued after July 10, 1989, pursuant to a
reorganization plan in a title 11 or similar case (as defined in
section 368(a)(3) of the Internal Revenue Code of 1986) if the
amount of proceeds of such instruments, and the maturities of
such instruments, do not exceed the amount or maturities
specified in the last reorganization plan filed in such case on
or before July 10, 1989."
Section 7210(b) of Pub. L. 101-239 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to interest paid or accrued in taxable
years beginning after July 10, 1989.
"(2) Special rule for demand loans, etc. - In the case of any
demand loan (or other loan without a fixed term) which was
outstanding on July 10, 1989, interest on such loan to the extent
attributable to periods before September 1, 1989, shall not be
treated as disqualified interest for purposes of section 163(j) of
the Internal Revenue Code of 1986 (as added by subsection (a))."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1005(c)(13) of Pub. L. 100-647 provided that: "For
purposes of applying the amendments made by this subsection
[amending this section and sections 467, 1255, and 7872 of this
title] and the amendments made by section 10102 of the Revenue Act
of 1987 [section 10102 of Pub. L. 100-203, amending this section],
the provisions of this subsection shall be treated as having been
enacted immediately before the enactment of the Revenue Act of
1987."
Amendment by sections 1006(u)(1) and 1009(b)(6) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 2004(b)(1) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provisions of
the Revenue Act of 1987, Pub. L. 100-203, title X, to which such
amendment relates, see section 2004(u) of Pub. L. 100-647, set out
as a note under section 56 of this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10102(c) of Pub. L. 100-203 provided that: "The
amendments made by this section [amending this section] shall apply
to taxable years beginning after December 31, 1987."
Amendment by section 10212(b) of Pub. L. 100-203 effective as if
included in the amendments made by section 501 of the Tax Reform
Act of 1986, Pub. L. 99-514, see section 10212(c) of Pub. L.
100-203, set out as a note under section 58 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 511(e) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and sections 467, 703,
1255, 1363, and 7872 of this title] shall apply to taxable years
beginning after December 31, 1986."
Amendment by section 902(e)(1) of Pub. L. 99-514 applicable to
taxable years ending after Dec. 31, 1986, with certain exceptions
and qualifications, see section 902(f) of Pub. L. 99-514, set out
as a note under section 265 of this title.
Amendment by section 1301(j)(3) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
Amendment by sections 1803(a)(4) and 1810(e)(1) of Pub. L. 99-514
effective, except as otherwise provided, as if included in the
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,
to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 42(a)(3) of Pub. L. 98-369 applicable to
taxable years ending after July 18, 1984, see section 44 of Pub. L.
98-369, set out as an Effective Date note under section 1271 of
this title.
Section 56(d) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and sections 263 and
265 of this title] shall apply to short sales after the date of
enactment of this Act [July 18, 1984] in taxable years ending after
such date."
Amendment by section 127(f) of Pub. L. 98-369 applicable to
interest received after July 18, 1984, with respect to obligations
issued after such date, in taxable years ending after such date,
see section 127(g)(1) of Pub. L. 98-369, set out as a note under
section 871 of this title.
Amendment by section 128(c) of Pub. L. 98-369 applicable to
obligations issued after June 9, 1984, see section 128(d)(2) of
Pub. L. 98-369, set out as a note under section 871 of this title.
Amendment by section 612(c) of Pub. L. 98-369 applicable to
interest paid or accrued after Dec. 31, 1984, on indebtedness
incurred after Dec. 31, 1984, see section 612(g) of Pub. L. 98-369,
set out as an Effective Date note under section 25 of this title.
EFFECTIVE DATE OF 1982 AMENDMENTS
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
Amendment by Pub. L. 97-248 applicable to obligations issued
after Dec. 31, 1982, with exceptions for certain warrants, see
section 310(d) of Pub. L. 97-248, set out as a note under section
103 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 205(c)(3) of Pub. L. 94-455 applicable with
respect to taxable years ending after Dec. 31, 1975, see section
205(e) of Pub. L. 94-455, set out as an Effective Date note under
section 1254 of this title.
Section 209(b) of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by subsection (a) [amending this section] shall
apply to taxable years beginning after December 31, 1975.
"(2) Indebtedness incurred before september 11, 1975. - In the
case of indebtedness attributable to a specific item of property
which -
"(A) is for a specified term, and
"(B) was incurred before September 11, 1975, or is incurred
after September 10, 1975, pursuant to a written contract or
commitment which on September 11, 1975, and at all times
thereafter before the incurring of such indebtedness, is binding
on the taxpayer,
the amendments made by this section shall not apply, but section
163(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(as in effect before the enactment of this Act [Oct. 4, 1976])
shall apply. For purposes of the preceding sentence, so much of the
net investment income (as defined in section 163(d)(3)(A) of such
Code) for any taxable year as is not taken into account under
section 163(d) of such Code, as amended by this Act, by reason of
the last sentence of section 163(d)(3)(A) of such Code, shall be
taken into account for purposes of applying such section as in
effect before the date of enactment of this Act [Oct. 4, 1976] with
respect to interest on indebtedness referred to in the preceding
sentence."
Amendment by section 1901(b)(8)(C), (3)(K) of Pub. L. 94-455
applicable with respect to taxable years beginning after Dec. 31,
1976, see section 1901(d) of Pub. L. 94-455, set out as a note
under section 2 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Section 304(e) of Pub. L. 92-178 provided that: "The amendments
made by this section to section 57 of the Internal Revenue Code of
1954 shall apply to taxable years beginning after December 31,
1969. The amendments made by this section to section 163 of such
Code shall apply to taxable years beginning after December 31,
1971."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 221(b) of Pub. L. 91-172 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1971."
EFFECTIVE DATE OF 1964 AMENDMENT
Section 224(d) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) [enacting section 483 of this title] and
(b) [amending the analysis preceding section 481 of this title]
shall apply to payments made after December 31, 1963, on account of
sales or exchanges of property occurring after June 30, 1963, other
than any sale or exchange made pursuant to a binding written
contract (including an irrevocable written option) entered into
before July 1, 1963. The amendments made by subsection (c)
[amending this section] shall apply to payments made during taxable
years beginning after December 31, 1963."
EFFECTIVE DATE OF 1963 AMENDMENT
Subsec. (c) effective as of Jan. 1, 1962, and applicable with
respect to taxable years ending on or after such date, see section
2 of Pub. L. 88-9, set out as an Effective Date note under section
1055 of this title.
APPLICATION OF SUBSECTION (H) TO TAXABLE YEARS BEGINNING IN 1987
Section 1005(c)(14) of Pub. L. 100-647 provided that:
"(A) For purposes of applying section 163(h) of the 1986 Code to
any taxable year beginning during 1987, if, incident to a divorce
or legal separation -
"(i) an individual acquires the interest of a spouse or former
spouse in a qualified residence in a transfer to which section
1041 of the 1986 Code applies, and
"(ii) such individual incurs indebtedness which is secured by
such qualified residence,
the amount determined under paragraph (3)(B)(ii)(I) of section
163(h) of the 1986 Code (as in effect before the amendments made by
the Revenue Act of 1987 [Pub. L. 100-203, title X]) with respect to
such qualified residence shall be increased by the amount
determined under subparagraph (B).
"(B) The amount determined under this subparagraph shall be equal
to the excess (if any) of -
"(i) the lesser of the amount of the indebtedness described in
subparagraph (A)(ii), or the fair market value of the spouse's or
former spouse's interest in the qualified residence as of the
time of the transfer, over
"(ii) the basis of the spouse or former spouse in such interest
in such residence (adjusted only by the cost of any improvements
to such residence)."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TRANSITIONAL RULE FOR TREATMENT OF CERTAIN INCOME FROM S
CORPORATIONS
Section 1066 of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - If -
"(1) a corporation had an election in effect under subchapter S
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] for
the taxable years of such corporation beginning in 1982, 1983,
and 1984, and
"(2) a shareholder of such corporation makes an election to
have this section apply,
then any qualified income which such shareholder takes into account
by reason of holding stock in such corporation for any taxable year
of such corporation beginning in 1983 or 1984 shall be treated for
purposes of section 163(d) of the Internal Revenue Code of 1986 as
such income would have been treated but for the enactment of the
Subchapter S Revision Act of 1982 [Pub. L. 97-354, see Tables for
classification].
"(b) Qualified Income. - For purposes of subsection (a), the term
'qualified income' means any income other than income which is
attributable to personal services performed by the shareholder for
the corporation.
"(c) Election. - The election under subsection (a)(2) shall be
made at such time and in such manner as the Secretary of the
Treasury or his delegate may by regulations prescribe."
TRANSITIONAL RULE
For provision that, for purposes of amendments by section 231(b)
of Pub. L. 97-248, any evidence of indebtedness issued pursuant to
a written commitment which was binding on July 1, 1982, and at all
times thereafter be treated as issued on July 1, 1982, see section
231(e) of Pub. L. 97-248, set out as a note under section 1232A of
this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 56, 67, 68, 149, 162,
165, 195, 216, 263A, 312, 465, 469, 483, 691, 805, 832, 860H, 860K,
860L, 871, 881, 911, 1275, 1287, 1288, 2057, 4701, 6109, 7872 of
this title.
-FOOTNOTE-
(!1) So in original. Probably should be followed by "in".
-End-
-CITE-
26 USC Sec. 164 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 164. Taxes
-STATUTE-
(a) General rule
Except as otherwise provided in this section, the following taxes
shall be allowed as a deduction for the taxable year within which
paid or accrued:
(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits, and
excess profits taxes.
(4) The GST tax imposed on income distributions.
(5) The environmental tax imposed by section 59A.
In addition, there shall be allowed as a deduction State and local,
and foreign, taxes not described in the preceding sentence which
are paid or accrued within the taxable year in carrying on a trade
or business or an activity described in section 212 (relating to
expenses for production of income). Notwithstanding the preceding
sentence, any tax (not described in the first sentence of this
subsection) which is paid or accrued by the taxpayer in connection
with an acquisition or disposition of property shall be treated as
part of the cost of the acquired property or, in the case of a
disposition, as a reduction in the amount realized on the
disposition.
(b) Definitions and special rules
For purposes of this section -
(1) Personal property taxes
The term "personal property tax" means an ad valorem tax which
is imposed on an annual basis in respect of personal property.
(2) State or local taxes
A State or local tax includes only a tax imposed by a State, a
possession of the United States, or a political subdivision of
any of the foregoing, or by the District of Columbia.
(3) Foreign taxes
A foreign tax includes only a tax imposed by the authority of a
foreign country.
(4) Special rules for GST tax
(A) In general
The GST tax imposed on income distributions is -
(i) the tax imposed by section 2601, and
(ii) any State tax described in section 2604,
but only to the extent such tax is imposed on a transfer which
is included in the gross income of the distributee and to which
section 666 does not apply.
(B) Special rule for tax paid before due date
Any tax referred to in subparagraph (A) imposed with respect
to a transfer occurring during the taxable year of the
distributee (or, in the case of a taxable termination, the
trust) which is paid not later than the time prescribed by law
(including extensions) for filing the return with respect to
such transfer shall be treated as having been paid on the last
day of the taxable year in which the transfer was made.
(c) Deduction denied in case of certain taxes
No deduction shall be allowed for the following taxes:
(1) Taxes assessed against local benefits of a kind tending to
increase the value of the property assessed; but this paragraph
shall not prevent the deduction of so much of such taxes as is
properly allocable to maintenance or interest charges.
(2) Taxes on real property, to the extent that subsection (d)
requires such taxes to be treated as imposed on another taxpayer.
(d) Apportionment of taxes on real property between seller and
purchaser
(1) General rule
For purposes of subsection (a), if real property is sold during
any real property tax year, then -
(A) so much of the real property tax as is properly allocable
to that part of such year which ends on the day before the date
of the sale shall be treated as a tax imposed on the seller,
and
(B) so much of such tax as is properly allocable to that part
of such year which begins on the date of the sale shall be
treated as a tax imposed on the purchaser.
(2) Special rules
(A) in the case of any sale of real property, if -
(i) a taxpayer may not, by reason of his method of
accounting, deduct any amount for taxes unless paid, and
(ii) the other party to the sale is (under the law imposing
the real property tax) liable for the real property tax for
the real property tax year,
then for purposes of subsection (a) the taxpayer shall be
treated as having paid, on the date of the sale, so much of
such tax as, under paragraph (1) of this subsection, is treated
as imposed on the taxpayer. For purposes of the preceding
sentence, if neither party is liable for the tax, then the
party holding the property at the time the tax becomes a lien
on the property shall be considered liable for the real
property tax for the real property tax year.
(B) In the case of any sale of real property, if the
taxpayer's taxable income for the taxable year during which the
sale occurs is computed under an accrual method of accounting,
and if no election under section 461(c) (relating to the
accrual of real property taxes) applies, then, for purposes of
subsection (a), that portion of such tax which -
(i) is treated, under paragraph (1) of this subsection, as
imposed on the taxpayer, and
(ii) may not, by reason of the taxpayer's method of
accounting, be deducted by the taxpayer for any taxable year,
shall be treated as having accrued on the date of the sale.
(e) Taxes of shareholder paid by corporation
Where a corporation pays a tax imposed on a shareholder on his
interest as a shareholder, and where the shareholder does not
reimburse the corporation, then -
(1) the deduction allowed by subsection (a) shall be allowed to
the corporation; and
(2) no deduction shall be allowed the shareholder for such tax.
(f) Deduction for one-half of self-employment taxes
(1) In general
In the case of an individual, in addition to the taxes
described in subsection (a), there shall be allowed as a
deduction for the taxable year an amount equal to one-half of the
taxes imposed by section 1401 for such taxable year.
(2) Deduction treated as attributable to trade or business
For purposes of this chapter, the deduction allowed by
paragraph (1) shall be treated as attributable to a trade or
business carried on by the taxpayer which does not consist of the
performance of services by the taxpayer as an employee.
(g) Cross references
(1) For provisions disallowing any deduction for certain
taxes, see section 275.
(2) For treatment of taxes imposed by Indian tribal
governments (or their subdivisions), see section 7871.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 47; Pub. L. 85-866, title I,
Sec. 6(a), Sept. 2, 1958, 72 Stat. 1608; Pub. L. 88-272, title II,
Sec. 207(a), (b)(1), (2), Feb. 26, 1964, 78 Stat. 40-42; Pub. L.
92-580, Sec. 4(a), Oct. 27, 1972, 86 Stat. 1277; Pub. L. 94-455,
title XIX, Secs. 1901(a)(25), 1951(b)(3)(A), Oct. 4, 1976, 90 Stat.
1767, 1837; Pub. L. 95-600, title I, Sec. 111(a), (b), Nov. 6,
1978, 92 Stat. 2777; Pub. L. 96-223, title I, Sec. 101(b), Apr. 2,
1980, 94 Stat. 250; Pub. L. 97-473, title II, Sec. 202(b)(3), Jan.
14, 1983, 96 Stat. 2609; Pub. L. 98-21, title I, Sec. 124(c)(1),
Apr. 20, 1983, 97 Stat. 90; Pub. L. 98-369, div. A, title IV, Sec.
474(r)(29)(F), July 18, 1984, 98 Stat. 844; Pub. L. 99-499, title
V, Sec. 516(b)(2)(A), Oct. 17, 1986, 100 Stat. 1771; Pub. L.
99-514, title I, Sec. 134, title XIV, Sec. 1432(a)(1), (2), Oct.
22, 1986, 100 Stat. 2116, 2729; Pub. L. 100-418, title I, Sec.
1941(b)(2)(A), Aug. 23, 1988, 102 Stat. 1323; Pub. L. 100-647,
title I, Sec. 1018(u)(11), Nov. 10, 1988, 102 Stat. 3590; Pub. L.
104-188, title I, Sec. 1704(t)(79), Aug. 20, 1996, 110 Stat. 1891.)
-MISC1-
AMENDMENTS
1996 - Subsec. (a)(4), (5). Pub. L. 104-188 added pars. (4) and
(5) and struck out former pars. (4) and (5) which read as follows:
"(4) The environmental tax imposed by section 59A.
"(5) The GST tax imposed on income distributions."
1988 - Subsec. (a)(4). Pub. L. 100-418 struck out par. (4)
relating to windfall profit tax imposed by section 4986 and
redesignated par. (5) relating to environmental tax as (4).
Subsec. (a)(5). Pub. L. 100-647 substituted "The GST" for "the
GST".
Pub. L. 100-418 redesignated par. (5), relating to environmental
tax, as (4).
1986 - Subsec. (a). Pub. L. 99-514, Sec. 134(a)(2), inserted
"Notwithstanding the preceding sentence, any tax (not described in
the first sentence of this subsection) which is paid or accrued by
the taxpayer in connection with an acquisition or disposition of
property shall be treated as part of the cost of the acquired
property or, in the case of a disposition, as a reduction in the
amount realized on the disposition."
Subsec. (a)(4). Pub. L. 99-514, Sec. 134(a)(1), struck out par.
(4) relating to "State and local general sales taxes" and
redesignated as par. (4) former par. (5) relating to windfall
profit tax.
Subsec. (a)(5). Pub. L. 99-514, Sec. 1432(a)(1), added par. (5)
relating to GST tax imposed on income distributions.
Pub. L. 99-499 added par. (5) relating to environmental tax.
Subsec. (b)(2). Pub. L. 99-514, Sec. 134(b)(1), (2), redesignated
par. (3) as (2) and struck out former par. (2), general sales taxes
provisions, subpars. (A) to (E) of which covered in general rule,
special rules for food, etc., items taxed at different rates,
compensating use taxes, and special rules for motor vehicles,
respectively.
Subsec. (b)(3). Pub. L. 99-514, Sec. 134(b)(2), redesignated par.
(4) as (3). Former par. (3) redesignated (2).
Subsec. (b)(4). Pub. L. 99-514, Sec. 1432(a)(2), added par. (4).
Pub. L. 99-514, Sec. 134(b)(2), redesignated par. (4) as (3).
Subsec. (b)(5). Pub. L. 99-514, Sec. 134(b)(1), struck out par.
(5), separately stated general sales taxes, which read as follows:
"If the amount of any general sales tax is separately stated, then,
to the extent that the amount so stated is paid by the consumer
(otherwise than in connection with the consumer's trade or
business) to his seller, such amount shall be treated as a tax
imposed on, and paid by, such consumer."
1984 - Subsec. (f). Pub. L. 98-369 redesignated pars. (2) and (3)
as pars. (1) and (2), respectively. Former par. (1), which referred
to section 1451 for provisions disallowing any deduction for the
payment of the tax imposed by subchapter B of chapter 3 (relating
to tax-free covenant bonds), was struck out.
1983 - Subsec. (f). Pub. L. 98-21 added subsec. (f). Former
subsec. (f) redesignated (g).
Subsec. (f)(3). Pub. L. 97-473 added par. (3).
Subsec. (g). Pub. L. 98-21 redesignated subsec. (f) as (g).
1980 - Subsec. (a)(5). Pub. L. 96-223 added par. (5).
1978 - Subsec. (a)(5). Pub. L. 95-600, Sec. 111(a), struck out
par. (5) relating to a deduction for State and local taxes on the
sale of gasoline, diesel fuel, and other motor fuels.
Subsec. (b)(5). Pub. L. 95-600, Sec. 111(b), struck out in
heading "and gasoline taxes" after "sales taxes", and in text "or
of any tax on the sale of gasoline, diesel fuel, or other motor
fuel" after "sales tax".
1976 - Subsec. (d)(2). Pub. L. 94-455, Sec. 1901(a)(25),
redesignated subpar. (D) as (B), and struck out subpar. (B) which
related to the taxable years that subsec. (d)(1) applied and
subpar. (C) which related to the limitations on subsec. (d)(1)
where real property tax was allowable as a deduction under the
Internal Revenue Code of 1939.
Subsecs. (f), (g). Pub. L. 94-455, Sec. 1951(b)(3)(A),
redesignated subsec. (g) as (f). Former subsec. (f), which related
to payments for municipal services in atomic energy communities,
was struck out.
1972 - Subsec. (b)(2)(E). Pub. L. 92-580 added subpar. (E).
1964 - Subsec. (a). Pub. L. 88-272, Sec. 207(a), limited the
subsection to State, local and foreign real property, income, war
profits, excess profits, and unspecified taxes, on a business or
activity described in section 212, and to State and local personal
property, general sales, gasoline, diesel fuel and other motor fuel
taxes.
Subsec. (b). Pub. L. 88-272, Sec. 207(a), added subsec. (b).
Former subsec. (b), which denied the deduction for certain Federal
income taxes, for Federal war profits and excess profits taxes,
import duties, excise and stamp taxes, and estate, inheritance,
legacy, succession and gift taxes, local assessments against
benefits increasing property values, and certain taxes imposed by
any foreign country or possession of the United States if the
taxpayer chose to benefit by section 901 relating to foreign tax
credit, and for taxes on real property to the extent that they are
treated as imposed on another taxpayer, was struck out.
Subsec. (c). Pub. L. 88-272, Sec. 207(a), substituted provisions
denying the deduction for taxes assessed against local benefits
which increase property value, except for so much as is properly
allocable to maintenance or interest charges, and for real property
taxes to the extent they are treated as imposed on another
taxpayer, for provisions relating to certain retail sales taxes and
gasoline taxes, the extent to which they were deductible, and to
definition of "state or local sales tax".
Subsec. (f). Pub. L. 88-272, Sec. 207(b)(1), inserted "State"
before "real property taxes".
Subsec. (g). Pub. L. 88-272, Sec. 207(b)(2), designated existing
provisions as par. (1), substituted "1451" for "1451(f)" and added
par. (2).
1958 - Subsecs. (f), (g). Pub. L. 85-866, Sec. 6(a), added
subsec. (f) and redesignated former subsec. (f) as (g).
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
Section 1941(c) of Pub. L. 100-418 provided that: "The amendments
made by this section [amending this section and sections 193, 291,
6161, 6211, 6212, 6213, 6214, 6302, 6344, 6501, 6511, 6512, 6611,
6654, 6655, 6724, 6862, 7422, and 7512 of this title, and repealing
sections 280D, 4986 to 4998, 6050C, 6076, 6232, 6429, 6430, and
7241 of this title] shall apply to crude oil removed from the
premises on or after the date of the enactment of this Act [Aug.
23, 1988]."
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 134 of Pub. L. 99-514 applicable to taxable
years beginning after Dec. 31, 1986, see section 151(a) of Pub. L.
99-514, set out as a note under section 1 of this title.
Amendment by section 1432(a)(1), (2) of Pub. L. 99-514 applicable
to generation-skipping transfers (within the meaning of section
2611 of this title) made after Oct. 22, 1986, except as otherwise
provided, see section 1433 of Pub. L. 99-514, set out as an
Effective Date note under section 2601 of this title.
Amendment by Pub. L. 99-499 applicable to taxable years beginning
after Dec. 31, 1986, see section 516(c) of Pub. L. 99-499, set out
as a note under section 26 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 not applicable with respect to
obligations issued before Jan. 1, 1984, see section 475(b) of Pub.
L. 98-369, set out as a note under section 33 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1989, see section 124(d)(2) of Pub. L. 98-21, set
out as a note under section 1401 of this title.
For effective date of amendment by Pub. L. 97-473, see section
204(1) of Pub. L. 97-473, set out as an Effective Date note under
section 7871 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-223 applicable to periods after Feb. 29,
1980, see section 101(i) of Pub. L. 96-223, set out as an Effective
Date note under section 6161 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 111(c) of Pub. L. 95-600 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1978."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see sections 1901(d) and
1951(d) of Pub. L. 94-455, set out as notes under sections 2 and 72
of this title, respectively.
EFFECTIVE DATE OF 1972 AMENDMENT
Section 4(b) of Pub. L. 92-580 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years ending on or after January 1, 1971."
EFFECTIVE DATE OF 1964 AMENDMENT
Section 207(c) of Pub. L. 88-272, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) General rule. - Except as provided in paragraph (2), the
amendments made by this section [enacting section 275 of this title
and amending this section and sections 535, 545, 556, 901, and 903
of this title] shall apply to taxable years beginning after
December 31, 1963.
"(2) Special taxing districts. - Section 164(c)(1) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by
subsection (a)) shall not prevent the deduction under section 164
of such Code (as so amended) of taxes levied by a special taxing
district which is described in section 164(b)(5) of such Code (as
in effect for a taxable year ending on December 31, 1963) and which
was in existence on December 31, 1963, for the purpose of retiring
indebtedness existing on such date."
EFFECTIVE DATE OF 1958 AMENDMENT
Section 6(b) of Pub. L. 85-866 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1957."
SAVINGS PROVISION
Section 1951(b)(3)(B) of Pub. L. 94-455 provided that:
"Notwithstanding subparagraph (A) [amending this section], any
amount paid or accrued in a taxable year beginning after December
31, 1976, to the Atomic Energy Commission or its successors for
municipal-type services shall be allowed as a deduction under
section 164 if such amount would have been deductible by reason of
section 164(f) (as in effect for a taxable year ending on December
31, 1976) and if the amount is paid or accrued with respect to real
property in a community (within the meaning of section 21(b) of the
Atomic Energy Community Act of 1955 (42 U.S.C. 2304(b))) in which
the Commission on December 31, 1976, was rendering municipal-type
services for which it received compensation from the owners of
property within such community."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 32, 56, 59A, 67, 195,
216, 275, 542, 556, 691, 703, 832, 834, 853, 901, 903, 905, 911,
960, 1001, 1012, 6045, 7871 of this title; title 31 section 6704.
-End-
-CITE-
26 USC Sec. 165 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 165. Losses
-STATUTE-
(a) General rule
There shall be allowed as a deduction any loss sustained during
the taxable year and not compensated for by insurance or otherwise.
(b) Amount of deduction
For purposes of subsection (a), the basis for determining the
amount of the deduction for any loss shall be the adjusted basis
provided in section 1011 for determining the loss from the sale or
other disposition of property.
(c) Limitation on losses of individuals
In the case of an individual, the deduction under subsection (a)
shall be limited to -
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit,
though not connected with a trade or business; and
(3) except as provided in subsection (h), losses of property
not connected with a trade or business or a transaction entered
into for profit, if such losses arise from fire, storm,
shipwreck, or other casualty, or from theft.
(d) Wagering losses
Losses from wagering transactions shall be allowed only to the
extent of the gains from such transactions.
(e) Theft losses
For purposes of subsection (a), any loss arising from theft shall
be treated as sustained during the taxable year in which the
taxpayer discovers such loss.
(f) Capital losses
Losses from sales or exchanges of capital assets shall be allowed
only to the extent allowed in sections 1211 and 1212.
(g) Worthless securities
(1) General rule
If any security which is a capital asset becomes worthless
during the taxable year, the loss resulting therefrom shall, for
purposes of this subtitle, be treated as a loss from the sale or
exchange, on the last day of the taxable year, of a capital
asset.
(2) Security defined
For purposes of this subsection, the term "security" means -
(A) a share of stock in a corporation;
(B) a right to subscribe for, or to receive, a share of stock
in a corporation; or
(C) a bond, debenture, note, or certificate, or other
evidence of indebtedness, issued by a corporation or by a
government or political subdivision thereof, with interest
coupons or in registered form.
(3) Securities in affiliated corporation
For purposes of paragraph (1), any security in a corporation
affiliated with a taxpayer which is a domestic corporation shall
not be treated as a capital asset. For purposes of the preceding
sentence, a corporation shall be treated as affiliated with the
taxpayer only if -
(A) the taxpayer owns directly stock in such corporation
meeting the requirements of section 1504(a)(2), and
(B) more than 90 percent of the aggregate of its gross
receipts for all taxable years has been from sources other than
royalties, rents (except rents derived from rental of
properties to employees of the corporation in the ordinary
course of its operating business), dividends, interest (except
interest received on deferred purchase price of operating
assets sold), annuities, and gains from sales or exchanges of
stocks and securities.
In computing gross receipts for purposes of the preceding
sentence, gross receipts from sales or exchanges of stocks and
securities shall be taken into account only to the extent of
gains therefrom.
(h) Treatment of casualty gains and losses
(1) $100 limitation per casualty
Any loss of an individual described in subsection (c)(3) shall
be allowed only to the extent that the amount of the loss to such
individual arising from each casualty, or from each theft,
exceeds $100.
(2) Net casualty loss allowed only to the extent it exceeds 10
percent of adjusted gross income
(A) In general
If the personal casualty losses for any taxable year exceed
the personal casualty gains for such taxable year, such losses
shall be allowed for the taxable year only to the extent of the
sum of -
(i) the amount of the personal casualty gains for the
taxable year, plus
(ii) so much of such excess as exceeds 10 percent of the
adjusted gross income of the individual.
(B) Special rule where personal casualty gains exceed personal
casualty losses
If the personal casualty gains for any taxable year exceed
the personal casualty losses for such taxable year -
(i) all such gains shall be treated as gains from sales or
exchanges of capital assets, and
(ii) all such losses shall be treated as losses from sales
or exchanges of capital assets.
(3) Definitions of personal casualty gain and personal casualty
loss
For purposes of this subsection -
(A) Personal casualty gain
The term "personal casualty gain" means the recognized gain
from any involuntary conversion of property which is described
in subsection (c)(3) arising from fire, storm, shipwreck, or
other casualty, or from theft.
(B) Personal casualty loss
The term "personal casualty loss" means any loss described in
subsection (c)(3). For purposes of paragraph (2), the amount of
any personal casualty loss shall be determined after the
application of paragraph (1).
(4) Special rules
(A) Personal casualty losses allowable in computing adjusted
gross income to the extent of personal casualty gains
In any case to which paragraph (2)(A) applies, the deduction
for personal casualty losses for any taxable year shall be
treated as a deduction allowable in computing adjusted gross
income to the extent such losses do not exceed the personal
casualty gains for the taxable year.
(B) Joint returns
For purposes of this subsection, a husband and wife making a
joint return for the taxable year shall be treated as 1
individual.
(C) Determination of adjusted gross income in case of estates
and trusts
For purposes of paragraph (2), the adjusted gross income of
an estate or trust shall be computed in the same manner as in
the case of an individual, except that the deductions for costs
paid or incurred in connection with the administration of the
estate or trust shall be treated as allowable in arriving at
adjusted gross income.
(D) Coordination with estate tax
No loss described in subsection (c)(3) shall be allowed if,
at the time of filing the return, such loss has been claimed
for estate tax purposes in the estate tax return.
(E) Claim required to be filed in certain cases
Any loss of an individual described in subsection (c)(3) to
the extent covered by insurance shall be taken into account
under this section only if the individual files a timely
insurance claim with respect to such loss.
(i) Disaster losses
(1) Election to take deduction for preceding year
Notwithstanding the provisions of subsection (a), any loss
attributable to a disaster occurring in an area subsequently
determined by the President of the United States to warrant
assistance by the Federal Government under the Disaster Relief
and Emergency Assistance Act may, at the election of the
taxpayer, be taken into account for the taxable year immediately
preceding the taxable year in which the disaster occurred.
(2) Year of loss
If an election is made under this subsection, the casualty
resulting in the loss shall be treated for purposes of this title
as having occurred in the taxable year for which the deduction is
claimed.
(3) Amount of loss
The amount of the loss taken into account in the preceding
taxable year by reason of paragraph (1) shall not exceed the
uncompensated amount determined on the basis of the facts
existing at the date the taxpayer claims the loss.
(4) Use of disaster loan appraisals to establish amount of loss
Nothing in this title shall be construed to prohibit the
Secretary from prescribing regulations or other guidance under
which an appraisal for the purpose of obtaining a loan of Federal
funds or a loan guarantee from the Federal Government as a result
of a Presidentially declared disaster (as defined by section
1033(h)(3)) may be used to establish the amount of any loss
described in paragraph (1) or (2).
(j) Denial of deduction for losses on certain obligations not in
registered form
(1) In general
Nothing in subsection (a) or in any other provision of law
shall be construed to provide a deduction for any loss sustained
on any registration-required obligation unless such obligation is
in registered form (or the issuance of such obligation was
subject to tax under section 4701).
(2) Definitions
For purposes of this subsection -
(A) Registration-required obligation
The term "registration-required obligation" has the meaning
given to such term by section 163(f)(2) except that clause (iv)
of subparagraph (A), and subparagraph (B), of such section
shall not apply.
(B) Registered form
The term "registered form" has the same meaning as when used
in section 163(f).
(3) Exceptions
The Secretary may, by regulations, provide that this subsection
and section 1287 shall not apply with respect to obligations held
by any person if -
(A) such person holds such obligations in connection with a
trade or business outside the United States,
(B) such person holds such obligations as a broker dealer
(registered under Federal or State law) for sale to customers
in the ordinary course of his trade or business,
(C) such person complies with reporting requirements with
respect to ownership, transfers, and payments as the Secretary
may require, or
(D) such person promptly surrenders the obligation to the
issuer for the issuance of a new obligation in registered form,
but only if such obligations are held under arrangements provided
in regulations or otherwise which are designed to assure that
such obligations are not delivered to any United States person
other than a person described in subparagraph (A), (B), or (C).
(k) Treatment as disaster loss where taxpayer ordered to demolish
or relocate residence in disaster area because of disaster
In the case of a taxpayer whose residence is located in an area
which has been determined by the President of the United States to
warrant assistance by the Federal Government under the Disaster
Relief and Emergency Assistance Act, if -
(1) not later than the 120th day after the date of such
determination, the taxpayer is ordered, by the government of the
State or any political subdivision thereof in which such
residence is located, to demolish or relocate such residence, and
(2) the residence has been rendered unsafe for use as a
residence by reason of the disaster,
any loss attributable to such disaster shall be treated as a loss
which arises from a casualty and which is described in subsection
(i).
(l) Treatment of certain losses in insolvent financial institutions
(1) In general
If -
(A) as of the close of the taxable year, it can reasonably be
estimated that there is a loss on a qualified individual's
deposit in a qualified financial institution, and
(B) such loss is on account of the bankruptcy or insolvency
of such institution,
then the taxpayer may elect to treat the amount so estimated as a
loss described in subsection (c)(3) incurred during the taxable
year.
(2) Qualified individual defined
For purposes of this subsection, the term "qualified
individual" means any individual, except an individual -
(A) who owns at least 1 percent in value of the outstanding
stock of the qualified financial institution,
(B) who is an officer of the qualified financial institution,
(C) who is a sibling (whether by the whole or half blood),
spouse, aunt, uncle, nephew, niece, ancestor, or lineal
descendant of an individual described in subparagraph (A) or
(B), or
(D) who otherwise is a related person (as defined in section
267(b)) with respect to an individual described in subparagraph
(A) or (B).
(3) Qualified financial institution
For purposes of this subsection, the term "qualified financial
institution" means -
(A) any bank (as defined in section 581),
(B) any institution described in section 591,
(C) any credit union the deposits or accounts in which are
insured under Federal or State law or are protected or
guaranteed under State law, or
(D) any similar institution chartered and supervised under
Federal or State law.
(4) Deposit
For purposes of this subsection, the term "deposit" means any
deposit, withdrawable account, or withdrawable or repurchasable
share.
(5) Election to treat as ordinary loss
(A) In general
In lieu of any election under paragraph (1), the taxpayer may
elect to treat the amount referred to in paragraph (1) for the
taxable year as an ordinary loss described in subsection (c)(2)
incurred during the taxable year.
(B) Limitations
(i) Deposit may not be federally insured
No election may be made under subparagraph (A) with respect
to any loss on a deposit in a qualified financial institution
if part or all of such deposit is insured under Federal law.
(ii) Dollar limitation
With respect to each financial institution, the aggregate
amount of losses attributable to deposits in such financial
institution to which an election under subparagraph (A) may
be made by the taxpayer for any taxable year shall not exceed
$20,000 ($10,000 in the case of a separate return by a
married individual). The limitation of the preceding sentence
shall be reduced by the amount of any insurance proceeds
under any State law which can reasonably be expected to be
received with respect to losses on deposits in such
institution.
(6) Election
Any election by the taxpayer under this subsection for any
taxable year -
(A) shall apply to all losses for such taxable year of the
taxpayer on deposits in the institution with respect to which
such election was made, and
(B) may be revoked only with the consent of the Secretary.
(7) Coordination with section 166
Section 166 shall not apply to any loss to which an election
under this subsection applies.
(m) Cross references
(1) For special rule for banks with respect to worthless
securities, see section 582.
(2) For disallowance of deduction for worthlessness of
securities to which subsection (g)(2)(C) applies, if issued by
a political party or similar organization, see section 271.
(3) For special rule for losses on stock in a small business
investment company, see section 1242.
(4) For special rule for losses of a small business
investment company, see section 1243.
(5) For special rule for losses on small business stock, see
section 1244.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 49; Pub. L. 85-866, title I,
Secs. 7, 57(c)(1), title II, Sec. 202(a), Sept. 2, 1958, 72 Stat.
1608, 1646, 1676; Pub. L. 87-426, Sec. 2(a), Mar. 31, 1962, 76
Stat. 51; Pub. L. 88-272, title II, Secs. 208(a), 238, Feb. 26,
1964, 78 Stat. 43, 128; Pub. L. 88-348, Sec. 3(a), June 30, 1964,
78 Stat. 237; Pub. L. 91-606, title III, Sec. 301(h), Dec. 31,
1970, 84 Stat. 1759; Pub. L. 91-677, Sec. 1(a), Jan. 12, 1971, 84
Stat. 2061; Pub. L. 91-687, Sec. 1, Jan. 12, 1971, 84 Stat. 2071;
Pub. L. 92-336, Sec. 2(a), July 1, 1972, 86 Stat. 406; Pub. L.
92-418, Sec. 2(a), Aug. 29, 1972, 86 Stat. 656, 657; Pub. L.
93-288, title VII, Sec. 702(h), formerly title VI, Sec. 602(h), May
22, 1974, 88 Stat. 164, renumbered title VII, Sec. 702(h), Pub. L.
103-337, div. C, title XXXIV, Sec. 3411(a)(1), (2), Oct. 5, 1994,
108 Stat. 3100; Pub. L. 94-455, title XIX, Sec. 1901(a)(26), Oct.
4, 1976, 90 Stat. 1767; Pub. L. 97-248, title II, Sec. 203(a), (b),
title III, Sec. 310(b)(5), Sept. 3, 1982, 96 Stat. 422, 598; Pub.
L. 98-369, div. A, title I, Sec. 42(a)(4), title VII, Sec.
711(c)(1), (2)(A)(i), (ii), title X, Sec. 1051(a), July 18, 1984,
98 Stat. 556, 943, 1044; Pub. L. 99-514, title IX, Sec. 905(a),
title X, Sec. 1004(a), Oct. 22, 1986, 100 Stat. 2385, 2388; Pub. L.
100-647, title I, Sec. 1009(d)(1), Nov. 10, 1988, 102 Stat. 3449;
Pub. L. 100-707, title I, Sec. 109(l), Nov. 23, 1988, 102 Stat.
4709; Pub. L. 105-34, title IX, Sec. 912(a), Aug. 5, 1997, 111
Stat. 878; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.
318(b)(1), (2)], Dec. 21, 2000, 114 Stat. 2763, 2763A-645.)
-REFTEXT-
REFERENCES IN TEXT
The Disaster Relief and Emergency Assistance Act, referred to in
subsecs. (i)(1) and (k), is Pub. L. 93-288, May 22, 1974, 88 Stat.
143, as amended, known as the Robert T. Stafford Disaster Relief
and Emergency Assistance Act, which is classified principally to
chapter 68 (Sec. 5121 et seq.) of Title 42, The Public Health and
Welfare. For complete classification of this Act to the Code, see
Short Title note set out under section 5121 of Title 42 and Tables.
-MISC1-
AMENDMENTS
2000 - Subsec. (g)(3). Pub. L. 106-554, Sec. 1(a)(7) [title III,
Sec. 318(b)(2)], struck out last sentence of concluding provisions
which read as follows: "As used in subparagraph (A), the term
'stock' does not include nonvoting stock which is limited and
preferred as to dividends."
Subsec. (g)(3)(A). Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.
318(b)(1)], amended subpar. (A) generally. Prior to amendment,
subpar. (A) read as follows: "stock possessing at least 80 percent
of the voting power of all classes of its stock and at least 80
percent of each class of its nonvoting stock is owned directly by
the taxpayer, and".
1997 - Subsec. (i)(4). Pub. L. 105-34 added par. (4).
1988 - Subsecs. (i)(1), (k). Pub. L. 100-707 substituted "and
Emergency Assistance Act" for "Act of 1974".
Subsec. (l)(5) to (7). Pub. L. 100-647 added pars. (5) and (6),
redesignated former par. (6) as (7), and struck out former par. (5)
which read as follows: "Election. - Any election by the taxpayer
under this subsection may be revoked only with the consent of the
Secretary and shall apply to all losses of the taxpayer on deposits
in the institution with respect to which such election was made."
1986 - Subsec. (h)(4)(E). Pub. L. 99-514, Sec. 1004(a), added
subpar. (E).
Subsecs. (l), (m). Pub. L. 99-514, Sec. 905(a), added subsec. (l)
and redesignated former subsec. (l) as (m).
1984 - Subsec. (c)(3). Pub. L. 98-369, Sec. 711(c)(2)(A)(i),
extended limitation to losses of property not connected with a
transaction entered into for profit.
Subsec. (h). Pub. L. 98-369, Sec. 711(c)(2)(A)(ii), substituted
heading "Treatment of casualty gains and losses" for "Casualty and
theft losses"; substituted par. (1) "$100 limitation per casualty"
provision for former par. (1) "General rule" provision stating
that: "Any loss of an individual described in subsection (c)(3)
shall be allowed for any taxable year only to the extent that -
"(A) the amount of loss to such individual arising from each
casualty, or from each theft, exceeds $100, and
"(B) the aggregate amount of all such losses sustained by such
individual during the taxable year (determined after application
of subparagraph (A) exceeds 10 percent of the adjusted gross
income of the individual.";
added par. (2) "Net casualty loss allowed only to the extent it
exceeds 10 percent of adjusted gross income" provision and par. (3)
"Definitions of personal casualty gain and personal casualty loss"
provisions; redesignated as par. (4) former par. (2) catchline;
added par. (4)(A) "Personal casualty losses allowable in computing
adjusted gross income to the extent of personal casualty gains"
provision; redesignated as par. (4)(B) former par. (2)(A) joint
returns provision, substituting "For purposes of this section" for
"For purposes of the $100 and 10 percent limitations described in
paragraph (1)" and "individual" for "one individual"; redesignated
as par. (4)(C) former par. (2)(B), substituting therein paragraph
"(2)" for "(1)"; and redesignated as par. (4)(D) former par.
(2)(C).
Pub. L. 98-369, Sec. 711(c)(1), amended par. (2) by redesignating
subpar. (B) as (C) and by adding a new subpar. (B) relating to the
determination of adjusted gross income in case of estates and
trusts.
Subsec. (j)(3). Pub. L. 98-369, Sec. 42(a)(4), substituted
"section 1287" for "subsection (d) of section 1232".
Subsecs. (k), (l). Pub. L. 98-369, Sec. 1051(a), added subsec.
(k) and redesignated former subsec. (k) as (l).
1982 - Subsec. (c)(3). Pub. L. 97-248, Sec. 203(b), inserted
"except as provided in subsection (h)," before "losses of property"
and struck out provisions that a loss described in this paragraph
would be allowed only to the extent that the amount of loss to such
individual arising from each casualty, or from each theft, exceeded
$100, that, for purposes of the $100 limitation, a husband and wife
making a joint return under section 6013 for the taxable year in
which the loss was allowed as a deduction would be treated as one
individual, and that no loss described in this paragraph would be
allowed if, at the time of filing the return, such loss had been
claimed for estate tax purposes in the estate tax return.
Subsec. (h). Pub. L. 97-248, Sec. 203(a), added subsec. (h)
relating to casualty and theft losses. Former subsec. (h), relating
to disaster losses, redesignated (i).
Subsec. (i). Pub. L. 97-248, Sec. 203(a), redesignated former
subsec. (h), relating to disaster losses, as (i), in subsec. (i),
as so redesignated, further redesignated existing unnumbered
provisions as pars. (1) and (2), in par. (1), as so redesignated,
substituted "be taken into account for the taxable year" for "be
deducted for the taxable year", in par. (2), as so redesignated,
substituted "shall be treated for purposes of this title as having
occurred" for "will be deemed to have occurred", added par. (3),
and struck out provision that a deduction under this subsection
could not be in excess of so much of the loss as would have been
deductible in the taxable year in which the casualty occurred,
based on facts existing at the date the taxpayer claimed the loss.
Former subsec. (i), setting forth cross references, redesignated
(j).
Subsec. (j). Pub. L. 97-248, Sec. 310(b)(5), added subsec. (j)
relating to denial of deduction for losses on certain obligations
not in registered form. Former subsec. (j), setting forth cross
references, redesignated (k).
Pub. L. 97-248, Sec. 203(a), redesignated former subsec. (i),
setting forth cross references, as (j).
Subsec. (k). Pub. L. 97-248, Sec. 310(b)(5), redesignated former
subsec. (j), setting forth cross references, as (k).
1976 - Subsecs. (i), (j). Pub. L. 94-455 redesignated subsec. (j)
as subsec. (i). Former subsec. (i), which related to property
confiscated by Cuba, was struck out.
1974 - Subsec. (h). Pub. L. 93-288 substituted "Disaster Relief
Act of 1974" for "Disaster Relief Act of 1970".
1972 - Subsec. (h). Pub. L. 92-418 struck out par. (1) provisions
relating to losses attributable to a disaster occurring during
period following close of taxable year and on or before time
prescribed by law for filing the income tax return for the taxable
year without regard to any extension of time, struck out par. (2)
designation, and inserted "attributable to a disaster" before
"occurring in an area", and at end of second sentence, inserted
"based on facts existing at the date the taxpayer claims the loss".
Subsec. (h)(1). Pub. L. 92-336 substituted provisions relating to
losses attributable to a disaster which occurs during the period
after the close of the taxable year and on or before the last day
of the 6th calendar month beginning after the close of the taxable
year, for provisions relating to losses attributable to a disaster
which occurs during the period following the close of the taxable
year and on or before the time prescribed by law for filing the
income tax return for the taxable year, determined without regard
to any extension of time.
1971 - Subsec. (g)(3). Pub. L. 91-687 substituted "stock
possessing at least 80 percent of the voting power of all classes
of its stock and at least 80 percent of each class of its nonvoting
stock" for "at least 95 percent of each class of its stock" in
subpar. (A), and inserted at the end of the subsection the sentence
providing that the term "stock", as used in subpar. (A), does not
include nonvoting stock which is limited and preferred as to
dividends.
Subsec. (i)(1). Pub. L. 91-677, Sec. 1(a)(1), (2), struck out "or
(2)" after "paragraph (1)" in cl. (B), and substituted "one or more
days in the period beginning on December 31, 1958, and ending on
May 16, 1959" for "December 31, 1958".
Subsec. (i)(2)(B). Pub. L. 91-677, Sec. 1(a)(3), substituted "one
or more days during the period beginning on December 31, 1958, and
ending on May 16, 1959" for "December 31, 1958" and "the first day
in such period on which the property was held by the taxpayer" for
"December 31, 1958".
Subsec. (i)(3). Pub. L. 91-677, Sec. 1(a)(4), struck out subsec.
(i)(3) which authorized a refund or credit to be given for any
overpayment attributable to the application of par. (1), provided
that a claim was filed for such refund or credit before Jan. 1,
1965.
1970 - Subsec. (h)(2). Pub. L. 91-606 substituted "the Disaster
Relief Act of 1970" for "sections 1855-1855g of title 42".
1964 - Subsec. (c)(3). Pub. L. 88-272, Sec. 208(a), inserted
requirement that losses must exceed $100 to be deductible.
Subsec. (i). Pub. L. 88-348 designated existing provisions as
par. (1), substituted provisions permitting individuals who were
citizens of the United States or resident aliens on Dec. 31, 1958,
who sustained any loss of property prior to Jan. 1, 1964, and which
was not a loss described in par. (1) or (2) of subsec. (c), to
treat such loss as a loss under subsec. (c)(3), except that in
cases of tangible property, the property had to be held by the
taxpayer, and located in Cuba, on Dec. 31, 1958, for provisions
which permitted any loss of tangible property to be treated as a
loss from a casualty within subsec. (c)(3), therein, and added
pars. (2) and (3).
Pub. L. 88-272, Sec. 238, added subsec. (i). Former subsec. (i)
redesignated (j).
Subsec. (j). Pub. L. 88-272, Sec. 238, redesignated former
subsec. (i) as (j).
1962 - Subsecs. (h), (i). Pub. L. 87-426 added subsec. (h) and
redesignated former subsec. (h) as (i).
1958 - Subsec. (g)(3)(B). Pub. L. 85-866, Sec. 7, substituted
"rental of" for "rental from".
Subsec. (h)(3), (4). Pub. L. 85-866, Sec. 57(c)(1), added pars.
(3) and (4).
Subsec. (h)(5). Pub. L. 85-866, Sec. 202(a), added par. (5).
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 318(b)(3)], Dec.
21, 2000, 114 Stat. 2763, 2763A-645, provided that: "The amendments
made by this subsection [amending this section] shall apply to
taxable years beginning after December 31, 1984."
EFFECTIVE DATE OF 1997 AMENDMENT
Section 912(b) of Pub. L. 105-34 provided that: "The amendment
made by subsection (a) [amending this section] shall take effect on
the date of the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 905(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1981, see section 905(c)(1)
of Pub. L. 99-514, as amended, set out as a note under section 451
of this title.
Section 1004(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending this section] shall apply to losses
sustained in taxable years beginning after December 31, 1986."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 42(a)(4) of Pub. L. 98-369 applicable to
taxable years ending after July 18, 1984, see section 44 of Pub. L.
98-369, set out as an Effective Date note under section 1271 of
this title.
Amendment by section 711(c)(1) of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
Section 711(c)(2)(A)(v) of Pub. L. 98-369 provided that: "The
amendments made by this subparagraph [amending this section and
sections 873, 931, and 1231 of this title] shall apply to taxable
years beginning after December 31, 1983."
Section 1051(b) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after December 31, 1981, with respect to
residences in areas determined by the President of the United
States, after such date, to warrant assistance by the Federal
Government under the Disaster Relief Act of 1974 [42 U.S.C. 5121 et
seq.]."
EFFECTIVE DATE OF 1982 AMENDMENT
Section 203(c) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this section [amending this section] shall apply
to taxable years beginning after December 31, 1982. Such amendments
shall also apply to the taxpayer's last taxable year beginning
before January 1, 1983, solely for purposes of determining the
amount allowable as a deduction with respect to any loss taken into
account for such year by reason of an election under section 165(i)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as
amended by this section)."
Amendment by section 310(b)(5) of Pub. L. 97-248 applicable to
obligations issued after Dec. 31, 1982, with exceptions for certain
warrants, see section 310(d) of Pub. L. 97-248, set out as a note
under section 103 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by Pub. L. 93-288 effective Apr. 1, 1974, see section
605 of Pub. L. 93-288, set out as an Effective Date note under
section 5121 of Title 42, The Public Health and Welfare.
EFFECTIVE DATE OF 1972 AMENDMENTS
Section 2(c) of Pub. L. 92-418 provided in part that: "The
amendment made by subsection (a) [amending this section] shall
apply to disasters occurring after December 31, 1971, in taxable
years ending after such date."
Section 2(b) of Pub. L. 92-336 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to disasters
occurring after December 31, 1971, in taxable years ending after
such date."
EFFECTIVE DATE OF 1971 AMENDMENTS
Section 2 of Pub. L. 91-687 provided that: "The amendments made
by this Act [amending this section] shall apply with respect to
taxable years beginning on or after January 1, 1970."
Section 1(b)(1) of Pub. L. 91-677 provided that: "The amendments
made by subsection (a) [amending this section] shall apply in
respect of losses sustained in taxable years ending after December
31, 1958."
EFFECTIVE DATE OF 1970 AMENDMENT
Section 304 of Pub. L. 91-606 provided that: "This Act [enacting
sections 4401 to 4485 of Title 42, The Public Health and Welfare,
amending this section, sections 5064 and 5708 of this title,
sections 1706e, 1709, 1715l of Title 12, Banks and Banking,
sections 241-1, 646 and 758 of Title 20, Education, section 1820
[now 3720] of Title 38, Veterans' Benefits, section 461 of former
Title 40, Public Buildings, Property, and Works, section 1681 note
of Title 42, repealing sections 1855 to 1855g, 1855aa, 1855aa note,
1855bb to 1855ii, 1855aaa, 1855aaa note, 1855bbb to 1855nnn of
Title 42, and section 1926 of Title 7, Agriculture, and enacting
provisions set out as notes under section 4401 and section 4434 of
Title 42] shall take effect immediately upon its enactment [Dec.
31, 1970], except that sections 226(b), 237, 241, 252(a), and 254
[sections 4436(b), 4456, 4460, 4482(a), and 4484 of Title 42,
respectively] shall take effect as of August 1, 1969, and sections
231, 232, and 233 [sections 4451, 4452 of Title 42 and amendments
to section 1820 [now 3720] of Title 38, respectively] shall take
effect as of April 1, 1970."
EFFECTIVE DATE OF 1964 AMENDMENTS
Section 208(b) of Pub. L. 88-272 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
losses sustained after December 31, 1963, in taxable years ending
after such date."
Section 3(b) of Pub. L. 88-348 provided that: "The amendment made
by subsection (a) [amending this section] shall apply in respect of
losses sustained in taxable years ending after December 31, 1958."
EFFECTIVE DATE OF 1962 AMENDMENT
Section 2(b) of Pub. L. 87-426 provided that: "The amendments
made by this section [amending this section] shall be effective
with respect to any disaster occurring after December 31, 1961."
EFFECTIVE DATE OF 1958 AMENDMENT
Section 1(c) of title I of Pub. L. 85-866, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Except as otherwise expressly provided -
"(1) amendments made by this title to subtitle A of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
income taxes) [enacting section 558 of this title and amending
this section and sections 152, 166, 168, 170, 172, 213, 337, 404,
421, 535, 545, 556, 582, 611, 613, 851, 1015, 1031, 1033, 1034,
1053, 1232, 1233, 1234, 1237, 1341, and 1347 of this title] shall
apply to taxable years beginning after December 31, 1953, and
ending after August 16, 1954; and
"(2) amendments made by this title to subtitle F of such Code
(relating to procedure and administration) [enacting sections
7513 and 7514 of this title and amending sections 6013, 6015,
6212, 6325, 6338, 6339, 6501, 6504, 6511, 6601, 6652, 6653, 6851,
6871, 7213, 7324, 7325, and 7422 of this title] shall take effect
as of August 17, 1954, and such subtitle, as so amended, shall
apply as provided in section 7851 of the Internal Revenue Code of
1986".
Amendment by section 57(c)(1) of Pub. L. 85-866 applicable with
respect to taxable years beginning after Sept. 2, 1958, see section
57(d) of Pub. L. 85-866, set out as a note under section 243 of
this title.
TRANSITIONAL RULE FOR 1984 AMENDMENT
Section 711(c)(2)(B) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of taxable years beginning before January 1, 1984 -
"(i) For purposes of paragraph (1)(B) of section 165(h) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954], adjusted
gross income shall be determined without regard to the
application of section 1231 of such Code to any gain or loss from
an involuntary conversion of property described in subsection
(c)(3) of section 165 of such Code arising from fire, storm,
shipwreck, or other casualty or from theft.
"(ii) Section 1231 of such Code shall be applied after the
application of paragraph (1) of section 165(h) of such Code."
CLARIFICATION OF TREATMENT OF CERTAIN FSLIC FINANCIAL ASSISTANCE
Pub. L. 103-66, title XIII, Sec. 13224, Aug. 10, 1993, 107 Stat.
485, provided that:
"(a) General Rule. - For purposes of chapter 1 of the Internal
Revenue Code of 1986 -
"(1) any FSLIC assistance with respect to any loss of
principal, capital, or similar amount upon the disposition of any
asset shall be taken into account as compensation for such loss
for purposes of section 165 of such Code, and
"(2) any FSLIC assistance with respect to any debt shall be
taken into account for purposes of section 166, 585, or 593 of
such Code in determining whether such debt is worthless (or the
extent to which such debt is worthless) and in determining the
amount of any addition to a reserve for bad debts arising from
the worthlessness or partial worthlessness of such debts.
"(b) FSLIC Assistance. - For purposes of this section, the term
'FSLIC assistance' means any assistance (or right to assistance)
with respect to a domestic building and loan association (as
defined in section 7701(a)(19) of such Code without regard to
subparagraph (C) thereof) under section 406(f) of the National
Housing Act [former 12 U.S.C. 1729(f)] or section 21A of the
Federal Home Loan Bank Act [12 U.S.C. 1441a] (or under any similar
provision of law).
"(c) Effective Date. -
"(1) In general. - Except as otherwise provided in this
subsection -
"(A) The provisions of this section shall apply to taxable
years ending on or after March 4, 1991, but only with respect
to FSLIC assistance not credited before March 4, 1991.
"(B) If any FSLIC assistance not credited before March 4,
1991, is with respect to a loss sustained or charge-off in a
taxable year ending before March 4, 1991, for purposes of
determining the amount of any net operating loss carryover to a
taxable year ending on or after March 4, 1991, the provisions
of this section shall apply to such assistance for purposes of
determining the amount of the net operating loss for the
taxable year in which such loss was sustained or debt written
off. Except as provided in the preceding sentence, this section
shall not apply to any FSLIC assistance with respect to a loss
sustained or charge-off in a taxable year ending before March
4, 1991.
"(2) Exceptions. - The provisions of this section shall not
apply to any assistance to which the amendments made by section
1401(a)(3) of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 [Pub. L. 101-73, amending section 597 of
this title and repealing provisions set out as a note under
section 597 of this title] apply."
OVERPAYMENTS OR UNDERPAYMENTS OF TAX ATTRIBUTABLE TO CERTAIN
AMENDMENTS BY PUB. L. 99-514 OR PUB. L. 100-647
Section 1009(d)(4) of Pub. L. 100-647 provided that: "If on the
date of the enactment of this Act [Nov. 10, 1988] (or at any time
before the date 1 year after such date of enactment) credit or
refund of any overpayment of tax attributable to amendments made by
section 905 of the Reform Act [section 905 of Pub. L. 99-514,
amending this section and section 451 of this title] or by this
subsection [amending this section and section 451 of this title and
provisions set out as a note under section 451 of this title] (or
the assessment of any underpayment of tax so attributable) is
barred by any law or rule of law -
"(A) credit or refund of any such overpayment may nevertheless
be made if claim therefore [sic] is filed before the date 1 year
after such date of enactment, and
"(B) assessment of any such underpayment may nevertheless be
made if made before the date 1 year after such date of
enactment."
DEDUCTION FOR BUS AND FREIGHT FORWARDER OPERATING AUTHORITY
Section 243 of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1002(j), Nov. 10, 1988, 102 Stat. 3371, provided
that:
"(a) Bus Operating Authority. -
"(1) In general. - Subject to the modifications contained in
paragraph (2), section 266 of the Economic Recovery Tax Act of
1981 [section 266 of Pub. L. 97-34, set out below] shall be
applied as if the term 'motor carrier operating authority'
included a bus operating authority.
"(2) Modifications. - For purposes of paragraph (1), section
266 of such Act shall be applied -
"(A) by substituting 'November 19, 1982' for 'July 1, 1980'
each place it appears, and
"(B) by substituting 'November 1982' for 'July 1980' in
subsection (a) thereof.
"(3) Bus operating authority defined. - For purposes of this
subsection and section 266 of such Act, the term 'bus operating
authority' means -
"(A) a certificate or permit held by a motor common or
contract carrier of passengers which was issued pursuant to
subchapter II of chapter 109 of title 49, United States Code,
and
"(B) a certificate or permit held by a motor carrier
authorizing the transportation of passengers, as a common
carrier, over regular routes in intrastate commerce which was
issued by the appropriate State agency.
"(b) Freight Forwarder Operating Authority. -
"(1) In general. - Subject to the modifications contained in
paragraph (2), section 266 of the Economic Recovery Tax Act of
1981 [section 266 of Pub. L. 97-34, set out below] shall be
applied as if subsection (b) thereof contained 'or a freight
forwarder' after 'contract carrier of property'.
"(2) Modifications. - The modifications referred to in this
paragraph are:
"(A) 60-month period. - The 60-month period referred to in
section 266(a) of such Act shall begin with the later of -
"(i) the deregulation month, or
"(ii) at the election of the taxpayer, the 1st month of the
taxpayer's 1st taxable year beginning after the deregulation
month.
"(B) Authority must be held as of beginning of 60-month
period. - A motor carrier operating authority shall not be
taken into account unless such authority is held by the
taxpayer at the beginning of the 60-month period applicable to
the taxpayer under subparagraph (A).
"(C) Adjusted basis not to exceed adjusted basis at beginning
of 60-month period. - The adjusted basis taken into account
with respect to any motor carrier operating authority shall not
exceed the adjusted basis of such authority as of the beginning
of the 60-month period applicable to the taxpayer under
subparagraph (A).
"(3) Deregulation month. - For purposes of this section, the
term 'deregulation month' means the month in which the Secretary
of the Treasury or his delegate determines that a Federal law has
been enacted which deregulates the freight forwarding industry.
"(c) Special Rule for Motor Carrier Operating Authority. - In the
case of a corporation which was incorporated on December 29, 1969,
in the State of Delaware, notwithstanding any other provision of
law, there shall be allowed as a deduction for the taxable year of
the taxpayer beginning in 1980 an amount equal to $2,705,188 for
its entire loss due to a decline in value of its motor carrier
operating authority by reason of deregulation.
"(d) Application of Section 334(b)(2). - For purposes of
subsections (a) and (b), the reference to section 334(b)(2) in
section 266(c)(2)(A)(ii) of the Economic Recovery Tax Act of 1981
[section 266(c)(2)(A)(ii) of Pub. L. 97-34, set out below] shall be
a reference to such section as in effect before its repeal.
"(e) Effective Dates. -
"(1) Bus operating authority. -
"(A) In general. - Subsection (a) shall apply to taxable
years ending after November 18, 1982.
"(B) Statute of limitations. - If refund or credit of any
overpayment of tax resulting from subsection (a) is prevented
at any time on or before the date which is 1 year after the
date of the enactment of this Act [Oct. 22, 1986] by the
operation of any law or rule of law (including res judicata),
refund or credit of such overpayment (to the extent
attributable to the application of such subsection) may,
notwithstanding such law or rule of law, be made or allowed if
claim therefore [sic] is filed on or before the date which is
18 months after such date of enactment.
"(2) Freight forwarder operating authority. - Subsection (b)
shall apply to taxable years ending after the month preceding the
deregulation month."
DEDUCTION FOR MOTOR CARRIER OPERATING AUTHORITY
Pub. L. 97-34, title II, Sec. 266, Aug. 13, 1981, 95 Stat. 265,
as amended by Pub. L. 97-424, title V, Sec. 517(a), Jan. 6, 1983,
96 Stat. 2183; Pub. L. 97-448, title I, Sec. 102(n), Jan. 12, 1983,
96 Stat. 2374; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
2095, provided that:
"(a) General Rule. - For purposes of chapter 1 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] [this chapter], in
computing the taxable income of a taxpayer who, on July 1, 1980,
held one or more motor carrier operating authorities, an amount
equal to the aggregate adjusted basis of all motor carrier
operating authorities held by the taxpayer on July 1, 1980, or
acquired subsequent thereto pursuant to a binding contract in
effect on July 1, 1980, shall be allowed as a deduction ratably
over a period of 60 months. Such 60-month period shall begin with
the month of July 1980 (or if later, the month in which acquired),
or at the election of the taxpayer, the first month of the
taxpayer's first taxable year beginning after July 1, 1980.
"(b) Definition of Motor Carrier Operating Authority. - For
purposes of this section, the term 'motor carrier operating
authority' means a certificate or permit held by a motor common or
contract carrier of property and issued pursuant to subchapter II
of chapter 109 of title 49 of the United States Code.
"(c) Special Rules. -
"(1) Adjusted basis. - For purposes of the Internal Revenue
Code of 1986, proper adjustments shall be made in the adjusted
basis of any motor carrier operating authority held by the
taxpayer on July 1, 1980, for the amounts allowable as a
deduction under this section.
"(2) Certain stock acquisitions. -
"(A) In general. - Under regulations prescribed by the
Secretary of the Treasury or his delegate, and at the election
of the holder of the authority, in any case in which a
corporation -
"(i) on or before July 1, 1980 (or after such date pursuant
to a binding contract in effect on such date), acquired stock
in a corporation which held, directly or indirectly, any
motor carrier operating authority at the time of such
acquisition, and
"(ii) would have been able to allocate to the basis of such
authority that portion of the acquiring corporation's cost
basis in such stock attributable to such authority if the
acquiring corporation had received such authority in the
liquidation of the acquired corporation immediately following
such acquisition and such allocation would have been proper
under section 334(b)(2) of such Code,
the holder of the authority may, for purposes of this section,
allocate a portion of the basis of the acquiring corporation in
the stock of the acquired corporation to the basis of such
authority in such manner as the Secretary may prescribe in such
regulations.
"(B) Treatment of certain noncorporate taxpayers. - Under
regulations prescribed by the Secretary of the Treasury or his
delegate, and at the election of the holder of the authority,
in any case in which -
"(i) a noncorporate taxpayer or group of noncorporate
taxpayers on or before July 1, 1980, acquired in one purchase
stock in a corporation which held, directly or indirectly,
any motor carrier operating authority at the time of such
acquisition, and
"(ii) the acquisition referred to in clause (i) would have
satisfied the requirements of subparagraph (A) if the stock
had been acquired by a corporation,
then, for purposes of subparagraphs (A) and (C), the noncorporate
taxpayer or group of noncorporate taxpayers referred to in clause
(i) shall be treated as a corporation. The preceding sentence
shall apply only if such noncorporate taxpayer (or group of
noncorporate taxpayers) on July 1, 1980, held stock constituting
control (within the meaning of section 368(c) of the Internal
Revenue Code of 1986) of the corporation holding (directly or
indirectly) the motor carrier operating authority.
"(C) Adjustment to basis. - Under regulations prescribed by
the Secretary of the Treasury or his delegate, proper
adjustment shall be made to the basis of the stock or other
assets in the manner provided by such regulations to take into
account any allocation under subparagraph (A).
"(3) Section 381 of the internal revenue code of 1986 to apply.
- For purposes of section 381 of the Internal Revenue Code of
1986, any item described in this section shall be treated as an
item described in subsection (c) of such section 381.
"(d) Effective Date. - The provisions of this section shall apply
to taxable years ending after June 30, 1980."
[Section 517(b) of Pub. L. 97-424 provided that: "The amendment
made by subsection (a) [adding subsec. (c)(2)(B) of this note]
shall apply to taxable years ending after July 30, 1980."]
TAX TREATMENT OF CERTAIN 1972 DISASTER LOANS
Section 2103 of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) Application of Section. - This section shall apply to any
individual -
"(1) who was allowed a deduction under section 165 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
losses) for a loss attributable to a disaster occurring during
calendar year 1972 which was determined by the President, under
section 102 of the Disaster Relief Act of 1970, to warrant
disaster assistance by the Federal Government.
"(2) who in connection with such disaster -
"(A) received income in the form of cancellation of a
disaster loan under section 7 of the Small Business Act
[section 636 of Title 15, Commerce and Trade] or an emergency
loan under subtitle C of the Consolidated Farm and Rural
Development Act [section 1961 et seq. of Title 7, Agriculture],
or
"(B) received income in the form of compensation (not taken
into account in computing the amount of the deduction) for such
loss in settlement of any claim of the taxpayer against a
person for that person's liability in tort for the damage or
destruction of that taxpayer's property in connection with the
disaster, and
"(3) who elects (at such time and in such manner as the
Secretary of the Treasury or his delegate may by regulations
prescribe) to take the benefits of this section.
"(b) Effect of Election. - In the case of any individual to whom
this section applies -
"(1) the tax imposed by chapter 1 of the Internal Revenue Code
of 1986 for the taxable year in which the income taken into
account is received or accrued which is attributable to such
income shall not exceed the additional tax under such chapter
which would have been payable for the year in which the deduction
for the loss was taken if such deduction had not been taken for
such year,
"(2) any amount of tax imposed by chapter 1 attributable to the
income taken into account which, on October 1, 1975, was unpaid
may be paid in 3 equal annual installments (with the first such
installment due and payable on April 15, 1977), and
"(3) no interest on any deficiency shall be payable for any
period before April 16, 1977, to the extent such deficiency is
attributable to the receipt of such compensation, and no interest
on any installment referred to in paragraph (2) shall be payable
for any period before the due date of such installment.
"(c) Income Taken Into Account. - For purposes of this section,
the income taken into account is -
"(1) in the case of an individual described in subsection
(a)(2)(A), the amount of income (not in excess of $5,000)
attributable to the cancellation of a disaster loan under section
7 of the Small Business Act or an emergency loan under subtitle C
of the Consolidated Farm and Rural Development Act received by
reason of the disaster described in subsection (a)(1), or
"(2) in the case of an individual described in subsection
(a)(2)(B), the amount of compensation (not in excess of $5,000)
for the loss in settlement of any claim of the taxpayer against a
person for that person's liability in tort for the damage or
destruction of that taxpayer's property in connection with the
disaster described in subsection (a)(1).
"(d) Phaseout Where Adjusted Gross Income Exceeds $15,000. - If
for the taxable year for which the deduction for the loss was taken
the individual's adjusted gross income exceeded $15,000, the $5,000
limit set forth in paragraph (1) or (2) of subsection (c)
(whichever applies) shall be reduced by one dollar for each full
dollar that such adjusted gross income exceeds $15,000. In the case
of a married individual filing a separate return, the preceding
sentence shall be applied by substituting '$7,500' for '$15,000'.
"(e) Statute of Limitations. - If refund or credit of any
overpayment of income tax resulting from an election made under
this section is prevented on the date of the enactment of this Act
[Oct. 4, 1976], or at any time within one year after such date, by
the operation of any law, or rule of law, refund or credit of such
overpayment (to the extent attributable to such election) may,
nevertheless, be made or allowed if claim therefor is filed within
one year after such date. If the taxpayer makes an election under
this section and if assessment of any deficiency for any taxable
year resulting from such election is prevented on the date of the
enactment of this Act [Oct. 4, 1976], or at any time within one
year after such date, by the operation of any law or rule of law,
such assessment (to the extent attributable to such election) may,
nevertheless, be made if made within one year after such date."
REFUND OR CREDIT OF OVERPAYMENT; TIME FOR FILING CLAIM; INTEREST
Section 1(b)(2) of Pub. L. 91-677 authorized refund or credit of
overpayment attributable to the amendments made by subsec. (a) to
subsec. (i) of this section if claim therefor was filed after Jan.
12, 1971, and before July 1, 1971, without interest for any period
before Jan. 1, 1972.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 62, 67, 68, 80, 86,
148, 166, 172, 195, 271, 272, 451, 593, 709, 832, 873, 877, 897,
1022, 1042, 1212, 1351, 1367, 6227, 6405, 6511 of this title.
-End-
-CITE-
26 USC Sec. 166 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 166. Bad debts
-STATUTE-
(a) General rule
(1) Wholly worthless debts
There shall be allowed as a deduction any debt which becomes
worthless within the taxable year.
(2) Partially worthless debts
When satisfied that a debt is recoverable only in part, the
Secretary may allow such debt, in an amount not in excess of the
part charged off within the taxable year, as a deduction.
(b) Amount of deduction
For purposes of subsection (a), the basis for determining the
amount of the deduction for any bad debt shall be the adjusted
basis provided in section 1011 for determining the loss from the
sale or other disposition of property.
[(c) Repealed. Pub. L. 99-514, title VIII, Sec. 805(a), Oct. 22,
1986, 100 Stat. 2361]
(d) Nonbusiness debts
(1) General rule
In the case of a taxpayer other than a corporation -
(A) subsection (a) shall not apply to any nonbusiness debt;
and
(B) where any nonbusiness debt becomes worthless within the
taxable year, the loss resulting therefrom shall be considered
a loss from the sale or exchange, during the taxable year, of a
capital asset held for not more than 1 year.
(2) Nonbusiness debt defined
For purposes of paragraph (1), the term "nonbusiness debt"
means a debt other than -
(A) a debt created or acquired (as the case may be) in
connection with a trade or business of the taxpayer; or
(B) a debt the loss from the worthlessness of which is
incurred in the taxpayer's trade or business.
(e) Worthless securities
This section shall not apply to a debt which is evidenced by a
security as defined in section 165(g)(2)(C).
(f) Cross references
(1) For disallowance of deduction for worthlessness of debts
owed by political parties and similar organizations, see
section 271.
(2) For special rule for banks with respect to worthless
securities, see section 582.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 50; Pub. L. 85-866, title I,
Sec. 8, Sept. 2, 1958, 72 Stat. 1608; Pub. L. 89-722, Sec. 1(a),
Nov. 2, 1966, 80 Stat. 1151; Pub. L. 91-172, title IV, Sec.
431(c)(1), Dec. 30, 1969, 83 Stat. 619; Pub. L. 94-455, title VI,
Sec. 605(a), title XIV, Sec. 1402(b)(1)(A), (2), title XIX, Sec.
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1575, 1731, 1732, 1834; Pub.
L. 98-369, div. A, title X, Sec. 1001(b)(1), (e), July 18, 1984, 98
Stat. 1011, 1012; Pub. L. 99-514, title VIII, Sec. 805(a), (b),
title IX, Sec. 901(d)(4)(A), Oct. 22, 1986, 100 Stat. 2361, 2379;
Pub. L. 100-647, title I, Sec. 1008(d)(1), (2), Nov. 10, 1988, 102
Stat. 3439.)
-MISC1-
AMENDMENTS
1988 - Subsec. (d)(1)(A). Pub. L. 100-647, Sec. 1008(d)(1),
substituted "subsection (a)" for "subsections (a) and (c)".
Subsecs. (f), (g). Pub. L. 100-647, Sec. 1008(d)(2), made
clarifying amendment to directory language of Pub. L. 99-514, Sec.
805(b), see 1986 Amendment note below.
1986 - Subsec. (c). Pub. L. 99-514, Sec. 805(a), struck out
subsec. (c), reserve for bad debts, which read as follows: "In lieu
of any deduction under subsection (a), there shall be allowed (in
the discretion of the Secretary) a deduction for a reasonable
addition to a reserve for bad debts."
Subsec. (f). Pub. L. 99-514, Sec. 805(b), as amended by Pub. L.
100-647, Sec. 1008(d)(2), redesignated subsec. (g) as (f) and
struck out former subsec. (f) which related to reserve for certain
guaranteed debt obligations, par. (1) thereof providing for
allowance of deduction, par. (2) disallowing deduction in other
cases, par. (3) relating to opening balance of reserve, and par.
(4) relating to suspense account.
Subsec. (g). Pub. L. 99-514, Sec. 805(b), as amended by Pub. L.
100-647, Sec. 1008(d)(2), redesignated subsec. (g) as (f).
Pub. L. 99-514, Sec. 901(d)(4)(A), struck out pars. (3) and (4)
which read as follows:
"(3) For special rule for bad debt reserves of certain mutual
savings banks, domestic building and loan associations, and
cooperative banks, see section 593.
"(4) For special rule for bad debt reserves of banks, small
business investment-companies, etc., see sections 585 and 586."
1984 - Subsec. (d)(1)(B). Pub. L. 98-369 substituted "6 months"
for "1 year", applicable to property acquired after June 22, 1984,
and before Jan. 1, 1988. See Effective Date of 1984 Amendment note
below.
1976 - Subsecs. (a)(2), (c). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (d)(1)(B). Pub. L. 94-455, Sec. 1401(b)(1)(A), (2),
provided that "6 months" would be changed to "9 months" for taxable
years beginning in 1977, and "9 months" would be changed to "1
year" for taxable years beginning after Dec. 31, 1977.
Subsec. (f). Pub. L. 94-455, Secs. 605(a), 1906(b)(13)(A),
redesignated subsec. (g) as (f) and struck out "or his delegate"
after "Secretary" in pars. (1), (3) and (4)(D). Former subsec. (f),
which related to treatment of payments made by guarantors of
certain noncorporate obligations, was struck out.
Subsecs. (g), (h). Pub. L. 94-455, Sec. 605(a), redesignated
subsecs. (g) and (h) as (f) and (g), respectively.
1969 - Subsec. (h)(4). Pub. L. 91-172 added par. (4).
1966 - Subsecs. (g), (h). Pub. L. 89-722 added subsec. (g) and
redesignated former subsec. (g) as (h).
1958 - Subsec. (d)(2)(A). Pub. L. 85-866 substituted "a trade or
business of the taxpayer" for "a taxpayer's trade or business".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 805(d) of Pub. L. 99-514 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 81, 108, 461, and 805 of this title]
shall apply to taxable years beginning after December 31, 1986.
"(2) Change in method of accounting. - In the case of any
taxpayer who maintained a reserve for bad debts for such taxpayer's
last taxable year beginning before January 1, 1987, and who is
required by the amendments made by this section to change its
method of accounting for any taxable year -
"(A) such change shall be treated as initiated by the taxpayer,
"(B) such change shall be treated as made with the consent of
the Secretary, and
"(C) the net amount of adjustments required by section 481 of
the Internal Revenue Code of 1986 to be taken into account by the
taxpayer shall -
"(i) in the case of a taxpayer maintaining a reserve under
section 166(f), be reduced by the balance in the suspense
account under section 166(f)(4) of such Code as of the close of
such last taxable year, and
"(ii) be taken into account ratably in each of the first 4
taxable years beginning after December 31, 1986."
Section 901(e) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and sections 172, 291,
582, 585, 593, 596, 856, 1277, and 1361 of this title and repealing
section 586 of this title] shall apply to taxable years beginning
after December 31, 1986."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 1001(e) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and sections 341, 402,
403, 423, 582, 584, 631, 642, 702, 818, 852, 856, 857, 1222, 1223,
1231, 1232, 1233, 1234, 1235, 1246, 1247, 1248, 1251, and 1278 of
this title] shall apply to property acquired after June 22, 1984,
and before January 1, 1988."
EFFECTIVE DATE OF 1976 AMENDMENT
Section 605(c) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and section 81 of this
title] shall apply to guarantees made after December 31, 1975, in
taxable years beginning after such date."
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after July 11, 1969, see section 431(d) of Pub. L. 91-172, set out
as an Effective Date note under section 585 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Section 2 of Pub. L. 89-722, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) Except as provided in subsections (b) and (c), the
amendments made by the first section of this Act [amending this
section and section 81 of this title] shall apply to taxable years
ending after October 21, 1965.
"(b) If -
"(1) the taxpayer before October 22, 1965, claimed a deduction,
for a taxable year ending before such date, under section 166(c)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] for
an addition to a reserve for bad debts on account of debt
obligations described in section 166(g)(1)(A) of such Code (as
amended by the first section of this Act), and
"(2) the assessment of a deficiency of the tax imposed by
chapter 1 of such Code for such taxable year and each subsequent
taxable year ending before October 22, 1965, is not prevented on
December 31, 1966, by the operation of any law or rule of law,
then such deduction on account of such debt obligations shall be
allowed for each such taxable year under such section 166(c) to the
extent that the deduction would have been allowable under the
provisions of such section 166(g)(1)(A) if such provisions applied
to such taxable years.
"(c) Section 166(g)(2) of the Internal Revenue Code of 1986 (as
amended by the first section of this Act) shall apply to taxable
years beginning after December 31, 1953, and ending after August
16, 1954."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
ESTABLISHMENT OF RESERVE FOR TAXABLE YEAR ENDING AFTER OCT. 21,
1965, AND BEGINNING BEFORE AUG. 2, 1966
Section 1(c) of Pub. L. 89-722, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If the
taxpayer establishes a reserve described in section 166(g)(1) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as
amended by subsection (a) of this section) for a taxable year
ending after October 21, 1965, and beginning before August 2, 1966,
the establishment of such reserve shall not be considered as a
change in method of accounting for purposes of section 446(e) of
such Code."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 108, 165, 172, 271, 582,
585, 593, 1351, 1367, 6227, 6511 of this title.
-End-
-CITE-
26 USC Sec. 167 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 167. Depreciation
-STATUTE-
(a) General rule
There shall be allowed as a depreciation deduction a reasonable
allowance for the exhaustion, wear and tear (including a reasonable
allowance for obsolescence) -
(1) of property used in the trade or business, or
(2) of property held for the production of income.
(b) Cross reference
For determination of depreciation deduction in case of
property to which section 168 applies, see section 168.
(c) Basis for depreciation
(1) In general
The basis on which exhaustion, wear and tear, and obsolescence
are to be allowed in respect of any property shall be the
adjusted basis provided in section 1011, for the purpose of
determining the gain on the sale or other disposition of such
property.
(2) Special rule for property subject to lease
If any property is acquired subject to a lease -
(A) no portion of the adjusted basis shall be allocated to
the leasehold interest, and
(B) the entire adjusted basis shall be taken into account in
determining the depreciation deduction (if any) with respect to
the property subject to the lease.
(d) Life tenants and beneficiaries of trusts and estates
In the case of property held by one person for life with
remainder to another person, the deduction shall be computed as if
the life tenant were the absolute owner of the property and shall
be allowed to the life tenant. In the case of property held in
trust, the allowable deduction shall be apportioned between the
income beneficiaries and the trustee in accordance with the
pertinent provisions of the instrument creating the trust, or, in
the absence of such provisions, on the basis of the trust income
allocable to each. In the case of an estate, the allowable
deduction shall be apportioned between the estate and the heirs,
legatees, and devisees on the basis of the income of the estate
allocable to each.
(e) Certain term interests not depreciable
(1) In general
No depreciation deduction shall be allowed under this section
(and no depreciation or amortization deduction shall be allowed
under any other provision of this subtitle) to the taxpayer for
any term interest in property for any period during which the
remainder interest in such property is held (directly or
indirectly) by a related person.
(2) Coordination with other provisions
(A) Section 273
This subsection shall not apply to any term interest to which
section 273 applies.
(B) Section 305(e)
This subsection shall not apply to the holder of the dividend
rights which were separated from any stripped preferred stock
to which section 305(e)(1) applies.
(3) Basis adjustments
If, but for this subsection, a depreciation or amortization
deduction would be allowable to the taxpayer with respect to any
term interest in property -
(A) the taxpayer's basis in such property shall be reduced by
any depreciation or amortization deductions disallowed under
this subsection, and
(B) the basis of the remainder interest in such property
shall be increased by the amount of such disallowed deductions
(properly adjusted for any depreciation deductions allowable
under subsection (d) to the taxpayer).
(4) Special rules
(A) Denial of increase in basis of remainderman
No increase in the basis of the remainder interest shall be
made under paragraph (3)(B) for any disallowed deductions
attributable to periods during which the term interest was held
-
(i) by an organization exempt from tax under this subtitle,
or
(ii) by a nonresident alien individual or foreign
corporation but only if income from the term interest is not
effectively connected with the conduct of a trade or business
in the United States.
(B) Coordination with subsection (d)
If, but for this subsection, a depreciation or amortization
deduction would be allowable to any person with respect to any
term interest in property, the principles of subsection (d)
shall apply to such person with respect to such term interest.
(5) Definitions
For purposes of this subsection -
(A) Term interest in property
The term "term interest in property" has the meaning given
such term by section 1001(e)(2).
(B) Related person
The term "related person" means any person bearing a
relationship to the taxpayer described in subsection (b) or (e)
of section 267.
(6) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subsection, including
regulations preventing avoidance of this subsection through
cross-ownership arrangements or otherwise.
(f) Treatment of certain property excluded from section 197
(1) Computer software
(A) In general
If a depreciation deduction is allowable under subsection (a)
with respect to any computer software, such deduction shall be
computed by using the straight line method and a useful life of
36 months.
(B) Computer software
For purposes of this section, the term "computer software"
has the meaning given to such term by section 197(e)(3)(B);
except that such term shall not include any such software which
is an amortizable section 197 intangible.
(2) Certain interests or rights acquired separately
If a depreciation deduction is allowable under subsection (a)
with respect to any property described in subparagraph (B), (C),
or (D) of section 197(e)(4), such deduction shall be computed in
accordance with regulations prescribed by the Secretary.
(3) Mortgage servicing rights
If a depreciation deduction is allowable under subsection (a)
with respect to any right described in section 197(e)(7), such
deduction shall be computed by using the straight line method and
a useful life of 108 months.
(g) Depreciation under income forecast method
(1) In general
If the depreciation deduction allowable under this section to
any taxpayer with respect to any property is determined under the
income forecast method or any similar method -
(A) the income from the property to be taken into account in
determining the depreciation deduction under such method shall
be equal to the amount of income earned in connection with the
property before the close of the 10th taxable year following
the taxable year in which the property was placed in service,
(B) the adjusted basis of the property shall only include
amounts with respect to which the requirements of section
461(h) are satisfied,
(C) the depreciation deduction under such method for the 10th
taxable year beginning after the taxable year in which the
property was placed in service shall be equal to the adjusted
basis of such property as of the beginning of such 10th taxable
year, and
(D) such taxpayer shall pay (or be entitled to receive)
interest computed under the look-back method of paragraph (2)
for any recomputation year.
(2) Look-back method
The interest computed under the look-back method of this
paragraph for any recomputation year shall be determined by -
(A) first determining the depreciation deductions under this
section with respect to such property which would have been
allowable for prior taxable years if the determination of the
amounts so allowable had been made on the basis of the sum of
the following (instead of the estimated income from such
property) -
(i) the actual income earned in connection with such
property for periods before the close of the recomputation
year, and
(ii) an estimate of the future income to be earned in
connection with such property for periods after the
recomputation year and before the close of the 10th taxable
year following the taxable year in which the property was
placed in service,
(B) second, determining (solely for purposes of computing
such interest) the overpayment or underpayment of tax for each
such prior taxable year which would result solely from the
application of subparagraph (A), and
(C) then using the adjusted overpayment rate (as defined in
section 460(b)(7)), compounded daily, on the overpayment or
underpayment determined under subparagraph (B).
For purposes of the preceding sentence, any cost incurred after
the property is placed in service (which is not treated as a
separate property under paragraph (5)) shall be taken into
account by discounting (using the Federal mid-term rate
determined under section 1274(d) as of the time such cost is
incurred) such cost to its value as of the date the property is
placed in service. The taxpayer may elect with respect to any
property to have the preceding sentence not apply to such
property.
(3) Exception from look-back method
Paragraph (1)(D) shall not apply with respect to any property
which had a cost basis of $100,000 or less.
(4) Recomputation year
For purposes of this subsection, except as provided in
regulations, the term "recomputation year" means, with respect to
any property, the 3d and the 10th taxable years beginning after
the taxable year in which the property was placed in service,
unless the actual income earned in connection with the property
for the period before the close of such 3d or 10th taxable year
is within 10 percent of the income earned in connection with the
property for such period which was taken into account under
paragraph (1)(A).
(5) Special rules
(A) Certain costs treated as separate property
For purposes of this subsection, the following costs shall be
treated as separate properties:
(i) Any costs incurred with respect to any property after
the 10th taxable year beginning after the taxable year in
which the property was placed in service.
(ii) Any costs incurred after the property is placed in
service and before the close of such 10th taxable year if
such costs are significant and give rise to a significant
increase in the income from the property which was not
included in the estimated income from the property.
(B) Syndication income from television series
In the case of property which is 1 or more episodes in a
television series, income from syndicating such series shall
not be required to be taken into account under this subsection
before the earlier of -
(i) the 4th taxable year beginning after the date the first
episode in such series is placed in service, or
(ii) the earliest taxable year in which the taxpayer has an
arrangement relating to the future syndication of such
series.
(C) Special rules for financial exploitation of characters,
etc.
For purposes of this subsection, in the case of television
and motion picture films, the income from the property shall
include income from the exploitation of characters, designs,
scripts, scores, and other incidental income associated with
such films, but only to the extent that such income is earned
in connection with the ultimate use of such items by, or the
ultimate sale of merchandise to, persons who are not related
persons (within the meaning of section 267(b)) to the taxpayer.
(D) Collection of interest
For purposes of subtitle F (other than sections 6654 and
6655), any interest required to be paid by the taxpayer under
paragraph (1) for any recomputation year shall be treated as an
increase in the tax imposed by this chapter for such year.
(E) Determinations
For purposes of paragraph (2), determinations of the amount
of income earned in connection with any property shall be made
in the same manner as for purposes of applying the income
forecast method; except that any income from the disposition of
such property shall be taken into account.
(F) Treatment of pass-thru entities
Rules similar to the rules of section 460(b)(4) shall apply
for purposes of this subsection.
(6) Limitation on property for which income forecast method may
be used
The depreciation deduction allowable under this section may be
determined under the income forecast method or any similar method
only with respect to -
(A) property described in paragraph (3) or (4) of section
168(f),
(B) copyrights,
(C) books,
(D) patents, and
(E) other property specified in regulations.
Such methods may not be used with respect to any amortizable
section 197 intangible (as defined in section 197(c)).
(h) Cross references
(1) For additional rule applicable to depreciation of
improvements in the case of mines, oil and gas wells, other
natural deposits, and timber, see section 611.
(2) For amortization of goodwill and certain other
intangibles, see section 197.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 51; Pub. L. 85-866, title I,
Sec. 89(b), Sept. 2, 1958, 72 Stat. 1665; Pub. L. 87-834, Sec.
13(b), (c)(1), Oct. 16, 1962, 76 Stat. 1034; Pub. L. 89-800, Sec.
2, Nov. 8, 1966, 80 Stat. 1513; Pub. L. 90-26, Secs. 1, 2(b), June
13, 1967, 81 Stat. 57, 58; Pub. L. 91-172, title IV, Sec. 441(a),
title V, Sec. 521(a), (d), Dec. 30, 1969, 83 Stat. 625, 649, 653;
Pub. L. 92-178, title I, Sec. 109(a), Dec. 10, 1971, 85 Stat. 508;
Pub. L. 93-625, Sec. 3(c), Jan. 3, 1975, 88 Stat. 2109; Pub. L.
94-455, title II, Secs. 202(c)(3), 203(a), title XIX, Secs.
1901(a)(27), 1906(b)(13)(A), title XXI, Sec. 2124(c)(1), (d)(1),
Oct. 4, 1976, 90 Stat. 1530, 1768, 1834, 1918; Pub. L. 95-171, Sec.
4(a), Nov. 12, 1977, 91 Stat. 1355; Pub. L. 95-600, title III,
Secs. 312(c)(4), 367, title VII, Sec. 701(f)(4), (6), Nov. 6, 1978,
92 Stat. 2826, 2857, 2901, 2902; Pub. L. 95-615, Sec. 7(a), Nov. 8,
1978, 92 Stat. 3098; Pub. L. 95-618, title III, Sec. 301(d)(3),
(e)(1), Nov. 9, 1978, 92 Stat. 3200, 3201; Pub. L. 96-541, Secs.
2(c), (d), 3, Dec. 17, 1980, 94 Stat. 3204, 3205; Pub. L. 96-613,
Sec. 2(a), Dec. 28, 1980, 94 Stat. 3579; Pub. L. 97-34, title II,
Secs. 203(a)-(c)(1), (d), 209(d)(3), 212(d)(1), 264(a), Aug. 13,
1981, 95 Stat. 221, 222, 227, 239, 264; Pub. L. 97-424, title V,
Sec. 541(a)(2), Jan. 6, 1983, 96 Stat. 2192; Pub. L. 98-369, div.
A, title X, Sec. 1064, July 18, 1984, 98 Stat. 1047; Pub. L.
99-514, title II, Sec. 201(d)(1), title XV, Sec. 1511(c)(4), title
XVIII, Sec. 1809(d)(1), Oct. 22, 1986, 100 Stat. 2139, 2745, 2821;
Pub. L. 100-647, title I, Sec. 1002(a)(22), (24), (31), (i)(1),
Nov. 10, 1988, 102 Stat. 3356, 3357, 3370; Pub. L. 101-239, title
VII, Secs. 7622(b)(1) [(d)(1)], 7645(a), Dec. 19, 1989, 103 Stat.
2378, 2381; Pub. L. 101-508, title XI, Sec. 11812(a), (b)(1), Nov.
5, 1990, 104 Stat. 1388-534; Pub. L. 103-66, title XIII, Secs.
13206(c)(2), 13261(b), (f)(1), Aug. 10, 1993, 107 Stat. 466, 538,
539; Pub. L. 104-188, title I, Sec. 1604(a), Aug. 20, 1996, 110
Stat. 1836; Pub. L. 105-34, title X, Sec. 1086(a), Aug. 5, 1997,
111 Stat. 957.)
-MISC1-
AMENDMENTS
1997 - Subsec. (g)(6). Pub. L. 105-34 added par. (6).
1996 - Subsecs. (g), (h). Pub. L. 104-188 added subsec. (g) and
redesignated former subsec. (g) as (h).
1993 - Subsec. (c). Pub. L. 103-66, Sec. 13261(b)(2), amended
heading and text of subsec. (c) generally. Prior to amendment, text
read as follows: "The basis on which exhaustion, wear and tear, and
obsolescence are to be allowed in respect of any property shall be
the adjusted basis provided in section 1011 for the purpose of
determining the gain on the sale or other disposition of such
property."
Subsec. (e)(2). Pub. L. 103-66, Sec. 13206(c)(2), amended heading
and text of par. (2) generally. Prior to amendment, text read as
follows: "This subsection shall not apply to any term interest to
which section 273 applies."
Subsec. (f). Pub. L. 103-66, Sec. 13261(b)(1), added subsec. (f).
Former subsec. (f) redesignated (g).
Subsec. (g). Pub. L. 103-66, Sec. 13261(b)(1), (f)(1),
redesignated subsec. (f) as (g) and amended heading and text
generally, designating existing provisions of text as par. (1) and
adding par. (2).
1990 - Subsec. (b). Pub. L. 101-508, Sec. 11812(a), added subsec.
(b) and struck out former subsec. (b) "Use of certain methods and
rates" which read as follows: "For taxable years ending after
December 31, 1953, the term 'reasonable allowance' as used in
subsection (a) shall include (but shall not be limited to) an
allowance computed in accordance with regulations prescribed by the
Secretary, under any of the following methods:
"(1) the straight line method,
"(2) the declining balance method, using a rate not exceeding
twice the rate which would have been used had the annual
allowance been computed under the method described in paragraph
(1),
"(3) the sum of the years-digits method, and
"(4) any other consistent method productive of an annual
allowance which, when added to all allowances for the period
commencing with the taxpayer's use of the property and including
the taxable year, does not, during the first two-thirds of the
useful life of the property, exceed the total of such allowances
which would have been used had such allowances been computed
under the method described in paragraph (2).
Nothing in this subsection shall be construed to limit or reduce an
allowance otherwise allowable under subsection (a)."
Subsec. (c). Pub. L. 101-508, Sec. 11812(a)(1), redesignated
subsec. (g) as (c) and struck out former subsec. (c) "Limitations
on use of certain methods and rates" which read as follows:
"Paragraphs (2), (3), and (4) of subsection (b) shall apply only in
the case of property (other than intangible property) described in
subsection (a) with a useful life of 3 years or more -
"(1) the construction, reconstruction, or erection of which is
completed after December 31, 1953, and then only to that portion
of the basis which is properly attributable to such construction,
reconstruction, or erection after December 31, 1953, or
"(2) acquired after December 31, 1953, if the original use of
such property commences with the taxpayer and commences after
such date.
Paragraphs (2), (3), and (4) of subsection (b) shall not apply to
any motion picture film, video tape, or sound recording."
Subsec. (d). Pub. L. 101-508, Sec. 11812(a)(1), redesignated
subsec. (h) as (d) and struck out former subsec. (d) "Agreement as
to useful life on which depreciation rate is based" which read as
follows: "Where, under regulations prescribed by the Secretary, the
taxpayer and the Secretary have, after August 16, 1954, entered
into an agreement in writing specifically dealing with the useful
life and rate of depreciation of any property, the rate so agreed
upon shall be binding on both the taxpayer and the Secretary in the
absence of facts or circumstances not taken into consideration in
the adoption of such agreement. The responsibility of establishing
the existence of such facts and circumstances shall rest with the
party initiating the modification. Any change in the agreed rate
and useful life specified in the agreement shall not be effective
for taxable years before the taxable year in which notice in
writing by certified mail or registered mail is served by the party
to the agreement initiating such change. This subsection shall not
apply with respect to property to which section 168 applies."
Subsec. (e). Pub. L. 101-508, Sec. 11812(a)(1), redesignated
subsec. (r) as (e) and struck out former subsec. (e) which related
to changes in method of depreciation from declining balance method
and changes with respect to sections 1245 and 1250 property.
Subsec. (e)(3)(B). Pub. L. 101-508, Sec. 11812(b)(1) substituted
"(d)" for "(h)".
Subsec. (e)(4)(B). Pub. L. 101-508, Sec. 11812(b)(1), substituted
"(d)" for "(h)" in heading and text.
Subsec. (f). Pub. L. 101-508, Sec. 11812(a)(1), redesignated
subsec. (s) as (f) and struck out former subsec. (f) "Salvage
value" which read as follows:
"(1) General rule. - Under regulations prescribed by the
Secretary, a taxpayer may, for purposes of computing the allowance
under subsection (a) with respect to personal property, reduce the
amount taken into account as salvage value by an amount which does
not exceed 10 percent of the basis of such property (as determined
under subsection (g) as of the time as of which such salvage value
is required to be determined).
"(2) Personal property defined. - For purposes of this
subsection, the term 'personal property' means depreciable personal
property (other than livestock) with a useful life of 3 years or
more acquired after October 16, 1962."
Subsecs. (g), (h). Pub. L. 101-508, Sec. 11812(a)(1),
redesignated subsecs. (g) and (h) as (c) and (d), respectively.
Subsec. (j). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (j) which related to special rules for section 1250
property including residential rental property and change in method
of depreciation.
Subsec. (k). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (k) which related to depreciation of expenditures to
rehabilitate low-income rental housing.
Subsec. (l). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (l) which related to reasonable allowance in case of
property of certain utilities, pre-1970 public utility property and
post-1969 public utility property.
Subsec. (m). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (m) which related to class lives.
Subsec. (p). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (p) which related to straight line method for boilers
fueled by oil or gas.
Subsec. (q). Pub. L. 101-508, Sec. 11812(a)(1), struck out
subsec. (q) which related to retirement or replacement of certain
boilers, etc., fueled by oil or gas.
Subsecs. (r), (s). Pub. L. 101-508, Sec. 11812(a)(1),
redesignated subsecs. (r) and (s) as (e) and (f), respectively.
1989 - Subsec. (r). Pub. L. 101-239, Sec. 7645(a), added subsec.
(r).
Pub. L. 101-239, Sec. 7622(b)(1) [(d)(1)], repealed subsec. (r)
which provided that trademark or trade name expenditures were not
depreciable.
1988 - Subsec. (a). Pub. L. 100-647, Sec. 1002(a)(24), struck out
at end "In the case of recovery property (within the meaning of
section 168), the deduction allowable under section 168 shall be
deemed to constitute the reasonable allowance provided by this
section, except with respect to that portion of the basis of such
property to which subsection (k) applies."
Subsec. (d). Pub. L. 100-647, Sec. 1002(a)(31), substituted
"property to which section 168 applies" for "recovery property
defined in section 168".
Subsec. (l)(3)(G). Pub. L. 100-647, Sec. 1002(a)(22), substituted
"section 168(i)(9)(B)" for "section 168(e)(3)(C)" in last sentence.
Subsecs. (r), (s). Pub. L. 100-647, Sec. 1002(i)(1), added
subsec. (r) and redesignated former subsec. (r) as (s).
1986 - Subsec. (c). Pub. L. 99-514, Sec. 1809(d)(1), inserted
"Paragraphs (2), (3), and (4) of subsection (b) shall not apply to
any motion picture film, video tape, or sound recording."
Subsec. (m)(4). Pub. L. 99-514, Sec. 201(d)(1), amended par. (4)
generally. Prior to amendment, par. (4) read as follows: "This
subsection shall not apply with respect to recovery property
(within the meaning of section 168) placed in service after
December 31, 1980."
Subsec. (q)(2)(B). Pub. L. 99-514, Sec. 1511(c)(4), substituted
"at the underpayment rate established under section 6621" for "at
the rate determined under section 6621".
1984 - Subsec. (k)(1), (3)(D). Pub. L. 98-369 substituted
"January 1, 1987" for "January 1, 1984" wherever appearing.
1983 - Subsec. (l)(3)(G). Pub. L. 97-424 inserted provision that,
for the purposes of this paragraph, rules similar to the rules of
section 168(e)(3)(C) of this title shall apply.
1981 - Subsec. (a). Pub. L. 97-34, Sec. 203(a), inserted
provision that, in the case of recovery property (within the
meaning of section 168), the deduction allowable under section 168
shall be deemed to constitute the reasonable allowance provided by
this section, except with respect to that portion of the basis of
such property to which subsection (k) applies.
Subsec. (d). Pub. L. 97-34, Sec. 203(d), provided that subsec.
(d) did not apply with respect to recovery property defined in
section 168.
Subsec. (k)(2). Pub. L. 97-34, Sec. 264(a), substituted "Except
as provided in subparagraph (B), the aggregate amount" for "The
aggregate amount" in subpar. (A), added subpar. (B), and
redesignated former subpar. (B) as (C).
Subsec. (l)(3)(C). Pub. L. 97-34, Sec. 209(d)(3), inserted "and
which is placed in service before January 1, 1981" after "pre-1970
public utility property".
Subsec. (m)(4). Pub. L. 97-34, Sec. 203(b), added par. (4).
Subsecs. (n), (o). Pub. L. 97-34, Sec. 212(d)(1), struck out
subsec. (n) which dealt with the use of the straight line method of
depreciation in certain cases, and subsec. (o) which dealt with the
method of depreciation to be used in the case of substantially
rehabilitated historic property.
Subsec. (r). Pub. L. 97-34, Sec. 203(c)(1), redesignated subsec.
(s) as (r). Former subsec. (r), relating to the
retirement-replacement-betterment method of calculating
depreciation, was struck out.
Subsec. (s). Pub. L. 97-34, Sec. 203(c)(1), redesignated subsec.
(s) as (r).
1980 - Subsec. (k). Pub. L. 96-541, Sec. 3, substituted in pars.
(1) and (3)(D) "January 1, 1984" for "January 1, 1982" wherever
appearing.
Subsec. (n)(4). Pub. L. 96-541, Sec. 2(c), added par. (4).
Subsec. (o)(3). Pub. L. 96-541, Sec. 2(d), added par. (3).
Subsecs. (r), (s). Pub. L. 96-613 added subsec. (r) and
redesignated former subsec. (r) as (s).
1978 - Subsec. (i). Pub. L. 95-600, Sec. 312(c)(4), struck out
subsec. (i) which related to a limitation in the case of property
constructed or acquired during the suspension period.
Subsec. (k)(1), (3)(D). Pub. L. 95-615 substituted "January 1,
1979" for "January 1, 1978" wherever appearing.
Pub. L. 95-600, Sec. 367, substituted "January 1, 1982" for
"January 1, 1979" wherever appearing.
Subsec. (n). Pub. L. 95-600, Sec. 701(f)(4), in par. (1),
substituted "occupied by a certified historic structure (or by any
structure in a registered historic district) which is demolished or
substantially altered after such date" for "occupied by a certified
historic structure (as defined in section 191(d)(1)) which is
demolished or substantially altered (other than by virtue of a
certified rehabilitation as defined in section 191(d)(3) after such
date", inserted "and" preceding subpar. (B), substituted "means"
for "shall mean" in subpar. (B), and inserted provision that "The
preceding sentence shall not apply if the last substantial
alteration of the structure is a certified rehabilitation."; in
par. (2), substituted heading "Exceptions" for "Exception",
designated existing text as subpar. (A), and added subpar. (B); and
added par. (3).
Subsec. (o). Pub. L. 95-600, Sec. 701(f)(6), inserted in par. (1)
"(other than property with respect to which an amortization
deduction has been allowed to the taxpayer under section 191)"
after "substantially rehabilitated historic property" and
substituted in par. (2) "section 191(d)(4)" for "section
191(d)(3)".
Subsec. (p). Pub. L. 95-618, Sec. 301(d)(3), added subsec. (p).
Former subsec. (p) redesignated (r).
Subsec. (q). Pub. L. 95-618, Sec. 301(e)(1), added subsec. (q).
Subsec. (r). Pub. L. 95-618, Sec. 301(d)(3), redesignated former
subsec. (p) as (r).
1977 - Subsec. (k). Pub. L. 95-171 substituted "January 1, 1979"
for "January 1, 1978" wherever appearing in pars. (1) and (3)(D).
1976 - Subsec. (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (d). Pub. L. 94-455, Secs. 1901(a)(27)(A),
1906(b)(13)(A), substituted "after August 16, 1954" for "after the
date of enactment of this title" and struck out "or his delegate"
after "Secretary" in first sentence before "shall be binding".
Subsec. (e). Pub. L. 94-455, Secs. 202(c)(3), 1906(b)(13)(A),
substituted in par. (3) "beginning after December 31, 1975" for
"beginning after July 24, 1969" and in pars. (1) to (3) struck out
"or his delegate" after "Secretary".
Subsec. (f)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (f)(2). Pub. L. 94-455, Sec. 1901(a)(27)(B), substituted
"October 16, 1962" for "the date of enactment of the Revenue Act of
1962".
Subsec. (i). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out in
pars. (1) and (2) "or his delegate" after "Secretary".
Subsec. (j). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out in
pars. (1), (4)(B), (5)(C), and (6)(A) "or his delegate" after
"Secretary".
Subsec. (k)(1). Pub. L. 94-455, Secs. 203(a)(1), 1906(b)(13)(A),
substituted reference to January 1, 1978 for reference to January
1, 1976 and struck out "or his delegate" after "Secretary".
Subsec. (k)(2)(A). Pub. L. 94-455, Sec. 203(a)(2), substituted
"$20,000" for "$15,000".
Subsec. (k)(3)(B). Pub. L. 94-455, Secs. 203(a)(3),
1906(b)(13)(A), substituted "the Leased Housing Program under
section 8 of the United States Housing Act of 1937" for "the
policies of the Housing and Urban Development Act of 1968" and
struck out "or his delegate" after "Secretary".
Subsec. (k)(3)(D). Pub. L. 94-455, Sec. 203(a)(4), added subpar.
(D).
Subsec. (l)(3)(F). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (l)(4)(A). Pub. L. 94-455, Secs. 1901(a)(27)(C),
1906(b)(13)(A), substituted "before June 29, 1970," for "within 180
days after the date of the enactment of this subparagraph" and
struck out "or his delegate" after "Secretary".
Subsec. (l)(5). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (m). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out in
pars. (1) and (3) "or his delegate" after "Secretary".
Subsec. (n). Pub. L. 94-455, Sec. 2124(c)(1), added subsec. (n).
Former subsec. (n) redesignated (p).
Subsec. (o). Pub. L. 94-455, Sec. 2124(d)(1), added subsec. (o).
Subsec. (p). Pub. L. 94-455, Sec. 2124(c)(1), redesignated former
subsec. (n) as (p).
1975 - Subsec. (k)(1). Pub. L. 93-625 substituted "January 1,
1976" for "January 1, 1975".
1971 - Subsecs. (m), (n). Pub. L. 92-178 added subsec. (m) and
redesignated former subsec. (m) as (n).
1969 - Subsec. (e)(3). Pub. L. 91-172, Sec. 521(d), added par.
(3).
Subsecs. (j), (k). Pub. L. 91-172, Sec. 521(a), added subsecs.
(j) and (k). Former subsec. (j) redesignated (m).
Subsec. (l). Pub. L. 91-172, Sec. 441(a), added subsec. (l).
Subsec. (m). Pub. L. 91-172, Sec. 521(a), redesignated former
subsec. (j) as (m).
1967 - Subsec. (i)(1). Pub. L. 90-26, Sec. 2(b), provided that
accelerated depreciation was not to apply if the physical
construction, reconstruction or erection by any person was begun
during the suspension period or begun, pursuant to an order placed
during such period, before May 24, 1967, subject to the proviso
that only that portion of the basis which was properly attributable
to construction, reconstruction or erection before May 24, 1967,
shall be affected by the applicability of the suspension period.
Subsec. (i)(3). Pub. L. 90-26, Sec. 1, substituted "March 9,
1967" for "December 31, 1967".
1966 - Subsecs. (i), (j). Pub. L. 89-800 added subsec. (i) and
redesignated former subsec. (i) as (j).
1962 - Subsec. (e). Pub. L. 87-834, Sec. 13(b), designated
existing provisions as par. (1) and added par. (2).
Subsecs. (f) to (i). Pub. L. 87-834, Sec. 13(c)(1), added subsec.
(f) and redesignated former subsecs. (f), (g), and (h) as (g), (h),
and (i), respectively.
1958 - Subsec. (d). Pub. L. 85-866 inserted "certified mail or"
before "registered mail".
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1086(c) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section and section 168 of this
title] shall apply to property placed in service after the date of
the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1604(b) of Pub. L. 104-188, as amended by Pub. L.
105-206, title VI, Sec. 6018(d), July 22, 1998, 112 Stat. 823,
provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to property placed in service after
September 13, 1995.
"(2) Binding contracts. - The amendment made by subsection (a)
shall not apply to any property produced or acquired by the
taxpayer pursuant to a written contract which was binding on
September 13, 1995, and at all times thereafter before such
production or acquisition.
"(3) Underpayments of income tax. - No addition to tax shall be
made under section 6662 of the Internal Revenue Code of 1986 as a
result of the application of subsection (d) of that section
(relating to substantial understatements of income tax) with
respect to any underpayment of income tax for any taxable year
ending before the date of the enactment of this Act [Aug. 20,
1996], to the extent such underpayment was created or increased by
the amendments made by subsection (a)."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13206(c)(3) of Pub. L. 103-66 provided that: "The
amendments made by this subsection [amending this section and
section 305 of this title] shall take effect on April 30, 1993."
Amendment by section 13261(b) and (f)(1) of Pub. L. 103-66
applicable, except as otherwise provided, with respect to property
acquired after Aug. 10, 1993, see section 13261(g) of Pub. L.
103-66, set out as an Effective Date note under section 197 of this
title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to property placed in
service after Nov. 5, 1990, but not applicable to any property to
which section 168 of this title does not apply by reason of subsec.
(f)(5) of section 168, and not applicable to rehabilitation
expenditures described in section 252(f)(5) of Pub. L. 99-514, see
section 11812(c) of Pub. L. 101-508, set out as a note under
section 42 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7622(c)[(e)] of Pub. L. 101-239 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 1245 and 1253 of this title] shall apply
to transfers after October 2, 1989.
"(2) Binding contract. - The amendments made by this section
shall not apply to any transfer pursuant to a written binding
contract in effect on October 2, 1989, and at all times thereafter
before the transfer."
Section 7645(b) of Pub. L. 101-239 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
interests created or acquired after July 27, 1989, in taxable years
ending after such date."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 201(d)(1) of Pub. L. 99-514 applicable to
property placed in service after Dec. 31, 1986, in taxable years
ending after such date, with exceptions, see sections 203 and 204
of Pub. L. 99-514, set out as a note under section 168 of this
title.
Amendment by section 201(d)(1) of Pub. L. 99-514 not applicable
to any property placed in service before Jan. 1, 1994, if such
property placed in service as part of specified rehabilitations,
and not applicable to certain additional rehabilitations, see
section 251(d)(2), (3) of Pub. L. 99-514, set out as a note under
section 46 of this title.
Amendment by section 1511(c)(4) of Pub. L. 99-514 applicable for
purposes of determining interest for periods after Dec. 31, 1986,
see section 1511(d) of Pub. L. 99-514, set out as a note under
section 47 of this title.
Section 1809(d)(1) of Pub. L. 99-514 provided that subsec. (c) is
amended except with respect to property placed in service by the
taxpayer on or before Mar. 28, 1985.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-424 applicable to taxable years beginning
after Dec. 31, 1979, with a special rule for periods beginning
before Mar. 1, 1980, see section 541(c) of Pub. L. 97-424, set out
as a note under section 46 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 264(b) of Pub. L. 97-34 provided that: "The amendments
made by this section [amending this section] shall apply with
respect to rehabilitation expenditures incurred after December 31,
1980."
Amendment by sections 203 and 209 of Pub. L. 97-34 applicable to
property placed in service after Dec. 31, 1980, in taxable years
ending after that date, except that amendment by section 203(c) of
Pub. L. 97-34 effective Jan. 1, 1981, and applicable with respect
to taxable years ending after that date, see section 209(a), (b) of
Pub. L. 97-34, set out as an Effective Date note under section 168
of this title.
Amendment by section 212(d)(1) of Pub. L. 97-34 applicable to
expenditures incurred after Dec. 31, 1981, in taxable years ending
after that date, see section 212(e) of Pub. L. 97-34, set out as a
note under section 46 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 2(b) of Pub. L. 96-613 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years ending after December 31, 1953."
EFFECTIVE AND TERMINATION DATES OF 1978 AMENDMENTS
Amendment by section 312(c)(4) of Pub. L. 95-600 applicable to
taxable years ending after Dec. 31, 1978, see section 312(d) of
Pub. L. 95-600, set out as an Effective Date of 1978 Amendment note
under section 46 of this title.
Section 701(f)(8) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this subsection [amending this section and
sections 57, 191, 280B, 1245, and 1250 of this title] shall take
effect as if included in the respective provisions of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] to which such
amendments relate, as such provision[s] were added to such Code, or
amended, by section 2124 of the Tax Reform Act of 1976 [Pub. L.
94-455, title XXI, Sec. 2124, Oct. 4, 1976, 90 Stat. 1916]."
Amendment by Pub. L. 95-615 to cease to have effect on the day
after Nov. 8, 1978, see section 210(a) of Pub. L. 95-615, set out
as a Termination Date of 1978 Amendment note under section 61 of
this title.
Amendment by section 301(d)(3) of Pub. L. 95-618 applicable to
property which is placed in service after Sept. 30, 1978, but not
to property which is constructed, reconstructed, erected, or
acquired pursuant to a contract which, on Oct. 1, 1978, and at all
times thereafter, was binding on the taxpayer, see section
301(d)(4) of Pub. L. 95-618, set out as an Effective Date of 1978
Amendment note under section 48 of this title.
Section 301(e)(2) of Pub. L. 95-618 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
taxable years ending after the date of enactment of this Act [Nov.
9, 1978]."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(27)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Amendment by section 202(c)(3) of Pub. L. 94-455 applicable for
taxable years ending after Dec. 31, 1975, see section 202(d) of
Pub. L. 94-455, set out as a note under section 1250 of this title.
Section 203(b) of Pub. L. 94-455, as amended by Pub. L. 95-171,
Sec. 4(b), Nov. 12, 1977, 91 Stat. 1355; Pub. L. 95-615, Sec. 7(b),
Nov. 8, 1978, 92 Stat. 3098, provided that: "The amendments made by
paragraphs (1), (3), and (4) of subsection (a) [amending this
section] shall apply to expenditures paid or incurred after
December 31, 1975. The amendment made by paragraph (2) of
subsection (a) [amending this section] shall apply to expenditures
incurred after December 31, 1975."
[Section 7(b) of Pub. L. 95-615 [which amended section 203(b) of
Pub. L. 94-455 exactly as that section 203(b) had been amended by
Pub. L. 95-171] to cease to have effect on the day after Nov. 8,
1978, see section 210(a) of Pub. L. 95-615, set out as a
Termination Date of 1978 Amendment note under section 61 of this
title.]
Section 2124(c)(2), (d)(2) of Pub. L. 94-455, which provided that
the amendment of this section was applicable to that portion of the
basis attributable to construction, reconstruction, or erection
after Dec. 31, 1975, and before Jan. 1, 1981, and with respect to
additions to capital account occurring after June 30, 1976, and
before July 1, 1981, was repealed by section 2(e)(3), (4) of Pub.
L. 96-541.
EFFECTIVE DATE OF 1975 AMENDMENT
Section 5(d) of Pub. L. 93-625 provided that: "The amendments
made by this section [amending section 1250 of this title and
enacting and repealing provisions set out as notes under this
section] shall apply with respect to property placed in service
after December 31, 1973."
EFFECTIVE DATE OF 1971 AMENDMENT
Section 109(d)(1) of Pub. L. 92-178 provided that: "The
amendments made by subsection (a) [amending this section] shall
apply to property placed in service after December 31, 1970."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 441(b) of Pub. L. 91-172 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to all taxable years for which a return has not been filed
before August 1, 1969."
Section 521(g) of Pub. L. 91-172 provided that: "The amendments
made by this section [amending this section and sections 381 and
1250 of this title] shall apply with respect to taxable years
ending after July 24, 1969."
EFFECTIVE DATE OF 1967 AMENDMENT
Amendment by Pub. L. 90-26 applicable with respect to taxable
years ending after March 9, 1967, see section 4 of Pub. L. 90-26,
set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-800 applicable to taxable years ending
after Oct. 9, 1966, see section 4 of Pub. L. 89-800, set out as a
note under section 46 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by section 13(b) of Pub. L. 87-834 applicable to
taxable years beginning after Dec. 31, 1962, and amendment by
section 13(c)(1) of Pub. L. 87-834 applicable to taxable years
beginning after Dec. 31, 1961, and ending after Oct. 16, 1962, see
section 13(g) of Pub. L. 87-834, set out as an Effective Date note
under section 1245 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable only if mailing occurs
after Sept. 2, 1958, see section 89(d) of Pub. L. 85-866, set out
as a note under section 7502 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
DISCONTINUATION OF RETIREMENT-REPLACEMENT-BETTERMENT METHOD OF
DEPRECIATION; TRANSITIONAL RULE
Section 203(c)(2), (3) of Pub. L. 97-34, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(2) Change in method of accounting. - Sections 446 and 481 of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall not
apply to the change in the method of depreciation to comply with
the provisions of this subsection [which struck out subsec. (r) of
this section relating to the retirement-replacement-betterment
method of accounting].
"(3) Transitional rule. - The adjusted basis of RRB property (as
defined in section 168(g)(6) of such Code) as of December 31, 1980,
shall be depreciated using a useful life of no less than 5 years
and no more than 50 years and a method described in section 167(b)
of such Code, including the method described in section 167(b)(2)
of such Code, switching to the method described in section
167(b)(3) of such Code at a time to maximize the deduction."
INTERNAL REVENUE CODE PROVISIONS RELATING TO DEPRECIATION AS NOT
APPLICABLE TO CALCULATIONS OF SECRETARY OF HEALTH AND HUMAN
SERVICES IN DETERMINING COSTS OF PROGRAMS
Section 203(e) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
Secretary of Health and Human Services is not required to apply any
provision of the Internal Revenue Code of 1986 [formerly I.R.C.
1954], as amended, in calculating depreciation (for the purpose of
determining any cost under a program administered by the
Secretary), unless a provision of law requires so expressly."
CLASS LIFE SYSTEM; APPLICATION TO REAL PROPERTY; GENERAL RULE
Section 5(a) of Pub. L. 93-625, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the case
of buildings and other items of section 1250 property (within the
meaning of section 1250(c) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) placed in service before the effective date
of the class lives first prescribed by the Secretary of the
Treasury or his delegate under section 167(m) of such Code for the
class in which such property falls, if an election under such
section 167(m) applies to the taxpayer for the taxable year in
which such property is placed in service, the taxpayer may, in
accordance with regulations prescribed by the Secretary of the
Treasury or his delegate, elect to determine the useful life of
such property -
"(1) under Revenue Procedure 62-21 (as amended and
supplemented) as in effect on December 31, 1970, or
"(2) on the facts and circumstances."
TRANSITIONAL RULES FOR REASONABLE ALLOWANCE FOR DEPRECIATION
Section 109(e) of Pub. L. 92-178, as amended by Pub. L. 93-625,
Sec. 5(b), Jan. 3, 1975, 88 Stat. 2112; Pub. L. 99-514, Sec. 2,
Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) [Repealed. Pub. L. 93-625, Sec. 5(b), Jan. 3, 1975, 88 Stat.
2112.]
"(2) Subsidiary assets. - If a significant portion of a class of
property first prescribed by the Secretary of the Treasury or his
delegate under section 167(m) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] consists of subsidiary assets, all such
subsidiary assets in such class placed in service by the taxpayer
during the period beginning on January 1, 1971, and ending on
December 31, 1973 (or such earlier date on which a class which
includes such subsidiary assets subsequently prescribed by the
Secretary of the Treasury or his delegate under such section
becomes effective), may, in accordance with regulations prescribed
by the Secretary of the Treasury or his delegate, be excluded by
the taxpayer from an election under such section."
REHABILITATION EXPENDITURES FOR LOW INCOME RENTAL HOUSING INCURRED
AFTER DECEMBER 31, 1974, AND BEFORE JANUARY 1, 1978, PURSUANT TO
CONTRACT ENTERED BEFORE DECEMBER 31, 1974
Pub. L. 93-482, Sec. 4, Oct. 26, 1974, 88 Stat. 1456, as amended
by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that: "Notwithstanding the provisions of section 167(k)(1) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
depreciation of expenditures to rehabilitate low income rental
housing), the provisions of section 167(k) shall apply with respect
to rehabilitation expenditures incurred with respect to low income
rental housing after December 31, 1974, and before January 1, 1978,
if such expenditures are incurred pursuant to a binding contract
entered into before December 31, 1974."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 56, 62, 132, 142,
168, 169, 172, 174, 175, 179, 179A, 197, 198, 216, 312, 381, 453,
514, 542, 543, 545, 556, 611, 616, 617, 642, 818, 832, 834, 936,
1016, 1082, 1221, 1231, 1239, 1245, 1250, 1400L, 4940, 7518, 7701
of this title; title 33 sections 1316, 1326; title 46 App. section
1177.
-End-
-CITE-
26 USC Sec. 168 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 168. Accelerated cost recovery system
-STATUTE-
(a) General rule
Except as otherwise provided in this section, the depreciation
deduction provided by section 167(a) for any tangible property
shall be determined by using -
(1) the applicable depreciation method,
(2) the applicable recovery period, and
(3) the applicable convention.
(b) Applicable depreciation method
For purposes of this section -
(1) In general
Except as provided in paragraphs (2) and (3), the applicable
depreciation method is -
(A) the 200 percent declining balance method,
(B) switching to the straight line method for the 1st taxable
year for which using the straight line method with respect to
the adjusted basis as of the beginning of such year will yield
a larger allowance.
(2) 150 percent declining balance method in certain cases
Paragraph (1) shall be applied by substituting "150 percent"
for "200 percent" in the case of -
(A) any 15-year or 20-year property,
(B) any property used in a farming business (within the
meaning of section 263A(e)(4)), or
(C) any property (other than property described in paragraph
(3)) with respect to which the taxpayer elects under paragraph
(5) to have the provisions of this paragraph apply.
(3) Property to which straight line method applies
The applicable depreciation method shall be the straight line
method in the case of the following property:
(A) Nonresidential real property.
(B) Residential rental property.
(C) Any railroad grading or tunnel bore.
(D) Property with respect to which the taxpayer elects under
paragraph (5) to have the provisions of this paragraph apply.
(E) Property described in subsection (e)(3)(D)(ii).
(F) Water utility property described in subsection (e)(5).
(4) Salvage value treated as zero
Salvage value shall be treated as zero.
(5) Election
An election under paragraph (2)(C) or (3)(D) may be made with
respect to 1 or more classes of property for any taxable year and
once made with respect to any class shall apply to all property
in such class placed in service during such taxable year. Such an
election, once made, shall be irrevocable.
(c) Applicable recovery period
For purposes of this section, the applicable recovery period
shall be determined in accordance with the following table:
In the case of: 2The applicable
recovery period
is:
--------------------------------------------------------------------
3-year property 3 years
5-year property 5 years
7-year property 7 years
10-year property 10 years
15-year property 15 years
20-year property 20 years
Water utility property 25 years
Residential rental property 27.5 years
Nonresidential real property 39 years.
Any railroad grading or tunnel bore 50 years.
--------------------------------------------------------------------
(d) Applicable convention
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the applicable
convention is the half-year convention.
(2) Real property
In the case of -
(A) nonresidential real property,
(B) residential rental property, and
(C) any railroad grading or tunnel bore,
the applicable convention is the mid-month convention.
(3) Special rule where substantial property placed in service
during last 3 months of taxable year
(A) In general
Except as provided in regulations, if during any taxable year
-
(i) the aggregate bases of property to which this section
applies placed in service during the last 3 months of the
taxable year, exceed
(ii) 40 percent of the aggregate bases of property to which
this section applies placed in service during such taxable
year,
the applicable convention for all property to which this section
applies placed in service during such taxable year shall be the
mid-quarter convention.
(B) Certain property not taken into account
For purposes of subparagraph (A), there shall not be taken
into account -
(i) any nonresidential real property (!1) residential
rental property, and railroad grading or tunnel bore, and
(ii) any other property placed in service and disposed of
during the same taxable year.
(4) Definitions
(A) Half-year convention
The half-year convention is a convention which treats all
property placed in service during any taxable year (or disposed
of during any taxable year) as placed in service (or disposed
of) on the mid-point of such taxable year.
(B) Mid-month convention
The mid-month convention is a convention which treats all
property placed in service during any month (or disposed of
during any month) as placed in service (or disposed of) on the
mid-point of such month.
(C) Mid-quarter convention
The mid-quarter convention is a convention which treats all
property placed in service during any quarter of a taxable year
(or disposed of during any quarter of a taxable year) as placed
in service (or disposed of) on the mid-point of such quarter.
(e) Classification of property
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, property shall
be classified under the following table:
Property shall be treated If such property has a class
as: life (in years) of:
--------------------------------------------------------------------
3-year property 4 or less
5-year property More than 4 but less than 10
7-year property 10 or more but less than 16
10-year property 16 or more but less than 20
15-year property 20 or more but less than 25
20-year property 25 or more.
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(2) Residential rental or nonresidential real property
(A) Residential rental property
(i) Residential rental property
The term "residential rental property" means any building
or structure if 80 percent or more of the gross rental income
from such building or structure for the taxable year is
rental income from dwelling units.
(ii) Definitions
For purposes of clause (i) -
(I) the term "dwelling unit" means a house or apartment
used to provide living accommodations in a building or
structure, but does not include a unit in a hotel, motel,
or other establishment more than one-half of the units in
which are used on a transient basis, and
(II) if any portion of the building or structure is
occupied by the taxpayer, the gross rental income from such
building or structure shall include the rental value of the
portion so occupied.
(B) Nonresidential real property
The term "nonresidential real property" means section 1250
property which is not -
(i) residential rental property, or
(ii) property with a class life of less than 27.5 years.
(3) Classification of certain property
(A) 3-year property
The term "3-year property" includes -
(i) any race horse which is more than 2 years old at the
time it is placed in service,
(ii) any horse other than a race horse which is more than
12 years old at the time it is placed in service, and
(iii) any qualified rent-to-own property.
(B) 5-year property
The term "5-year property" includes -
(i) any automobile or light general purpose truck,
(ii) any semi-conductor manufacturing equipment,
(iii) any computer-based telephone central office switching
equipment,
(iv) any qualified technological equipment,
(v) any section 1245 property used in connection with
research and experimentation, and
(vi) any property which -
(I) is described in subparagraph (A) of section 48(a)(3)
(or would be so described if "solar and wind" were
substituted for "solar" in clause (i) thereof),
(II) is described in paragraph (15) of section 48(l) (as
in effect on the day before the date of the enactment of
the Revenue Reconciliation Act of 1990) and is a qualifying
small power production facility within the meaning of
section 3(17)(C) of the Federal Power Act (16 U.S.C.
796(17)(C)), as in effect on September 1, 1986, or
(III) is described in section 48(l)(3)(A)(ix) (as in
effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990).
Nothing in any provision of law shall be construed to treat
property as not being described in clause (vi)(I) (or the
corresponding provisions of prior law) by reason of being
public utility property (within the meaning of section
48(a)(3)).
(C) 7-year property
The term "7-year property" includes -
(i) any railroad track, and
(ii) any property which -
(I) does not have a class life, and
(II) is not otherwise classified under paragraph (2) or
this paragraph.
(D) 10-year property
The term "10-year property" includes -
(i) any single purpose agricultural or horticultural
structure (within the meaning of subsection (i)(13)), and
(ii) any tree or vine bearing fruit or nuts.
(E) 15-year property
The term "15-year property" includes -
(i) any municipal wastewater treatment plant,
(ii) any telephone distribution plant and comparable
equipment used for 2-way exchange of voice and data
communications, and
(iii) any section 1250 property which is a retail motor
fuels outlet (whether or not food or other convenience items
are sold at the outlet).
(4) Railroad grading or tunnel bore
The term "railroad grading or tunnel bore" means all
improvements resulting from excavations (including tunneling),
construction of embankments, clearings, diversions of roads and
streams, sodding of slopes, and from similar work necessary to
provide, construct, reconstruct, alter, protect, improve,
replace, or restore a roadbed or right-of-way for railroad track.
(5) Water utility property
The term "water utility property" means property -
(A) which is an integral part of the gathering, treatment, or
commercial distribution of water, and which, without regard to
this paragraph, would be 20-year property, and
(B) any municipal sewer.
(f) Property to which section does not apply
This section shall not apply to -
(1) Certain methods of depreciation
Any property if -
(A) the taxpayer elects to exclude such property from the
application of this section, and
(B) for the 1st taxable year for which a depreciation
deduction would be allowable with respect to such property in
the hands of the taxpayer, the property is properly depreciated
under the unit-of-production method or any method of
depreciation not expressed in a term of years (other than the
retirement-replacement-betterment method or similar method).
(2) Certain public utility property
Any public utility property (within the meaning of subsection
(i)(10)) if the taxpayer does not use a normalization method of
accounting.
(3) Films and video tape
Any motion picture film or video tape.
(4) Sound recordings
Any works which result from the fixation of a series of
musical, spoken, or other sounds, regardless of the nature of the
material (such as discs, tapes, or other phonorecordings) in
which such sounds are embodied.
(5) Certain property placed in service in churning transactions
(A) In general
Property -
(i) described in paragraph (4) of section 168(e) (as in
effect before the amendments made by the Tax Reform Act of
1986), or
(ii) which would be described in such paragraph if such
paragraph were applied by substituting "1987" for "1981" and
"1986" for "1980" each place such terms appear.
(B) Subparagraph (A)(ii) not to apply
Clause (ii) of subparagraph (A) shall not apply to -
(i) any residential rental property or nonresidential real
property,
(ii) any property if, for the 1st taxable year in which
such property is placed in service -
(I) the amount allowable as a deduction under this
section (as in effect before the date of the enactment of
this paragraph) with respect to such property is greater
than,
(II) the amount allowable as a deduction under this
section (as in effect on or after such date and using the
half-year convention) for such taxable year, or
(iii) any property to which this section (as amended by the
Tax Reform Act of 1986) applied in the hands of the
transferor.
(C) Special rule
In the case of any property to which this section would apply
but for this paragraph, the depreciation deduction under
section 167 shall be determined under the provisions of this
section as in effect before the amendments made by section 201
of the Tax Reform Act of 1986.
(g) Alternative depreciation system for certain property
(1) In general
In the case of -
(A) any tangible property which during the taxable year is
used predominantly outside the United States,
(B) any tax-exempt use property,
(C) any tax-exempt bond financed property,
(D) any imported property covered by an Executive order under
paragraph (6), and
(E) any property to which an election under paragraph (7)
applies,
the depreciation deduction provided by section 167(a) shall be
determined under the alternative depreciation system.
(2) Alternative depreciation system
For purposes of paragraph (1), the alternative depreciation
system is depreciation determined by using -
(A) the straight line method (without regard to salvage
value),
(B) the applicable convention determined under subsection
(d), and
(C) a recovery period determined under the following table:
In the case of: 2The recovery
period
shall be:
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(i) Property not described in clause (ii) The class life.
or (iii)
(ii) Personal property with no class life 12 years.
(iii) Nonresidential real and residential 40 years.
rental property
(iv) Any railroad grading or tunnel bore 50 years.
or water utility property
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(3) Special rules for determining class life
(A) Tax-exempt use property subject to lease
In the case of any tax-exempt use property subject to a
lease, the recovery period used for purposes of paragraph (2)
shall in no event be less than 125 percent of the lease term.
(B) Special rule for certain property assigned to classes
For purposes of paragraph (2), in the case of property
described in any of the following subparagraphs of subsection
(e)(3), the class life shall be determined as follows:
If property is described 2 The
in subparagraph: class
life is:
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(A)(iii) 4
(B)(ii) 5
(B)(iii) 9.5
(C)(i) 10
(D)(i) 15
(D)(ii) 20
(E)(i) 24
(E)(ii) 24
(E)(iii) 20
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(C) Qualified technological equipment
In the case of any qualified technological equipment, the
recovery period used for purposes of paragraph (2) shall be 5
years.
(D) Automobiles, etc.
In the case of any automobile or light general purpose truck,
the recovery period used for purposes of paragraph (2) shall be
5 years.
(E) Certain real property
In the case of any section 1245 property which is real
property with no class life, the recovery period used for
purposes of paragraph (2) shall be 40 years.
(4) Exception for certain property used outside United States
Subparagraph (A) of paragraph (1) shall not apply to -
(A) any aircraft which is registered by the Administrator of
the Federal Aviation Agency and which is operated to and from
the United States or is operated under contract with the United
States;
(B) rolling stock which is used within and without the United
States and which is -
(i) of a rail carrier subject to part A of subtitle IV of
title 49, or
(ii) of a United States person (other than a corporation
described in clause (i)) but only if the rolling stock is not
leased to one or more foreign persons for periods aggregating
more than 12 months in any 24-month period;
(C) any vessel documented under the laws of the United States
which is operated in the foreign or domestic commerce of the
United States;
(D) any motor vehicle of a United States person (as defined
in section 7701(a)(30)) which is operated to and from the
United States;
(E) any container of a United States person which is used in
the transportation of property to and from the United States;
(F) any property (other than a vessel or an aircraft) of a
United States person which is used for the purpose of exploring
for, developing, removing, or transporting resources from the
outer Continental Shelf (within the meaning of section 2 of the
Outer Continental Shelf Lands Act, as amended and supplemented;
(43 U.S.C. 1331));
(G) any property which is owned by a domestic corporation
(other than a corporation which has an election in effect under
section 936) or by a United States citizen (other than a
citizen entitled to the benefits of section 931 or 933) and
which is used predominantly in a possession of the United
States by such a corporation or such a citizen, or by a
corporation created or organized in, or under the law of, a
possession of the United States;
(H) any communications satellite (as defined in section
103(3) of the Communications Satellite Act of 1962, 47 U.S.C.
702(3)), or any interest therein, of a United States person;
(I) any cable, or any interest therein, of a domestic
corporation engaged in furnishing telephone service to which
section 168(i)(10)(C) applies (or of a wholly owned domestic
subsidiary of such a corporation), if such cable is part of a
submarine cable system which constitutes part of a
communication link exclusively between the United States and
one or more foreign countries;
(J) any property (other than a vessel or an aircraft) of a
United States person which is used in international or
territorial waters within the northern portion of the Western
Hemisphere for the purpose of exploring for, developing,
removing, or transporting resources from ocean waters or
deposits under such waters;
(K) any property described in section 48(l)(3)(A)(ix) (as in
effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990) which is owned by a United
States person and which is used in international or territorial
waters to generate energy for use in the United States; and
(L) any satellite (not described in subparagraph (H)) or
other spacecraft (or any interest therein) held by a United
States person if such satellite or other spacecraft was
launched from within the United States.
For purposes of subparagraph (J), the term "northern portion of
the Western Hemisphere" means the area lying west of the 30th
meridian west of Greenwich, east of the international dateline,
and north of the Equator, but not including any foreign country
which is a country of South America.
(5) Tax-exempt bond financed property
For purposes of this subsection -
(A) In general
Except as otherwise provided in this paragraph, the term
"tax-exempt bond financed property" means any property to the
extent such property is financed (directly or indirectly) by an
obligation the interest on which is exempt from tax under
section 103(a).
(B) Allocation of bond proceeds
For purposes of subparagraph (A), the proceeds of any
obligation shall be treated as used to finance property
acquired in connection with the issuance of such obligation in
the order in which such property is placed in service.
(C) Qualified residential rental projects
The term "tax-exempt bond financed property" shall not
include any qualified residential rental project (within the
meaning of section 142(a)(7)).
(6) Imported property
(A) Countries maintaining trade restrictions or engaging in
discriminatory acts
If the President determines that a foreign country -
(i) maintains nontariff trade restrictions, including
variable import fees, which substantially burden United
States commerce in a manner inconsistent with provisions of
trade agreements, or
(ii) engages in discriminatory or other acts (including
tolerance of international cartels) or policies unjustifiably
restricting United States commerce,
the President may by Executive order provide for the
application of paragraph (1)(D) to any article or class of
articles manufactured or produced in such foreign country for
such period as may be provided by such Executive order. Any
period specified in the preceding sentence shall not apply to
any property ordered before (or the construction,
reconstruction, or erection of which began before) the date of
the Executive order unless the President determines an earlier
date to be in the public interest and specifies such date in
the Executive order.
(B) Imported property
For purposes of this subsection, the term "imported property"
means any property if -
(i) such property was completed outside the United States,
or
(ii) less than 50 percent of the basis of such property is
attributable to value added within the United States.
For purposes of this subparagraph, the term "United States"
includes the Commonwealth of Puerto Rico and the possessions of
the United States.
(7) Election to use alternative depreciation system
(A) In general
If the taxpayer makes an election under this paragraph with
respect to any class of property for any taxable year, the
alternative depreciation system under this subsection shall
apply to all property in such class placed in service during
such taxable year. Notwithstanding the preceding sentence, in
the case of nonresidential real property or residential rental
property, such election may be made separately with respect to
each property.
(B) Election irrevocable
An election under subparagraph (A), once made, shall be
irrevocable.
(h) Tax-exempt use property
(1) In general
For purposes of this section -
(A) Property other than nonresidential real property
Except as otherwise provided in this subsection, the term
"tax-exempt use property" means that portion of any tangible
property (other than nonresidential real property) leased to a
tax-exempt entity.
(B) Nonresidential real property
(i) In general
In the case of nonresidential real property, the term
"tax-exempt use property" means that portion of the property
leased to a tax-exempt entity in a disqualified lease.
(ii) Disqualified lease
For purposes of this subparagraph, the term "disqualified
lease" means any lease of the property to a tax-exempt
entity, but only if -
(I) part or all of the property was financed (directly or
indirectly) by an obligation the interest on which is
exempt from tax under section 103(a) and such entity (or a
related entity) participated in such financing,
(II) under such lease there is a fixed or determinable
price purchase or sale option which involves such entity
(or a related entity) or there is the equivalent of such an
option,
(III) such lease has a lease term in excess of 20 years,
or
(IV) such lease occurs after a sale (or other transfer)
of the property by, or lease of the property from, such
entity (or a related entity) and such property has been
used by such entity (or a related entity) before such sale
(or other transfer) or lease.
(iii) 35-percent threshold test
Clause (i) shall apply to any property only if the portion
of such property leased to tax-exempt entities in
disqualified leases is more than 35 percent of the property.
(iv) Treatment of improvements
For purposes of this subparagraph, improvements to a
property (other than land) shall not be treated as a separate
property.
(v) Leasebacks during 1st 3 months of use not taken into
account
Subclause (IV) of clause (ii) shall not apply to any
property which is leased within 3 months after the date such
property is first used by the tax-exempt entity (or a related
entity).
(C) Exception for short-term leases
(i) In general
Property shall not be treated as tax-exempt use property
merely by reason of a short-term lease.
(ii) Short-term lease
For purposes of clause (i), the term "short-term lease"
means any lease the term of which is -
(I) less than 3 years, and
(II) less than the greater of 1 year or 30 percent of the
property's present class life.
In the case of nonresidential real property and property with
no present class life, subclause (II) shall not apply.
(D) Exception where property used in unrelated trade or
business
The term "tax-exempt use property" shall not include any
portion of a property if such portion is predominantly used by
the tax-exempt entity (directly or through a partnership of
which such entity is a partner) in an unrelated trade or
business the income of which is subject to tax under section
511. For purposes of subparagraph (B)(iii), any portion of a
property so used shall not be treated as leased to a tax-exempt
entity in a disqualified lease.
(E) Nonresidential real property defined
For purposes of this paragraph, the term "nonresidential real
property" includes residential rental property.
(2) Tax-exempt entity
(A) In general
For purposes of this subsection, the term "tax-exempt entity"
means -
(i) the United States, any State or political subdivision
thereof, any possession of the United States, or any agency
or instrumentality of any of the foregoing,
(ii) an organization (other than a cooperative described in
section 521) which is exempt from tax imposed by this
chapter, and
(iii) any foreign person or entity.
(B) Exception for certain property subject to United States tax
and used by foreign person or entity
Clause (iii) of subparagraph (A) shall not apply with respect
to any property if more than 50 percent of the gross income for
the taxable year derived by the foreign person or entity from
the use of such property is -
(i) subject to tax under this chapter, or
(ii) included under section 951 in the gross income of a
United States shareholder for the taxable year with or within
which ends the taxable year of the controlled foreign
corporation in which such income was derived.
For purposes of the preceding sentence, any exclusion or
exemption shall not apply for purposes of determining the
amount of the gross income so derived, but shall apply for
purposes of determining the portion of such gross income
subject to tax under this chapter.
(C) Foreign person or entity
For purposes of this paragraph, the term "foreign person or
entity" means -
(i) any foreign government, any international organization,
or any agency or instrumentality of any of the foregoing, and
(ii) any person who is not a United States person.
Such term does not include any foreign partnership or other
foreign pass-thru entity.
(D) Treatment of certain taxable instrumentalities
For purposes of this subsection, a corporation shall not be
treated as an instrumentality of the United States or of any
State or political subdivision thereof if -
(i) all of the activities of such corporation are subject
to tax under this chapter, and
(ii) a majority of the board of directors of such
corporation is not selected by the United States or any State
or political subdivision thereof.
(E) Certain previously tax-exempt organizations
(i) In general
For purposes of this subsection, an organization shall be
treated as an organization described in subparagraph (A)(ii)
with respect to any property (other than property held by
such organization) if such organization was an organization
(other than a cooperative described in section 521) exempt
from tax imposed by this chapter at any time during the
5-year period ending on the date such property was first used
by such organization. The preceding sentence and subparagraph
(D)(ii) shall not apply to the Federal Home Loan Mortgage
Corporation.
(ii) Election not to have clause (i) apply
(I) In general
In the case of an organization formerly exempt from tax
under section 501(a) as an organization described in
section 501(c)(12), clause (i) shall not apply to such
organization with respect to any property if such
organization elects not to be exempt from tax under section
501(a) during the tax-exempt use period with respect to
such property.
(II) Tax-exempt use period
For purposes of subclause (I), the term "tax-exempt use
period" means the period beginning with the taxable year in
which the property described in subclause (I) is first used
by the organization and ending with the close of the 15th
taxable year following the last taxable year of the
applicable recovery period of such property.
(III) Election
Any election under subclause (I), once made, shall be
irrevocable.
(iii) Treatment of successor organizations
Any organization which is engaged in activities
substantially similar to those engaged in by a predecessor
organization shall succeed to the treatment under this
subparagraph of such predecessor organization.
(iv) First used
For purposes of this subparagraph, property shall be
treated as first used by the organization -
(I) when the property is first placed in service under a
lease to such organization, or
(II) in the case of property leased to (or held by) a
partnership (or other pass-thru entity) in which the
organization is a member, the later of when such property
is first used by such partnership or pass-thru entity or
when such organization is first a member of such
partnership or pass-thru entity.
(3) Special rules for certain high technology equipment
(A) Exemption where lease term is 5 years or less
For purposes of this section, the term "tax-exempt use
property" shall not include any qualified technological
equipment if the lease to the tax-exempt entity has a lease
term of 5 years or less.
(B) Exception for certain property
(i) In general
For purposes of subparagraph (A), the term "qualified
technological equipment" shall not include any property
leased to a tax-exempt entity if -
(I) part or all of the property was financed (directly or
indirectly) by an obligation the interest on which is
exempt from tax under section 103(a),
(II) such lease occurs after a sale (or other transfer)
of the property by, or lease of such property from, such
entity (or related entity) and such property has been used
by such entity (or a related entity) before such sale (or
other transfer) or lease, or
(III) such tax-exempt entity is the United States or any
agency or instrumentality of the United States.
(ii) Leasebacks during 1st 3 months of use not taken into
account
Subclause (II) of clause (i) shall not apply to any
property which is leased within 3 months after the date such
property is first used by the tax-exempt entity (or a related
entity).
(4) Related entities
For purposes of this subsection -
(A)(i) Each governmental unit and each agency or
instrumentality of a governmental unit is related to each other
such unit, agency, or instrumentality which directly or
indirectly derives its powers, rights, and duties in whole or
in part from the same sovereign authority.
(ii) For purposes of clause (i), the United States, each
State, and each possession of the United States shall be
treated as a separate sovereign authority.
(B) Any entity not described in subparagraph (A)(i) is
related to any other entity if the 2 entities have -
(i) significant common purposes and substantial common
membership, or
(ii) directly or indirectly substantial common direction or
control.
(C)(i) An entity is related to another entity if either
entity owns (directly or through 1 or more entities) a 50
percent or greater interest in the capital or profits of the
other entity.
(ii) For purposes of clause (i), entities treated as related
under subparagraph (A) or (B) shall be treated as 1 entity.
(D) An entity is related to another entity with respect to a
transaction if such transaction is part of an attempt by such
entities to avoid the application of this subsection.
(5) Tax-exempt use of property leased to partnerships, etc.,
determined at partner level
For purposes of this subsection -
(A) In general
In the case of any property which is leased to a partnership,
the determination of whether any portion of such property is
tax-exempt use property shall be made by treating each
tax-exempt entity partner's proportionate share (determined
under paragraph (6)(C)) of such property as being leased to
such partner.
(B) Other pass-thru entities; tiered entities
Rules similar to the rules of subparagraph (A) shall also
apply in the case of any pass-thru entity other than a
partnership and in the case of tiered partnerships and other
entities.
(C) Presumption with respect to foreign entities
Unless it is otherwise established to the satisfaction of the
Secretary, it shall be presumed that the partners of a foreign
partnership (and the beneficiaries of any other foreign
pass-thru entity) are persons who are not United States
persons.
(6) Treatment of property owned by partnerships, etc.
(A) In general
For purposes of this subsection, if -
(i) any property which (but for this subparagraph) is not
tax-exempt use property is owned by a partnership which has
both a tax-exempt entity and a person who is not a tax-exempt
entity as partners, and
(ii) any allocation to the tax-exempt entity of partnership
items is not a qualified allocation,
an amount equal to such tax-exempt entity's proportionate share
of such property shall (except as provided in paragraph (1)(D))
be treated as tax-exempt use property.
(B) Qualified allocation
For purposes of subparagraph (A), the term "qualified
allocation" means any allocation to a tax-exempt entity which -
(i) is consistent with such entity's being allocated the
same distributive share of each item of income, gain, loss,
deduction, credit, and basis and such share remains the same
during the entire period the entity is a partner in the
partnership, and
(ii) has substantial economic effect within the meaning of
section 704(b)(2).
For purposes of this subparagraph, items allocated under
section 704(c) shall not be taken into account.
(C) Determination of proportionate share
(i) In general
For purposes of subparagraph (A), a tax-exempt entity's
proportionate share of any property owned by a partnership
shall be determined on the basis of such entity's share of
partnership items of income or gain (excluding gain allocated
under section 704(c)), whichever results in the largest
proportionate share.
(ii) Determination where allocations vary
For purposes of clause (i), if a tax-exempt entity's share
of partnership items of income or gain (excluding gain
allocated under section 704(c)) may vary during the period
such entity is a partner in the partnership, such share shall
be the highest share such entity may receive.
(D) Determination of whether property used in unrelated trade
or business
For purposes of this subsection, in the case of any property
which is owned by a partnership which has both a tax-exempt
entity and a person who is not a tax-exempt entity as partners,
the determination of whether such property is used in an
unrelated trade or business of such an entity shall be made
without regard to section 514.
(E) Other pass-thru entities; tiered entities
Rules similar to the rules of subparagraphs (A), (B), (C),
and (D) shall also apply in the case of any pass-thru entity
other than a partnership and in the case of tiered partnerships
and other entities.
(F) Treatment of certain taxable entities
(i) In general
For purposes of this paragraph and paragraph (5), except as
otherwise provided in this subparagraph, any tax-exempt
controlled entity shall be treated as a tax-exempt entity.
(ii) Election
If a tax-exempt controlled entity makes an election under
this clause -
(I) such entity shall not be treated as a tax-exempt
entity for purposes of this paragraph and paragraph (5),
and
(II) any gain recognized by a tax-exempt entity on any
disposition of an interest in such entity (and any dividend
or interest received or accrued by a tax-exempt entity from
such tax-exempt controlled entity) shall be treated as
unrelated business taxable income for purposes of section
511.
Any such election shall be irrevocable and shall bind all
tax-exempt entities holding interests in such tax-exempt
controlled entity. For purposes of subclause (II), there
shall only be taken into account dividends which are properly
allocable to income of the tax-exempt controlled entity which
was not subject to tax under this chapter.
(iii) Tax-exempt controlled entity
(I) In general
The term "tax-exempt controlled entity" means any
corporation (which is not a tax-exempt entity determined
without regard to this subparagraph and paragraph (2)(E))
if 50 percent or more (in value) of the stock in such
corporation is held by 1 or more tax-exempt entities (other
than a foreign person or entity).
(II) Only 5-percent shareholders taken into account in case
of publicly traded stock
For purposes of subclause (I), in the case of a
corporation the stock of which is publicly traded on an
established securities market, stock held by a tax-exempt
entity shall not be taken into account unless such entity
holds at least 5 percent (in value) of the stock in such
corporation. For purposes of this subclause, related
entities (within the meaning of paragraph (4)) shall be
treated as 1 entity.
(III) Section 318 to apply
For purposes of this clause, a tax-exempt entity shall be
treated as holding stock which it holds through application
of section 318 (determined without regard to the 50-percent
limitation contained in subsection (a)(2)(C) thereof).
(G) Regulations
For purposes of determining whether there is a qualified
allocation under subparagraph (B), the regulations prescribed
under paragraph (8) for purposes of this paragraph -
(i) shall set forth the proper treatment for partnership
guaranteed payments, and
(ii) may provide for the exclusion or segregation of items.
(7) Lease
For purposes of this subsection, the term "lease" includes any
grant of a right to use property.
(8) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection.
(i) Definitions and special rules
For purposes of this section -
(1) Class life
Except as provided in this section, the term "class life" means
the class life (if any) which would be applicable with respect to
any property as of January 1, 1986, under subsection (m) of
section 167 (determined without regard to paragraph (4) and as if
the taxpayer had made an election under such subsection). The
Secretary, through an office established in the Treasury, shall
monitor and analyze actual experience with respect to all
depreciable assets. The reference in this paragraph to subsection
(m) of section 167 shall be treated as a reference to such
subsection as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990.
(2) Qualified technological equipment
(A) In general
The term "qualified technological equipment" means -
(i) any computer or peripheral equipment,
(ii) any high technology telephone station equipment
installed on the customer's premises, and
(iii) any high technology medical equipment.
(B) Computer or peripheral equipment defined
For purposes of this paragraph -
(i) In general
The term "computer or peripheral equipment" means -
(I) any computer, and
(II) any related peripheral equipment.
(ii) Computer
The term "computer" means a programmable electronically
activated device which -
(I) is capable of accepting information, applying
prescribed processes to the information, and supplying the
results of these processes with or without human
intervention, and
(II) consists of a central processing unit containing
extensive storage, logic, arithmetic, and control
capabilities.
(iii) Related peripheral equipment
The term "related peripheral equipment" means any auxiliary
machine (whether on-line or off-line) which is designed to be
placed under the control of the central processing unit of a
computer.
(iv) Exceptions
The term "computer or peripheral equipment" shall not
include -
(I) any equipment which is an integral part of other
property which is not a computer,
(II) typewriters, calculators, adding and accounting
machines, copiers, duplicating equipment, and similar
equipment, and
(III) equipment of a kind used primarily for amusement or
entertainment of the user.
(C) High technology medical equipment
For purposes of this paragraph, the term "high technology
medical equipment" means any electronic, electromechanical, or
computer-based high technology equipment used in the screening,
monitoring, observation, diagnosis, or treatment of patients in
a laboratory, medical, or hospital environment.
(3) Lease term
(A) In general
In determining a lease term -
(i) there shall be taken into account options to renew, and
(ii) 2 or more successive leases which are part of the same
transaction (or a series of related transactions) with
respect to the same or substantially similar property shall
be treated as 1 lease.
(B) Special rule for fair rental options on nonresidential real
property or residential rental property
For purposes of clause (i) of subparagraph (A), in the case
of nonresidential real property or residential rental property,
there shall not be taken into account any option to renew at
fair market value, determined at the time of renewal.
(4) General asset accounts
Under regulations, a taxpayer may maintain 1 or more general
asset accounts for any property to which this section applies.
Except as provided in regulations, all proceeds realized on any
disposition of property in a general asset account shall be
included in income as ordinary income.
(5) Changes in use
The Secretary shall, by regulations, provide for the method of
determining the deduction allowable under section 167(a) with
respect to any tangible property for any taxable year (and the
succeeding taxable years) during which such property changes
status under this section but continues to be held by the same
person.
(6) Treatments of additions or improvements to property
In the case of any addition to (or improvement of) any property
-
(A) any deduction under subsection (a) for such addition or
improvement shall be computed in the same manner as the
deduction for such property would be computed if such property
had been placed in service at the same time as such addition or
improvement, and
(B) the applicable recovery period for such addition or
improvement shall begin on the later of -
(i) the date on which such addition (or improvement) is
placed in service, or
(ii) the date on which the property with respect to which
such addition (or improvement) was made is placed in service.
(7) Treatment of certain transferees
(A) In general
In the case of any property transferred in a transaction
described in subparagraph (B), the transferee shall be treated
as the transferor for purposes of computing the depreciation
deduction determined under this section with respect to so much
of the basis in the hands of the transferee as does not exceed
the adjusted basis in the hands of the transferor. In any case
where this section as in effect before the amendments made by
section 201 of the Tax Reform Act of 1986 applied to the
property in the hands of the transferor, the reference in the
preceding sentence to this section shall be treated as a
reference to this section as so in effect.
(B) Transactions covered
The transactions described in this subparagraph are -
(i) any transaction described in section 332, 351, 361,
721, or 731, and
(ii) any transaction between members of the same affiliated
group during any taxable year for which a consolidated return
is made by such group.
Subparagraph (A) shall not apply in the case of a termination
of a partnership under section 708(b)(1)(B).
(C) Property reacquired by the taxpayer
Under regulations, property which is disposed of and then
reacquired by the taxpayer shall be treated for purposes of
computing the deduction allowable under subsection (a) as if
such property had not been disposed of.
(8) Treatment of leasehold improvements
(A) In general
In the case of any building erected (or improvements made) on
leased property, if such building or improvement is property to
which this section applies, the depreciation deduction shall be
determined under the provisions of this section.
(B) Treatment of lessor improvements which are abandoned at
termination of lease
An improvement -
(i) which is made by the lessor of leased property for the
lessee of such property, and
(ii) which is irrevocably disposed of or abandoned by the
lessor at the termination of the lease by such lessee,
shall be treated for purposes of determining gain or loss under
this title as disposed of by the lessor when so disposed of or
abandoned.
(C) Cross reference
For treatment of qualified long-term real property
constructed or improved in connection with cash or rent
reduction from lessor to lessee, see section 110(b).
(9) Normalization rules
(A) In general
In order to use a normalization method of accounting with
respect to any public utility property for purposes of
subsection (f)(2) -
(i) the taxpayer must, in computing its tax expense for
purposes of establishing its cost of service for ratemaking
purposes and reflecting operating results in its regulated
books of account, use a method of depreciation with respect
to such property that is the same as, and a depreciation
period for such property that is no shorter than, the method
and period used to compute its depreciation expense for such
purposes; and
(ii) if the amount allowable as a deduction under this
section with respect to such property differs from the amount
that would be allowable as a deduction under section 167
using the method (including the period, first and last year
convention, and salvage value) used to compute regulated tax
expense under clause (i), the taxpayer must make adjustments
to a reserve to reflect the deferral of taxes resulting from
such difference.
(B) Use of inconsistent estimates and projections, etc.
(i) In general
One way in which the requirements of subparagraph (A) are
not met is if the taxpayer, for ratemaking purposes, uses a
procedure or adjustment which is inconsistent with the
requirements of subparagraph (A).
(ii) Use of inconsistent estimates and projections
The procedures and adjustments which are to be treated as
inconsistent for purposes of clause (i) shall include any
procedure or adjustment for ratemaking purposes which uses an
estimate or projection of the taxpayer's tax expense,
depreciation expense, or reserve for deferred taxes under
subparagraph (A)(ii) unless such estimate or projection is
also used, for ratemaking purposes, with respect to the other
2 such items and with respect to the rate base.
(iii) Regulatory authority
The Secretary may by regulations prescribe procedures and
adjustments (in addition to those specified in clause (ii))
which are to be treated as inconsistent for purposes of
clause (i).
(C) Public utility property which does not meet normalization
rules
In the case of any public utility property to which this
section does not apply by reason of subsection (f)(2), the
allowance for depreciation under section 167(a) shall be an
amount computed using the method and period referred to in
subparagraph (A)(i).
(10) Public utility property
The term "public utility property" means property used
predominantly in the trade or business of the furnishing or sale
of -
(A) electrical energy, water, or sewage disposal services,
(B) gas or steam through a local distribution system,
(C) telephone services, or other communication services if
furnished or sold by the Communications Satellite Corporation
for purposes authorized by the Communications Satellite Act of
1962 (47 U.S.C. 701), or
(D) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case may be,
have been established or approved by a State or political
subdivision thereof, by any agency or instrumentality of the
United States, or by a public service or public utility
commission or other similar body of any State or political
subdivision thereof.
(11) Research and experimentation
The term "research and experimentation" has the same meaning as
the term research and experimental has under section 174.
(12) Section 1245 and 1250 property
The terms "section 1245 property" and "section 1250 property"
have the meanings given such terms by sections 1245(a)(3) and
1250(c), respectively.
(13) Single purpose agricultural or horticultural structure
(A) In general
The term "single purpose agricultural or horticultural
structure" means -
(i) a single purpose livestock structure, and
(ii) a single purpose horticultural structure.
(B) Definitions
For purposes of this paragraph -
(i) Single purpose livestock structure
The term "single purpose livestock structure" means any
enclosure or structure specifically designed, constructed,
and used -
(I) for housing, raising, and feeding a particular type
of livestock and their produce, and
(II) for housing the equipment (including any
replacements) necessary for the housing, raising, and
feeding referred to in subclause (I).
(ii) Single purpose horticultural structure
The term "single purpose horticultural structure" means -
(I) a greenhouse specifically designed, constructed, and
used for the commercial production of plants, and
(II) a structure specifically designed, constructed, and
used for the commercial production of mushrooms.
(iii) Structures which include work space
An enclosure or structure which provides work space shall
be treated as a single purpose agricultural or horticultural
structure only if such work space is solely for -
(I) the stocking, caring for, or collecting of livestock
or plants (as the case may be) or their produce,
(II) the maintenance of the enclosure or structure, and
(III) the maintenance or replacement of the equipment or
stock enclosed or housed therein.
(iv) Livestock
The term "livestock" includes poultry.
(14) Qualified rent-to-own property
(A) In general
The term "qualified rent-to-own property" means property held
by a rent-to-own dealer for purposes of being subject to a
rent-to-own contract.
(B) Rent-to-own dealer
The term "rent-to-own dealer" means a person that, in the
ordinary course of business, regularly enters into rent-to-own
contracts with customers for the use of consumer property, if a
substantial portion of those contracts terminate and the
property is returned to such person before the receipt of all
payments required to transfer ownership of the property from
such person to the customer.
(C) Consumer property
The term "consumer property" means tangible personal property
of a type generally used within the home for personal use.
(D) Rent-to-own contract
The term "rent-to-own contract" means any lease for the use
of consumer property between a rent-to-own dealer and a
customer who is an individual which -
(i) is titled "Rent-to-Own Agreement" or "Lease Agreement
with Ownership Option," or uses other similar language,
(ii) provides for level (or decreasing where no payment is
less than 40 percent of the largest payment), regular
periodic payments (for a payment period which is a week or
month),
(iii) provides that legal title to such property remains
with the rent-to-own dealer until the customer makes all the
payments described in clause (ii) or early purchase payments
required under the contract to acquire legal title to the
item of property,
(iv) provides a beginning date and a maximum period of time
for which the contract may be in effect that does not exceed
156 weeks or 36 months from such beginning date (including
renewals or options to extend),
(v) provides for payments within the 156-week or 36-month
period that, in the aggregate, generally exceed the normal
retail price of the consumer property plus interest,
(vi) provides for payments under the contract that, in the
aggregate, do not exceed $10,000 per item of consumer
property,
(vii) provides that the customer does not have any legal
obligation to make all the payments referred to in clause
(ii) set forth under the contract, and that at the end of
each payment period the customer may either continue to use
the consumer property by making the payment for the next
payment period or return such property to the rent-to-own
dealer in good working order, in which case the customer does
not incur any further obligations under the contract and is
not entitled to a return of any payments previously made
under the contract, and
(viii) provides that the customer has no right to sell,
sublease, mortgage, pawn, pledge, encumber, or otherwise
dispose of the consumer property until all the payments
stated in the contract have been made.
(j) Property on Indian reservations
(1) In general
For purposes of subsection (a), the applicable recovery period
for qualified Indian reservation property shall be determined in
accordance with the table contained in paragraph (2) in lieu of
the table contained in subsection (c).
(2) Applicable recovery period for Indian reservation property
For purposes of paragraph (1) -
In the case of: 2The
applicable
recovery
period is:
--------------------------------------------------------------------
3-year property 2 years
5-year property 3 years
7-year property 4 years
10-year property 6 years
15-year property 9 years
20-year property 12 years
Nonresidential real property 22 years.
--------------------------------------------------------------------
(3) Deduction allowed in computing minimum tax
For purposes of determining alternative minimum taxable income
under section 55, the deduction under subsection (a) for property
to which paragraph (1) applies shall be determined under this
section without regard to any adjustment under section 56.
(4) Qualified Indian reservation property defined
For purposes of this subsection -
(A) In general
The term "qualified Indian reservation property" means
property which is property described in the table in paragraph
(2) and which is -
(i) used by the taxpayer predominantly in the active
conduct of a trade or business within an Indian reservation,
(ii) not used or located outside the Indian reservation on
a regular basis,
(iii) not acquired (directly or indirectly) by the taxpayer
from a person who is related to the taxpayer (within the
meaning of section 465(b)(3)(C)), and
(iv) not property (or any portion thereof) placed in
service for purposes of conducting or housing class I, II, or
III gaming (as defined in section 4 of the Indian Regulatory
Act (25 U.S.C. 2703)).
(B) Exception for alternative depreciation property
The term "qualified Indian reservation property" does not
include any property to which the alternative depreciation
system under subsection (g) applies, determined -
(i) without regard to subsection (g)(7) (relating to
election to use alternative depreciation system), and
(ii) after the application of section 280F(b) (relating to
listed property with limited business use).
(C) Special rule for reservation infrastructure investment
(i) In general
Subparagraph (A)(ii) shall not apply to qualified
infrastructure property located outside of the Indian
reservation if the purpose of such property is to connect
with qualified infrastructure property located within the
Indian reservation.
(ii) Qualified infrastructure property
For purposes of this subparagraph, the term "qualified
infrastructure property" means qualified Indian reservation
property (determined without regard to subparagraph (A)(ii))
which -
(I) benefits the tribal infrastructure,
(II) is available to the general public, and
(III) is placed in service in connection with the
taxpayer's active conduct of a trade or business within an
Indian reservation.
Such term includes, but is not limited to, roads, power
lines, water systems, railroad spurs, and communications
facilities.
(5) Real estate rentals
For purposes of this subsection, the rental to others of real
property located within an Indian reservation shall be treated as
the active conduct of a trade or business within an Indian
reservation.
(6) Indian reservation defined
For purposes of this subsection, the term "Indian reservation"
means a reservation, as defined in -
(A) section 3(d) of the Indian Financing Act of 1974 (25
U.S.C. 1452(d)), or
(B) section 4(10) of the Indian Child Welfare Act of 1978 (25
U.S.C. 1903(10)).
For purposes of the preceding sentence, such section 3(d) shall
be applied by treating the term "former Indian reservations in
Oklahoma" as including only lands which are within the
jurisdictional area of an Oklahoma Indian tribe (as determined by
the Secretary of the Interior) and are recognized by such
Secretary as eligible for trust land status under 25 CFR Part 151
(as in effect on the date of the enactment of this sentence).
(7) Coordination with nonrevenue laws
Any reference in this subsection to a provision not contained
in this title shall be treated for purposes of this subsection as
a reference to such provision as in effect on the date of the
enactment of this paragraph.
(8) Termination
This subsection shall not apply to property placed in service
after December 31, 2004.
(k) Special allowance for certain property acquired after September
10, 2001, and before January 1, 2005
(1) Additional allowance
In the case of any qualified property -
(A) the depreciation deduction provided by section 167(a) for
the taxable year in which such property is placed in service
shall include an allowance equal to 30 percent of the adjusted
basis of the qualified property, and
(B) the adjusted basis of the qualified property shall be
reduced by the amount of such deduction before computing the
amount otherwise allowable as a depreciation deduction under
this chapter for such taxable year and any subsequent taxable
year.
(2) Qualified property
For purposes of this subsection -
(A) In general
The term "qualified property" means property -
(i)(I) to which this section applies which has a recovery
period of 20 years or less,
(II) which is computer software (as defined in section
167(f)(1)(B)) for which a deduction is allowable under
section 167(a) without regard to this subsection,
(III) which is water utility property, or
(IV) which is qualified leasehold improvement property,
(ii) the original use of which commences with the taxpayer
after September 10, 2001,
(iii) which is -
(I) acquired by the taxpayer after September 10, 2001,
and before January 1, 2005, but only if no written binding
contract for the acquisition was in effect before September
11, 2001, or
(II) acquired by the taxpayer pursuant to a written
binding contract which was entered into after September 10,
2001, and before January 1, 2005, and
(iv) which is placed in service by the taxpayer before
January 1, 2005, or, in the case of property described in
subparagraph (B), before January 1, 2006.
(B) Certain property having longer production periods treated
as qualified property
(i) In general
The term "qualified property" includes property -
(I) which meets the requirements of clauses (i), (ii),
and (iii) of subparagraph (A),
(II) which has a recovery period of at least 10 years or
is transportation property, and
(III) which is subject to section 263A by reason of
clause (ii) or (iii) of subsection (f)(1)(B) thereof.
(ii) Only pre-January 1, 2005, basis eligible for additional
allowance
In the case of property which is qualified property solely
by reason of clause (i), paragraph (1) shall apply only to
the extent of the adjusted basis thereof attributable to
manufacture, construction, or production before January 1,
2005.
(iii) Transportation property
For purposes of this subparagraph, the term "transportation
property" means tangible personal property used in the trade
or business of transporting persons or property.
(C) Exceptions
(i) Alternative depreciation property
The term "qualified property" shall not include any
property to which the alternative depreciation system under
subsection (g) applies, determined -
(I) without regard to paragraph (7) of subsection (g)
(relating to election to have system apply), and
(II) after application of section 280F(b) (relating to
listed property with limited business use).
(ii) Qualified new york liberty zone leasehold improvement
property
The term "qualified property" shall not include any
qualified New York Liberty Zone leasehold improvement
property (as defined in section 1400L(c)(2)).
(iii) Election out
If a taxpayer makes an election under this clause with
respect to any class of property for any taxable year, this
subsection shall not apply to all property in such class
placed in service during such taxable year. The preceding
sentence shall be applied separately with respect to property
treated as qualified property by paragraph (4) and other
qualified property.
(D) Special rules
(i) Self-constructed property
In the case of a taxpayer manufacturing, constructing, or
producing property for the taxpayer's own use, the
requirements of clause (iii) of subparagraph (A) shall be
treated as met if the taxpayer begins manufacturing,
constructing, or producing the property after September 10,
2001, and before January 1, 2005.
(ii) Sale-leasebacks
For purposes of subparagraph (A)(ii), if property -
(I) is originally placed in service after September 10,
2001, by a person, and
(II) sold and leased back by such person within 3 months
after the date such property was originally placed in
service,
such property shall be treated as originally placed in
service not earlier than the date on which such property is
used under the leaseback referred to in subclause (II).
(E) Coordination with section 280F
For purposes of section 280F -
(i) Automobiles
In the case of a passenger automobile (as defined in
section 280F(d)(5)) which is qualified property, the
Secretary shall increase the limitation under section
280F(a)(1)(A)(i) by $4,600.
(ii) Listed property
The deduction allowable under paragraph (1) shall be taken
into account in computing any recapture amount under section
280F(b)(2).
(F) Deduction allowed in computing miniumum (!2) tax
For purposes of determining alternative minimum taxable
income under section 55, the deduction under subsection (a) for
qualified property shall be determined under this section
without regard to any adjustment under section 56.
(3) Qualified leasehold improvement property
For purposes of this subsection -
(A) In general
The term "qualified leasehold improvement property" means any
improvement to an interior portion of a building which is
nonresidential real property if -
(i) such improvement is made under or pursuant to a lease
(as defined in subsection (h)(7)) -
(I) by the lessee (or any sublessee) of such portion, or
(II) by the lessor of such portion,
(ii) such portion is to be occupied exclusively by the
lessee (or any sublessee) of such portion, and
(iii) such improvement is placed in service more than 3
years after the date the building was first placed in
service.
(B) Certain improvements not included
Such term shall not include any improvement for which the
expenditure is attributable to -
(i) the enlargement of the building,
(ii) any elevator or escalator,
(iii) any structural component benefiting a common area,
and
(iv) the internal structural framework of the building.
(C) Definitions and special rules
For purposes of this paragraph -
(i) Commitment to lease treated as lease
A commitment to enter into a lease shall be treated as a
lease, and the parties to such commitment shall be treated as
lessor and lessee, respectively.
(ii) Related persons
A lease between related persons shall not be considered a
lease. For purposes of the preceding sentence, the term
"related persons" means -
(I) members of an affiliated group (as defined in section
1504), and
(II) persons having a relationship described in
subsection (b) of section 267; except that, for purposes of
this clause, the phrase "80 percent or more" shall be
substituted for the phrase "more than 50 percent" each
place it appears in such subsection.
(4) 50-percent bonus depreciation for certain property
(A) In general
In the case of 50-percent bonus depreciation property -
(i) paragraph (1)(A) shall be applied by substituting "50
percent" for "30 percent", and
(ii) except as provided in paragraph (2)(C), such property
shall be treated as qualified property for purposes of this
subsection.
(B) 50-percent bonus depreciation property
For purposes of this subsection, the term "50-percent bonus
depreciation property" means property described in paragraph
(2)(A)(i) -
(i) the original use of which commences with the taxpayer
after May 5, 2003,
(ii) which is acquired by the taxpayer after May 5, 2003,
and before January 1, 2005, but only if no written binding
contract for the acquisition was in effect before May 6,
2003, and
(iii) which is placed in service by the taxpayer before
January 1, 2005, or, in the case of property described in
paragraph (2)(B) (as modified by subparagraph (C) of this
paragraph), before January 1, 2006.
(C) Special rules
Rules similar to the rules of subparagraphs (B) and (D) of
paragraph (2) shall apply for purposes of this paragraph;
except that references to September 10, 2001, shall be treated
as references to May 5, 2003.
(D) Automobiles
Paragraph (2)(E) shall be applied by substituting "$7,650"
for "$4,600" in the case of 50-percent bonus depreciation
property.
(E) Election of 30-percent bonus
If a taxpayer makes an election under this subparagraph with
respect to any class of property for any taxable year,
subparagraph (A)(i) shall not apply to all property in such
class placed in service during such taxable year.
-SOURCE-
(Added Pub. L. 97-34, title II, Sec. 201(a), Aug. 13, 1981, 95
Stat. 203; amended Pub. L. 97-248, title II, Secs. 206, 208(a)(1),
(2)(A), (b), 209(a), (b), 216(a), 224(c)(1), (2), Sept. 3, 1982, 96
Stat. 431, 432, 435, 442, 445, 470, 489; Pub. L. 97-354, Sec.
5(a)(19), (20), Oct. 19, 1982, 96 Stat. 1693, 1694; Pub. L. 97-424,
title V, Sec. 541(a)(1), Jan. 6, 1983, 96 Stat. 2192; Pub. L.
97-448, title I, Sec. 102(a)(1)-(5), (8)-(10)(A), (f)(4), Jan. 12,
1983, 96 Stat. 2367, 2368, 2371; Pub. L. 98-369, div. A, title I,
Secs. 12(a)(3), 31(a), (d), 32(a), 111(a)-(e)(4), (9), 113(a)(2),
(b)(1), (2)(A), title IV, Sec. 474(r)(7), title VI, Secs.
612(e)(4), (5), 628(b), July 18, 1984, 98 Stat. 503, 509, 518, 530,
631-633, 636, 637, 840, 912, 931; Pub. L. 99-121, title I, Sec.
103(a), (b)(1)(A), (2)-(4), Oct. 11, 1985, 99 Stat. 509; Pub. L.
99-514, title II, Sec. 201(a), title XVIII, Secs.
1802(a)(1)-(2)(E)(i), (G), (3), (4)(A), (B), (7), (b)(1),
1809(a)(1)-(2)(C)(i), (4)(A), (B), (b)(1), (2), Oct. 22, 1986, 100
Stat. 2121, 2786-2789, 2791, 2818-2821; Pub. L. 100-647, title I,
Secs. 1002(a)(5)-(8), (11), (16)(B), (21), (23)(A), (i)(2)(A)-(G),
1018(b)(2), title VI, Secs. 6027(a), (b), 6028(a), 6029(a)-(c),
6253, Nov. 10, 1988, 102 Stat. 3353-3356, 3370, 3371, 3577, 3693,
3694, 3753; Pub. L. 101-239, title VII, Sec. 7816(e), (f), (w),
Dec. 19, 1989, 103 Stat. 2421, 2423; Pub. L. 101-508, title XI,
Secs. 11801(c)(8)(B), 11812(b)(2), 11813(b)(9), Nov. 5, 1990, 104
Stat. 1388-524, 1388-534, 1388-552; Pub. L. 103-66, title XIII,
Secs. 13151(a), 13321(a), Aug. 10, 1993, 107 Stat. 448, 558; Pub.
L. 104-88, title III, Sec. 304(a), Dec. 29, 1995, 109 Stat. 943;
Pub. L. 104-188, title I, Secs. 1120(a), (b), 1121(a),
1613(b)(1)-(4), 1702(h)(1), 1704(t)(54), Aug. 20, 1996, 110 Stat.
1765, 1766, 1850, 1873, 1890; Pub. L. 105-34, title X, Sec.
1086(b), title XII, Sec. 1213(c), title XVI, Sec. 1604(c)(1), Aug.
5, 1997, 111 Stat. 957, 1001, 1097; Pub. L. 105-206, title VI, Sec.
6006(b), July 22, 1998, 112 Stat. 806; Pub. L. 107-147, title I,
Sec. 101(a), title VI, Sec. 613(b), Mar. 9, 2002, 116 Stat. 22, 61;
Pub. L. 108-27, title II, Sec. 201(a)-(c)(1), May 28, 2003, 117
Stat. 756, 757.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Revenue Reconciliation Act of
1990, referred to in subsecs. (e)(3)(B)(vi)(II), (III), (g)(4)(K),
and (i)(1), is the date of enactment of Pub. L. 101-508, which was
approved Nov. 5, 1990.
Section 168(e) as in effect before the amendments made by the Tax
Reform Act of 1986, referred to in subsec. (f)(5)(A)(i), is subsec.
(e) of this section prior to the general amendment of this section
by Pub. L. 99-514.
The date of the enactment of this paragraph, referred to in
subsec. (f)(5)(B)(ii)(I), probably means the date of enactment of
Pub. L. 99-514, which was approved Oct. 22, 1986.
The Tax Reform Act of 1986, referred to in subsecs.
(f)(5)(B)(iii), (C) and (i)(7)(A), is Pub. L. 99-514, section
201(a) of which amended this section generally.
The Communications Satellite Act of 1962, referred to in subsec.
(i)(10)(C), is Pub. L. 87-624, Aug. 31, 1962, 76 Stat. 419, as
amended, which is classified generally to chapter 6 (Sec. 701 et
seq.) of Title 47, Telegraphs, Telephones, and Radiotelegraphs. For
complete classification of this Act to the Code, see Short Title
note set out under section 701 of Title 47 and Tables.
The date of the enactment of this sentence, referred to in
subsec. (j)(6), is the date of enactment of Pub. L. 105-34, which
was approved Aug. 5, 1997.
The date of the enactment of this paragraph, referred to in
subsec. (j)(7), is the date of enactment of Pub. L. 103-66, which
was approved Aug. 10, 1993.
-MISC1-
PRIOR PROVISIONS
A prior section 168, acts Aug. 16, 1954, ch. 746, 68A Stat. 52;
Aug. 26, 1957, Pub. L. 85-165, Sec. 4, 71 Stat. 414; Sept. 2, 1958,
Pub. L. 85-866, title I, Sec. 9(a), (b), 72 Stat. 1608, 1609,
related to deductions with respect to amortization of emergency
facilities, prior to repeal by Pub. L. 94-455, title XIX, Sec.
1951(b)(4)(A), Oct. 4, 1976, 90 Stat. 1837.
Section 1951(b)(4)(B) of Pub. L. 94-455 provided that:
"Notwithstanding the repeal made by subparagraph (A) [repealing
former section 168], if a certificate was issued before January 1,
1960, with respect to an emergency facility which is or has been
placed in service before the date of the enactment of this Act
[Oct. 4, 1976], the provisions of [former] section 168 shall not,
with respect to such facility, be considered repealed. The benefit
of deductions by reason of the preceding sentence shall be allowed
to estates and trusts in the same manner as in the case of an
individual. The allowable deduction shall be apportioned between
the income beneficiaries and the fiduciary in accordance with
regulations prescribed under section 642(f)."
AMENDMENTS
2003 - Subsec. (k). Pub. L. 108-27, Sec. 201(c)(1), substituted
"January 1, 2005" for "September 11, 2004" in heading.
Subsec. (k)(2)(A)(iii). Pub. L. 108-27, Sec. 201(b)(2),
substituted "January 1, 2005" for "September 11, 2004" in subcls.
(I) and (II).
Subsec. (k)(2)(B)(ii). Pub. L. 108-27, Sec. 201(b)(1),
substituted "pre-January 1, 2005" for "pre-September 11, 2004" in
heading and "January 1, 2005" for "September 11, 2004" in text.
Subsec. (k)(2)(C)(iii). Pub. L. 108-27, Sec. 201(b)(3), inserted
at end "The preceding sentence shall be applied separately with
respect to property treated as qualified property by paragraph (4)
and other qualified property."
Subsec. (k)(2)(D)(i). Pub. L. 108-27, Sec. 201(b)(1)(A),
substituted "January 1, 2005" for "September 11, 2004".
Subsec. (k)(4). Pub. L. 108-27, Sec. 201(a), added par. (4).
2002 - Subsec. (j)(8). Pub. L. 107-147, Sec. 613(b), substituted
"December 31, 2004" for "December 31, 2003".
Subsec. (k). Pub. L. 107-147, Sec. 101(a), added subsec. (k).
1998 - Subsec. (c). Pub. L. 105-206, Sec. 6006(b)(2), reenacted
subsec. heading without change and substituted "For purposes of
this section, the applicable recovery period shall be determined in
accordance with the following table:" for "For purposes of this
section -
"(1) In general. - Except as provided in paragraph (2), the
applicable recovery period shall be determined in accordance with
the following table:".
Subsec. (c)(2). Pub. L. 105-206, Sec. 6006(b)(1), struck out
heading and text of par. (2). Text read as follows: "In the case of
property to which an election under subsection (b)(2)(C) applies,
the applicable recovery period shall be determined under the table
contained in subsection (g)(2)(C)."
1997 - Subsec. (e)(3)(A)(iii). Pub. L. 105-34, Sec. 1086(b)(1),
added cl. (iii).
Subsec. (g)(3)(B). Pub. L. 105-34, Sec. 1086(b)(2), inserted
table item relating to subpar. (A)(iii).
Subsec. (i)(8)(C). Pub. L. 105-34, Sec. 1213(c), added subpar.
(C).
Subsec. (i)(14). Pub. L. 105-34, Sec. 1086(b)(3), added par.
(14).
Subsec. (j)(6). Pub. L. 105-34, Sec. 1604(c)(1), inserted
concluding provisions "For purposes of the preceding sentence, such
section 3(d) shall be applied by treating the term 'former Indian
reservations in Oklahoma' as including only lands which are within
the jurisdictional area of an Oklahoma Indian tribe (as determined
by the Secretary of the Interior) and are recognized by such
Secretary as eligible for trust land status under 25 CFR Part 151
(as in effect on the date of the enactment of this sentence)."
1996 - Subsec. (b)(3)(F). Pub. L. 104-188, Sec. 1613(b)(1), added
subpar. (F).
Subsec. (c)(1). Pub. L. 104-188, Sec. 1613(b)(2), inserted table
item relating to water utility property.
Subsec. (e)(3)(B). Pub. L. 104-188, Sec. 1702(h)(1)(B), inserted
closing provisions.
Subsec. (e)(3)(B)(vi)(I). Pub. L. 104-188, Sec. 1704(t)(54),
provided that section 11813(b)(9)(A)(i) of Pub. L. 101-508 shall be
applied as if a comma appeared after "(3)(A)(ix)" in the material
proposed to be stricken. See 1990 Amendment note below.
Subsec. (e)(3)(B)(vi)(III). Pub. L. 104-188, Sec. 1702(h)(1)(A),
added subcl. (III).
Subsec. (e)(3)(E)(iii). Pub. L. 104-188, Sec. 1120(a), added cl.
(iii).
Subsec. (e)(3)(F). Pub. L. 104-188, Sec. 1613(b)(3)(B)(i), struck
out subpar. (F) which read as follows: "20-year property. - The
term '20-year property' includes any municipal sewers."
Subsec. (e)(5). Pub. L. 104-188, Sec. 1613(b)(3)(A), added par.
(5).
Subsec. (g)(2)(C)(iv). Pub. L. 104-188, Sec. 1613(b)(4), inserted
"or water utility property" after "tunnel bore".
Subsec. (g)(3)(B). Pub. L. 104-188, Sec. 1120(b), inserted table
item relating to subpar. (E)(iii).
Pub. L. 104-188, Sec. 1613(b)(3)(B)(ii), struck out table item
relating to subpar. (F) for which the class life was 50.
Subsec. (g)(4)(K). Pub. L. 104-188, Sec. 1702(h)(1)(C),
substituted "section 48(l)(3)(A)(ix) (as in effect on the day
before the date of the enactment of the Revenue Reconciliation Act
of 1990)" for "section 48(a)(3)(A)(iii)".
Subsec. (i)(8). Pub. L. 104-188, Sec. 1121(a), reenacted heading
without change and amended text generally. Prior to amendment, text
read as follows: "In the case of any building erected (or
improvements made) on leased property, if such building or
improvement is property to which this section applies, the
depreciation deduction shall be determined under the provisions of
this section."
1995 - Subsec. (g)(4)(B)(i). Pub. L. 104-88 substituted "rail
carrier subject to part A of subtitle IV" for "domestic railroad
corporation providing transportation subject to subchapter I of
chapter 105".
1993 - Subsec. (c)(1). Pub. L. 103-66, Sec. 13151(a), substituted
"39 years" for "31.5 years" in table item relating to
nonresidential real property.
Subsec. (j). Pub. L. 103-66, Sec. 13321(a), added subsec. (j).
1990 - Subsec. (e)(2)(A). Pub. L. 101-508, Sec. 11812(b)(2)(A),
amended subpar. (A) generally. Prior to amendment, subpar. (A) read
as follows: "The term 'residential rental property' has the meaning
given such term by section 167(j)(2)(B)."
Subsec. (e)(3)(B)(vi)(I). Pub. L. 101-508, Sec.
11813(b)(9)(A)(i), which directed the substitution of "subparagraph
(A) of section 48(a)(3) (or would be so described if 'solar and
wind' were substituted for 'solar' in clause (i) thereof)" for
"paragraph (3)(A)(viii), (3)(A)(ix) or (4) of section 48(l)" was
executed by making the substitution for "paragraph (3)(A)(viii),
(3)(A)(ix), or (4) of section 48(l)". See 1996 Amendment note
above.
Subsec. (e)(3)(B)(vi)(II). Pub. L. 101-508, Sec.
11813(b)(9)(A)(ii), inserted "(as in effect on the day before the
date of the enactment of the Revenue Reconciliation Act of 1990)"
after "48(l)".
Subsec. (e)(3)(D)(i). Pub. L. 101-508, Sec. 11813(b)(9)(B)(i),
substituted "subsection (i)(13)" for "section 48(p)".
Subsec. (f)(2). Pub. L. 101-508, Sec. 11812(b)(2)(C), substituted
"subsection (i)(10)" for "section 167(l)(3)(A)."
Subsec. (g)(4). Pub. L. 101-508, Sec. 11813(b)(9)(C), substituted
heading for one which read: "Property used predominantly outside
the United States" and amended text generally. Prior to amendment,
text read as follows: "For purposes of this subsection, rules
similar to the rules under section 48(a)(2) (including the
exceptions contained in subparagraph (B) thereof) shall apply in
determining whether property is used predominantly outside the
United States. In addition to the exceptions contained in such
subparagraph (B), there shall be excepted any satellite or other
spacecraft (or any interest therein) held by a United States person
if such satellite or spacecraft was launched from within the United
States."
Subsec. (i)(1). Pub. L. 101-508, Sec. 11812(b)(2)(D), inserted at
end "The reference in this paragraph to subsection (m) of section
167 shall be treated as a reference to such subsection as in effect
on the day before the date of the enactment of the Revenue
Reconciliation Act of 1990."
Subsec. (i)(7)(B)(i). Pub. L. 101-508, Sec. 11801(c)(8)(B),
struck out, "371(a), 374(a)," after "361,".
Subsec. (i)(9)(A)(ii). Pub. L. 101-508, Sec. 11812(b)(2)(E),
struck out "(determined without regard to section 167(l))" after
"section 167".
Subsec. (i)(10). Pub. L. 101-508, Sec. 11812(b)(2)(B), amended
par. (10) generally. Prior to amendment, par. (10) read as follows:
"The term 'public utility property' has the meaning given such term
by section 167(l)(3)(A)."
Subsec. (i)(13). Pub. L. 101-508, Sec. 11813(b)(9)(B)(ii), added
par. (13).
1989 - Subsec. (b)(3)(D), (E). Pub. L. 101-239, Sec. 7816(f),
redesignated subpar. (D), relating to property described in subsec.
(e)(3)(D)(ii), as (E).
Subsec. (b)(5). Pub. L. 101-239, Sec. 7816(e)(1), substituted
"paragraph (2)(C)" for "paragraph (2)(B)".
Subsec. (c)(2). Pub. L. 101-239, Sec. 7816(e)(2), substituted
"subsection (b)(2)(C)" for "subsection (b)(2)(B)".
Subsec. (i)(1). Pub. L. 101-239, Sec. 7816(w), made clarifying
amendment to directory language of Pub. L. 100-647, Sec. 6253, see
1988 Amendment note below.
1988 - Subsec. (b)(2). Pub. L. 100-647, Sec. 1002(a)(11)(A),
substituted "150 percent declining balance method in certain cases"
for "15-year and 20-year property" in heading and amended text
generally. Prior to amendment, text read as follows: "In the case
of 15-year and 20-year property, paragraph (1) shall be applied by
substituting '150 percent' for '200 percent'."
Subsec. (b)(2)(B), (C). Pub. L. 100-647, Sec. 6028(a), added
subpar. (B) and redesignated former subpar. (B) as (C).
Subsec. (b)(3)(C). Pub. L. 100-647, Sec. 1002(i)(2)(B)(i), added
subpar. (C). Former subpar. (C) redesignated (D).
Subsec. (b)(3)(D). Pub. L. 100-647, Sec. 6029(b), added subpar.
(D) relating to property described in subsec. (e)(3)(D)(ii).
Pub. L. 100-647, Sec. 1002(i)(2)(B)(i), redesignated subpar. (C),
relating to property with respect to which the taxpayer elects
under par. (5), as (D).
Subsec. (b)(5). Pub. L. 100-647, Sec. 1002(i)(2)(B)(ii),
substituted "paragraph (3)(D)" for "paragraph (3)(C)".
Pub. L. 100-647, Sec. 1002(a)(11)(B), substituted "paragraph
(2)(B) or (3)(C)" for "paragraph (3)(C)".
Subsec. (c). Pub. L. 100-647, Sec. 1002(a)(11)(C), amended
subsec. (c) generally, designating existing provisions as par. (1)
and adding par. (2).
Subsec. (c)(1). Pub. L. 100-647, Sec. 1002(i)(2)(A), inserted
table item relating to any railroad grading or tunnel bore.
Subsec. (d)(2)(C). Pub. L. 100-647, Sec. 1002(i)(2)(D), added
subpar. (C).
Subsec. (d)(3)(A)(i). Pub. L. 100-647, Sec. 1002(a)(5), struck
out "and which are" after "this section applies".
Subsec. (d)(3)(B). Pub. L. 100-647, Sec. 1002(a)(23)(A), struck
out "real" after "Certain" in heading and amended text generally.
Prior to amendment, text read as follows: "For purposes of
subparagraph (A), nonresidential real property and residential
rental property shall not be taken into account."
Subsec. (d)(3)(B)(i). Pub. L. 100-647, Sec. 1002(i)(2)(E),
substituted "residential rental property, and railroad grading or
tunnel bore" for "and residential rental property".
Subsec. (e)(3)(B)(v). Pub. L. 100-647, Sec. 1002(a)(21),
substituted "any section 1245 property" for "any property".
Subsec. (e)(3)(C). Pub. L. 100-647, Sec. 6027(b)(1)(C),
redesignated cl. (iii) as (ii), and struck out former cl. (ii)
which read as follows: "any single-purpose agricultural or
horticultural structure (within the meaning of section 48(p)),
and".
Subsec. (e)(3)(D). Pub. L. 100-647, Sec. 6029(a), amended subpar.
(D) generally. Prior to amendment, subpar. (D) read as follows:
"The term '10-year property' includes any single purpose
agricultural or horticultural structure (within the meaning of
section 48(p))."
Pub. L. 100-647, Sec. 6027(a), added subpar. (D). Former subpar.
(D) redesignated (E).
Subsec. (e)(3)(E), (F). Pub. L. 100-647, Sec. 6027(a),
redesignated former subpars. (D) and (E) as (E) and (F),
respectively.
Subsec. (e)(4). Pub. L. 100-647, Sec. 1002(i)(2)(C), added par.
(4).
Subsec. (f)(4). Pub. L. 100-647, Sec. 1002(a)(16)(B), amended
par. (4) generally. Prior to amendment, par. (4) read as follows:
"Any sound recording described in section 48(r)(5)."
Subsec. (f)(5)(B)(ii). Pub. L. 100-647, Sec. 1002(a)(6)(A)(i),
substituted "1st taxable year" for "1st full taxable year".
Subsec. (f)(5)(B)(iii). Pub. L. 100-647, Sec. 1002(a)(6)(A)(ii),
added cl. (iii).
Subsec. (f)(5)(C). Pub. L. 100-647, Sec. 100-647, Sec.
1002(a)(6)(B), added subpar. (C).
Subsec. (g)(2)(C). Pub. L. 100-647, Sec. 1002(i)(2)(F), added
item (iv) in table.
Subsec. (g)(3)(B). Pub. L. 100-647, Sec. 6029(c), substituted
"(D)(i)" for "(D)" and added item for "(D)(ii)" in table.
Pub. L. 100-647, Sec. 6027(b)(2), substituted "(D)" for
"(C)(ii)", "(E)(i)" for "(D)(i)", "(E)(ii)" for "(D)(ii)", and
"(F)" for "(E)" in table.
Subsec. (h)(2)(B). Pub. L. 100-647, Sec. 1002(a)(8), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows:
"(i) Income from property subject to United States tax. - Clause
(iii) of subparagraph (A) shall not apply with respect to any
property if more than 50 percent of the gross income for the
taxable year derived by the foreign person or entity from the use
of such property is -
"(I) subject to tax under this chapter, or
"(II) included under section 951 in the gross income of a
United States shareholder for the taxable year with or within
which ends the taxable year of the controlled foreign corporation
in which such income was derived.
For purposes of the preceding sentence, any exclusion or exemption
shall not apply for purposes of determining the amount of the gross
income so derived, but shall apply for purposes of determining the
portion of such gross income subject to tax under this chapter.
"(ii) Movies and sound recordings. - Clause (iii) of subparagraph
(A) shall not apply with respect to any qualified film (as defined
in section 48(k)(1)(B)) or any sound recording (as defined in
section 48(r)(5))."
Subsec. (i)(1). Pub. L. 100-647, Sec. 6253, as amended by Pub. L.
101-239, Sec. 7816(w), amended par. (1) generally, substituting a
single par. relating to class life for former subpar. (A) relating
to class life generally, (B) relating to Secretarial authority, (C)
relating to effect of modification, (D) prohibiting modification of
assigned property before January 1, 1992, and (E) relating to
assigned property and item.
Subsec. (i)(1)(E)(iii). Pub. L. 100-647, Sec. 1002(i)(2)(G),
added cl. (iii), which provided: "Special rule for railroad grading
or tunnel bores. - In the case of any property which is a railroad
grading or tunnel bore -
"(I) such property shall be treated as an assigned property,
"(II) the recovery period applicable to such property shall be
treated as an assigned item, and
"(III) clause (ii) of subparagraph (D) shall not apply."
Subsec. (i)(7)(A). Pub. L. 100-647, Sec. 1002(a)(7)(A), inserted
at end "In any case where this section as in effect before the
amendments made by section 201 of the Tax Reform Act of 1986
applied to the property in the hands of the transferor, the
reference in the preceding sentence to this section shall be
treated as a reference to this section as so in effect."
Subsec. (i)(7)(B). Pub. L. 100-647, Sec. 1002(a)(7)(B), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "The transactions described in this subparagraph are any
transaction described in section 332, 351, 361, 371(a), 374(a),
721, or 731. Subparagraph (A) shall not apply in the case of a
termination of a partnership under section 708(b)(1)(B)."
Subsec. (i)(7)(D). Pub. L. 100-647, Sec. 1002(a)(7)(C), struck
out subpar. (D) which read as follows: "This paragraph shall not
apply to any transaction to which subsection (f)(5) applies
(relating to churning transactions)."
Subsec. (j)(9)(E). Pub. L. 100-647, Sec. 1018(b)(2), amended
subpar. (E), as amended by section 1802(a)(2) of Pub. L. 99-514 and
as in effect before the general amendment by section 201(a) of Pub.
L. 99-514, by substituting "this paragraph and paragraph (8)" for
"this paragraph" in cls. (i) and (ii)(I) and by striking out cl.
(iii) and inserting a new cl. (iii) which read as follows:
"Tax-exempt controlled entity. -
"(I) In general. - The term 'tax-exempt controlled entity' means
any corporation (which is not a tax-exempt entity determined
without regard to this subparagraph and paragraph (4)(E)) if 50
percent or more (in value) of the stock in such corporation is held
by 1 or more tax-exempt entities (other than a foreign person or
entity).
"(II) Only 5-percent shareholders taken into account in case of
publicly traded stock. - For purposes of subclause (I), in the case
of a corporation the stock of which is publicly traded on an
established securities market, stock held by a tax-exempt entity
shall not be taken into account unless such entity holds at least 5
percent (in value) of the stock in such corporation. For purposes
of this subclause, related entities (within the meaning of
paragraph (7)) shall be treated as 1 entity.
"(III) Section 318 to apply. - For purposes of this clause, a
tax-exempt entity shall be treated as holding stock which it holds
through application of section 318 (determined without regard to
the 50-percent limitation contained in subsection (a)(2)(C)
thereof)."
1986 - Pub. L. 99-514, Sec. 201(a), amended section generally,
applicable, with exceptions enumerated in sections 203, 204, and
251(d) of Pub. L. 99-514 [set out as notes below and under section
46 of this title], to property placed in service after Dec. 31,
1986, modifying existing accelerated cost recovery system by
substituting new subsecs. (a) to (i) for former subsecs. (a) to
(k). See following paragraphs of 1986 Amendment note for amendments
to former text by sections 1802 and 1809 of Pub. L. 99-514.
Subsec. (b)(2)(A). Pub. L. 99-514, Sec. 1809(a)(2)(A)(i)(I),
struck out closing provisions relating to determination, in the
case of 19-year real property, of applicable percentage in taxable
year in which the property is placed in service.
Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 1809(a)(2)(A)(i)(II),
substituted "Mid-month convention for 19-year real property" for
"Special rule for year of disposition" in heading and amended text
generally, substituting "In the case of 19-year real property, the
amount of the deduction determined under any provision of this
section (or for purposes of section 57(a)(12)(B) or 312(k)) for any
taxable year shall be determined on the basis of the number of
months (using a mid-month convention) in which the property is in
service." for prior provisions.
Subsec. (b)(3)(A). Pub. L. 99-514, Sec. 1809(a)(1)(A), which
directed that the table be amended by striking "and low-income
housing" in last item, was executed by striking "and low-income
housing" after "19-year real property" in next-to-the-last item, to
reflect the probable intent of Congress, because that phrase did
not appear in last item.
Pub. L. 99-514, Sec. 1809(a)(1)(B), inserted at the end item for
low-income housing with recovery periods of 15, 35, or 45 years.
Subsec. (b)(4)(B). Pub. L. 99-514, Sec. 1809(a)(2)(B),
substituted "Monthly convention" for "Special rule for year of
disposition" in heading and amended text generally, substituting
"In the case of low-income housing, the amount of the deduction
determined under any provision of this section (or for purposes of
section 57(a)(12)(B) or 312(k)) for any taxable year shall be
determined on the basis of the number of months (treating all
property placed in service or disposed of during any month as
placed in service or disposed of on the first day of such month) in
which the property is in service." for prior provisions.
Subsec. (f)(2)(B). Pub. L. 99-514, Sec. 1809(a)(2)(A)(ii),
redesignated existing provisions as entire subpar. (B), struck out
"(i) In general", redesignated subcls. (I) and (II) as cls. (i) and
(ii), and in cl. (ii) struck out "(taking into account the next to
the last sentence of subsection (b)(2)(A))" after "assign
percentages" and struck out heading, "(ii) Special rule for
disposition" and text, "In the case of a disposition of 19-year
real property or low-income housing described in clause (i),
subsection (b)(2)(B) shall apply."
Subsec. (f)(10)(A). Pub. L. 99-514, Sec. 1809(b)(1), amended
subpar. (A) generally, substituting "In the case of recovery
property transferred in a transaction described in subparagraph
(B), for purposes of computing the deduction allowable under
subsection (a) with respect to so much of the basis in the hands of
the transferee as does not exceed the adjusted basis in the hands
of the transferor -
"(i) if the transaction is described in subparagraph (B)(i),
the transferee shall be treated in the same manner as the
transferor, or
"(ii) if the transaction is described in clause (ii) or (iii)
of subparagraph (B) and the transferor made an election with
respect to such property under subsection (b)(3) or (f)(2)(C),
the transferee shall be treated as having made the same election
(or its equivalent)."
for prior provisions.
Subsec. (f)(10)(B). Pub. L. 99-514, Sec. 1809(b)(2), inserted at
end "Clause (i) shall not apply in the case of the termination of a
partnership under section 708(b)(1)(B)."
Subsec. (f)(12)(B)(ii). Pub. L. 99-514, Sec. 1809(a)(4)(A),
amended cl. (ii) generally, substituting "In the case of 19-year
real property, the amount of the deduction allowed shall be
determined by using the straight-line method (without regard to
salvage value) and a recovery period of 19 years." for prior
provisions.
Subsec. (f)(12)(C). Pub. L. 99-514, Sec. 1809(a)(4)(B),
substituted "Exception for low- and moderate-income housing" for
"Exception for projects for residential rental property" in heading
and amended text generally, substituting "Subparagraph (A) shall
not apply to -
"(i) any low-income housing, and
"(ii) any other recovery property which is placed in service in
connection with projects for residential rental property financed
by the proceeds of obligations described in section
103(b)(4)(A)."
for prior provisions.
Subsec. (f)(14), (15). Pub. L. 99-514, Sec. 1802(b)(1),
redesignated the par. (13) relating to motor vehicle operating
leases as (14) and redesignated former par. (14) as (15).
Subsec. (j)(2)(B)(ii). Pub. L. 99-514, Sec. 1809(a)(2)(C)(i),
substituted "Cross reference" for "19-year real property" in
heading and amended text generally, substituting "For other
applicable conventions, see paragraphs (2)(B) and (4)(B) of
subsection (b)." for prior provisions.
Subsec. (j)(3)(D). Pub. L. 99-514, Sec. 1802(a)(1), inserted at
end "For purposes of subparagraph (B)(iii), any portion of a
property so used shall not be treated as leased to a tax-exempt
entity in a disqualified lease."
Subsec. (j)(4)(E)(i). Pub. L. 99-514, Sec. 1802(a)(2)(A), (G),
substituted "any property (other than property held by such
organization)" for "any property of which such organization is the
lessee", "first used by" for "first leased to", and "preceding
sentence and subparagraph (D)(ii)" for "preceding sentence".
Subsec. (j)(4)(E)(ii). Pub. L. 99-514, Sec. 1802(a)(2)(B), (C),
struck out "of which such organization is the lessee" after
"respect to any property" in subcl. (I) and substituted "is first
used by the organization" for "is placed in service under the
lease" in subcl. (II).
Subsec. (j)(4)(E)(iv). Pub. L. 99-514, Sec. 1802(a)(2)(D), added
cl. (iv), first used, which read as follows: "For purposes of this
subparagraph, property shall be treated as first used by the
organization -
"(I) when the property is first placed in service under a lease
to such organization, or
"(II) in the case of property leased to (or held by) a
partnership (or other pass-thru entity) in which the organization
is a member, the later of when such property is first used by
such partnership or pass-thru entity or when such organization is
first a member of such partnership or pass-thru entity."
Subsec. (j)(5)(C)(iv). Pub. L. 99-514, Sec. 1802(a)(3), struck
out cl. (iv), relating to exclusion of property not subject to
rapid obsolescence.
Subsec. (j)(8), (9)(A). Pub. L. 99-514, Sec. 1802(a)(4)(A),
(B)(i), struck out "and paragraphs (4) and (5) of section 48(a)"
after "For purposes of this subsection" in introductory provisions.
Subsec. (j)(9)(B)(i). Pub. L. 99-514, Sec. 1802(a)(4)(B)(ii),
inserted a comma between "loss" and "deduction".
Subsec. (j)(9)(D). Pub. L. 99-514, Sec. 1802(a)(7)(A), added
subpar. (D), determination of whether property used in unrelated
trade or business, which read as follows: "For purposes of this
subsection, in the case of any property which is owned by a
partnership which has both a tax-exempt entity and a person who is
not a tax-exempt entity as partners, the determination of whether
such property is used in an unrelated trade or business of such an
entity shall be made without regard to section 514." Former subpar.
(D) was redesignated (E).
Subsec. (j)(9)(E). Pub. L. 99-514, Sec. 1802(a)(7), redesignated
former subpar. (D) as (E) and substituted "(C), and (D)" for "and
(C)". Former subpar. (E), was redesignated (F).
Pub. L. 99-514, Sec. 1802(a)(2)(E)(i), added subpar. (E),
treatment of certain taxable entities, consisting of cl. (i), in
general, which read: "For purposes of this paragraph, except as
otherwise provided in this subparagraph, any tax-exempt controlled
entity shall be treated as a tax-exempt entity.", cl. (ii),
election, which read: "If a tax-exempt controlled entity makes an
election under this clause -
"(I) such entity shall not be treated as a tax-exempt entity
for purposes of this paragraph, and
"(II) any gain recognized by a tax-exempt entity on any
disposition of an interest in such entity (and any dividend or
interest received or accrued by a tax-exempt entity from such
tax-exempt controlled entity) shall be treated as unrelated
business taxable income for purposes of section 511.
Any such election shall be irrevocable and shall bind all
tax-exempt entities holding interests in such tax-exempt controlled
entity. For purposes of subclause (II), there shall only be taken
into account dividends which are properly allocable to income of
the tax-exempt controlled entity which was not subject to tax under
this chapter.", and cl. (iii), tax-exempt controlled entity, which
read "The term 'tax-exempt controlled entity' means any corporation
(which is not a tax-exempt entity determined without regard to this
subparagraph and paragraph (4)(E)) if 50 percent or more (by value)
of the stock in such corporation is held (directly or through the
application of section 318 determined without regard to the
50-percent limitation contained in subsection (a)(2)(C) thereof) by
1 or more tax-exempt entities." Former subpar. (E) was redesignated
(F).
Subsec. (j)(9)(F). Pub. L. 99-514, Sec. 1802(a)(7)(A),
redesignated former subpar. (E) as (F). Former subpar. (F)
redesignated (G).
Pub. L. 99-514, Sec. 1802(a)(2)(E)(i), redesignated former
subpar. (E) as (F).
Subsec. (j)(9)(G). Pub. L. 99-514, Sec. 1802(a)(7)(A),
redesignated former subpar. (F) as (G).
1985 - Subsec. (b)(2). Pub. L. 99-121, Sec. 103(b)(1)(A),
substituted "19-year real property" for "18-year real property" in
heading and wherever appearing in text.
Subsec. (b)(2)(A)(i). Pub. L. 99-121, Sec. 103(a), substituted
"19-year recovery period" for "18-year recovery period".
Subsec.(b)(3)(A). Pub. L. 99-121, Sec. 103(b)(1)(A), substituted
"19-year real property" for "18-year real property" in table.
Pub. L. 99-121, Sec. 103(b)(2), substituted "19, 35, or 45 years"
for "18, 35, or 45" in table.
Subsec. (b)(3)(B)(ii), (iii). Pub. L. 99-121, Sec. 103(b)(1)(A),
substituted "19-year real property" for "18-year real property"
wherever appearing.
Subsec. (c)(2)(D). Pub. L. 99-121, Sec. 103(b)(1)(A), substituted
"19-year real property" for "18-year real property" in heading and
in text.
Subsec. (d)(2)(B). Pub. L. 99-121, Sec. 103(b)(1)(A), substituted
"19-year real property" for "18-year real property".
Subsec. (f)(1)(B)(ii). Pub. L. 99-121, Sec. 103(b)(3)(B),
substituted "March 15, 1984, and before May, 9, 1985, the" for
"March 15, 1984, the".
Subsec. (f)(1)(B)(iii), (iv). Pub. L. 99-121, Sec. 103(b)(3)(A),
(C), added cl. (iii), redesignated former cl. (iii) as (iv), and in
cl. (iv) substituted ", (ii), or (iii)" for "or (ii)".
Subsec. (f)(2), (5). Pub. L. 99-121, Sec. 103(b)(1)(A),
substituted "19-year real property" for "18-year real property"
wherever appearing.
Subsec. (f)(12)(B)(ii). Pub. L. 99-121, Sec. 103(b)(4),
substituted "19-year real property" for "15-year real property" in
heading and wherever appearing in text, and substituted "19 years"
for "15 years".
Subsec. (j). Pub. L. 99-121, Sec. 103(b)(1)(A), substituted
"19-year real property" for "18-year real property" wherever
appearing in headings, table, and text.
1984 - Subsec. (b)(2). Pub. L. 98-369, Sec. 111(a)(1),
substituted "18-year real property" for "15-year real property" in
heading and wherever appearing in text.
Pub. L. 98-369, Sec. 111(d), inserted in provision following cl.
(ii) "(using a mid-month convention)".
Subsec. (b)(2)(A). Pub. L. 98-369, Sec. 111(b)(3)(A), struck out
in text following cl. (ii) provision that for purposes of this
subparagraph "low-income housing" means property described in
section 1250(a)(1)(B)(i), (ii), (iii), or (iv).
Subsec. (b)(2)(A)(i). Pub. L. 98-369, Sec. 111(a)(2), substituted
"18-year recovery period" for "15-year recovery period".
Subsec. (b)(2)(A)(ii). Pub. L. 98-369, Sec. 111(a)(3), struck out
"(200 percent declining balance method in the case of low-income
housing)" after "declining balance method".
Subsec. (b)(2)(B). Pub. L. 98-369, Sec. 111(d), inserted "(using
a mid-month convention)".
Subsec. (b)(3)(A). Pub. L. 98-369, Sec. 111(e)(9)(A), substituted
"under paragraph (1), (2), or (4)" for "under paragraphs (1) and
(2)".
Pub. L. 98-369, Sec. 111(e)(9)(B), substituted in table "18-year
real property and low-income housing" for "15-year real property"
and "18" for "15" and struck out "years" after "45".
Subsec. (b)(3)(B)(ii). Pub. L. 98-369, Sec. 111(e)(2),
substituted "18-year real property or low-income housing," for
"15-year real property".
Subsec. (b)(3)(B)(iii). Pub. L. 98-369, Sec. 111(e)(1),
substituted "18-year real property or low-income housing" for
"15-year real property".
Subsec. (b)(4). Pub. L. 98-369, Sec. 111(b)(1), added par. (4).
Subsec. (c)(2)(D). Pub. L. 98-369, Sec. 111(b)(3)(B), amended
subpar. (D) generally, substituting "18-year real property" for
"15-year real property" in heading and text and including within
such definition section 1250 property which is not low-income
housing.
Subsec. (c)(2)(F), (G). Pub. L. 98-369, Sec. 111(b)(2), added
subpar. (F) and redesignated former subpar. (F) as (G).
Subsec. (d)(2)(B). Pub. L. 98-369, Sec. 111(e)(3), substituted
"18-year real property or low-income housing" for "15-year real
property".
Subsec. (e). Pub. L. 98-369, Sec. 113(b)(2)(A), substituted
"title" for "section" in provision preceding par. (1).
Subsec. (e)(5). Pub. L. 98-369, Sec. 113(b)(1), added par. (5).
Subsec. (f)(1)(B). Pub. L. 98-369, Sec. 111(c), designated
existing provision as cl. (i), inserted heading, inserted ", and
before March 16, 1984," and struck out provision that for the
purposes of the preceding sentence, the method of computing the
deduction allowable with respect to such first component be
determined as if it were a separate building, which provision is
covered in cl. (iii), and added cls. (ii) and (iii).
Subsec. (f)(2)(B). Pub. L. 98-369, Sec. 111(e)(1), substituted
"18-year real property or low-income housing" for "15-year real
property" wherever appearing.
Subsec. (f)(2)(C)(i). Pub. L. 98-369, Sec. 111(e)(4), substituted
in table "18-year real property or low-income housing" for "15-year
real property".
Subsec. (f)(2)(C)(ii)(II), (E), (5). Pub. L. 98-369, Sec.
111(e)(1), substituted "18-year real property or low-income
housing" for "15-year real property".
Subsec. (f)(8)(B)(ii)(I). Pub. L. 98-369, Sec. 12(a)(3)(A), in
par. (8) as amended by section 209(a) of Pub. L. 97-248,
substituted "1990" for "1986".
Subsec. (f)(12)(C). Pub. L. 98-369, Sec. 628(b)(1), designated
provisions preceding cl. (i) and cl. (i) as subpar. (C), and struck
out cls. (ii), (iii), and (iv) which dealt with the application of
subpar. (A) to a sewage or solid waste disposal facility, an air or
water pollution control facility or a facility which has received
an urban development action grant under section 119 of the Housing
and Community Development Act of 1974.
Subsec. (f)(12)(D), (E). Pub. L. 98-369, Sec. 628(b)(2),
redesignated subpar. (E) as (D) and struck out former subpar. (D)
which read as follows: "For purposes of this paragraph, the term
'existing facility' means a plant or property in operation before
July 1, 1982."
Subsec. (f)(13). Pub. L. 98-369, Sec. 32(a), added second par.
(13) relating to motor vehicle operating leases.
Subsec. (f)(14). Pub. L. 98-369, Sec. 113(a)(2), added par. (14).
Subsec. (g)(2). Pub. L. 98-369, Sec. 31(d), inserted "If any
property (other than section 1250 class property) does not have a
present class life within the meaning of the preceding sentence,
the Secretary may prescribe a present class life for such property
which reasonably reflects the anticipated useful life of such
property to the industry or other group."
Subsec. (i)(1)(D)(i). Pub. L. 98-369, Sec. 474(r)(7)(D), in
subsec. (i) as amended by section 209(b) of Pub. L. 97-248,
substituted "subparts A, B, and D of part IV" for "subpart A of
part IV".
Pub. L. 98-369, Sec. 474(r)(7)(A), in subsec. (i) as added by
section 208(a)(1) of Pub. L. 97-248, substituted "subparts A, B,
and D of part IV" for "subpart A of part IV".
Subsec. (i)(1)(D)(iii). Pub. L. 98-369, Sec. 612(e)(5), in
subsec. (i) as amended by section 209(b) of Pub. L. 97-248,
substituted "section 26(b)(2)" for "section 25(b)(2)".
Pub. L. 98-369, Sec. 612(e)(4), in subsec. (i) as added by
section 208(a)(1) of Pub. L. 97-248, substituted "section 26(b)(2)"
for "section 25(b)(2)".
Pub. L. 98-369, Sec. 474(r)(7)(E), in subsec. (i) as amended by
section 209(b) of Pub. L. 97-248, substituted "section 25(b)(2)"
for "the last sentence of section 53(a)".
Pub. L. 98-369, Sec. 474(r)(7)(B), in subsec. (i) as added by
section 208(a)(1) of Pub. L. 97-248, substituted "section 25(b)(2)"
for "the last sentence of section 53(a)".
Subsec. (i)(4)(A). Pub. L. 98-369, Sec. 12(a)(3)(B), in subsec.
(i) as amended by section 209(b) of Pub. L. 97-248, substituted
"1989" for "1985" in cls. (i) and (ii).
Pub. L. 98-369, Sec. 474(r)(7)(C), in subsec. (i) as added by
section 208(a)(1) of Pub. L. 97-248, substituted "section 38" for
"subpart A of part IV of subchapter A of this chapter".
Subsecs. (j), (k). Pub. L. 98-369, Sec. 31(a), added subsec. (j)
and redesignated former subsec. (j) as (k).
1983 - Subsec. (b)(2)(A). Pub. L. 97-448, Sec. 102(a)(5),
substituted "In the case of 15-year real property" for "For
purposes of this subparagraph" in third sentence.
Subsec. (c)(2)(F). Pub. L. 97-448, Sec. 102(a)(8), added subpar.
(F).
Subsec. (d)(2)(B). Pub. L. 97-448, Sec. 102(a)(2), substituted
"paragraph (7) or (10) of subsection (f)" for "subsection (f)(7)".
Subsec. (e)(3)(C), (D). Pub. L. 97-424, Sec. 541(a)(1), added
subpar. (C). Former subpar. (C) redesignated (D).
Subsec. (e)(4)(D). Pub. L. 97-448, Sec. 102(a)(9)(A), inserted
provision that, in the case of the acquisition of property by any
partnership which results from the termination of another
partnership under section 708(b)(1)(B), the determination of
whether the acquiring partnership is related to the other
partnership shall be made immediately before the event resulting in
such termination occurs.
Subsec. (e)(4)(H), (I). Pub. L. 97-448, Sec. 102(a)(9)(B), added
subpars. (H) and (I).
Subsec. (f)(4)(B). Pub. L. 97-448, Sec. 102(f)(4), substituted
"Election made on return" for "Made on return" as the subpar. (B)
heading, designated existing provisions as cl. (i), added heading
for cl. (i), substituted "Except as provided in clause (ii), any
election" for "Any election", in cl. (i) as so designated, and
added cl. (ii).
Subsec. (f)(5). Pub. L. 97-448, Sec. 102(a)(1), inserted
provision that, in the case of 15-year real property, the first
sentence of this paragraph shall not apply to the taxable year in
which the property is placed in service or disposed of.
Subsec. (f)(8)(D). Pub. L. 97-448, Sec. 102(a)(10)(A), amended
subpar. (D), as in effect before the amendments made by the Tax
Equity and Fiscal Responsibility Act of 1982 [Pub. L. 97-248], by
inserting at end thereof the following new sentence: "Under
regulations prescribed by the Secretary, public utility property
shall not be treated as qualified leased property unless the
requirements of rules similar to the rules of subsection (e)(3) of
this section and section 46(f) are met with respect to such
property." See 1982 Amendment note below for subsec. (f)(8)(D).
Subsec. (f)(13). Pub. L. 97-448, Sec. 102(a)(3), added par. (13).
Subsec. (g)(8)(A). Pub. L. 97-448, Sec. 102(a)(4)(B), substituted
"Qualified coal utilization property" for "In general" in heading.
Subsec. (g)(8)(B). Pub. L. 97-448, Sec. 102(a)(4)(C), substituted
"Coal utilization property" for "In general" in heading.
Subsec. (h)(4). Pub. L. 97-448, Sec. 102(a)(4)(A), substituted
"coal utilization property which would otherwise be 15-year public
utility property" for "coal utilization property which is not
3-year property, 5-year property, or 10-year property (determined
without regard to this paragraph)".
1982 - Subsec. (b)(1). Pub. L. 97-248, Sec. 206(a), substituted
"table" for "tables" in introductory provisions, struck out
designation "(A)" preceding the table and struck out subpar. (A)
heading which had limited the application of the table to property
placed in service after Dec. 31, 1980, and before Jan. 1, 1985, and
struck out subpars. (B) and (C), which had provided tables,
respectively, for property placed in service in 1985 and for
property placed in service after Dec. 31, 1985.
Subsec. (e)(4). Pub. L. 97-248, Secs. 206(b), 224(c)(1),
substituted "1981" for "1986" in heading, in subpar. (E) inserted
provision that a similar rule shall apply in the case of a deemed
liquidation under section 338, and struck out former subpar. (H)
which had provided for special rules for property placed in service
before certain percentages took effect.
Subsec. (f)(8). Pub. L. 97-248, Sec. 209(a), amended par. (8)
generally, substituting provisions relating to special rules for
finance leases for provisions relating to special rule for leases.
Subsec. (f)(8)(A). Pub. L. 97-248, Sec. 208(a)(2)(A), inserted
"except as provided in subsection (i)," before "for purposes of
this subtitle".
Subsec. (f)(8)(B)(i)(I). Pub. L. 97-354, Sec. 5(a)(19),
substituted "an S corporation" for "an electing small business
corporation (within the meaning of section 1371(b))" in subsec.
(f)(8)(B)(i)(I) as in effect before the enactment of the Tax Equity
and Fiscal Responsibility Act of 1982 [Pub. L. 97-248].
Pub. L. 97-248, Sec. 208(b)(1), inserted "which is not a related
person with respect to the lessee".
Subsec. (f)(8)(B)(iii). Pub. L. 97-248, Sec. 208(b)(2), in subcl.
(I) substituted "120 percent of the present class life of the
property, or" for "90 percent of the useful life of such property
for purposes of section 167, or", and in subcl. II substituted "the
period equal to the recovery period determined with respect to such
property under subsection (i)(2)" for "150 percent of the present
class life of such property".
Subsec. (f)(8)(C)(i). Pub. L. 97-354, Sec. 5(a)(20), in par. (8)
as amended by section 209(a) of Pub. L. 97-248, substituted "an S
corporation" for "an electing small business corporation within the
meaning of section 1371(b)".
Subsec. (f)(8)(D). Pub. L. 97-248, Sec. 208(b)(3), amended
subpar. (D) generally. Prior to amendment, subpar. (D) read as
follows:
"(D) Qualified leased property defined. - For purposes of
subparagraph (A), the term 'qualified leased property' means
recovery property (other than a qualified rehabilitated building
within the meaning of section 48(g)(1)) which is -
"(i) new section 38 property (as defined in section 48(b)) of
the lessor which is leased within 3 months after such property
was placed in service and which, if acquired by the lessee, would
have been new section 38 property of the lessee,
"(ii) property -
"(I) which was new section 38 property of the lessee,
"(II) which was leased within 3 months after such property
was placed in service by the lessee, and
"(III) with respect to which the adjusted basis of the lessor
does not exceed the adjusted basis of the lessee at the time of
the lease, or
"(iii) property which is a qualified mass commuting vehicle (as
defined in section 103(b)(9)) and which is financed in whole or
in part by obligations the interest on which is excludable from
income under section 103(a).
For purposes of this title (other than this subparagraph), any
property described in clause (i) or (ii) to which subparagraph (A)
applies shall be deemed originally placed in service not earlier
than the date such property is used under the lease. In the case of
property placed in service after December 31, 1980, and before the
date of the enactment of this subparagraph, this subparagraph shall
be applied by submitting 'the date of the enactment of this
subparagraph' for 'such property was placed in service'." See 1983
Amendment note above for subsec. (f)(8)(D).
Subsec. (f)(8)(H) to (K). Pub. L. 97-248, Sec. 208(b)(4), added
subpars. (H) to (J) and redesignated former subpar. (H) as (K).
Subsec. (f)(10)(B)(i). Pub. L. 97-248, Sec. 224(c)(2), struck out
"(other than a transaction with respect to which the basis is
determined under section 334(b)(2))" after "section 332".
Subsec. (f)(12). Pub. L. 97-248, Sec. 216(a), added par. (12).
Subsec. (i). Pub. L. 97-248, Sec. 209(b), amended subsec. (i)
generally, substituting provisions concerning limitations relating
to leases of finance lease property for provisions concerning
limitations relating to lease of qualified leased property.
Pub. L. 97-248, Sec. 208(a)(1), added subsec. (i). Former subsec.
(i) redesignated (j).
Subsec. (j). Pub. L. 97-248, Sec. 208(a)(1), redesignated former
subsec. (i) as (j).
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-27, title II, Sec. 201(d), May 28, 2003, 117 Stat.
757, provided that: "The amendments made by this section [amending
this section and section 1400L of this title] shall apply to
taxable years ending after May 5, 2003."
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-147, title I, Sec. 101(b), Mar. 9, 2002, 116 Stat.
25, provided that: "The amendments made by this section [amending
this section] shall apply to property placed in service after
September 10, 2001, in taxable years ending after such date."
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 1086(b) of Pub. L. 105-34 applicable to
property placed in service after Aug. 5, 1997, see section 1086(c)
of Pub. L. 105-34, set out as a note under section 167 of this
title.
Amendment by section 1213(c) of Pub. L. 105-34 applicable to
leases entered into after Aug. 5, 1997, see section 1213(e) of Pub.
L. 105-34, set out as an Effective Date note under section 110 of
this title.
Section 1604(c)(2) of Pub. L. 105-34 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
as if included in the amendments made by section 13321 of the
Omnibus Budget Reconciliation Act of 1993 [Pub. L. 103-66], except
that such amendment shall not apply -
"(A) with respect to property (with an applicable recovery
period under section 168(j) of the Internal Revenue Code of 1986
of 6 years or less) held by the taxpayer if the taxpayer claimed
the benefits of section 168(j) of such Code with respect to such
property on a return filed before March 18, 1997, but only if
such return is the first return of tax filed for the taxable year
in which such property was placed in service, or
"(B) with respect to wages for which the taxpayer claimed the
benefits of section 45A of such Code for a taxable year on a
return filed before March 18, 1997, but only if such return was
the first return of tax filed for such taxable year."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1120(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to
property which is placed in service on or after the date of the
enactment of this Act [Aug. 20, 1996] and to which section 168 of
the Internal Revenue Code of 1986 applies after the amendment made
by section 201 of the Tax Reform Act of 1986 [Pub. L. 99-514]. A
taxpayer may elect (in such form and manner as the Secretary of the
Treasury may prescribe) to have such amendments apply with respect
to any property placed in service before such date and to which
such section so applies."
Section 1121(b) of Pub. L. 104-188 provided that: "Subparagraph
(B) of section 168(i)(8) of the Internal Revenue Code of 1986, as
added by the amendment made by subsection (a), shall apply to
improvements disposed of or abandoned after June 12, 1996."
Section 1613(b)(5) of Pub. L. 104-188 provided that: "The
amendments made by this subsection [amending this section] shall
apply to property placed in service after June 12, 1996, other than
property placed in service pursuant to a binding contract in effect
before June 10, 1996, and at all times thereafter before the
property is placed in service."
Amendment by section 1702(h)(1) of Pub. L. 104-188 effective,
except as otherwise expressly provided, as if included in the
provision of the Revenue Reconciliation Act of 1990, Pub. L.
101-508, title XI, to which such amendment relates, see section
1702(i) of Pub. L. 104-188, set out as a note under section 38 of
this title.
EFFECTIVE DATE OF 1995 AMENDMENT
Amendment by Pub. L. 104-88 effective Jan. 1, 1996, see section 2
of Pub. L. 104-88, set out as an Effective Date note under section
701 of Title 49, Transportation.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13151(b) of Pub. L. 103-66 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by subsection (a) [amending this section] shall
apply to property placed in service by the taxpayer on or after May
13, 1993.
"(2) Exception. - The amendments made by this section [amending
this section] shall not apply to property placed in service by the
taxpayer before January 1, 1994, if -
"(A) the taxpayer or a qualified person entered into a binding
written contract to purchase or construct such property before
May 13, 1993, or
"(B) the construction of such property was commenced by or for
the taxpayer or a qualified person before May 13, 1993.
For purposes of this paragraph, the term 'qualified person' means
any person who transfers his rights in such a contract or such
property to the taxpayer but only if the property is not placed in
service by such person before such rights are transferred to the
taxpayer."
Section 13321(b) of Pub. L. 103-66 provided that: "The amendment
made by this section [amending this section] shall apply to
property placed in service after December 31, 1993."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11812(b)(2) of Pub. L. 101-508 applicable to
property placed in service after Nov. 5, 1990, but not applicable
to any property to which section 168 of this title does not apply
by reason of subsec. (f)(5) of section 168, and not applicable to
rehabilitation expenditures described in section 252(f)(5) of Pub.
L. 99-514, see section 11812(c) of Pub. L. 101-508, set out as a
note under section 42 of this title.
Amendment by section 11813(b)(9) of Pub. L. 101-508 applicable to
property placed in service after Dec. 31, 1990, but not applicable
to any transition property (as defined in section 49(e) of this
title), any property with respect to which qualified progress
expenditures were previously taken into account under section 46(d)
of this title, and any property described in section 46(b)(2)(C) of
this title, as such sections were in effect on Nov. 4, 1990, see
section 11813(c) of Pub. L. 101-508, set out as a note under
section 29 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1002(a)(23)(B) of Pub. L. 100-647 provided that: "Clause
(ii) of section 168(d)(3)(B) of the 1986 Code (as added by
subparagraph (A)) shall apply to taxable years beginning after
March 31, 1988, unless the taxpayer elects, at such time and in
such manner as the Secretary of the Treasury or his delegate may
prescribe, to have such clause apply to taxable years beginning on
or before such date."
Amendment by sections 1002(a)(5)-(8), (11), (16)(B), (21),
(i)(2)(A)-(G), and 1018(b)(2) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6027(c) of Pub. L. 100-647 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to property placed in service after December 31, 1988.
"(2) Exception. - The amendments made by this section shall not
apply to any property if such property is placed in service before
January 1, 1990, and if such property -
"(A) is constructed, reconstructed, or acquired by the taxpayer
pursuant to a written contract which was binding on July 14,
1988, or
"(B) is constructed or reconstructed by the taxpayer and such
construction or reconstruction began by July 14, 1988."
Section 6028(b) of Pub. L. 100-647 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to property placed in service after December 31, 1988.
"(2) Exception. - The amendments made by this section shall not
apply to any property if such property is placed in service before
July 1, 1989, and if such property -
"(A) is constructed, reconstructed, or acquired by the taxpayer
pursuant to a written contract which was binding on July 14,
1988, or
"(B) is constructed or reconstructed by the taxpayer and such
construction or reconstruction began by July 14, 1988."
Section 6029(d) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section] shall apply to
property placed in service after December 31, 1988."
EFFECTIVE DATE OF 1986 AMENDMENT; TRANSITIONAL RULES
Sections 203 and 204 of Pub. L. 99-514, as amended by Pub. L.
99-509, title VIII, Sec. 8071, Oct. 21, 1986, 100 Stat. 1964; Pub.
L. 100-647, title I, Sec. 1002(c)(1), (2), (4)-(8), (d)(1)-(7)(A),
(8)-(35), Nov. 10, 1988, 102 Stat. 3358-3367, provided that:
"SEC. 203. EFFECTIVE DATES; GENERAL TRANSITIONAL RULES.
"(a) General Effective Dates. -
"(1) Section 201. -
"(A) In general. - Except as provided in this section,
section 204, and section 251(d) [set out as a note under
section 46 of this title], the amendments made by section 201
[amending sections 46, 167, 168, 178, 179, 280F, 291, 312, 465,
467, 514, 751, 1245, 4162, 6111, and 7701 of this title] shall
apply to property placed in service after December 31, 1986, in
taxable years ending after such date.
"(B) Election to have amendments made by section 201 apply. -
A taxpayer may elect (at such time and in such manner as the
Secretary of the Treasury or his delegate may prescribe) to
have the amendments made by section 201 apply to any property
placed in service after July 31, 1986, and before January 1,
1987. No election may be made under this subparagraph with
respect to property to which section 168 of the Internal
Revenue Code of 1986 would not apply by reason of section
168(f)(5) of such Code if such property were placed in service
after December 31, 1986.
"(2) Section 202. -
"(A) In general. - The amendments made by section 202
[amending section 179 of this title] shall apply to property
placed in service after December 31, 1986, in taxable years
ending after such date.
"(B) Special rule for fiscal years including january 1, 1987.
- In the case of any taxable year (other than a calendar year)
which includes January 1, 1987, for purposes of applying the
amendments made by section 202 to property placed in service
during such taxable year and after December 31, 1986 -
"(i) the limitation of section 179(b)(1) of the Internal
Revenue Code of 1986 (as amended by section 202) shall be
reduced by the aggregate deduction under section 179 (as in
effect on the day before the date of the enactment of the Tax
Reform Act of 1986 [Oct. 22, 1986]) for section 179 property
placed in service during such taxable year and before January
1, 1987,
"(ii) the limitation of section 179(b)(2) of such Code (as
so amended) shall be applied by taking into account the cost
of all section 179 property placed in service during such
taxable year, and
"(iii) the limitation of section 179(b)(3) of such Code
shall be applied by taking into account the taxable income
for the entire taxable year reduced by the amount of any
deduction under section 179 of such Code for property placed
in service during such taxable year and before January 1,
1987.
"(b) General Transitional Rule. -
"(1) In general. - The amendments made by section 201 [amending
this section and sections 46, 167, 178, 179, 280F, 291, 312, 465,
467, 514, 751, 1245, 4162, 6111, and 7701 of this title] shall
not apply to -
"(A) any property which is constructed, reconstructed, or
acquired by the taxpayer pursuant to a written contract which
was binding on March 1, 1986,
"(B) property which is constructed or reconstructed by the
taxpayer if -
"(i) the lesser of (I) $1,000,000, or (II) 5 percent of the
cost of such property has been incurred or committed by March
1, 1986, and
"(ii) the construction or reconstruction of such property
began by such date, or
"(C) an equipped building or plant facility if construction
has commenced as of March 1, 1986, pursuant to a written
specific plan and more than one-half of the cost of such
equipped building or facility has been incurred or committed by
such date.
For purposes of this paragraph, all members of the same
affiliated group of corporations (within the meaning of section
1504 of the Internal Revenue Code of 1986) filing a consolidated
return shall be treated as one taxpayer.
"(2) Requirement that certain property be placed in service
before certain date. -
"(A) In general. - Paragraph (1) and section 204(a) (other
than paragraph (8) or (12) thereof) shall not apply to any
property unless such property has a class life of at least 7
years and is placed in service before the applicable date
determined under the following table:
"In the case of property The applicable
with a class life of: date is:
At least 7 but less than 20 years January 1, 1989
20 years or more January 1, 1991.
--------------------------------------------------------------------
"(B) Residential rental and nonresidential real property. -
In the case of residential rental property and nonresidential
real property, the applicable date is January 1, 1991.
"(C) Class lives. - For purposes of subparagraph (A) -
"(i) the class life of property to which section
168(g)(3)(B) of the Internal Revenue Code of 1986 (as added
by section 201) applies shall be the class life in effect on
January 1, 1986, except that computer-based telephone central
office switching equipment described in section
168(e)(3)(B)(iii) of such Code shall be treated as having a
class life of 6 years,
"(ii) property described in section 204(a) shall be treated
as having a class life of 20 years, and
"(iii) property with no class life shall be treated as
having a class life of 12 years.
"(D) Substitution of applicable dates. - If any provision of
this Act [see Tables for classification] substitutes a date for
an applicable date, this paragraph shall be applied by using
such date.
"(3) Property qualifies if sold and leased back in 3 months. -
Property shall be treated as meeting the requirements of
paragraphs (1) and (2) or section 204(a) with respect to any
taxpayer if such property is acquired by the taxpayer from a
person -
"(A) in whose hands such property met the requirements of
paragraphs (1) and (2) or section 204(a) (or would have met
such requirements if placed in service by such person), or
"(B) who placed the property in service before January 1,
1987,
and such property is leased back by the taxpayer to such person,
or is leased to such person, not later than the earlier of the
applicable date under paragraph (2) or the day which is 3 months
after such property was placed in service.
"(4) Plant facility. - For purposes of paragraph (1), the term
'plant facility' means a facility which does not include any
building (or with respect to which buildings constitute an
insignificant portion) and which is -
"(A) a self-contained single operating unit or processing
operation,
"(B) located on a single site, and
"(C) identified as a single unitary project as of March 1,
1986.
"(c) Property Financed With Tax-Exempt Bonds. -
"(1) In general. - Except as otherwise provided in this
subsection or section 204, subparagraph (C) of section 168(g)(1)
of the Internal Revenue Code of 1986 (as added by this Act) shall
apply to property placed in service after December 31, 1986, in
taxable years ending after such date, to the extent such property
is financed by the proceeds of an obligation (including a
refunding obligation) issued after March 1, 1986.
"(2) Exceptions. -
"(A) Construction or binding agreements. - Subparagraph (C)
of section 168(g)(1) of such Code (as so added) shall not apply
to obligations with respect to a facility -
"(i)(I) the original use of which commences with the
taxpayer, and the construction, reconstruction, or
rehabilitation of which began before March 2, 1986, and was
completed on or after such date,
"(II) with respect to which a binding contract to incur
significant expenditures for construction, reconstruction, or
rehabilitation was entered into before March 2, 1986, and
some of such expenditures are incurred on or after such date,
or
"(III) acquired on or after March 2, 1986, pursuant to a
binding contract entered into before such date, and
"(ii) described in an inducement resolution or other
comparable preliminary approval adopted by the issuing
authority (or by a voter referendum) before March 2, 1986.
"(B) Refunding. -
"(i) In general. - Except as provided in clause (ii), in
the case of property placed in service after December 31,
1986, which is financed by the proceeds of an obligation
which is issued solely to refund another obligation which was
issued before March 2, 1986, subparagraph (C) of section
168(g)(1) of such Code (as so added) shall apply only with
respect to an amount equal to the basis in such property
which has not been recovered before the date such refunded
obligation is issued.
"(ii) Significant expenditures. - In the case of facilities
the original use of which commences with the taxpayer and
with respect to which significant expenditures are made
before January 1, 1987, subparagraph (C) of section 168(g)(1)
of such Code (as so added) shall not apply with respect to
such facilities to the extent such facilities are financed by
the proceeds of an obligation issued solely to refund another
obligation which was issued before March 2, 1986.
"(C) Facilities. - In the case of an inducement resolution or
other comparable preliminary approval adopted by an issuing
authority before March 2, 1986, for purposes of subparagraphs
(A) and (B)(ii) with respect to obligations described in such
resolution, the term 'facilities' means the facilities
described in such resolution.
"(D) Significant expenditures. - For purposes of this
paragraph, the term 'significant expenditures' means
expenditures greater than 10 percent of the reasonably
anticipated cost of the construction, reconstruction, or
rehabilitation of the facility involved.
"(d) Mid-Quarter Convention. - In the case of any taxable year
beginning before October 1, 1987 in which property to which the
amendments made by section 201 [amending this section and sections
46, 167, 178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245, 4162,
6111, and 7701 of this title] do not apply is placed in service,
such property shall be taken into account in determining whether
section 168(d)(3) of the Internal Revenue Code of 1986 (as added by
section 201) applies for such taxable year to property to which
such amendments apply. The preceding sentence shall only apply to
property which would be taken into account if such amendments did
apply.
"(e) Normalization Requirements. -
"(1) In general. - A normalization method of accounting shall
not be treated as being used with respect to any public utility
property for purposes of section 167 or 168 of the Internal
Revenue Code of 1986 if the taxpayer, in computing its cost of
service for ratemaking purposes and reflecting operating results
in its regulated books of account, reduces the excess tax reserve
more rapidly or to a greater extent than such reserve would be
reduced under the average rate assumption method.
"(2) Definitions. - For purposes of this subsection -
"(A) Excess tax reserve. - The term 'excess tax reserve'
means the excess of -
"(i) the reserve for deferred taxes (as described in
section 167(l)(3)(G)(ii) or 168(e)(3)(B)(ii) of the Internal
Revenue Code of 1954 as in effect on the day before the date
of the enactment of this Act [Oct. 22, 1986]), over
"(ii) the amount which would be the balance in such reserve
if the amount of such reserve were determined by assuming
that the corporate rate reductions provided in this Act [see
Tables for classification] were in effect for all prior
periods.
"(B) Average rate assumption method. - The average rate
assumption method is the method under which the excess in the
reserve for deferred taxes is reduced over the remaining lives
of the property as used in its regulated books of account which
gave rise to the reserve for deferred taxes. Under such method,
if timing differences for the property reverse, the amount of
the adjustment to the reserve for the deferred taxes is
calculated by multiplying -
"(i) the ratio of the aggregate deferred taxes for the
property to the aggregate timing differences for the property
as of the beginning of the period in question, by
"(ii) the amount of the timing differences which reverse
during such period.
"SEC. 204. ADDITIONAL TRANSITIONAL RULES.
"(a) Other Transitional Rules. -
"(1) Urban renovation projects. -
"(A) In general. - The amendments made by section 201
[amending this section and sections 46, 167, 178, 179, 280F,
291, 312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701 of
this title] shall not apply to any property which is an
integral part of any qualified urban renovation project.
"(B) Qualified urban renovation project. - For purposes of
subparagraph (A), the term 'qualified urban renovation project'
means any project -
"(i) described in subparagraph (C), (D), (E), or (G) which
before March 1, 1986, was publicly announced by a political
subdivision of a State for a renovation of an urban area
within its jurisdiction,
"(ii) described in subparagraph (C), (D) or (G) which
before March 1, 1986, was identified as a single unitary
project in the internal financing plans of the primary
developer of the project,
"(iii) described in subparagraph (C) or (D), which is not
substantially modified on or after March 1, 1986, and
"(iv) described in subparagraph (F) or (H).
"(C) Project where agreement on december 19, 1984. - A
project is described in this subparagraph if -
"(i) a political subdivision granted on July 11, 1985,
development rights to the primary developer-purchaser of such
project, and
"(ii) such project was the subject of a development
agreement between a political subdivision and a bridge
authority on December 19, 1984.
For purposes of this subparagraph, section 203(b)(2) shall be
applied by substituting 'January 1, 1994' for 'January 1, 1991'
each place it appears.
"(D) Certain additional projects. - A project is described in
this subparagraph if it is described in any of the following
clauses of this subparagraph and the primary developer of all
such projects is the same person:
"(i) A project is described in this clause if the
development agreement with respect thereto was entered into
during April 1984 and the estimated cost of the project is
approximately $194,000,000.
"(ii) A project is described in this clause if the
development agreement with respect thereto was entered into
during May 1984 and the estimated cost of the project is
approximately $190,000,000.
"(iii) A project is described in this clause if the project
has an estimated cost of approximately $92,000,000 and at
least $7,000,000 was spent before September 26, 1985, with
respect to such project.
"(iv) A project is described in this clause if the
estimated project cost is approximately $39,000,000 and at
least $2,000,000 of construction cost for such project were
incurred before September 26, 1985.
"(v) A project is described in this clause if the
development agreement with respect thereto was entered into
before September 26, 1985, and the estimated cost of the
project is approximately $150,000,000.
"(vi) A project is described in this clause if the board of
directors of the primary developer approved such project in
December 1982, and the estimated cost of such project is
approximately $107,000,000.
"(vii) A project is described in this clause if the board
of directors of the primary developer approved such project
in December 1982, and the estimated cost of such project is
approximately $59,000,000.
"(viii) A project is described in this clause if the Board
of Directors of the primary developer approved such project
in December 1983, following selection of the developer by a
city council on September 26, 1983, and the estimated cost of
such project is approximately $107,000,000.
"(E) Project where plan confirmed on october 4, 1984. - A
project is described in this subparagraph if -
"(i) a State or an agency, instrumentality, or political
subdivision thereof approved the filing of a general project
plan on June 18, 1981, and on October 4, 1984, a State or an
agency, instrumentality, or political subdivision thereof
confirmed such plan,
"(ii) the project plan as confirmed on October 4, 1984,
included construction or renovation of office buildings, a
hotel, a trade mart, theaters, and a subway complex, and
"(iii) significant segments of such project were the
subject of one or more conditional designations granted by a
State or an agency, instrumentality, or political subdivision
thereof to one or more developers before January 1, 1985.
The preceding sentence shall apply with respect to a property
only to the extent that a building on such property site was
identified as part of the project plan before September 26, 1985,
and only to the extent that the size of the building on such
property site was not substantially increased by reason of a
modification to the project plan with respect to such property on
or after such date. For purposes of this subparagraph, section
203(b)(2) shall be applied by substituting 'January 1, 1998' for
'January 1, 1991' each place it appears.
"(F) A project is described in this subparagraph if it is a
sports and entertainment facility which -
"(i) is to be used by both a National Hockey League team
and a National Basketball Association team;
"(ii) is to be constructed on a platform utilizing air
rights over land acquired by a State authority and identified
as site B in a report dated May 30, 1984, prepared for a
State urban development corporation; and
"(iii) is eligible for real property tax, and power and
energy benefits pursuant to the provisions of State
legislation approved and effective July 7, 1982.
A project is also described in this subparagraph if it is a
mixed-use development which is -
"(I) to be constructed above a public railroad station
utilized by the national railroad passenger corporation and
commuter railroads serving two States; and
"(II) will include the reconstruction of such station so as to
make it a more efficient transportation center and to better
integrate the station with the development above, such
reconstruction plans to be prepared in cooperation with a
State transportation authority.
For purposes of this subparagraph, section 203(b)(2) shall be
applied by substituting 'January 1, 1998' for the applicable date
that would otherwise apply.
"(G) A project is described in this subparagraph if -
"(i) an inducement resolution was passed on March 9, 1984,
for the issuance of obligations with respect to such project,
"(ii) such resolution was extended by resolutions passed on
August 14, 1984, April 2, 1985, August 13, 1985, and July 8,
1986,
"(iii) an application was submitted on January 31, 1984,
for an Urban Development Action Grant with respect to such
project, and
"(iv) an Urban Development Action Grant was preliminarily
approved for all or part of such project on July 3, 1986.
"(H) A project is described in this subparagraph if it is a
redevelopment project, with respect to which $10,000,000 in
industrial revenue bonds were approved by a State Development
Finance Authority on January 15, 1986, a village transferred
approximately $4,000,000 of bond volume authority to the State
in June 1986, and a binding Redevelopment Agreement was
executed between a city and the development team on June 30,
1986.
"(2) Certain projects granted ferc licenses, etc. - The
amendments made by section 201 [amending this section and
sections 46, 167, 178, 179, 280F, 291, 312, 465, 467, 514, 751,
1245, 4162, 6111, and 7701 of this title] shall not apply to any
property which is part of a project -
"(A) which is certified by the Federal Energy Regulatory
Commission before March 2, 1986, as a qualifying facility for
purposes of the Public Utility Regulatory Policies Act of 1978
[see Short Title note set out under 16 U.S.C. 2601],
"(B) which was granted before March 2, 1986, a hydroelectric
license for such project by the Federal Energy Regulatory
Commission, or
"(C) which is a hydroelectric project of less than 80
megawatts that filed an application for a permit, exemption, or
license with the Federal Energy Regulatory Commission before
March 2, 1986.
"(3) Supply or service contracts. - The amendments made by
section 201 shall not apply to any property which is readily
identifiable with and necessary to carry out a written supply or
service contract, or agreement to lease, which was binding on
March 1, 1986.
"(4) Property treated under prior tax acts. - The amendments
made by section 201 shall not apply -
"(A) to property described in section 12(c)(2) (as amended by
the Technical and Miscellaneous Revenue Act of 1988), 31(g)(5),
or 31(g)(17)(J) of the Tax Reform Act of 1984 [sections
12(c)(2) and 31(g)(5), (17)(J) of Pub. L. 98-369, set out
below],
"(B) to property described in section 209(d)(1)(B) of the Tax
Equity and Fiscal Responsibility Act of 1982, as amended by the
Tax Reform Act of 1984 [section 209(d)(1)(B) of Pub. L. 97-248,
as amended, set out below], and
"(C) to property described in section 216(b)(3) of the Tax
Equity and Fiscal Responsibility Act of 1982 [section 216(b)(3)
of Pub. L. 97-248, set out below].
"(5) Special rules for property included in master plans of
integrated projects. - The amendments made by section 201 shall
not apply to any property placed in service pursuant to a master
plan which is clearly identifiable as of March 1, 1986, for any
project described in any of the following subparagraphs of this
paragraph:
"(A) A project is described in this subparagraph if -
"(i) the project involves production platforms for offshore
drilling, oil and gas pipeline to shore, process and storage
facilities, and a marine terminal, and
"(ii) at least $900,000,000 of the costs of such project
were incurred before September 26, 1985.
"(B) A project is described in this subparagraph if -
"(i) such project involves a fiber optic network of at
least 20,000 miles, and
"(ii) before September 26, 1985, construction commenced
pursuant to the master plan and at least $85,000,000 was
spent on construction.
"(C) A project is described in this subparagraph if -
"(i) such project passes through at least 10 States and
involves intercity communication links (including one or more
repeater sites, terminals and junction stations for microwave
transmissions, regenerators or fiber optics and other related
equipment),
"(ii) the lesser of $150,000,000 or 5 percent of the total
project cost has been expended, incurred, or committed before
March 2, 1986, by one or more taxpayers each of which is a
member of the same affiliated group (as defined in section
1504(a) [of the Internal Revenue Code of 1986]), and
"(iii) such project consists of a comprehensive plan for
meeting network capacity requirements as encompassed within
either:
"(I) a November 5, 1985, presentation made to and accepted by
the Chairman of the Board and the president of the taxpayer,
or
"(II) the approvals by the Board of Directors of the parent
company of the taxpayer on May 3, 1985, and September 22,
1985, and of the executive committee of said board on
December 23, 1985.
"(D) A project is described in this subparagraph if -
"(i) such project is part of a flat rolled product
modernization plan which was initially presented to the Board
of Directors of the taxpayer on July 8, 1983,
"(ii) such program will be carried out at 3 locations, and
"(iii) such project will involve a total estimated minimum
capital cost of at least $250,000,000.
"(E) A project is described in this subparagraph if the
project is being carried out by a corporation engaged in the
production of paint, chemicals, fiberglass, and glass, and if -
"(i) the project includes a production line which applies a
thin coating to glass in the manufacture of energy efficient
residential products, if approved by the management committee
of the corporation on January 29, 1986,
"(ii) the project is a turbogenerator which was approved by
the president of such corporation and at least $1,000,000 of
the cost of which was incurred or committed before such date,
"(iii) the project is a waste-to-energy disposal system
which was initially approved by the management committee of
the corporation on March 29, 1982, and at least $5,000,000 of
the cost of which was incurred before September 26, 1985,
"(iv) the project, which involves the expansion of an
existing service facility and the addition of new lab
facilities needed to accommodate topcoat and undercoat
production needs of a nearby automotive assembly plant, was
approved by the corporation's management committee on March
5, 1986, or
"(v) the project is part of a facility to consolidate and
modernize the silica production of such corporation and the
project was approved by the president of such corporation on
August 19, 1985.
"(F) A project is described in this subparagraph if -
"(i) such project involves a port terminal and oil pipeline
extending generally from the area of Los Angeles, California,
to the area of Midland, Texas, and
"(ii) before September 26, 1985, there is a binding
contract for dredging and channeling with respect thereto and
a management contract with a construction manager for such
project.
"(G) A project is described in this subparagraph if -
"(i) the project is a newspaper printing and distribution
plant project with respect to which a contract for the
purchase of 8 printing press units and related equipment to
be installed in a single press line was entered into on
January 8, 1985, and
"(ii) the contract price for such units and equipment
represents at least 50 percent of the total cost of such
project.
"(H) A project is described in this subparagraph if it is the
second phase of a project involving direct current transmission
lines spanning approximately 190 miles from the United
States-Canadian border to Ayer, Massachusetts, alternating
current transmission lines in Massachusetts from Ayers to
Millbury to West Medway, DC-AC converted terminals to Monroe,
New Hampshire, and Ayer, Massachusetts, and other related
equipment and facilities.
"(I) A project is described in this subparagraph if it
involves not more than two natural gas-fired combined cycle
electric generating units each having a net electrical
capability of approximately 233 megawatts, and a sales contract
for approximately one-half of the output of the 1st unit was
entered into in December 1985.
"(J) A project is described in this subparagraph if -
"(i) the project involves an automobile manufacturing
facility (including equipment and incidental appurtenances)
to be located in the United States, and
"(ii) either -
"(I) the project was the subject of a memorandum of
understanding between 2 automobile manufacturers that was
signed before September 25, 1985, the automobile
manufacturing facility (including equipment and incidental
appurtenances) will involve a total estimated cost of
approximately $750,000,000, and will have an annual
production capacity of approximately 240,000 vehicles or
"(II) the Board of Directors of an automobile manufacturer
approved a written plan for the conversion of existing
facilities to produce new models of a vehicle not currently
produced in the United States, such facilities will be placed
in service by July 1, 1987, and such Board action occurred in
July 1985 with respect to a $602,000,000 expenditure, a
$438,000,000 expenditure, and a $321,000,000 expenditure.
"(K) A project is described in this subparagraph if -
"(i) the project involves a joint venture between a utility
company and a paper company for a supercalendered paper mill,
and at least $50,000,000 was incurred or committed with
respect to such project before March 1, 1986, or
"(ii) the project involves a paper mill for the manufacture
of newsprint (including a cogeneration facility) is generally
based on a written design and feasibility study that was
completed on December 15, 1981, and will be placed in service
before January 1, 1991, or
"(iii) the project is undertaken by a Maine corporation and
involves the modernization of pulp and paper mills in
Millinocket and/or East Millinocket, Maine, or
"(iv) the project involves the installation of a paper
machine for production of coated publication papers, the
modernization of a pulp mill, and the installation of
machinery and equipment with respect to related processes, as
of December 31, 1985, in excess of $50,000,000 was incurred
for the project, as of July 1986, in excess of $150,000,000
was incurred for the project, and the project is located in
Pine Bluff, Arkansas, or
"(v) the project involves property of a type described in
ADR classes 26.1, 26.2, 25, 00.3 and 00.4 included in a paper
plant which will manufacture and distribute tissue, towel or
napkin products; is located in Effingham County, Georgia; and
is generally based upon a written General Description which
was submitted to the Georgia Department of Revenue on or
about June 13, 1985.
"(L) A project is described in this subparagraph if -
"(i) a letter of intent with respect to such project was
executed on June 4, 1985, and
"(ii) a 5-percent downpayment was made in connection with
such project for 2 10-unit press lines and related equipment.
"(M) A project is described in this subparagraph if -
"(i) the project involves the retrofit of ammonia plants,
"(ii) as of March 1, 1986, more than $390,000 had been
expended for engineering and equipment, and
"(iii) more than $170,000 was expensed in 1985 as a portion
of preliminary engineering expense.
"(N) A project is described in this subparagraph if the
project involves bulkhead intermodal flat cars which are placed
in service before January 1, 1987, and either -
"(i) more than $2,290,000 of expenditures were made before
March 1, 1986, with respect to a project involving up to 300
platforms, or
"(ii) more than $95,000 of expenditures were made before
March 1, 1986, with respect to a project involving up to 850
platforms.
"(O) A project is described in this subparagraph if -
"(i) the project involves the production and transportation
of oil and gas from a well located north of the Arctic
Circle, and
"(ii) more than $200,000,000 of cost had been incurred or
committed before September 26, 1985.
"(P) A project is described in this subparagraph if -
"(i) a commitment letter was entered into with a financial
institution on January 23, 1986, for the financing of the
project,
"(ii) the project involves intercity communication links
(including microwave and fiber optics communications systems
and related property),
"(iii) the project consists of communications links between
-
"(I) Omaha, Nebraska, and Council Bluffs, Iowa,
"(II) Waterloo, Iowa and Sioux City, Iowa,
"(III) Davenport, Iowa and Springfield, Illinois, and
"(iv) the estimated cost of such project is approximately
$13,000,000.
"(Q) A project is described in this subparagraph if -
"(i) such project is a mining modernization project
involving mining, transport, and milling operations,
"(ii) before September 26, 1985, at least $20,000,000 was
expended for engineering studies which were approved by the
Board of Directors of the taxpayer on January 27, 1983, and
"(iii) such project will involve a total estimated minimum
cost of $350,000,000.
"(R) A project is described in this subparagraph if -
"(i) such project is a dragline acquired in connection with
a 3-stage program which began in 1980 to increase production
from a coal mine,
"(ii) at least $35,000,000 was spent before September 26,
1985, on the 1st 2 stages of the program, and
"(iii) at least $4,000,000 was spent to prepare the mine
site for the dragline.
"(S) A project is described in this subparagraph if - it is a
project consisting of a mineral processing facility using a
heap leaching system (including waste dumps, low-grade dumps, a
leaching area, and mine roads) and if -
"(i) convertible subordinated debentures were issued in
August 1985, to finance the project,
"(ii) construction of the project was authorized by the
Board of Directors of the taxpayer on or before December 31,
1985,
"(iii) at least $750,000 was paid or incurred with respect
to the project on or before December 31, 1985, and
"(iv) the project is placed in service on or before
December 31, 1986.
"(T) A project is described in this subparagraph if it is a
plant facility on Alaska's North Slope which is placed in
service before January 1, 1988, and -
"(i) the approximate cost of which is $675,000,000, of
which approximately $400,000,000 was spent on off-site
construction,
"(ii) the approximate cost of which is $445,000,000, of
which approximately $400,000,000 was spent on off-site
construction and more than 50 percent of the project cost was
spent prior to December 31, 1985, or
"(iii) the approximate cost of which is $375,000,000, of
which approximately $260,000,000 was spent on off-site
construction.
"(U) A project is described in this subparagraph if it
involves the connecting of existing retail stores in the
downtown area of a city to a new covered area, the total
project will be 250,000 square feet, a formal Memorandum of
Understanding relating to development of the project was
executed with the city on July 2, 1986, and the estimated cost
of the project is $18,186,424.
"(V) A project is described in this subparagraph if it
includes a 200,000 square foot office tower, a 200-room hotel,
a 300,000 square foot retail center, an 800-space parking
facility, the total cost is projected to be $60,000,000, and
$1,250,000 was expended with respect to the site before August
25, 1986.
"(W) A project is described in this subparagraph if it is a
joint use and development project including an integrated
hotel, convention center, office, related retail facilities and
public mass transportation terminal, and vehicle parking
facilities which satisfies the following conditions:
"(i) is developed within certain air space rights and upon
real property exchanged for such joint use and development
project which is owned or acquired by a state department of
transportation, a regional mass transit district in a county
with a population of at least 5,000,000 and a community
redevelopment agency;
"(ii) such project affects an existing, approximately 40
acre public mass transportation bus-way terminal facility
located adjacent to an interstate highway;
"(iii) a memorandum of understanding with respect to such
joint use and development project is executed by a state
department of transportation, such a county regional mass
transit district and a community redevelopment agency on or
before December 31, 1986, and
"(iv) a major portion of such joint use and development
project is placed in service by December 31, 1990.
"(X) A project is described in this subparagraph if -
"(i) it is an $8,000,000 project to provide advanced
control technology for adipic acid at a plant, which was
authorized by the company's Board of Directors in October
1985, at December 31, 1985, $1,400,000 was committed and
$400,000 expended with respect to such project, or
"(ii) it is an $8,300,000 project to achieve compliance
with State and Federal regulations for particulates
emissions, which was authorized by the company's Board of
Directors in December 1985, by March 31, 1986, $250,000 was
committed and $250,000 was expended with respect to such
project, or
"(iii) it is a $22,000,000 project for the retrofit of a
plant that makes a raw material for aspartame, which was
approved in the company's December 1985 capital budget, if
approximately $3,000,000 of the $22,000,000 was spent before
August 1, 1986.
"(Y) A project is described in this subparagraph if such
project passes through at least 9 States and involves an
intercity communication link (including multiple repeater sites
and junction stations for microwave transmissions and
amplifiers for fiber optics); the link from Buffalo to New
York/Elizabeth was completed in 1984; the link from Buffalo to
Chicago was completed in 1985; and the link from New York to
Washington is completed in 1986.
"(Z) A project is described in this subparagraph if -
"(i) such project involves a fiber optic network of at
least 475 miles, passing through Minnesota and Wisconsin; and
"(ii) before January 1, 1986, at least $15,000,000 was
expended or committed for electronic equipment or fiber optic
cable to be used in constructing the network.
"(6) Natural gas pipeline. - The amendments made by section 201
[amending sections 46, 167, 168, 178, 179, 280F, 291, 312, 465,
467, 514, 751, 1245, 4162, 6111, and 7701 of this title] shall
not apply to any interstate natural gas pipeline (and related
equipment) if -
"(A) 3 applications for the construction of such pipeline
were filed with the Federal Energy Regulatory Commission before
November 22, 1985 (and 2 of which were filed before September
26, 1985), and
"(B) such pipeline has 1 of its terminal points near
Bakersfield, California.
"(7) Certain leasehold improvements. - The amendments made by
section 201 shall not apply to any reasonable leasehold
improvements, equipment and furnishings placed in service by a
lessee or its affiliates if -
"(A) the lessee or an affiliate is the original lessee of
each building in which such property is to be used,
"(B) such lessee is obligated to lease the building under an
agreement to lease entered into before September 26, 1985, and
such property is provided for such building, and
"(C) such buildings are to serve as world headquarters of the
lessee and its affiliates.
For purposes of this paragraph, a corporation is an affiliate of
another corporation if both corporations are members of a
controlled group of corporations within the meaning of section
1563(a) of the Internal Revenue Code of 1954 without regard to
section 1563(b)(2) of such Code. Such lessee shall include a
securities firm that meets the requirements of subparagraph (A),
except the lessee is obligated to lease the building under a
lease entered into on June 18, 1986.
"(8) Solid waste disposal facilities. - The amendments made by
section 201 [amending sections 46, 167, 168, 178, 179, 280F, 291,
312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701 of this
title] shall not apply to the taxpayer who originally places in
service any qualified solid waste disposal facility (as defined
in section 7701(e)(3)(B) of the Internal Revenue Code of 1986) if
before March 2, 1986 -
"(A) there is a binding written contract between a service
recipient and a service provider with respect to the operation
of such facility to pay for the services to be provided by such
facility,
"(B) a service recipient or governmental unit (or any entity
related to such recipient or unit) made a financial commitment
of at least $200,000 for the financing or construction of such
facility,
"(C) such facility is the Tri-Cities Solid Waste Recovery
Project involving Fremont, Newark, and Union City, California,
and has received an authority to construct from the
Environmental Protection Agency or from a State or local agency
authorized by the Environmental Protection Agency to issue air
quality permits under the Clean Air Act [42 U.S.C. 7401 et
seq.],
"(D) a bond volume carryforward election was made for the
facility and the facility is for Chattanooga, Knoxville, or
Kingsport, Tennessee, or
"(E) such facility is to serve Haverhill, Massachusetts.
"(9) Certain submersible drilling units. - In the case of a
binding contract entered into on October 30, 1984, for the
purchase of 6 semi-submersible drilling units at a cost of
$425,000,000, such units shall be treated as having an applicable
date under subsection [section] 203(b)(2) of January 1, 1991.
"(10) Wastewater or sewage treatment facility. - The amendments
made by section 201 [amending this section and sections 46, 167,
178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245, 4162, 6111,
and 7701 of this title] shall not apply to any property which is
part of a wastewater or sewage treatment facility if -
"(A) site preparation for such facility commenced before
September 1985, and a parish council approved a service
agreement with respect to such facility on December 4, 1985;
"(B) a city-parish advertised in September 1985, for bids for
construction of secondary treatment improvements for such
facility, in May 1985, the city-parish received statements from
16 firms interested in privatizing the wastewater treatment
facilities, and the metropolitan council selected a privatizer
at its meeting on November 20, 1985, and adopted a resolution
authorizing the Mayor to enter into contractual negotiation
with the selected privatizer;
"(C) the property is part of a wastewater treatment facility
serving Greenville, South Carolina with respect to which a
binding service agreement between a privatizer and the Western
Carolina Regional Sewer Authority with respect to such facility
was signed before January 1, 1986; or
"(D) such property is part of a wastewater treatment facility
(located in Cameron County, Texas, within one mile of the City
of Harlingen), an application for a wastewater discharge permit
was filed with respect to such facility on December 4, 1985,
and a City Commission approved a letter of intent relating to a
service agreement with respect to such facility on August 7,
1986; or a wastewater facility (located in Harlingen, Texas)
which is a subject of such letter of intent and service
agreement and the design of which was contracted for in a
letter of intent dated January 23, 1986.
"(11) Certain aircraft. - The amendments made by section 201
[amending this section and sections 46, 167, 178, 179, 280F, 291,
312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701 of this
title] shall not apply to any new aircraft with 19 or fewer
passenger seats if -
"(A) the aircraft is manufactured in the United States. For
purposes of this subparagraph, an aircraft is 'manufactured' at
the point of its final assembly,
"(B) the aircraft was in inventory or in the planned
production schedule of the final assembly manufacturer, with
orders placed for the engine(s) on or before August 16, 1986,
and
"(C) the aircraft is purchased or subject to a binding
contract on or before December 31, 1986, and is delivered and
placed in service by the purchaser, before July 1, 1987.
"(12) Certain satellites. - The amendments made by section 201
shall not apply to any satellite with respect to which -
"(A) on or before January 28, 1986, there was a binding
contract to construct or acquire a satellite, and
"(i) an agreement to launch was in existence on that date,
or
"(ii) on or before August 5, 1983, the Federal
Communications Commission had authorized the construction and
for which the authorized party has a specific although
undesignated agreement to launch in existence on January 28,
1986;
"(B) by order adopted on July 25, 1985, the Federal
Communications Commission granted the taxpayer an orbital slot
and authorized the taxpayer to launch and operate 2 satellites
with a cost of approximately $300,000,000; or
"(C) the International Telecommunications Satellite
Organization or the International Maritime Satellite
Organization entered into written binding contracts before May
1, 1985.
"(13) Certain nonwire line cellular telephone systems. - The
amendments made by section 201 shall not apply to property that
is part of a nonwire line system in the Domestic Public Cellular
Radio Telecommunications Service for which the Federal
Communications Commission has issued a construction permit before
September 26, 1985, but only if such property is placed in
service before January 1, 1987.
"(14) Certain cogeneration facilities. - The amendments made by
section 201 shall not apply to projects consisting of 1 or more
facilities for the cogeneration and distribution of electricity
and steam or other forms of thermal energy if -
"(A) at least $100,000 was paid or incurred with respect to
the project before March 1, 1986, a memorandum of understanding
was executed on September 13, 1985, and the project is placed
in service before January 1, 1989,
"(B) at least $500,000 was paid or incurred with respect to
the projects before May 6, 1986, the projects involve a
22-megawatt combined cycle gas turbine plant and a 45-megawatt
coal waste plant, and applications for qualifying facility
status were filed with the Federal Energy Regulatory Commission
on March 5, 1986,
"(C) the project cost approximates $125,000,000 to
$140,000,000 and an application was made to the Federal Energy
Regulatory Commission in July 1985,
"(D) an inducement resolution for such facility was adopted
on September 10, 1985, a development authority was given an
inducement date of September 10, 1985, for a loan not to exceed
$80,000,000 with respect to such facility, and such facility is
expected to have a capacity of approximately 30 megawatts of
electric power and 70,000 pounds of steam per hour,
"(E) at least $1,000,000 was incurred with respect to the
project before May 6, 1986, the project involves a 52-megawatt
combined cycle gas turbine plant and a petition was filed with
the Connecticut Department of Public Utility Control to approve
a power sales agreement with respect to the project on March
27, 1986,
"(F) the project has a planned scheduled capacity of
approximately 38,000 kilowatts, the project property is placed
in service before January 1, 1991, and the project is operated,
established, or constructed pursuant to certain agreements, the
negotiation of which began before 1986, with public or
municipal utilities conducting business in Massachusetts, or
"(G) the Board of Regents of Oklahoma State University took
official action on July 25, 1986, with respect to the project.
In the case of the project described in subparagraph (F), section
203(b)(2)(A) shall be applied by substituting 'January 1, 1991'
for 'January 1, 1989'.
"(15) Certain electric generating stations. - The amendments
made by section 201 shall not apply to a project located in New
Mexico consisting of a coal-fired electric generating station
(including multiple generating units, coal mine equipment, and
transmission facilities) if -
"(A) a tax-exempt entity will own an equity interest in all
property included in the project (except the coal mine
equipment), and
"(B) at least $72,000,000 was expended in the acquisition of
coal leases, land and water rights, engineering studies, and
other development costs before May 6, 1986.
For purposes of this paragraph, section 203(b)(2) shall be
applied by substituting 'January 1, 1996' for 'January 1, 1991'
each place it appears.
"(16) Sports arenas. -
"(A) Indoor sports facility. - The amendments made by section
201 shall not apply to up to $20,000,000 of improvements made
by a lessee of any indoor sports facility pursuant to a lease
from a State commission granting the right to make limited and
specified improvements (including planned seat explanations),
if architectural renderings of the project were commissioned
and received before December 22, 1985.
"(B) Metropolitan sports arena. - The amendments made by
section 201 shall not apply to any property which is part of an
arena constructed for professional sports activities in a
metropolitan area, provided that such arena is capable of
seating no less than 18,000 spectators and a binding contract
to incur significant expenditures for its construction was
entered into before June 1, 1986.
"(17) Certain waste-to-energy facilities. - The amendments made
by section 201 shall not apply to 2 agricultural waste-to-energy
powerplants (and required transmission facilities), in connection
with which a contract to sell 100 megawatts of electricity to a
city was executed in October 1984.
"(18) Certain coal-fired plants. - The amendments made by
section 201 shall not apply to one of three 540 megawatt
coal-fired plants that are placed in service after a sale
leaseback occurring after January 1, 1986, if -
"(A) the Board of Directors of an electric power cooperation
authorized the investigation of a sale leaseback of a nuclear
generation facility by resolution dated January 22, 1985, and
"(B) a loan was extended by the Rural Electrification
Administration on February 20, 1986, which contained a covenant
with respect to used property leasing from unit II.
"(19) Certain rail systems. -
"(A) The amendments made by section 201 shall not apply to a
light rail transit system, the approximate cost of which is
$235,000,000, if, with respect to which, the board of directors
of a corporation (formed in September 1984 for the purpose of
developing, financing, and operating the system) authorized a
$300,000 expenditure for a feasibility study in April 1985.
"(B) The amendments made by section 201 shall not apply to
any project for rehabilitation of regional railroad rights of
way and properties including grade crossings which was
authorized by the Board of Directors of such company prior to
October 1985; and/or was modified, altered or enlarged as a
result of termination of company contracts, but approved by
said Board of Directors no later than January 30, 1986, and
which is in the public interest, and which is subject to
binding contracts or substantive commitments by December 31,
1987.
"(20) Certain detergent manufacturing facility. - The
amendments made by section 201 shall not apply to a laundry
detergent manufacturing facility, the approximate cost of which
is $13,200,000, with respect to which a project agreement was
fully executed on March 17, 1986.
"(21) Certain resource recovery facility. - The amendments made
by section 201 shall not apply to any of 3 resource recovery
plants, the aggregate cost of which approximates $300,000,000, if
an industrial development authority adopted a bond resolution
with respect to such facilities on December 17, 1984, and the
projects were approved by the department of commerce of a
Commonwealth on December 27, 1984.
"(22) The amendments made by section 201 shall not apply to a
computer and office support center building in Minneapolis, with
respect to which the first contract, with an architecture firm,
was signed on April 30, 1985, and a construction contract was
signed on March 12, 1986.
"(23) Certain district heating and cooling facilities. - The
amendments made by section 201 shall not apply to pipes, mains,
and related equipment included in district heating and cooling
facilities, with respect to which the development authority of a
State approved the project through an inducement resolution
adopted on October 8, 1985, and in connection with which
approximately $11,000,000 of tax-exempt bonds are to be issued.
"(24) Certain vessels. -
"(A) Certain offshore vessels. - The amendments made by
section 201 shall not apply to any offshore vessel the
construction contract for which was signed on February 28,
1986, and the approximate cost of which is $9,000,000.
"(B) Certain inland river vessel. - The amendments made by
section 201 shall not apply to a project involving the
reconstruction of an inland river vessel docked on the
Mississippi River at St. Louis, Missouri, on July 14, 1986, and
with respect to which:
"(i) the estimated cost of reconstruction is approximately
$39,000,000;
"(ii) reconstruction was commenced prior to December 1,
1985;
"(iii) at least $17,000,000 was expended before December
31, 1985; and
"(C) Special automobile carrier vessels. - The amendments
made by section 201 shall not apply to two new automobile
carrier vessels which will cost approximately $47,000,000 and
will be constructed by a United States-flag carrier to operate,
under the United States-flag and with an American crew, to
transport foreign automobiles to the United States, in a case
where negotiations for such transportation arrangements
commenced in April 1985, formal contract bids were submitted
prior to the end of 1985, and definitive transportation
contracts were awarded in May 1986.
"(D) The amendments made by section 201 shall not apply to a
562-foot passenger cruise ship, which was purchased in 1980 for
the purpose of returning the vessel to United States service,
the approximate cost of refurbishment of which is approximately
$47,000,000.
"(E) The amendments made by section 201 shall not apply to
the Muskegon, Michigan, Cross-Lake Ferry project having a
projected cost of approximately $7,200,000.
"(F) The amendments made by section 201 shall not apply to a
new automobile carrier vessel, the contract price for which is
no greater than $28,000,000, and which will be constructed for
and placed in service by OSG Car Carriers, Inc., to transport,
under the United States flag and with an American crew, foreign
automobiles to North America in a case where negotiations for
such transportation arrangements commenced in 1985, and
definitive transportation contracts were awarded before June
1986.
"(25) Certain wood energy projects. - The amendments made by
section 201 shall not apply to two wood energy projects for which
applications with the Federal Energy Regulatory Commission were
filed before January 1, 1986, which are described as follows:
"(A) a 26.5 megawatt plant in Fresno, California, and
"(B) a 26.5 megawatt plant in Rocklin, California.
"(26) The amendments made by section 201 shall not apply to
property which is a geothermal project of less than 20 megawatts
that was certified by the Federal Energy Regulatory Commission on
July 14, 1986, as a qualifying small power production facility
for purposes of the Public Utility Regulatory Policies Act of
1978 [see Short Title note set out under 16 U.S.C. 2601] pursuant
to an application filed with the Federal Energy Regulatory
Commission on April 17, 1986.
"(27) Certain economic development projects. - The amendments
made by section 201 shall not apply to any of the following
projects:
"(A) A mixed use development on the East River the total cost
of which is approximately $400,000,000, with respect to which a
letter of intent was executed on January 24, 1984, and with
respect to which approximately $2.5 million had been spent by
March 1, 1986.
"(B) A 356-room hotel, banquet, and conference facility
(including 540,000 square feet of office space) the approximate
cost of which is $158,000,000, with respect to which a letter
of intent was executed on June 1, 1984, and with respect to
which an inducement resolution and bond resolution was adopted
on August 20, 1985.
"(C) Phase 1 of a 4-phase project involving the construction
of laboratory space and ground-floor retail space the estimated
cost of which is $22,000,000 and with respect to which a
memoradum [sic] of understanding was made on August 29, 1983.
"(D) A project involving the development of a 490,000 square
foot mixed-use building at 152 W. 57th Street, New York, New
York, the estimated cost of which is $100,000,000, and with
respect to which a building permit application was filed in May
1986.
"(E) A mixed-use project containing a 300 unit, 12-story
hotel, garage, two multi-rise office buildings, and also
included a park, renovated riverboat, and barge with festival
marketplace, the capital outlays for which approximate
$68,000,000.
"(F) The construction of a three-story office building that
will serve as the home office for an insurance group and its
affiliated companies, with respect to which a city agreed to
transfer its ownership of the land for the project in a
Redevelopment Agreement executed on September 18, 1985, once
certain conditions are met.
"(G) A commercial bank formed under the laws of the State of
New York which entered into an agreement on September 5, 1985,
to construct its headquarters at 60 Wall Street, New York, New
York, with respect to such headquarters.
"(H) Any property which is part of a commercial and
residential project, the first phase of which is currently
under construction, to be developed on land which is the
subject of an ordinance passed on July 20, 1981, by the city
council of the city in which such land is located, designating
such land and the improvements to be placed thereon as a
residential-business planned development, which development is
being financed in part by the proceeds of industrial
development bonds in the amount of $62,600,000 issued on
December 4, 1985.
"(I) A 600,000 square foot mixed use building known as
Flushing Center with respect to which a letter of intent was
executed on March 26, 1986.
In the case of the building described in subparagraph (I),
section 203(b)(2)(A) shall be applied by substituting 'January 1,
1993' for the applicable date which would otherwise apply.
"(28) The amendments made by section 201 shall not apply to an
$80,000,000 capital project steel seamless tubular casings
minimill and melting facility located in Youngstown, Ohio, which
was purchased by the taxpayer in April 1985, and -
"(A) the purchase and renovation of which was approved by a
committee of the Board of Directors on February 22, 1985, and
"(B) as of December 31, 1985, more than $20,000,000 was
incurred or committed with respect to the renovation.
"(29) The amendments made by section 201 shall not apply to any
project for residential rental property if -
"(A) an inducement resolution with respect to such project
was adopted by the State housing development authority on
January 25, 1985, and
"(B) such project was the subject of a law suit filed on
October 25, 1985.
"(30) The amendments made by section 201 shall not apply to a
30 megawatt electric generating facility fueled by geothermal and
wood waste, the approximate cost of which is $55,000,000, and
with respect to which a 30-year power sales contract was executed
on March 22, 1985.
"(31) The amendments made by section 201 shall not apply to
railroad maintenance-of-way equipment, with respect to which a
Boston bank entered into a firm binding contract with a major
northeastern railroad before March 2, 1986, to finance
$10,500,000 of such equipment, if all of the equipment was placed
in service before August 1, 1986.
"(32) The amendment made by section 201 shall not apply to -
"(A) a facility constructed on approximately seven acres of
land located on Ogle's Poso Creek Oil field, the primary fuel
of which will be bituminous coal from Utah or Wyoming, with
respect to which an application for an authority to construct
was filed on December 26, 1985, an authority to construct was
issued on July 2, 1986, and a prevention of significant
deterioration permit application was submitted in May 1985,
"(B) a facility constructed on approximately seven acres of
land located on Teorco's Jasmin oil field, the primary fuel of
which will be bituminous coal from Utah or Wyoming, with
respect to which an authority to construct was filed on
December 26, 1985, an authority to construct was issued on July
2, 1986, and a prevention of significant deterioration permit
application was submitted in July 1985,
"(C) the Mountain View Apartments, in Hadley, Massachusetts,
"(D) a facility expected to have a capacity of not less than
65 megawatts of electricity, the steam from which is to be sold
to a pulp and paper mill, with respect to which application was
made to the Federal Regulatory Commission for certification as
a qualified facility on November 1, 1985, and received such
certification on January 24, 1986,
"(E) $5,000,000 of equipment ordered in 1986, in connection
with a 60,000 square foot plant in Masontown, Pennsylvania,
that was completed in 1983,
"(F) a magnetic resonance imaging machine, with respect to
which a binding contract to purchase was entered into in April
1986, in connection with the construction of a magnetic
resonance imaging clinic with respect to which a Determination
of Need certification was obtained from a State Department of
Public Health on October 22, 1985, if such property is placed
in service before December 31, 1986,
"(G) a company located in Salina, Kansas, which has been
engaged in the construction of highways and city streets since
1946, but only to the extent of $1,410,000 of investment in new
section 38 property,
"(H) a $300,000 project undertaken by a small metal finishing
company located in Minneapolis, Minnesota, the first parts of
which were received and paid for in January 1986, with respect
to which the company received Board approval to purchase the
largest piece of machinery it has ever ordered in 1985,
"(I) A $1,200,000 finishing machine that was purchased on
April 2, 1986 and placed into service in September 1986 by a
company located in Davenport, Iowa,
"(J) A 25 megawatt small power production facility, with
respect to which Qualifying Facility status numbered
QF86-593-000 was granted on March 5, 1986,
"(K) A 250 megawatt coal-fired electric plant in northeastern
Nevada estimated to cost $600,000,000 and known as the Thousand
Springs project, on which the Sierra Pacific Power Company, a
subsidiary of Sierra Pacific Resources, began in 1980 work to
design, finance, construct, and operate (and section 203(b)(2)
shall be applied with respect to such plant by substituting
'January 1, 1995' for 'January 1, 1991'),
"(L) 128 units of rental housing in connection with the Point
Gloria Limited Partnership,
"(M) property which is part of the Kenosha Downtown
Redevelopment Project and which is financed with the proceeds
of bonds issued pursuant to section 1317(6)(W) [set out as a
note under section 141 of this title],
"(N) Lakeland Park Phase II, in Baton Rouge, Louisiana,
"(O) the Santa Rosa Hotel, in Pensacola, Florida,
"(P) the Sheraton Baton Rouge, in Baton Rouge, Louisiana,
"(Q) $300,000 of equipment placed in service in 1986, in
connection with the renovation of the Best Western Townhouse
Convention Center in Cedar Rapids, Iowa,
"(R) the segment of a nationwide fiber optics
telecommunications network placed in service by SouthernNet,
the total estimated cost of which is $37,000,000,
"(S) two cogeneration facilities, to be placed in service by
the Reading Anthracite Coal Company (or any subsidiary
thereof), costing approximately $110,000,000 each, with respect
to which filings were made with the Federal Energy Regulatory
Commission by December 31, 1985, and which are located in
Pennsylvania,
"(T) a portion of a fiber optics network placed in service by
LDX NET after December 31, 1988, but only to the extent the
cost of such portion does not exceed $25,000,000,
"(U) 3 newly constructed fishing vessels, and one vessel that
is overhauled, constructed by Mid Coast Marine, but only to the
extent of $6,700,000 of investment,
"(V) $350,000 of equipment acquired in connection with the
reopening of a plant in Bristol, Rhode Island, which plant was
purchased by Buttonwoods, Ltd., Associates on February 7, 1986,
"(W) $4,046,000 of equipment placed in service by Brendle's
Incorporated, acquired in connection with a Distribution
Center,
"(X) a multi-family mixed-use housing project located in a
home rule city, the zoning for which was changed to residential
business planned development on November 26, 1985, and with
respect to which both the home rule city on December 4, 1985,
and the State housing finance agency on December 20, 1985,
adopted inducement resolutions,
"(Y) the Myrtle Beach Convention Center, in South Carolina,
to the extent of $25,000,000 of investment, and
"(Z) railroad cars placed in service by the Pullman Leasing
Company, pursuant to an April 3, 1986 purchase order, costing
approximately $10,000,000.
"(33) The amendments made by section 201 [amending this section
and sections 46, 167, 178, 179, 280F, 291, 312, 465, 467, 514,
751, 1245, 4162, 6111, and 7701 of this title] shall not apply to
-
"(A) $400,000 of equipment placed in service by Super Key
Market, if such equipment is placed in service before January
1, 1987,
"(B) the Trolley Square project, the total project cost of
which is $24,500,000, and the amount of depreciable real
property of which is $14,700,000.
"(C)(i) a waste-to-energy project in Derry, New Hampshire,
costing approximately $60,000,000, and
"(ii) a waste-to-energy project in Manchester, New Hampshire,
costing approximately $60,000,000,
"(D) the City of Los Angeles Co-composting project, the
estimated cost of which is $62,000,000, with respect to which,
on July 17, 1985, the California Pollution Control Financing
Authority issued an initial resolution in the maximum amount of
$75,000,000 to finance this project,
"(E) the St. Charles, Missouri Mixed-Use Center,
"(F) Oxford Place in Tulsa, Oklahoma,
"(G) an amount of investment generating $20,000,000 of
investment tax credits attributable to property used on the
Illinois Diversatech Campus,
"(H) $25,000,000 of equipment used in the Melrose Park Engine
Plant that is sold and leased back by Navistar,
"(I) 80,000 vending machines, for a cost approximating
$3,400,000 placed into service by Folz Vending Co.,
"(J) A 25.85 megawatt alternative energy facility located in
Deblois, Maine, with respect to which certification by the
Federal Energy Regulatory Commission was made on April 3, 1986,
"(K) Burbank Manors, in Illinois, and
"(L) a cogeneration facility to be built at a paper company
in Turners Falls, Massachusetts, with respect to which a letter
of intent was executed on behalf of the paper company on
September 26, 1985.
"(40) (!2) Certain trucks, etc. - The amendments made by
section 201 shall not apply to trucks, tractor units, and
trailers which a privately held truck leasing company
headquartered in Des Moines, Iowa, contracted to purchase in
September 1985 but only to the extent the aggregate reduction in
Federal tax liability by reason of the application of this
paragraph does not exceed $8,500,000.
"(34) The amendments made by section 201 shall not apply to an
approximately 240,000 square foot beverage container
manufacturing plant located in Batesville, Mississippi, or plant
equipment used exclusively on the plant premises if -
"(A) a 2-year supply contract was signed by the taxpayer and
a customer on November 1, 1985,
"(B) such contract further obligated the customer to purchase
beverage containers for an additional 5-year period if physical
signs of construction of the plant are present before September
1986,
"(C) ground clearing for such plant began before August 1986,
and
"(D) construction is completed, the equipment is installed,
and operations are commenced before July 1, 1987.
"(35) The amendments made by section 201 shall not apply to any
property which is part of the multifamily housing at the Columbia
Point Project in Boston, Massachusetts. A project shall be
treated as not described in the preceding sentence and as not
described in section 252(f)(1)(D) [set out as a note under
section 42 of this title] unless such project includes at
substantially all times throughout the compliance period (within
the meaning of section 42(i)(1) of the Internal Revenue Code of
1986), a facility which provides health services to the residents
of such project for fees commensurate with the ability of such
individuals to pay for such services.
"(36) The amendments made by section 201 shall not apply to any
ethanol facility located in Blair, Nebraska, if -
"(A) in July of 1984 an initial binding construction contract
was entered into for such facility,
"(B) in June of 1986, certain Department of Energy
recommended contract changes required a change of contractor,
and
"(C) in September of 1986, a new contract to construct such
facility, consistent with such recommended changes, was entered
into.
"(37) The amendments made by section 201 shall not apply to any
property which is part of a sewage treatment facility if, prior
to January 1, 1986, the City of Conyers, Georgia, selected a
privatizer to construct such facility, received a guaranteed
maximum price bid for the construction of such facility, signed a
letter of intent and began substantial negotiations of a service
agreement with respect to such facility.
"(38) The amendments made by section 201 shall not apply to -
"(A) a $28,000,000 wood resource complex for which
construction was authorized by the Board of Directors on August
9, 1985,
"(B) an electrical cogeneration plant in Bethel, Maine which
is to generate 2 megawatts of electricity from the burning of
wood residues, with respect to which a contract was entered
into on July 10, 1984, and with respect to which $200,000 of
the expected $2,000,000 cost had been committed before June 15,
1986,
"(C) a mixed income housing project in Portland, Maine which
is known as the Back Bay Tower and which is expected to cost
$17,300,000,
"(D) the Eastman Place project and office building in
Rochester, New York, which is projected to cost $20,000,000,
with respect to which an inducement resolution was adopted in
December 1986, and for which a binding contract of $500,000 was
entered into on April 30, 1986,
"(E) the Marquis Two project in Atlanta, Georgia which has a
total budget of $72,000,000 and the construction phase of which
began under a contract entered into on March 26, 1986,
"(F) a 166-unit continuing care retirement center in New
Orleans, Louisiana, the construction contract for which was
signed on February 12, 1986, and is for a maximum amount not to
exceed $8,500,000,
"(G) the expansion of the capacity of an oil refining
facility in Rosemont, Minnesota from 137,000 to 207,000 barrels
per day which is expected to be completed by December 31, 1990,
and
"(H) a project in Ransom, Pennsylvania which will burn coal
waste (known as 'culm') with an approximate cost of $64,000,000
and for which a certification from the Federal Energy
Regulatory Commission was received on March 11, 1986.
"(39) The amendments made by section 201 shall not apply to any
facility for the manufacture of an improved particle board if a
binding contract to purchase such equipment was executed March 3,
1986, such equipment will be placed in service by January 1,
1988, and such facility is located in or near Moncure, North
Carolina.
"(b) Special Rule for Certain Property. - The provisions of
section 168(f)(8) of the Internal Revenue Code of 1954 (as amended
by section 209 of the Tax Equity and Fiscal Responsibility Act of
1982) shall continue to apply to any transaction permitted by
reason of section 12(c)(2) of the Tax Reform Act of 1984 or section
209(d)(1)(B) of the Tax Equity and Fiscal Responsibility Act of
1982 (as amended by the Tax Reform Act of 1984) [section 12(c)(2)
of Pub. L. 98-369 and section 209(d)(1)(B) of Pub. L. 97-248,
respectively, set out below].
"(c) Applicable Date in Certain Cases. -
"(1) Section 203(b)(2) shall be applied by substituting
'January 1, 1992' for 'January 1, 1991' in the following cases.
"(A) in the case of a 2-unit nuclear powered electric
generating plant (and equipment and incidental appurtenances),
located in Pennsylvania and constructed pursuant to contracts
entered into by the owner operator of the facility before
December 31, 1975, including contracts with the
engineer/constructor and the nuclear steam system supplier,
such contracts shall be treated as contracts described in
section 203(b)(1)(A),
"(B) a cogeneration facility with respect to which an
application with the Federal Energy Regulatory Commission was
filed on August 2, 1985, and approved October 15, 1985.
"(C) in the case of a 1,300 megawatt coal-fired steam powered
electric generating plant (and related equipment and incidental
appurtenances), which the three owners determined in 1984 to
convert from nuclear power to coal power and for which more
than $600,000,000 had been incurred or committed for
construction before September 25, 1985, except that no
investment tax credit will be allowable under section 49(d)(3)
added by section 211(a) of this Act [section 49(d) of this
title does not contain a par. (3)] for any qualified progress
expenditures made after December 31, 1990.
"(2) Section 203(b)(2) shall be applied by substituting 'April
1, 1992' for the applicable date that would otherwise apply, in
the case of the second unit of a twin steam electric generating
facility and related equipment which was granted a certificate of
public convenience and necessity by a public service commission
prior to January 1, 1982, if the first unit of the facility was
placed in service prior to January 1, 1985, and before September
26, 1985, more than $100,000,000 had been expended toward the
construction of the second unit.
"(3) Section 203(b)(2) shall be applied by substituting
'January 1, 1990,' (or, in the case of a project described in
subparagraph (B), by substituting 'April 1, 1992') for the
applicable date that would otherwise apply in the case of -
"(A) new commercial passenger aircraft used by a domestic
airline, if a binding contract with respect to such aircraft
was entered into on or before April 1, 1986, and such aircraft
has a present class life of 12 years,
"(B) a pumped storage hydroelectric project with respect to
which an application was made to the Federal Energy Regulatory
Commission for a license on February 4, 1974, and license was
issued August 1, 1977, the project number of which is 2740, and
"(C) a newsprint mill in Pend Oreille county, Washington,
costing about $290,000,000.
In the case of an aircraft described in subparagraph (A), section
203(b)(1)(A) shall be applied by substituting 'April 1, 1986' for
'March 1, 1986' and section 49(e)(1)(B) of the Internal Revenue
Code of 1986 shall not apply.
"(4) The amendments made by section 201 [amending this section
and sections 46, 167, 178, 179, 280F, 291, 312, 465, 467, 514,
751, 1245, 4162, 6111, and 7701 of this title] shall not apply to
a limited amount of the following property or a limited amount of
property set forth in a submission before September 16, 1986, by
the following taxpayers:
"(A) Arena project, Michigan, but only with respect to
$78,000,000 of investments.
"(B) Campbell Soup Company, Pennsylvania, California, North
Carolina, Ohio, Maryland, Florida, Nebraska, Michigan, South
Carolina, Texas, New Jersey, and Delaware, but only with
respect to $9,329,000 of regular investment tax credits.
"(C) The Southeast Overtown/Park West development, Florida,
but only with respect to $200,000,000 of investments.
"(D) Equipment placed in service and operated by Leggett and
Platt before July 1, 1987, but only with respect to $2,000,000
of regular investment tax credits, and subsections (c) and (d)
of section 49 of the Internal Revenue Code of 1986 shall not
apply to such equipment.
"(E) East Bank Housing Project.
"(F) $1,561,215 of investments by Standard Telephone Company.
"(G) Five aircraft placed in service before January 1, 1987,
by Presidential Air.
"(H) A rehabilitation project by Ann Arbor Railroad, but only
with respect to $2,900,000 of investments.
"(I) Property that is part of a cogeneration project located
in Ada, Michigan, but only with respect to $30,000,000 of
investments.
"(J) Anchor Store Project, Michigan, but only with respect to
$21,000,000 of investments.
"(K) A waste-fired electrical generating facility of Biogen
Power, but only with respect to $34,000,000 of investments.
"(L) $14,000,000 of television transmitting towers placed in
service by Media General, Inc., which were subject to binding
contracts as of January 21, 1986, and will be placed in service
before January 1, 1988,
"(M) Interests of Samuel A. Hardage (whether owned
individually or in partnership form).
"(N) Two aircraft of Mesa Airlines with an aggregate cost of
$5,723,484.
"(O) Yarn-spinning equipment used at Spray Cotton Mills, but
only with respect to $3,000,000 of investments.
"(P) 328 units of low-income housing at Angelus Plaza, but
only with respect to $20,500,000 of investments.
"(Q) One aircraft of Continental Aviation Services with a
cost of approximately $15,000,000 that was purchased pursuant
to a contract entered into during March of 1983 and that is
placed in service by December 31, 1988.
"(d) Railroad Grading and Tunnel Bores. -
"(1) In general. - In the case of expenditures for railroad
grading and tunnel bores which were incurred by a common carrier
by railroad to replace property destroyed in a disaster occurring
on or about April 17, 1983, near Thistle, Utah, such
expenditures, to the extent not in excess of $15,000,000, shall
be treated as recovery property which is 5-year property under
section 168 of the Internal Revenue Code of 1954 (as in effect
before the amendments made by this Act) and which is placed in
service at the time such expenditures were incurred.
"(2) Business interruption proceeds. - Business interruption
proceeds received for loss of use, revenues, or profits in
connection with the disaster described in paragraph (1) and
devoted by the taxpayer described in paragraph (1) to the
construction of replacement track and related grading and tunnel
bore expenditures shall be treated as constituting an amount
received from the involuntary conversion of property under
section 1033(a)(2) of such Code.
"(3) Effective date. - This subsection shall apply to taxable
years ending after April 17, 1983.
"(e) Treatment of Certain Disaster Losses. -
"(1) In general. - In the case of a disaster described in
paragraph (2), at the election of the taxpayer, the amendments
made by section 201 of this Act [amending this section and
sections 46, 167, 178, 179, 280F, 291, 312, 465, 467, 514, 751,
1245, 4162, 6111, and 7701 of this title] -
"(A) shall not apply to any property placed in service during
1987 or 1988, or
"(B) shall apply to any property placed in service during
1985 or 1986,
which is property to replace property lost, damaged, or destroyed
in such disaster.
"(2) Disaster to which section applies. - This section shall
apply to a flood which occurred on November 3 through 7, 1985,
and which was declared a natural disaster area by the President
of the United States."
Section 1002(c)(3) of Pub. L. 100-647 provided that:
"Notwithstanding section 203 of the Reform Act [section 203 of Pub.
L. 99-514, set out above], the amendments made by section 201 of
the Reform Act [section 201 of Pub. L. 99-514, amending this
section and sections 46, 167, 178, 179, 280F, 291, 312, 465, 467,
514, 751, 1245, 4162, 6111, and 7701 of this title] shall apply to
any real property which was acquired before January 1, 1987, and
was converted on or after such date from personal use to a use for
which depreciation is allowable."
Amendment by section 201(a) of Pub. L. 99-514 not applicable to
any property placed in service before Jan. 1, 1994, if such
property placed in service as part of specified rehabilitations,
and not applicable to certain additional rehabilitations, see
section 251(d)(2), (3) of Pub. L. 99-514, set out as a note under
section 46 of this title.
Amendment by sections 1802(a)(1)-(2)(D), (G), (3), (4)(A), (B),
(7), (b)(1), 1809(a)(1)-(2)(B), (4)(A), (B) of Pub. L. 99-514
effective, except as otherwise provided, as if included in the
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,
to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
Section 1802(a)(2)(E)(ii) of Pub. L. 99-514 provided that:
"(I) Except as otherwise provided in this clause, the amendment
made by clause (i) [amending this section] shall apply to property
placed in service after September 27, 1985; except that such
amendment shall not apply to any property acquired pursuant to a
binding written contract in effect on such date (and at all times
thereafter).
"(II) If an election under this subclause is made with respect to
any property, the amendment made by clause (i) shall apply to such
property whether or not placed in service on or before September
27, 1985."
Section 1809(a)(2)(C)(i) of Pub. L. 99-514 provided in part that
amendment by section 1809(a)(2)(C)(i) of Pub. L. 99-514 is
effective on and after Oct. 22, 1986.
Section 1809(b)(3) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to property placed in service by the transferee after
December 31, 1985, in taxable years ending after such date."
EFFECTIVE DATE OF 1985 AMENDMENT
Section 105(b) of Pub. L. 99-121, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by section 103 [amending this
section and sections 47, 48, 57, 312, and 1245 of this title] shall
apply with respect to property placed in service by the taxpayer
after May 8, 1985.
"(2) Exception. - The amendments made by section 103 shall not
apply to property placed in service by the taxpayer before January
1, 1987, if -
"(A) the taxpayer or a qualified person entered into a binding
contract to purchase or construct such property before May 9,
1985, or
"(B) construction of such property was commenced by or for the
taxpayer or a qualified person before May 9, 1985.
For purposes of this paragraph, the term 'qualified person' means
any person whose rights in such a contract or such property are
transferred to the taxpayer, but only if such property is not
placed in service before such rights are transferred to the
taxpayer.
"(3) Special rule for components. - For purposes of applying
section 168(f)(1)(B) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as amended by section 103) to components placed in
service after December 31, 1986, property to which paragraph (2) of
this subsection applies shall be treated as placed in service by
the taxpayer before May 9, 1985.
"(4) Technical correction. - The amendment made by paragraph (6)
of section 103(b) [amending section 47 of this title] shall apply
as if included in the amendments made by section 111 of the Tax
Reform Act of 1984 [Pub. L. 98-369, see Effective Date of 1984
Amendment note below].
"(5) Special rule for leasing of qualified rehabilitated
buildings. - The amendment made by paragraph (5) of section 103(b)
to section 48(g)(2)(B)(v) of the Internal Revenue Code of 1986
shall not apply to leases entered into before May 22, 1985, but
only if the lessee signed the lease before May 17, 1985."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 12 of Pub. L. 98-369 applicable to taxable
years ending after Dec. 31, 1983, see section 18(a) of Pub. L.
98-369, set out as a note under section 48 of this title.
Section 31(g) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1802(a)(2)(F), (10)(A)-(D)(i), (E)-(G),
Oct. 22, 1986, 100 Stat. 2095, 2788, 2790, 2791; Pub. L. 100-647,
title I, Sec. 1018(b)(1), Nov. 10, 1988, 102 Stat. 3577, provided
that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 46, 48, and 7701 of this title] shall apply -
"(A) to property placed in service by the taxpayer after May
23, 1983, in taxable years ending after such date, and
"(B) to property placed in service by the taxpayer on or before
May 23, 1983, if the lease to the tax-exempt entity is entered
into after May 23, 1983.
"(2) Leases entered into on or before may 23, 1983. - The
amendments made by this section shall not apply with respect to any
property leased to a tax-exempt entity if the property is leased
pursuant to -
"(A) a lease entered into on or before May 23, 1983 (or a
sublease under such a lease), or
"(B) any renewal or extension of a lease entered into on or
before May 23, 1983, if such renewal or extension is pursuant to
an option exercisable by the tax-exempt entity which was held by
the tax-exempt entity on May 23, 1983.
"(3) Binding contracts, etc. -
"(A) The amendments made by this section shall not apply with
respect to any property leased to a tax-exempt entity if such
lease is pursuant to 1 or more written binding contracts which,
on May 23, 1983, and at all times thereafter, required -
"(i) the taxpayer (or his predecessor in interest under the
contract) to acquire, construct, reconstruct, or rehabilitate
such property, and
"(ii) the tax-exempt entity (or a tax-exempt predecessor
thereof) to be the lessee of such property.
"(B) Paragraph (9) of section 168(j) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954] (as added by this section)
shall not apply with respect to any property owned by a
partnership if -
"(i) such property was acquired by such partnership on or
before October 21, 1983, or
"(ii) such partnership entered into a written binding
contract which, on October 21, 1983, and at all times
thereafter, required the partnership to acquire or construct
such property.
"(C) The amendments made by this section shall not apply with
respect to any property leased to a tax-exempt entity (other than
any foreign person or entity) -
"(i) if -
"(I) on or before May 23, 1983, the taxpayer (or his
predecessor in interest under the contract) or the tax-exempt
entity entered into a written binding contract to acquire,
construct, reconstruct, or rehabilitate such property and
such property had not previously been used by the tax-exempt
entity, or
"(II) the taxpayer or the tax-exempt entity acquired the
property after June 30, 1982, and on or before May 23, 1983,
or completed the construction, reconstruction, or
rehabilitation of the property after December 31, 1982, and
on or before May 23, 1983, and
"(ii) if such lease is pursuant to a written binding contract
entered into before January 1, 1985, which requires the
tax-exempt entity to be the lessee of such property.
"(4) Official governmental action on or before november 1, 1983.
-
"(A) In general. - The amendments made by this section shall
not apply with respect to any property leased to a tax-exempt
entity (other than the United States, any agency or
instrumentality thereof, or any foreign person or entity) if -
"(i) on or before November 1, 1983, there was significant
official governmental action with respect to the project or its
design, and
"(ii) the lease to the tax-exempt entity is pursuant to a
written binding contract entered into before January 1, 1985,
which requires the tax-exempt entity to be the lessee of the
property.
"(B) Significant official governmental action. - For purposes
of subparagraph (A), the term 'significant official governmental
action' does not include granting of permits, zoning changes,
environmental impact statements, or similar governmental actions.
"(C) Special rule for credit unions. - In the case of any
property leased to a credit union pursuant to a written binding
contract with an expiration date of December 31, 1984, which was
entered into by such organization on August 23, 1984 -
"(i) such credit union shall not be treated as an agency or
instrumentality of the United States; and
"(ii) clause (ii) of subparagraph (A) shall be applied by
substituting 'January 1, 1987' for 'January 1, 1985'.
"(D) Special rule for greenville auditorium board. - For
purposes of this paragraph, significant official governmental
action taken by the Greenville County Auditorium Board of
Greenville, South Carolina, before May 23, 1983, shall be treated
as significant official governmental action with respect to the
coliseum facility subject to a binding contract to lease which
was in effect on January 1, 1985.
"(E) Treatment of certain historic structures. - If -
"(i) on June 16, 1982, the legislative body of the local
governmental unit adopted a bond ordinance to provide funds to
renovate elevators in a deteriorating building owned by the
local governmental unit and listed in the National Register,
and
"(ii) the chief executive officer of the local governmental
unit, in connection with the renovation of such building, made
an application on June 1, 1983, to a State agency for a Federal
historic preservation grant and made an application on June 17,
1983, to the Economic Development Administration of the United
States Department of Commerce for a grant,
the requirements of clauses (i) and (ii) of subparagraph (A)
shall be treated as met.
"(5) Mass commuting vehicles. - The amendments made by this
section shall not apply to any qualified mass commuting vehicle (as
defined in section 103(b)(9) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) which is financed in whole or in part by
obligations the interest on which is excludable from gross income
under section 103(a) of such Code if -
"(A) such vehicle is placed in service before January 1, 1988,
or
"(B) such vehicle is placed in service on or after such date -
"(i) pursuant to a binding contract or commitment entered
into before April 1, 1983, and
"(ii) solely because of conditions which, as determined by
the Secretary of the Treasury or his delegate, are not within
the control of the lessor or lessee.
"(6) Certain turbines and boilers. - The amendments made by this
section shall not apply to any property described in section
208(d)(3)(E) of the Tax Equity and Fiscal Responsibility Act of
1982 [section 208(d)(3)(E) of Pub. L. 97-248, set out as an
Effective Date of 1982 Amendments note below].
"(7) Certain facilities for which ruling requests filed on or
before may 23, 1983. - The amendments made by this section shall
not apply with respect to any facilities described in clause (ii)
of section 168(f)(12)(C) of the Internal Revenue Code of 1986
(relating to certain sewage or solid waste disposal facilities), as
in effect on the day before the date of the enactment of this Act
[July 18, 1984], if a ruling request with respect to the lease of
such facility to the tax-exempt entity was filed with the Internal
Revenue Service on or before May 23, 1983.
"(8) Recovery period for certain qualified sewage facilities. -
"(A) In general. - In the case of any property (other than
15-year real property) which is part of a qualified sewage
facility, the recovery period used for purposes of paragraph (1)
of section 168(j) of the Internal Revenue Code of 1986 (as added
by this section) shall be 12 years. For purposes of the preceding
sentence, the term '15-year real property' includes 18-year real
property.
"(B) Qualified sewage facility. - For purposes of subparagraph
(A), the term 'qualified sewage facility' means any facility
which is part of the sewer system of a city, if -
"(i) on June 15, 1983, the City Council approved a resolution
under which the city authorized the procurement of equity
investments for such facility, and
"(ii) on July 12, 1983, the Industrial Development Board of
the city approved a resolution to issue a $100,000,000
industrial development bond issue to provide funds to purchase
such facility.
"(9) Property used by the postal service. - In the case of
property used by the United States Postal Service, paragraphs (1)
and (2) shall be applied by substituting 'October 31' for 'May 23'.
"(10) Existing appropriations. - The amendments made by this
section shall not apply to personal property leased to or used by
the United States if -
"(A) an express appropriation has been made for rentals under
such lease for the fiscal year 1983 before May 23, 1983, and
"(B) the United States or an agency or instrumentality thereof
has not provided an indemnification against the loss of all or a
portion of the tax benefits claimed under the lease or service
contract.
"(11) Special rule for certain partnerships. -
"(A) Partnerships for which qualifying action existed before
october 21, 1983. - Paragraph (9) of section 168(j) of the
Internal Revenue Code of 1986 (as added by this section) shall
not apply to any property acquired, directly or indirectly,
before January 1, 1985, by any partnership described in
subparagraph (B).
"(B) Application filed before october 21, 1983. - A partnership
is described in this subparagraph if -
"(i) before October 21, 1983, the partnership was organized,
a request for exemption with respect to such partnership was
filed with the Department of Labor, and a private placement
memorandum stating the maximum number of units in the
partnership that would be offered had been circulated,
"(ii) the interest in the property to be acquired, directly
or indirectly (including through acquiring an interest in
another partnership) by such partnership was described in such
private placement memorandum, and
"(iii) the marketing of partnership units in such partnership
is completed not later than two years after the later of the
date of the enactment of this Act [July 18, 1984] or the date
of publication in the Federal Register of such exemption by the
Department of Labor and the aggregate number of units in such
partnership sold does not exceed the amount described in clause
(i).
"(C) Partnerships for which qualifying action existed before
march 6, 1984. - Paragraph (9) of section 168(j) of the Internal
Revenue Code of 1986 (as added by this section) shall not apply
to any property acquired directly or indirectly, before January
1, 1986, by any partnership described in subparagraph (D). For
purposes of this subparagraph, property shall be deemed to have
been acquired prior to January 1, 1986, if the partnership had
entered into a written binding contract to acquire such property
prior to January 1, 1986 and the closing of such contract takes
place within 6 months of the date of such contract (24 months in
the case of new construction).
"(D) Partnership organized before march 6, 1984. - A
partnership is described in this subparagraph if -
"(i) before March 6, 1984, the partnership was organized and
publicly announced the maximum amount (as shown in the
registration statement, prospectus or partnership agreement,
whichever is greater) of interests which would be sold in the
partnership, and
"(ii) the marketing or partnership interests in such
partnership was completed not later than the 90th day after the
date of the enactment of this Act [July 18, 1984] and the
aggregate amount of interest in such partnership sold does not
exceed the maximum amount described in clause (i).
"(12) Special rule for amendment made by subsection (c)(2). - The
amendment made by subsection (c)(2) [amending section
48(g)(2)(B)(i) of this title] to the extent it relates to
subsection (f)(12) of section 168 of the Internal Revenue Code of
1986 shall take effect as if it had been included in the amendments
made by section 216(a) of the Tax Equity and Fiscal Responsibility
Act of 1982 [section 216(a) of Pub. L. 97-248, which amended this
section].
"(13) Special rule for service contracts not involving tax-exempt
entities. - In the case of a service contract or other arrangement
described in section 7701(e) of the Internal Revenue Code of 1986
(as added by this section) with respect to which no party is a
tax-exempt entity, such section 7701(e) shall not apply to -
"(A) such contract or other arrangement if such contract or
other arrangement was entered into before November 5, 1983, or
"(B) any renewal or other extension of such contract or other
arrangement pursuant to an option contained in such contract or
other arrangement on November 5, 1983.
"(14) Property leased to section 593 organizations. - For
purposes of the amendment made by subsection (f) [enacting section
46(e)(4) of this title], paragraphs (1), (2), and (4) shall be
applied by substituting -
"(A) 'November 5, 1983' for 'May 23, 1983' and 'November 1,
1983', as the case may be, and
"(B) 'organization described in section 593 of the Internal
Revenue Code of 1986' for 'tax-exempt entity'.
"(15) Special rules relating to foreign persons or entities. -
"(A) In general. - In the case of tax-exempt use property which
is used by a foreign person or entity, the amendments made by
this section shall not apply to any property which -
"(i) is placed in service by the taxpayer before January 1,
1984, and
"(ii) is used by such foreign person or entity pursuant to a
lease entered into before January 1, 1984.
"(B) Special rule for subleases. - If tax-exempt use property
is being used by a foreign person or entity pursuant to a
sublease under a lease described in subparagraph (A)(ii),
subparagraph (A) shall apply to such property only if such
property was used before January 1, 1984, by any foreign person
or entity pursuant to such lease.
"(C) Binding contracts, etc. - The amendments made by this
section shall not apply with respect to any property (other than
aircraft described in subparagraph (D)) leased to a foreign
person or entity -
"(i) if -
"(I) on or before May 23, 1983, the taxpayer (or a
predecessor in interest under the contract) or the foreign
person or entity entered into a written binding contract to
acquire, construct, or rehabilitate such property and such
property had not previously been used by the foreign person
or entity, or
"(II) the taxpayer or the foreign person or entity acquired
the property or completed the construction, reconstruction,
or rehabilitation of the property after December 31, 1982 and
on or before May 23, 1983, and
"(ii) if such lease is pursuant to a written binding contract
entered into before January 1, 1984, which requires the foreign
person or entity to be the lessee of such property.
"(D) Certain aircraft. - The amendments made by this section
shall not apply with respect to any wide-body, four-engine,
commercial aircraft used by a foreign person or entity if -
"(i) on or before November 1, 1983, the foreign person or
entity entered into a written binding contract to acquire such
aircraft, and
"(ii) such aircraft is originally placed in service by such
foreign person or entity (or its successor in interest under
the contract) after May 23, 1983, and before January 1, 1986.
"(E) Use after 1983. - Qualified container equipment placed in
service before January 1, 1984, which is used before such date by
a foreign person shall not, for purposes of section 47 of the
Internal Revenue Code of 1986, be treated as ceasing to be
section 38 property by reason of the use of such equipment before
January 1, 1985, by a foreign person or entity. For purposes of
this subparagraph, the term 'qualified container equipment' means
any container, container chassis, or container trailer of a
United States person with a present class life of not more than 6
years.
"(16) Organizations electing exemption from rules relating to
previously tax-exempt organizations must elect taxation of exempt
arbitrage profits. -
"(A) In general. - An organization may make the election under
section 168(j)(4)(E)(ii) of the Internal Revenue Code of 1986
(relating to election not to have rules relating to previously
tax-exempt organizations apply) only if such organization elects
the tax treatment of exempt arbitrage profits described in
subparagraph (B).
"(B) Taxation of exempt arbitrage profits. -
"(i) In general. - In the case of an organization which
elects the application of this subparagraph, there is hereby
imposed a tax on the exempt arbitrage profits of such
organization.
"(ii) Rate of tax, etc. - The tax imposed by clause (i) -
"(I) shall be the amount of tax which would be imposed by
section 11 of such Code if the exempt arbitrage profits were
taxable income (and there were no other taxable income), and
"(II) shall be imposed for the first taxable year of the
tax-exempt use period (as defined in section 168(j)(4)(E)(ii)
of such Code).
"(C) Exempt arbitrage profits. -
"(i) In general. - For purposes of this paragraph, the term
exempt arbitrage profits means the aggregate amount described
in clauses (i) and (ii) of subparagraph (D) of section
103(c)(6) of such Code for all taxable years for which the
organization was exempt from tax under section 501(a) of such
Code with respect to obligations -
"(I) associated with property described in section
168(j)(4)(E)(i), and
"(II) issued before January 1, 1985.
"(ii) Application of section 103(b)(6). - For purposes of
this paragraph, section 103(b)(6) of such Code shall apply to
obligations issued before January 1, 1985, but the amount
described in clauses (i) and (ii) of subparagraph (D) thereof
shall be determined without regard to clauses (i)(II) and (ii)
of subparagraph (F) thereof.
"(D) Other laws applicable. -
"(i) In general. - Except as provided in clause (ii), all
provisions of law, including penalties, applicable with respect
to the tax imposed by section 11 of such Code shall apply with
respect to the tax imposed by this paragraph.
"(ii) No credits against tax, etc. - The tax imposed by this
paragraph shall not be treated as imposed by section 11 of such
Code for purposes of -
"(I) part VI of subchapter A of chapter 1 of such Code
(relating to minimum tax for tax preferences), and
"(II) determining the amount of any credit allowable under
subpart A of part IV of such subchapter.
"(E) Election. - Any election under subparagraph (A) -
"(i) shall be made at such time and in such manner as the
Secretary may prescribe,
"(ii) shall apply to any successor organization which is
engaged in substantially similar activities, and
"(iii) once made, shall be irrevocable.
"(17) Certain transitional leased property. - The amendments made
by this section shall not apply to property described in section
168(c)(2)(D) of the Internal Revenue Code of 1986, as in effect on
the day before the date of the enactment of this Act [July 18,
1984], and which is described in any of the following
subparagraphs:
"(A) Property is described in this subparagraph if such
property is leased to a university, and -
"(i) on June 16, 1983, the Board of Administrators of the
university adopted a resolution approving the rehabilitation of
the property in connection with an overall campus development
program; and
"(ii) the property houses a basketball arena and university
offices.
"(B) Property is described in this subparagraph if such
property is leased to a charitable organization, and -
"(i) on August 21, 1981, the charitable organization acquired
the property, with a view towards rehabilitating the property;
and
"(ii) on June 12, 1982, an arson fire caused substantial
damage to the property, delaying the planned rehabilitation.
"(C) Property is described in this subparagraph if such
property is leased to a corporation that is described in section
501(c)(3) of the Internal Revenue Code of 1986 (relating to
organizations exempt from tax) pursuant to a contract -
"(i) which was entered into on August 3, 1983; and
"(ii) under which the corporation first occupied the property
on December 22, 1983.
"(D) Property is described in this subparagraph if such
property is leased to an educational institution for use as an
Arts and Humanities Center and with respect to which -
"(i) in November 1982, an architect was engaged to design a
planned renovation;
"(ii) in January 1983, the architectural plans were
completed;
"(iii) in December 1983, a demolition contract was entered
into; and
"(iv) in March 1984, a renovation contract was entered into.
"(E) Property is described in this subparagraph if such
property is used by a college as a dormitory, and -
"(i) in October 1981, the college purchased the property with
a view towards renovating the property;
"(ii) renovation plans were delayed because of a zoning
dispute; and
"(iii) in May 1983, the court of highest jurisdiction in the
State in which the college is located resolved the zoning
dispute in favor of the college.
"(F) Property is described in this subparagraph if such
property is a fraternity house related to a university with
respect to which -
"(i) in August 1982, the university retained attorneys to
advise the university regarding the rehabilitation of the
property;
"(ii) on January 21, 1983, the governing body of the
university established a committee to develop rehabilitation
plans;
"(iii) on January 10, 1984, the governor of the state in
which the university is located approved historic district
designation for an area that includes the property; and
"(iv) on February 2, 1984, historic preservation
certification applications for the property were filed with a
historic landmarks commission.
"(G) Property is described in this subparagraph if such
property is leased to a retirement community with respect to
which -
"(i) on January 5, 1977, a certificate of incorporation was
filed with the appropriate authority of the state in which the
retirement community is located; and
"(ii) on November 22, 1983, the Board of Trustees adopted a
resolution evidencing the intention to begin immediate
construction of the property.
"(H) Property is described in this subparagraph if such
property is used by a university, and -
"(i) in July 1982, the Board of Trustees of the university
adopted a master plan for the financing of the property; and
"(ii) as of August 1, 1983, at least $60,000 in private
expenditures had been expended in connection with the property.
In the case of Clemson University, the preceding sentence applies
only to the Continuing Education Center and the component housing
project.
"(I) Property is described in this subparagraph if such
property is used by a university as a fine arts center and the
Board of Trustees of such university authorized the
sale-leaseback agreement with respect to such property on March
7, 1984.
"(J) Property is described in this subparagraph if such
property is used by a tax-exempt entity as an international trade
center, and
"(i) prior to 1982, an environmental impact study for such
property was completed;
"(ii) on June 24, 1981, a developer made a written commitment
to provide one-third of the financing for the development of
such property; and
"(iii) on October 20, 1983, such developer was approved by
the Board of Directors of the tax-exempt entity.
"(K) Property is described in this subparagraph if such
property is used by university of osteopathic medicine and health
sciences, and on or before December 31, 1983, the Board of
Trustees of such university approved the construction of such
property.
"(L) Property is described in this subparagraph if such
property is used by a tax-exempt entity, and -
"(i) such use is pursuant to a lease with a taxpayer which
placed substantial improvements in service;
"(ii) on May 23, 1983, there existed architectural plans and
specifications (within the meaning of sec. 48(g)(1)(C)(ii) of
the Internal Revenue Code of 1986); and
"(iii) prior to May 23, 1983, at least 10 percent of the
total cost of such improvements was actually paid or incurred.
Property is described in this subparagraph if such property was
leased to a tax-exempt entity pursuant to a lease recorded in the
Register of Deed of Essex County, New Jersey, on May 7, 1984, and
a deed of such property was recorded in the Register of Deed of
Essex County, New Jersey, on May 7, 1984.
"(M) Property is described in this subparagraph if such
property is used as a convention center and on June 2, 1983, the
City Council of the city in which the center is located provided
for over $6 million for the project.
"(18) Special rule for amendment made by subsection (c)(1). -
"(A) In general. - The amendment made by subsection (c)(1)
[enacting section 48(g)(2)(B)(vi) of this title] shall not apply
to property -
"(i) leased by the taxpayer on or before November 1, 1983, or
"(ii) leased by the taxpayer after November 1, 1983, if on or
before such date the taxpayer entered into a written binding
contract requiring the taxpayer to lease such property.
"(B) Limitation. - Subparagraph (A) shall apply to the
amendment made by subsection (c)(1) only to the extent such
amendment relates to property described in subclause (II), (III),
or (IV) of section 168(j)(3)(B)(ii) of the Internal Revenue Code
of 1986 (as added by this section).
"(19) Special rule for certain energy management contracts. -
"(A) In general. - The amendments made by subsection (e)
[amending section 7701 of this title] shall not apply to property
used pursuant to an energy management contract that was entered
into prior to May 1, 1984.
"(B) Definition of energy management contract. - For purposes
of subparagraph (A), the term 'energy management contract' means
a contract for the providing of energy conservation or energy
management services.
"(20) Definitions. - For purposes of this subsection -
"(A) Tax-exempt entity. - The term 'tax-exempt entity' has the
same meaning as when used in section 168(j) of the Internal
Revenue Code of 1986 (as added by this section), except that such
term shall include any related entity (within the meaning of such
section).
"(B) Treatment of improvements. -
"(i) In general. - For purposes of this subsection, an
improvement to property shall not be treated as a separate
property unless such improvement is a substantial improvement
with respect to such property.
"(ii) Substantial improvement. - For purposes of clause (i),
the term 'substantial improvement' has the meaning given such
term by section 168(f)(1)(C) of such Code determined -
"(I) by substituting 'property' for 'building' each place
it appears therein,
"(II) by substituting '20 percent' for '25 percent' in
clause (ii) thereof, and
"(III) without regard to clause (iii) thereof.
"(C) Foreign person or entity. - The term 'foreign person or
entity' has the meaning given to such term by subparagraph (C) of
section 168(j)(4) of such Code (as added by this section). For
purposes of this subparagraph and subparagraph (A), such
subparagraph (C) shall be applied without regard to the last
sentence thereof.
"(D) Leases and subleases. - The determination of whether there
is a lease or sublease to a tax-exempt entity shall take into
account sections 168(j)(6)(A), 168(j)(8)(A), and 7701(e) of the
Internal Revenue Code of 1986 (as added by this section)."
[Section 1802(a)(10)(B) of Pub. L. 99-514 provided in part that
amendment by section 1802(a)(10)(B) of Pub. L. 99-514, amending
section 31(g)(15)(D)(ii) of Pub. L. 98-369, set out above, is
effective with respect to property placed in service by the
taxpayer after July 18, 1984.]
[Section 1802(a)(10)(D)(ii) of Pub. L. 99-514 provided that: "The
amendment made by clause (i) [amending section 31(g)(20)(B)(ii) of
Pub. L. 98-369, set out above] shall not apply to any property if -
"(I) on or before March 28, 1985, the taxpayer (or a
predecessor in interest under the contract) or the tax-exempt
entity entered into a written binding contract to acquire,
construct, or rehabilitate the property, or
"(II) the taxpayer or the tax-exempt entity began the
construction, reconstruction, or rehabilitation of the property
on or before March 28, 1985."]
Section 32(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1802(b)(2), Oct. 22, 1986, 100 Stat.
2095, 2791, provided that: "The amendment made by subsection (a)
[amending this section] shall apply to agreements described in
section 168(f)(14) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as added by subsection (a)) entered into more than 90
days after the date of the enactment of this Act [July 18, 1984]."
Section 111(g) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 48, 51, 312, and 1245 of this title] shall
apply with respect to property placed in service by the taxpayer
after March 15, 1984.
"(2) Exception. - The amendments made by this section shall not
apply to property placed in service by the taxpayer before January
1, 1987, if -
"(A) the taxpayer or a qualified person entered into a binding
contract to purchase or construct such property before March 16,
1984, or
"(B) construction of such property was commenced by or for the
taxpayer or a qualified person before March 16, 1984.
For purposes of this paragraph the term 'qualified person' means
any person who transfers his rights in such a contract or such
property to the taxpayer, but only if such property is not placed
in service by such person before such rights are transferred to the
taxpayer.
"(3) Special rules for application of paragraph (2). -
"(A) Certain inventory. - In the case of any property which -
"(i) is held by a person as property described in section
1221(1) [26 U.S.C. 1221(1)], and
"(ii) is disposed of by such person before January 1, 1985,
such person shall not, for purposes of paragraph (2), be treated
as having placed such property in service before such property is
disposed of merely because such person rented such property or
held such property for rental. No deduction for depreciation or
amortization shall be allowed to such person with respect to such
property,
"(B) Certain property financed by bonds. - In the case of any
property with respect to which -
"(i) bonds were issued to finance such property before 1984,
and
"(ii) an architectural contract was entered into before March
16, 1984,
paragraph (2) shall be applied by substituting 'May 2' for 'March
16'.
"(4) Special rule for components. - For purposes of applying
section 168(f)(1)(B) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as amended by this section) to components placed in
service after December 31, 1986, property to which paragraph (2)
applies shall be treated as placed in service by the taxpayer
before March 16, 1984.
"(5) Special rule for mid-month convention. - In the case of the
amendment made by subsection (d) [amending subsec. (b)(2)(A), (B)
of this section] -
"(A) paragraph (1) shall be applied by substituting 'June 22,
1984' for 'March 15, 1984', and
"(B) paragraph (2) shall be applied by substituting 'June 23,
1984' for 'March 15, 1984' each place it appears."
Amendment by section 113(a)(2) of Pub. L. 98-369 applicable to
property placed in service after Mar. 15, 1984, in taxable years
ending after such date, see section 113(c)(1) of Pub. L. 98-369,
set out as a note under section 48 of this title.
Section 113(c)(2) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(A) The amendments made by paragraphs (1) of subsection (b)
[amending this section] shall apply to any motion picture film or
video tape placed in service before, on, or after the date of the
enactment of this Act [July 18, 1984], except that such amendment
shall not apply to -
"(i) any qualified film placed in service by the taxpayer
before March 15, 1984, if the taxpayer treated such film as
recovery property for purposes of section 168 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] on a return of tax
under chapter 1 of such Code filed before March 16, 1984, or
"(ii) any qualified film placed in service by the taxpayer
before January 1, 1985, if -
"(I) 20 percent or more of the production costs of such film
were incurred before March 16, 1984, and
"(II) the taxpayer treats such film as recovery property for
purposes of section 168 of such Code.
No credit shall be allowable under section 38 of such Code with
respect to any qualified film described in clause (ii), except to
the extent provided in section 48(k) of such Code.
"(B) The amendment made by paragraph (2) and (3) of subsection
(b) [amending this section and sections 46 and 48 of this title]
shall apply as if included in the amendments made by section
201(a), 211(a)(1), and 211(f)(1) of the Economic Recovery Tax Act
of 1981 [sections 201(a), 211(a)(1), and 211(f)(1) of Pub. L.
97-34, enacting this section and amending section 46 of this
title].
"(C) The amendment made by paragraph (4) of subsection (b)
[amending section 48 of this title] shall take effect as if
included in the amendments made by section 205(a)(1) of the Tax
Equity and Fiscal Responsibility Act of 1982 [section 205(a)(1) of
Pub. L. 97-248, amending section 48 of this title].
"(D) For purposes of this paragraph, the terms 'qualified film'
and 'production costs' have the same respective meanings as when
used in section 48(k) of the Internal Revenue Code of 1986."
Amendment by section 474(r)(7) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 612(e) of Pub. L. 98-369 applicable to
interest paid or accrued after Dec. 31, 1984, on indebtedness
incurred after Dec. 31, 1984, see section 612(g) of Pub. L. 98-369,
set out as an Effective Date note under section 25 of this title.
Amendment by section 628(b) of Pub. L. 98-369 applicable to
property placed in service after Dec. 31, 1983, with certain
conditions and exceptions, see section 631(b) of Pub. L. 98-369,
set out as a note under section 103 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by title I of Pub. L. 97-448 effective, except as
otherwise provided, as if it had been included in the provision of
the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
Section 102(a)(10)(B) of Pub. L. 97-448, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply with respect to property to which the provisions of section
168(f)(8) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] (as in effect before the amendments made by the Tax Equity
and Fiscal Responsibility Act of 1982 [Pub. L. 97-248]) apply."
Amendment by section 541 of Pub. L. 97-424 applicable to taxable
years beginning after Dec. 31, 1979, with a special rule for
periods beginning before Mar. 1, 1980, see section 541(c) of Pub.
L. 97-424, set out as a note under section 46 of this title.
EFFECTIVE DATE OF 1982 AMENDMENTS
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
Section 208(d) of Pub. L. 97-248, as amended by Pub. L. 97-448,
title III, Sec. 306(a)(4), Jan. 12, 1983, 96 Stat. 2400; Pub. L.
98-369, div. A, title X, Sec. 1067(a), July 18, 1984, 98 Stat.
1048; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,
provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by subsections (a) and (b) of this
section [amending this section and section 47 of this title] shall
apply to agreements entered into after July 1, 1982, or to property
placed in service after July 1, 1982.
"(2) Transitional rule for certain safe harbor lease property. -
"(A) In general. - The amendments made by subsections (a) and
(b) [amending this section and section 47 of this title] shall
not apply to transitional safe harbor lease property.
"(B) Special rule for certain provisions. - Subparagraph (A)
shall not apply with respect to the provisions of paragraph (6)
of section 168(i) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as added by subsection (a)(1)), to the provisions
of section 168(f)(8)(J) of such Code (as added by subsection
(b)(4)), or to the amendment made by subsection (b)(1).
"(3) Transitional safe harbor lease property. - For purposes of
this subsection, the term 'transitional safe harbor lease property'
means property described in any of the following subparagraphs:
"(A) In general. - Property is described in this subparagraph
if such property is placed in service before January 1, 1983, if
-
"(i) with respect to such property a binding contract to
acquire or to construct such property was entered into by the
lessee after December 31, 1980, and before July 2, 1982, or
"(ii) such property was acquired by the lessee, or
construction of such property was commenced by or for the
lessee, after December 31, 1980, and before July 2, 1982.
"(B) Certain qualified lessees. - Property is described in this
subparagraph if such property is placed in service before July 1,
1982, and with respect to which -
"(i) an agreement to which section 168(f)(8)(A) of the
Internal Revenue Code of 1986 applies was entered into before
August 15, 1982, and
"(ii) the lessee under such agreement is a qualified lessee
(within the meaning of paragraph (6)).
"(C) Automotive manufacturing property. -
"(i) In general. - Property is described in this subparagraph
if -
"(I) such property is used principally by the taxpayer
directly in connection with the trade or business of the
taxpayer of the manufacture of automobiles or light-duty
trucks,
"(II) such property is automotive manufacturing property,
and
"(III) such property would be described in subparagraph (A)
if 'October 1' were substituted for 'January 1'.
"(ii) Light-duty truck. - For purposes of this subparagraph,
the term 'light-duty truck' means any truck with a gross
vehicle weight of 13,000 pounds or less. Such term shall not
include any truck tractor.
"(iii) Automotive manufacturing property. - For purposes of
this subparagraph, the term 'automotive manufacturing property'
means machinery, equipment, and special tools of the type
included in the former asset depreciation range guideline
classes 37.11 and 37.12.
"(iv) Special tools used by certain vendors. - For purposes
of this subparagraph, any special tools owned by a taxpayer
described in subclause (I) of clause (i) which are used by a
vendor solely for the production of component parts for sale to
the taxpayer shall be treated as automotive manufacturing
property used directly by such taxpayer.
"(D) Certain aircraft. - Property is described in this
subparagraph if such property -
"(i) is a commercial passenger aircraft (other than a
helicopter), and
"(ii) would be described in subparagraph (A) if 'January 1,
1984' were substituted for 'January 1, 1983'.
For purposes of determining whether property described in this
subparagraph is described in subparagraph (A), subparagraph
(A)(ii) shall be applied by substituting 'June 25, 1981' for
'December 31, 1980' and by substituting 'February 20, 1982' for
'July 2, 1982' and construction of the aircraft shall be treated
as having been begun during the period referred to in
subparagraph (A)(ii) if during such period construction or
reconstruction of a subassembly was commenced, or the stub wing
join occurred.
"(E) Turbines and boilers. - Property is described in this
subparagraph if such property -
"(i) is a turbine or boiler of a cooperative organization
engaged in the furnishing of electric energy to persons in
rural areas, and
"(ii) would be property described in subparagraph (A) if
'July 1' were substituted for 'January 1'.
For purposes of determining whether property described in this
subparagraph is described in subparagraph (A), such property
shall be treated as having been acquired during the period
referred to in subparagraph (A)(ii) if at least 20 percent of the
cost of such property is paid during such period.
"(F) Property used in the production of steel. - Property is
described in this subparagraph if such property -
"(i) is used by the taxpayer directly in connection with the
trade or business of the taxpayer of the manufacture or
production of steel, and
"(ii) would be described in subparagraph (A) if 'January 1,
1984' were substituted for 'January 1, 1983'.
"(G) Coal gasification facilities. -
"(i) In general. - Property is described in this subparagraph
if such property -
"(I) is used directly in connection with the manufacture or
production of low sulfur gaseous fuel from coal, and
"(II) would be described in subparagraph (A) if 'July 1,
1984' were substituted for 'January 1, 1983'.
"(ii) Special rule. - For purposes of determining whether
property described in this subparagraph is described in
subparagraph (A), such property shall be treated as having been
acquired during the period referred to in subparagraph (A)(ii)
if at least 20 percent of the cost of such property is paid
during such period.
"(iii) Limitation on amount. - Clause (i) shall only apply to
the lease of an undivided interest in the property in an amount
which does not exceed the lesser of -
"(I) 50 percent of the cost basis of such property, or
"(II) $67,500,000.
"(iv) Placed in service. - In the case of property to which
this subparagraph applies -
"(I) such property shall be treated as placed in service
when the taxpayer receives an operating permit with respect
to such property from a State environmental protection
agency, and
"(II) the term of the lease with respect to such property
shall be treated as being 5 years.
"(4) Special rule for antiavoidance provisions. - The provisions
of paragraph (6) of section 168(i) of such Code (as added by
subsection (a)(1)), and the amendment made by subsection (b)(1)
[amending this section] shall apply to leases entered into after
February 19, 1982, in taxable years ending after such date.
"(5) Special rule for mass commuting vehicles. - The amendments
made by this section (other than section 168(i)(1) and (7) of such
Code, as added by subsection (a)(1) or section 168(f)(8)(J) of such
Code, as added by subsection (b)(4)) and section 209 [amending this
section and section 48 of this title] shall not apply to qualified
leased property described in section 168(f)(8)(D)(V) of such Code
(as in effect after the amendments made by this section) which -
"(A) is placed in service before January 1, 1988, or
"(B) is placed in service after such date -
"(i) pursuant to a binding contract or commitment entered
into before April 1, 1983, and
"(ii) solely because of conditions which, as determined by
the Secretary of the Treasury or his delegate, are not within
the control of the lessor or lessee.
"(6) Qualified lessee defined. -
"(A) In general. - The term 'qualified lessee' means a taxpayer
which is a lessee of an agreement to which section 168(f)(8)(A)
of such Code applies and which -
"(i) had net operating losses in each of the three most
recent taxable years ending before July 1, 1982, and had an
aggregate net operating loss for the five most recent taxable
years ending before July 1, 1982, and
"(ii) which uses the property subject to the agreement to
manufacture and produce within the United States a class of
products in an industry with respect to which -
"(I) the taxpayer produced less than 5 percent of the total
number of units (or value) of such products during the period
covering the three most recent taxable years of the taxpayer
ending before July 1, 1982, and
"(II) four or fewer United States persons (including as one
person an affiliated group as defined in section 1504(a))
other than the taxpayer manufactured 85 percent or more of
the total number of all units (or value) within such class of
products manufactured and produced in the United States
during such period.
"(B) Class of products. - For purposes of subparagraph (A) -
"(i) the term 'class of products' means any of the categories
designated and numbered as a 'class of products' in the 1977
Census of Manufacturers compiled and published by the Secretary
of Commerce under title 13 of the United States Code, and
"(ii) information -
"(I) compiled or published by the Secretary of Commerce, as
part of or in connection with the Statistical Abstract of the
United States or the Census of Manufacturers, regarding the
number of units (or value) of a class of products
manufactured and produced in the United States during any
period, or
"(II) if information under subclause (I) is not available,
so compiled or published with respect to the number of such
units shipped or sold by such manufacturers during any
period,
shall constitute prima facie evidence of the total number of all
units of such class of products manufactured and produced in the
United States in such period.
"(6) Underpayments of tax for 1982. - No addition to the tax
shall be made under section 6655 of the Internal Revenue Code of
1954 (relating to failure by corporation to pay estimated income
tax) for any period before October 15, 1982, with respect to any
underpayment of estimated tax by a taxpayer with respect to any tax
imposed by chapter 1 of such Code to the extent that such
underpayment was created or increased by any provision of this
section.
"(7) Coordination with at risk rules. - Subparagraph (J) of
section 168(f)(8) of the Internal Revenue Code of 1986 (as added by
subsection (b)(4)) shall take effect as provided in such
subparagraph (J)."
[Section 1067(c) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [enacting section 208(d)(3)(G) of Pub. L.
97-248, set out above] shall take effect as if included in the
provision of section 208(d)(3) of the Tax Equity and Fiscal
Responsibility Act of 1982 [Pub. L. 97-248]."
Section 209(d) of Pub. L. 97-248; as amended by Pub. L. 98-369,
div. A, title I, Sec. 12(a)(1), (2), July 18, 1984, 98 Stat. 503,
provided that:
"(1) Subsection (a). -
"(A) In general. - Except as provided in subparagraph (B) and
paragraph (2), the amendments made by this section [amending this
section and section 48 of this title] shall apply to agreements
entered into after December 31, 1987.
"(B) Special rule for farm property aggregating $150,000 or
less. -
"(i) In general. - The amendments made by subsection (a)
[amending this section] shall also apply to any agreement
entered into after July 1, 1982, and before January 1, 1988, if
the property subject to such agreement is section 38 property
which is used for farming purposes (within the meaning of
section 2032A(e)(5)).
"(ii) $150,000 limitation. - The provisions of clause (i)
shall not apply to any agreement if the sum of -
"(I) the cost basis of the property subject to the
agreement, plus
"(II) the cost basis of any property subject to an
agreement to which this subparagraph previously applied,
which was entered into during the same calendar year, and
with respect to which the lessee was the lessee of the
agreement described in subclause (I) (or any related person
within the meaning of section 168(e)(4)(D)),
exceeds $150,000. For purposes of subclause (II), in the case of
an individual, there shall not be taken into account any
agreement of any individual who is a related person involving
property which is used in a trade or business of farming of such
related person which is separate from the trade or business of
farming of the lessee described in subclause (II).
"(2) Special rule for definition of new section 38 property. -
The amendment made by subsection (c) [amending section 48 of this
title] shall apply to property placed in service after December 31,
1983."
Section 216(b) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section] shall apply with respect to property placed in service
after December 31, 1982, to the extent such property is financed by
the proceeds of an obligation (including a refunding obligation)
issued after June 30, 1982.
"(2) Exceptions. -
"(A) Construction or binding agreement. - The amendments made
by this section [amending this section] shall not apply with
respect to facilities the original use of which commences with
the taxpayer and -
"(i) the construction, reconstruction, or rehabilitation of
which began before July 1, 1982, or
"(ii) with respect to which a binding agreement to incur
significant expenditures was entered into before July 1, 1982.
"(B) Refunding. -
"(i) In general. - Except as provided in clause (ii), in the
case of property placed in service after December 31, 1982
which is financed by the proceeds of an obligation which is
issued solely to refund another obligation which was issued
before July 1, 1982, the amendments made by this section
[amending this section] shall apply only with respect to the
basis in such property which has not been recovered before the
date such refunding obligation is issued.
"(ii) Significant expenditures. - In the case of facilities
the original use of which commences with the taxpayer and with
respect to which significant expenditures are made before
January 1, 1983, the amendments made by this section shall not
apply with respect to such facilities to the extent such
facilities are financed by the proceeds of an obligation issued
solely to refund another obligation which was issued before
July 1, 1982.
In the case of an inducement resolution adopted by an issuing
authority before July 1, 1982, for purposes of applying
subparagraphs (A)(i) and (B)(ii) with respect to obligations
described in such resolution, the term 'facilities' means the
facilities described in such resolution.
"(3) Certain projects for residential real property. - For
purposes of clause (i) of section 168(f)(12)(C) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this
section), any obligation issued to finance a project described in
the table contained in paragraph (1) of section 1104(n) of the
Mortgage Subsidy Bond Tax Act of 1980 [section 1104(n) of Pub. L.
96-499, set out as a note under section 103A of this title] shall
be treated as an obligation described in section 103(b)(4)(A) of
the Internal Revenue Code of 1986."
Amendment by section 224(c)(1), (2) of Pub. L. 97-248 to apply to
any target corporation, within the meaning of section 338 of this
title, with respect to which the acquisition date, within the
meaning of such section, occurs after Aug. 31, 1982, and also to
apply to certain acquisitions before September 1, 1982, but not to
apply in the case of certain acquisitions of financial
institutions, see section 224(d) of Pub. L. 97-248, set out as an
Effective Date note under section 338 of this title.
EFFECTIVE DATE
Section 209(a)-(c) of Pub. L. 97-34, as amended by Pub. L.
97-448, title I, Sec. 102(d)(1), (g), Jan. 12, 1983, 96 Stat. 2370;
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
"(a) General Rule. - Except as otherwise provided in this
section, the amendments made by this subtitle [subtitle A (Secs.
201-209) of title II of Pub. L. 97-34, enacting this section,
amending sections 44E, 46, 50A, 53, 57, 167, 172, 179, 263, 312,
381, 453, 812, 825, 964, 1033, 1245, and 1250 of this title, and
enacting provisions set out as notes under this section and
sections 46 and 167 of this title] shall apply to property placed
in service after December 31, 1980, in taxable years ending after
such date.
"(b) Special Rule for RRB Property. - The amendment made by
subsection (c) of section 203 [amending section 167 of this title
and enacting provisions set out as notes under section 167 of this
title] shall take effect on January 1, 1981, and shall apply with
respect to taxable years ending after such date.
"(c) Special Rule for Carryovers. -
"(1)(A) Except as provided in subparagraph (B), the amendments
made by subsections (a) and (b) of section 207 [amending sections
172, 812, and 825 of this title] shall apply to net operating
losses in taxable years ending after December 31, 1975.
"(B) The amendments made by subparagraph (B)(i) of section
207(a)(2) [amending section 172 of this title] shall take effect
as if they had been included in the amendments made by section
1(a) of Public Law 96-595 [amending section 172 of this title];
except that the amendments made by such subparagraph shall apply
only to net operating losses in taxable years ending after
December 31, 1972.
"(C) If any net operating loss for any taxable year ending on
or before December 31, 1975, could be a net operating loss
carryover to a taxable year ending in 1981 by reason of subclause
(II) of section 172(b)(1)(E)(ii) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] (as in effect on the day before the
date of the enactment of this Act [Aug. 13, 1981] and as modified
by section 1(b) of Public Law 96-595 [set out as an Effective
Date of 1980 Amendment note under section 172 of this title]),
such net operating loss shall be a net operating loss carryover
under section 172 of such Code to each of the 15 taxable years
following the taxable year of such loss.
"(2)(A) The amendments made by subsection (c)(1) of section 207
[amending sections 46 and 50A of this title] shall apply to
unused credit years ending after December 31, 1973.
"(B) The amendment made by subsection (c)(2) of section 207
[amending section 53 of this title] shall apply to unused credit
years beginning after December 31, 1976.
"(C) The amendments made by subsection (c)(3) of section 207
[amending section 44E of this title] shall apply to unused credit
years ending after September 30, 1980.
"(3) Carryover must have been alive in 1981. - The amendments
made by subsections (a), (b), and (c) of section 207 [amending
sections 44E, 46, 50A, 53, 172, 812, and 825 of this title] shall
not apply to any amount which, under the law in effect on the day
before the date of the enactment of this Act [Aug. 13, 1981],
could not be carried to a taxable year ending in 1981."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
DEPRECIATION STUDY
Pub. L. 105-277, div. J, title II, Sec. 2022, Oct. 21, 1998, 112
Stat. 2681-903, provided that: "The Secretary of the Treasury (or
the Secretary's delegate) -
"(1) shall conduct a comprehensive study of the recovery
periods and depreciation methods under section 168 of the
Internal Revenue Code of 1986, and
"(2) not later than March 31, 2000, shall submit the results of
such study, together with recommendations for determining such
periods and methods in a more rational manner, to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TREATMENT OF CERTAIN FARM FINANCE LEASES
Section 1801(a)(2) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(a), Nov. 10, 1988, 102 Stat. 3577,
provided that:
"(A) In general. - If -
"(i) any partnership or grantor trust is the lessor under a
specified agreement,
"(ii) such partnership or grantor trust met the requirements of
section 168(f)(8)(C)(i) of the Internal Revenue Code of 1954
(relating to special rules for finance leases) when the agreement
was entered into, and
"(iii) a person became a partner in such partnership (or a
beneficiary in such trust) after its formation but before
September 26, 1985,
then, for purposes of applying the revenue laws of the United
States in respect to such agreement, the portion of the property
allocable to partners (or beneficiaries) not described in clause
(iii) shall be treated as if it were subject to a separate
agreement and the portion of such property allocable to the partner
or beneficiary described in clause (iii) shall be treated as if it
were subject to a separate agreement.
"(B) Specified agreement. - For purposes of subparagraph (A), the
term 'specified agreement' means an agreement to which subparagraph
(B) of section 209(d)[(1)] of the Tax Equity and Fiscal
Responsibility Act of 1982 [section 209(d)(1) of Pub. L. 97-248,
set out as a note above] applies which is -
"(i) an agreement dated as of December 20, 1982, as amended and
restated as of February 1, 1983, involving approximately
$8,734,000 of property at December 31, 1983,
"(ii) an agreement dated as of December 15, 1983, as amended
and restated as of January 3, 1984, involving approximately
$13,199,000 of property at December 31, 1984, or
"(iii) an agreement dated as of October 25, 1984, as amended
and restated as of December 1, 1984, involving approximately
$966,000 of property at December 31, 1984."
CERTAIN RESIDENTIAL REAL PROPERTY TREATED AS RESIDENTIAL RENTAL
PROPERTY
Section 1809(a)(4)(C) of Pub. L. 99-514 provided that: "Any
property described in paragraph (3) of section 631(d) of the Tax
Reform Act of 1984 [section 631(d) of Pub. L. 99-369, set out as a
note under section 103 of this title] shall be treated as property
described in clause (ii) of section 168(f)(12)(C) of the Internal
Revenue Code of 1954 [now 1986] as amended by subparagraph (B)."
COORDINATION WITH IMPUTED INTEREST CHANGES
Section 1809(a)(5) of Pub. L. 99-514 provided that: "In the case
of any property placed in service before May 9, 1985 (or treated as
placed in service before such date by section 105(b)(3) of Public
Law 99-121 [set out as a note above]) -
"(A) any reference in any amendment made by this subsection
[amending this section and sections 57 and 312 of this title] to
19-year real property shall be treated as a reference to 18-year
real property, and
"(B) section 168(f)(12)(B)(ii) of the Internal Revenue Code of
1954 [now 1986] (as amended by paragraph (4)(A)) shall be applied
by substituting '18 years' for '19 years'."
TERMINATION OF SAFE HARBOR LEASING RULES
Section 12(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Paragraph
(8) of section 168(f) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (relating to special rules for leasing), as
in effect after the amendments made by section 208 of the Tax
Equity and Fiscal Responsibility Act of 1982 [Pub. L. 97-248] but
before the amendments made by section 209 of such Act, shall not
apply to agreements entered into after December 31, 1983. The
preceding sentence shall not apply to property described in
paragraph (3)(G) or (5) of section 208(d) of such Act [set out as
an Effective Date of 1982 Amendments note above]."
TRANSITIONAL RULES FOR 1984 AMENDMENT
Section 12(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1801(a)(1), Oct. 22, 1986, 100 Stat.
2095, 2785; Pub. L. 100-647, title I, Sec. 1002(d)(7)(B), Nov. 10,
1988, 102 Stat. 3360, provided that:
"(1) In general. - The amendments made by subsection (a)
[amending this section and section 208(d) of Pub. L. 97-248, set
out as an Effective Date of 1982 Amendments note above] shall not
apply with respect to any property if -
"(A) a binding contract to acquire or to construct such
property was entered into by or for the lessee before March 7,
1984, or
"(B) such property was acquired by the lessee, or the
construction of such property was begun, by or for the lessee,
before March 7, 1984.
The preceding sentence shall not apply to any property with respect
to which an election is made under this sentence at such time after
the date of the enactment of the Tax Reform Act of 1986 [Oct. 22,
1986] as the Secretary of the Treasury or his delegate may
prescribe.
"(2) Special rule for certain automotive property. -
"(A) In general. - The amendments made by subsection (a) shall
not apply to property -
"(i) which is automotive manufacturing property, and
"(ii) with respect to which the lessee is a qualified lessee
(within the meaning of section 208(d)(6) of the Tax Equity and
Fiscal Responsibility Act of 1982) [Pub. L. 97-248, set out as
an Effective Date of 1982 Amendments note above].
"(B) $150,000,000 limitation. - The provisions of subparagraph
(A) shall not apply to any agreement if the sum of -
"(i) the cost basis of the property subject to the agreement,
plus
"(ii) the cost basis of any property subject to an agreement
to which subparagraph (A) previously applied and with respect
to which the lessee was the lessee under the agreement
described in clause (i) (or any related person within the
meaning of section 168(e)(4)(D) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954]),
exceeds $150,000,000.
"(C) Automotive manufacturing property. - For purposes of this
paragraph, the term 'automotive manufacturing property' means -
"(i) property used principally by the taxpayer directly in
connection with the trade or business of the taxpayer of the
manufacturing of automobiles or trucks (other than truck
tractors) with a gross vehicle weight of 13,000 pounds or less,
"(ii) machinery, equipment, and special tools of the type
included in former depreciation range guideline classes 37.11
and 37.12, and
"(iii) any special tools owned by the taxpayer which are used
by a vendor solely for the production of component parts for
sale to the taxpayer.
"(3) Special rule for certain cogeneration facilities. - The
amendments made by subsection (a) shall not apply with respect to
any property which is part of a coal-fired cogeneration facility -
"(A) for which an application for certification was filed with
the Federal Energy Regulatory Commission on December 30, 1983,
"(B) for which an application for a construction permit was
filed with a State environmental protection agency on February
20, 1984, and
"(C) which is placed in service before January 1, 1988."
SPECIAL LEASING RULE REGARDING COAL GASIFICATION FACILITIES
Section 1067(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amount
of any recapture under section 47 of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] with respect to the credit allowed
under section 38 of such Code with respect to progress expenditures
(within the meaning of section 46(d) of such Code) shall apply only
to the percentage of the cost basis of the coal gasification
facility to which the amendment made by subsection (a) [amending
section 208(d) of Pub. L. 97-248, set out as an Effective Date of
1982 Amendments note above] applies."
CERTAIN LEASES BEFORE OCTOBER 20, 1981, TREATED AS QUALIFIED LEASES
Section 208(c) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Nothing in
paragraph (8) of section 168(f) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954], or in any regulations prescribed
thereunder, shall be treated as making such paragraph inapplicable
to any agreement entered into before October 20, 1981, solely
because under such agreement 1 party to such agreement is entitled
to the credit allowable under section 38 of such Code with respect
to property and another party to such agreement is entitled to the
deduction allowable under section 168 of such Code with respect to
such property. Section 168(f)(8)(B)(ii) of such Code shall not
apply to the party entitled to such credit."
MOTOR VEHICLE OPERATING LEASES
Section 210 of Pub. L. 97-248, as amended by Pub. L. 98-369, div.
A, title I, Sec. 32(b), title VII, Sec. 712(d), July 18, 1984, 98
Stat. 531, 947; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
2095, provided that:
"(a) In general. - In the case of any qualified motor vehicle
agreement entered into on or before the 90th day after the date of
the enactment of the Tax Reform Act of 1984 [July 18, 1984], the
fact that such agreement contains a terminal rental adjustment
clause shall not be taken into account in determining whether such
agreement is a lease.
"(b) Definitions. - For purposes of this section -
"(1) Qualified motor vehicle agreement. - The term 'qualified
motor vehicle agreement' means any agreement with respect to a
motor vehicle (including a trailer) -
"(A) which was entered into before -
"(i) the enactment of any law, or
"(ii) the publication by the Secretary of the Treasury or
his delegate of any regulation,
which provides that any agreement with a terminal rental
adjustment clause is not a lease,
"(B) with respect to which the lessor under the agreement -
"(i) is personally liable for the repayment of, or
"(ii) has pledged property (but only to the extent of the
net fair market value of the lessor's interest in such
property), other than property subject to the agreement or
property directly or indirectly financed by indebtedness
secured by property subject to the agreement, as security
for,
all amounts borrowed to finance the acquisition of property
subject to the agreement, and
"(C) with respect to which the lessee under the agreement
uses the property subject to the agreement in a trade or
business or for the production of income.
"(2) Terminal rental adjustment clause. - The term 'terminal
rental adjustment clause' means a provision of an agreement which
permits or requires the rental price to be adjusted upward or
downward by reference to the amount realized by the lessor under
the agreement upon sale or other disposition of such property.
Such term also includes a provision of an agreement which
requires a lessee who is a dealer in motor vehicles to purchase
the motor vehicle for a predetermined price and then resell such
vehicle where such provision achieves substantially the same
results as a provision described in the preceding sentence.
"(c) Exception Where Lessee Took Position on Return. - Subsection
(a) shall not apply to deny a deduction for interest paid or
accrued claimed by a lessee with respect to a qualified motor
vehicle agreement on a return of tax imposed by chapter 1 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] which was
filed before the date of the enactment of this Act [Sept. 3, 1982]
or to deny a credit for investment in depreciable property claimed
by the lessee on such a return pursuant to an agreement with the
lessor that the lessor would not claim the credit."
INFORMATION RETURNS WITH RESPECT TO SAFE HARBOR LEASES
Pub. L. 97-119, title I, Sec. 112, Dec. 29, 1981, 95 Stat. 1640,
as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
2095, provided that:
"(a) Requirement of Return. -
"(1) In general. - Except as provided in paragraph (2),
paragraph (8) of section 168(f) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] (relating to special rule for leases)
shall not apply with respect to an agreement unless a return,
signed by the lessor and lessee and containing the information
required to be included in the return pursuant to subsection (b),
has been filed with the Internal Revenue Service not later than
the 30th day after the date on which the agreement is executed.
"(2) Special rules for agreements executed before january 1,
1982. -
"(A) In general. - In the case of an agreement executed
before January 1, 1982, such agreement shall cease on February
1, 1982, to be treated as a lease under section 168(f)(8)
unless a return, signed by the lessor and containing the
information required to be included in subsection (b), has been
filed with the Internal Revenue Service not later than January
31, 1982.
"(B) Filing by lessee. - If the lessor does not file a return
under subparagraph (A), the return requirement under
subparagraph (A) shall be satisfied if such return is filed by
the lessee before January 31, 1982.
"(3) Certain failure to file. - If -
"(A) a lessor or lessee fails to file any return within the
time prescribed by this subsection, and
"(B) such failure is shown to be due to reasonable cause and
not due to willful neglect,
the lessor or lessee shall be treated as having filed a timely
return if a return is filed within a reasonable time after the
failure is ascertained.
"(b) Information Required. - The information required to be
included in the return pursuant to this subsection is as follows:
"(1) The name, address, and taxpayer identifying number of the
lessor and the lessee (and parent company if a consolidated
return is filed);
"(2) The district director's office with which the income tax
returns of the lessor and lessee are filed;
"(3) A description of each individual property with respect to
which the election is made;
"(4) The date on which the lessee places the property in
service, the date on which the lease begins and the term of the
lease;
"(5) The recovery property class and the ADR midpoint life of
the leased property;
"(6) The payment terms between the parties to the lease
transaction;
"(7) Whether the ACRS deductions and the investment tax credit
are allowable to the same taxpayer;
"(8) The aggregate amount paid to outside parties to arrange or
carry out the transaction;
"(9) For the lessor only: the unadjusted basis of the property
as defined in section 168(d)(1);
"(10) For the lessor only: if the lessor is a partnership or a
grantor trust, the name, address, and taxpayer identifying number
of the partners or the beneficiaries, and the district director's
office with which the income tax return of each partner or
beneficiary is filed; and
"(11) Such other information as may be required by the return
or its instructions.
Paragraph (8) shall not apply with respect to any person for any
calendar year if it is reasonable to estimate that the aggregate
adjusted basis of the property of such person which will be subject
to subsection (a) for such year is $1,000,000 or less.
"(c) Coordination With Other Information Requirements. - In the
case of agreements executed after December 31, 1982, to the extent
provided in regulations prescribed by the Secretary of the Treasury
or his delegate, the provisions of this section shall be modified
to coordinate such provisions with the other information
requirements of the Internal Revenue Code of 1986."
REGULATED PUBLIC UTILITIES; SPECIAL TRANSITIONAL RULE FOR
NORMALIZATION REQUIREMENTS
Section 209(d)(1) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If, by the
terms of the applicable rate order last entered before the date of
the enactment of this Act [Aug. 13, 1981] by a regulatory
commission having appropriate jurisdiction, a regulated public
utility would (but for this provision) fail to meet the
requirements of section 168(e)(3) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] with respect to property because, for
an accounting period ending after December 31, 1980, such public
utility used a method of accounting other than a normalization
method of accounting, such regulated public utility shall not fail
to meet such requirements if, by the terms of its first rate order
determining cost of service with respect to such property which
becomes effective after the date of the enactment of this Act and
on or before January 1, 1983, such regulated public utility uses a
normalization method of accounting. This provision shall not apply
to any rate order which, under the rules in effect before the date
of the enactment of this Act, required a regulated public utility
to use a method of accounting with respect to the deduction
allowable by section 167 which, under section 167(l), it was not
permitted to use."
INTERIM REGULATIONS WITH RESPECT TO NORMALIZATION; AUTHORITY TO
PRESCRIBE
Section 209(d)(4) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Until
Congress acts further, the Secretary of the Treasury or his
delegate may prescribe such interim regulations as may be necessary
or appropriate to determine whether the requirements of section
168(e)(3)(B) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] have been met with respect to property placed in service
after December 31, 1980."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 45A, 47, 50, 56, 110,
142, 167, 170, 179, 263A, 280F, 291, 312, 381, 404, 460, 467, 512,
514, 527, 860E, 865, 936, 1022, 1031, 1245, 1250, 1393, 1397C,
1397D, 1400I, 1400J, 1400L, 4052 of this title; title 10 section
2401.
-FOOTNOTE-
(!1) So in original. Probably should be "property,".
(!2) So in original. Probably should be "minimum".
(!2) So in original. Par. (40) probably should follow par. (39).
-End-
-CITE-
26 USC Sec. 169 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 169. Amortization of pollution control facilities
-STATUTE-
(a) Allowance of deduction
Every person, at his election, shall be entitled to a deduction
with respect to the amortization of the amortizable basis of any
certified pollution control facility (as defined in subsection
(d)), based on a period of 60 months. Such amortization deduction
shall be an amount, with respect to each month of such period
within the taxable year, equal to the amortizable basis of the
pollution control facility at the end of such month divided by the
number of months (including the month for which the deduction is
computed) remaining in the period. Such amortizable basis at the
end of the month shall be computed without regard to the
amortization deduction for such month. The amortization deduction
provided by this section with respect to any month shall be in lieu
of the depreciation deduction with respect to such pollution
control facility for such month provided by section 167. The
60-month period shall begin, as to any pollution control facility,
at the election of the taxpayer, with the month following the month
in which such facility was completed or acquired, or with the
succeeding taxable year.
(b) Election of amortization
The election of the taxpayer to take the amortization deduction
and to begin the 60-month period with the month following the month
in which the facility is completed or acquired, or with the taxable
year succeeding the taxable year in which such facility is
completed or acquired, shall be made by filing with the Secretary,
in such manner, in such form, and within such time, as the
Secretary may by regulations prescribe, a statement of such
election.
(c) Termination of amortization deduction
A taxpayer which has elected under subsection (b) to take the
amortization deduction provided in subsection (a) may, at any time
after making such election, discontinue the amortization deduction
with respect to the remainder of the amortization period, such
discontinuance to begin as of the beginning of any month specified
by the taxpayer in a notice in writing filed with the Secretary
before the beginning of such month. The depreciation deduction
provided under section 167 shall be allowed, beginning with the
first month as to which the amortization deduction does not apply,
and the taxpayer shall not be entitled to any further amortization
deduction under this section with respect to such pollution control
facility.
(d) Definitions
For purposes of this section -
(1) Certified pollution control facility
The term "certified pollution control facility" means a new
identifiable treatment facility which is used, in connection with
a plant or other property in operation before January 1, 1976, to
abate or control water or atmospheric pollution or contamination
by removing, altering, disposing, storing, or preventing the
creation or omission of pollutants, contaminants, wastes, or heat
and which -
(A) the State certifying authority having jurisdiction with
respect to such facility has certified to the Federal
certifying authority as having been constructed, reconstructed,
erected, or acquired in conformity with the State program or
requirements for abatement or control of water or atmospheric
pollution or contamination;
(B) the Federal certifying authority has certified to the
Secretary (i) as being in compliance with the applicable
regulations of Federal agencies and (ii) as being in
furtherance of the general policy of the United States for
cooperation with the States in the prevention and abatement of
water pollution under the Federal Water Pollution Control Act,
as amended (33 U.S.C. 466 et seq.), or in the prevention and
abatement of atmospheric pollution and contamination under the
Clean Air Act, as amended (42 U.S.C. 1857 et seq.); and
(C) does not significantly -
(i) increase the output or capacity, extend the useful
life, or reduce the total operating costs of such plant or
other property (or any unit thereof), or
(ii) alter the nature of the manufacturing or production
process or facility.
(2) State certifying authority
The term "State certifying authority" means, in the case of
water pollution, the State water pollution control agency as
defined in section 13(a) of the Federal Water Pollution Control
Act and, in the case of air pollution, the air pollution control
agency as defined in section 302(b) of the Clean Air Act. The
term "State certifying authority" includes any interstate agency
authorized to act in place of a certifying authority of the
State.
(3) Federal certifying authority
The term "Federal certifying authority" means, in the case of
water pollution, the Secretary of the Interior and, in the case
of air pollution, the Secretary of Health, Education, and
Welfare.
(4) New identifiable treatment facility
(A) In general
For purposes of paragraph (1), the term "new identifiable
treatment facility" includes only tangible property (not
including a building and its structural components, other than
a building which is exclusively a treatment facility) which is
of a character subject to the allowance for depreciation
provided in section 167, which is identifiable as a treatment
facility, and which is property -
(i) the construction, reconstruction, or erection of which
is completed by the taxpayer after December 31, 1968, or
(ii) acquired after December 31, 1968, if the original use
of the property commences with the taxpayer and commences
after such date.
In applying this section in the case of property described in
clause (i) there shall be taken into account only that portion
of the basis which is properly attributable to construction,
reconstruction, or erection after December 31, 1968.
(B) Certain plants, etc., placed in operation after 1968
In the case of any treatment facility used in connection with
any plant or other property not in operation before January 1,
1969, the preceding sentence shall be applied by substituting
December 31, 1975, for December 31, 1968.
(e) Profitmaking abatement works, etc.
The Federal certifying authority shall not certify any property
under subsection (d)(1)(B) to the extent it appears that by reason
of profits derived through the recovery of wastes or otherwise in
the operation of such property, its costs will be recovered over
its actual useful life.
(f) Amortizable basis
(1) Defined
For purposes of this section, the term "amortizable basis"
means that portion of the adjusted basis (for determining gain)
of a certified pollution control facility which may be amortized
under this section.
(2) Special rules
(A) If a certified pollution control facility has a useful
life (determined as of the first day of the first month for
which a deduction is allowable under this section) in excess of
15 years, the amortizable basis of such facility shall be equal
to an amount which bears the same ratio to the portion of the
adjusted basis of such facility, which would be eligible for
amortization but for the application of this subparagraph, as
15 bears to the number of years of useful life of such
facility.
(B) The amortizable basis of a certified pollution control
facility with respect to which an election under this section
is in effect shall not be increased, for purposes of this
section, for additions or improvements after the amortization
period has begun.
(g) Depreciation deduction
The depreciation deduction provided by section 167 shall, despite
the provisions of subsection (a), be allowed with respect to the
portion of the adjusted basis which is not the amortizable basis.
[(h) Repealed. Pub. L. 92-178, title I, Sec. 104(f)(2), Dec. 10,
1971, 85 Stat. 502]
(i) Life tenant and remainderman
In the case of property held by one person for life with
remainder to another person, the deduction under this section shall
be computed as if the life tenant were the absolute owner of the
property and shall be allowable to the life tenant.
(j) Cross reference
For special rule with respect to certain gain derived from
the disposition of property the adjusted basis of which is
determined with regard to this section, see section 1245.
-SOURCE-
(Added Pub. L. 91-172, title VII, Sec. 704(a), Dec. 30, 1969, 83
Stat. 667; amended Pub. L. 92-178, title I, Sec. 104(f)(2), Dec.
10, 1971, 85 Stat. 502; Pub. L. 93-625, Sec. 3(a), Jan. 3, 1975, 88
Stat. 2109; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), title
XXI, Sec. 2112(b), (c), Oct. 4, 1976, 90 Stat. 1834, 1906.)
-REFTEXT-
REFERENCES IN TEXT
The Federal Water Pollution Control Act, as amended (33 U.S.C.
466 et seq.), referred to in subsec. (d)(1)(B), is act June 30,
1948, ch. 758, as amended generally by Pub. L. 92-500, Sec. 2, Oct.
18, 1972, 86 Stat. 816, which is classified generally to chapter 26
(Sec. 1251 et seq.) of Title 33, Navigation and Navigable Waters.
The subject matter of section 13(a) of the act, referred to in
subsec. (d)(2), is covered by section 1362(1) of Title 33. For
complete classification of this Act to the Code, see Short Title
note set out under section 1251 of Title 33 and Tables.
The Clean Air Act, referred to in subsec. (d)(1)(B), is act July
14, 1955, ch. 360, 69 Stat. 322, as amended, which is classified
generally to chapter 85 (Sec. 7401 et seq.) of Title 42, The Public
Health and Welfare. For complete classification of this Act to the
Code, see Short Title note set out under section 7401 of Title 42
and Tables.
Section 302(b) of the Clean Air Act, referred to in subsec.
(d)(2), formerly classified to section 1857h(b) of Title 42, was
reclassified to section 7602(b) of Title 42 on enactment of Pub. L.
95-95.
-MISC1-
PRIOR PROVISIONS
A prior section 169, act Aug. 16, 1954, ch. 736, 68A Stat. 55,
related to amortization of grain-storage facilities, prior to the
reorganization of part VI of subchapter B of chapter 1 of this
title by Pub. L. 91-172.
AMENDMENTS
1976 - Subsecs. (b), (c). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (d)(1). Pub. L. 94-455, Secs. 1906(b)(13)(A), 2112(b),
substituted in provisions preceding subpar. (A) "January 1, 1976,"
for "January 1, 1969," and "storing, or preventing the creation or
emission of" for "or storing", struck out in subpar. (B) "or his
delegate" after "Secretary", and added subpar. (C).
Subsec. (d)(4). Pub. L. 94-455, Sec. 2112(c), among other
changes, struck out provisions relating to treatment facilities
placed in service by taxpayer before Jan. 1, 1976, and inserted
provisions that in case of treatment facilities used in connection
with any plan or other property not in operation before Jan. 1,
1969, Dec. 31, 1975, shall be substituted for Dec. 31, 1968, as the
cut-off date for taking into account that portion of the basis
which is attributable to construction, reconstruction, or erection.
1975 - Subsec. (d)(4)(B). Pub. L. 93-625 substituted "January 1,
1976" for "January 1, 1975".
1971 - Subsec. (h). Pub. L. 92-178 struck out provision that
investment credit not be allowed. See section 48(a)(8) of this
title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 2112(d)(2) of Pub. L. 94-455, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by subsection (b) [amending this section] shall
apply to taxable years beginning after December 31, 1975. Such
amendments shall not apply in the case of any property with respect
to which the amortization period under section 169 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] has begun before
January 1, 1976."
EFFECTIVE DATE
Section 704(c) of Pub. L. 91-172 provided that: "The amendments
made by this section [enacting this section and amending sections
642, 1082, 1245, and 1250 of this title] shall apply with respect
to taxable years ending after December 31, 1968."
-TRANS-
TRANSFER OF FUNCTIONS
Secretary of Health, Education, and Welfare redesignated
Secretary of Health and Human Services by section 3508(b) of Title
20, Education.
Functions vested in Secretary of the Interior and Secretary of
Health, Education, and Welfare by subsec. (d)(1)(B), (3) of this
section transferred to Administrator of Environmental Protection
Agency by Reorg. Plan No. 3, of 1970, Sec. 2(a)(9), eff. Dec. 2,
1970, 35 F.R. 15623, 84 Stat. 2086, set out in the Appendix to
Title 5, Government Organization and Employees.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 291, 642, 1082, 1245,
1250 of this title; title 33 sections 1316, 1326.
-End-
-CITE-
26 USC Sec. 170 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
-HEAD-
Sec. 170. Charitable, etc., contributions and gifts
-STATUTE-
(a) Allowance of deduction
(1) General rule
There shall be allowed as a deduction any charitable
contribution
|