-CITE-
    26 USC CHAPTER 79 - DEFINITIONS                             01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
                         CHAPTER 79 - DEFINITIONS                     

-MISC1-
    Sec.                                                     
    7701.       Definitions.                                          
    7702.       Life insurance contract defined.                      
    7702A.      Modified endowment contract defined.                  
    7702B.      Treatment of qualified long-term care insurance.      
    7703.       Determination of marital status.                      
    7704.       Certain publicly traded partnerships treated as
                 corporations.                                        

                                AMENDMENTS                            
      1996 - Pub. L. 104-191, title III, Sec. 321(e), Aug. 21, 1996,
    110 Stat. 2059, added item 7702B.
      1988 - Pub. L. 100-647, title V, Sec. 5012(c)(2), Nov. 10, 1988,
    102 Stat. 3664, added item 7702A.
      1987 - Pub. L. 100-203, title X, Sec. 10211(b), Dec. 22, 1987,
    101 Stat. 1330-405, added item 7704.
      1986 - Pub. L. 99-514, title XIII, Sec. 1301(j)(2)(B), Oct. 22,
    1986, 100 Stat. 2657, added item 7703.
      1984 - Pub. L. 98-369, div. A, title II, Sec. 221(c), July 18,
    1984, 98 Stat. 772, added item 7702.

-End-



-CITE-
    26 USC Sec. 7701                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7701. Definitions

-STATUTE-
      (a) When used in this title, where not otherwise distinctly
    expressed or manifestly incompatible with the intent thereof - 
      (1) Person
        The term "person" shall be construed to mean and include an
      individual, a trust, estate, partnership, association, company or
      corporation.
      (2) Partnership and partner
        The term "partnership" includes a syndicate, group, pool, joint
      venture, or other unincorporated organization, through or by
      means of which any business, financial operation, or venture is
      carried on, and which is not, within the meaning of this title, a
      trust or estate or a corporation; and the term "partner" includes
      a member in such a syndicate, group, pool, joint venture, or
      organization.
      (3) Corporation
        The term "corporation" includes associations, joint-stock
      companies, and insurance companies.
      (4) Domestic
        The term "domestic" when applied to a corporation or
      partnership means created or organized in the United States or
      under the law of the United States or of any State unless, in the
      case of a partnership, the Secretary provides otherwise by
      regulations.
      (5) Foreign
        The term "foreign" when applied to a corporation or partnership
      means a corporation or partnership which is not domestic.
      (6) Fiduciary
        The term "fiduciary" means a guardian, trustee, executor,
      administrator, receiver, conservator, or any person acting in any
      fiduciary capacity for any person.
      (7) Stock
        The term "stock" includes shares in an association, joint-stock
      company, or insurance company.
      (8) Shareholder
        The term "shareholder" includes a member in an association,
      joint-stock company, or insurance company.
      (9) United States
        The term "United States" when used in a geographical sense
      includes only the States and the District of Columbia.
      (10) State
        The term "State" shall be construed to include the District of
      Columbia, where such construction is necessary to carry out
      provisions of this title.
      (11) Secretary of the Treasury and Secretary
        (A) Secretary of the Treasury
          The term "Secretary of the Treasury" means the Secretary of
        the Treasury, personally, and shall not include any delegate of
        his.
        (B) Secretary
          The term "Secretary" means the Secretary of the Treasury or
        his delegate.
      (12) Delegate
        (A) In general
          The term "or his delegate" - 
            (i) when used with reference to the Secretary of the
          Treasury, means any officer, employee, or agency of the
          Treasury Department duly authorized by the Secretary of the
          Treasury directly, or indirectly by one or more redelegations
          of authority, to perform the function mentioned or described
          in the context; and
            (ii) when used with reference to any other official of the
          United States, shall be similarly construed.
        (B) Performance of certain functions in Guam or American Samoa
          The term "delegate," in relation to the performance of
        functions in Guam or American Samoa with respect to the taxes
        imposed by chapters 1, 2, and 21, also includes any officer or
        employee of any other department or agency of the United
        States, or of any possession thereof, duly authorized by the
        Secretary (directly, or indirectly by one or more redelegations
        of authority) to perform such functions.
      (13) Commissioner
        The term "Commissioner" means the Commissioner of Internal
      Revenue.
      (14) Taxpayer
        The term "taxpayer" means any person subject to any internal
      revenue tax.
      (15) Military or naval forces and armed forces of the United
        States
        The term "military or naval forces of the United States" and
      the term "Armed Forces of the United States" each includes all
      regular and reserve components of the uniformed services which
      are subject to the jurisdiction of the Secretary of Defense, the
      Secretary of the Army, the Secretary of the Navy, or the
      Secretary of the Air Force, and each term also includes the Coast
      Guard. The members of such forces include commissioned officers
      and personnel below the grade of commissioned officers in such
      forces.
      (16) Withholding agent
        The term "withholding agent" means any person required to
      deduct and withhold any tax under the provisions of section 1441,
      1442, 1443, or 1461.
      (17) Husband and wife
        As used in sections 682 and 2516, if the husband and wife
      therein referred to are divorced, wherever appropriate to the
      meaning of such sections, the term "wife" shall be read "former
      wife" and the term "husband" shall be read "former husband"; and,
      if the payments described in such sections are made by or on
      behalf of the wife or former wife to the husband or former
      husband instead of vice versa, wherever appropriate to the
      meaning of such sections, the term "husband" shall be read "wife"
      and the term "wife" shall be read "husband."
      (18) International organization
        The term "international organization" means a public
      international organization entitled to enjoy privileges,
      exemptions, and immunities as an international organization under
      the International Organizations Immunities Act (22 U.S.C. 288-
      288f).
      (19) Domestic building and loan association
        The term "domestic building and loan association" means a
      domestic building and loan association, a domestic savings and
      loan association, and a Federal savings and loan association - 
          (A) which either (i) is an insured institution within the
        meaning of section 401(a) (!1) of the National Housing Act (12
        U.S.C., sec. 1724(a)), or (ii) is subject by law to supervision
        and examination by State or Federal authority having
        supervision over such associations;

          (B) the business of which consists principally of acquiring
        the savings of the public and investing in loans; and
          (C) at least 60 percent of the amount of the total assets of
        which (at the close of the taxable year) consists of - 
            (i) cash,
            (ii) obligations of the United States or of a State or
          political subdivision thereof, and stock or obligations of a
          corporation which is an instrumentality of the United States
          or of a State or political subdivision thereof, but not
          including obligations the interest on which is excludable
          from gross income under section 103,
            (iii) certificates of deposit in, or obligations of, a
          corporation organized under a State law which specifically
          authorizes such corporation to insure the deposits or share
          accounts of member associations,
            (iv) loans secured by a deposit or share of a member,
            (v) loans (including redeemable ground rents, as defined in
          section 1055) secured by an interest in real property which
          is (or, from the proceeds of the loan, will become)
          residential real property or real property used primarily for
          church purposes, loans made for the improvement of
          residential real property or real property used primarily for
          church purposes, provided that for purposes of this clause,
          residential real property shall include single or multifamily
          dwellings, facilities in residential developments dedicated
          to public use or property used on a nonprofit basis for
          residents, and mobile homes not used on a transient basis,
            (vi) loans secured by an interest in real property located
          within an urban renewal area to be developed for
          predominantly residential use under an urban renewal plan
          approved by the Secretary of Housing and Urban Development
          under part A or part B of title I of the Housing Act of 1949,
          as amended, or located within any area covered by a program
          eligible for assistance under section 103 of the
          Demonstration Cities and Metropolitan Development Act of
          1966, as amended, and loans made for the improvement of any
          such real property,
            (vii) loans secured by an interest in educational, health,
          or welfare institutions or facilities, including structures
          designed or used primarily for residential purposes for
          students, residents, and persons under care, employees, or
          members of the staff of such institutions or facilities,
            (viii) property acquired through the liquidation of
          defaulted loans described in clause (v), (vi), or (vii),
            (ix) loans made for the payment of expenses of college or
          university education or vocational training, in accordance
          with such regulations as may be prescribed by the Secretary,
            (x) property used by the association in the conduct of the
          business described in subparagraph (B), and
            (xi) any regular or residual interest in a REMIC, but only
          in the proportion which the assets of such REMIC consist of
          property described in any of the preceding clauses of this
          subparagraph; except that if 95 percent or more of the assets
          of such REMIC are assets described in clauses (i) through
          (x), the entire interest in the REMIC shall qualify.

        At the election of the taxpayer, the percentage specified in
        this subparagraph shall be applied on the basis of the average
        assets outstanding during the taxable year, in lieu of the
        close of the taxable year, computed under regulations
        prescribed by the Secretary. For purposes of clause (v), if a
        multifamily structure securing a loan is used in part for
        nonresidential purposes, the entire loan is deemed a
        residential real property loan if the planned residential use
        exceeds 80 percent of the property's planned use (determined as
        of the time the loan is made). For purposes of clause (v),
        loans made to finance the acquisition or development of land
        shall be deemed to be loans secured by an interest in
        residential real property if, under regulations prescribed by
        the Secretary, there is reasonable assurance that the property
        will become residential real property within a period of 3
        years from the date of acquisition of such land; but this
        sentence shall not apply for any taxable year unless, within
        such 3-year period, such land becomes residential real
        property. For purposes of determining whether any interest in a
        REMIC qualifies under clause (xi), any regular interest in
        another REMIC held by such REMIC shall be treated as a loan
        described in a preceding clause under principles similar to the
        principles of clause (xi); except that, if such REMIC's are
        part of a tiered structure, they shall be treated as 1 REMIC
        for purposes of clause (xi).
      (20) Employee
        For the purpose of applying the provisions of section 79 with
      respect to group-term life insurance purchased for employees, for
      the purpose of applying the provisions of sections 104, 105, and
      106 with respect to accident and health insurance or accident and
      health plans, and for the purpose of applying the provisions of
      subtitle A with respect to contributions to or under a stock
      bonus, pension, profit-sharing, or annuity plan, and with respect
      to distributions under such a plan, or by a trust forming part of
      such a plan, and for purposes of applying section 125 with
      respect to cafeteria plans, the term "employee" shall include a
      full-time life insurance salesman who is considered an employee
      for the purpose of chapter 21, or in the case of services
      performed before January 1, 1951, who would be considered an
      employee if his services were performed during 1951.
      (21) Levy
        The term "levy" includes the power of distraint and seizure by
      any means.
      (22) Attorney General
        The term "Attorney General" means the Attorney General of the
      United States.
      (23) Taxable year
        The term "taxable year" means the calendar year, or the fiscal
      year ending during such calendar year, upon the basis of which
      the taxable income is computed under subtitle A. "Taxable year"
      means, in the case of a return made for a fractional part of a
      year under the provisions of subtitle A or under regulations
      prescribed by the Secretary, the period for which such return is
      made.
      (24) Fiscal year
        The term "fiscal year" means an accounting period of 12 months
      ending on the last day of any month other than December.
      (25) Paid or incurred, paid or accrued
        The terms "paid or incurred" and "paid or accrued" shall be
      construed according to the method of accounting upon the basis of
      which the taxable income is computed under subtitle A.
      (26) Trade or business
        The term "trade or business" includes the performance of the
      functions of a public office.
      (27) Tax Court
        The term "Tax Court" means the United States Tax Court.
      (28) Other terms
        Any term used in this subtitle with respect to the application
      of, or in connection with, the provisions of any other subtitle
      of this title shall have the same meaning as in such provisions.
      (29) Internal Revenue Code
        The term "Internal Revenue Code of 1986" means this title, and
      the term "Internal Revenue Code of 1939" means the Internal
      Revenue Code enacted February 10, 1939, as amended.
      (30) United States person
        The term "United States person" means - 
          (A) a citizen or resident of the United States,
          (B) a domestic partnership,
          (C) a domestic corporation,
          (D) any estate (other than a foreign estate, within the
        meaning of paragraph (31)), and
          (E) any trust if - 
            (i) a court within the United States is able to exercise
          primary supervision over the administration of the trust, and
            (ii) one or more United States persons have the authority
          to control all substantial decisions of the trust.
      (31) Foreign estate or trust
        (A) Foreign estate
          The term "foreign estate" means an estate the income of
        which, from sources without the United States which is not
        effectively connected with the conduct of a trade or business
        within the United States, is not includible in gross income
        under subtitle A.
        (B) Foreign trust
          The term "foreign trust" means any trust other than a trust
        described in subparagraph (E) of paragraph (30).
      (32) Cooperative bank
        The term "cooperative bank" means an institution without
      capital stock organized and operated for mutual purposes and
      without profit, which - 
          (A) either - 
            (i) is an insured institution within the meaning of section
          401(a) (!2) of the National Housing Act (12 U.S.C., sec.
          1724(a)), or

            (ii) is subject by law to supervision and examination by
          State or Federal authority having supervision over such
          institutions, and

          (B) meets the requirements of subparagraphs (B) and (C) of
        paragraph (19) of this subsection (relating to definition of
        domestic building and loan association).

      In determining whether an institution meets the requirements
      referred to in subparagraph (B) of this paragraph, any reference
      to an association or to a domestic building and loan association
      contained in paragraph (19) shall be deemed to be a reference to
      such institution.
      (33) Regulated public utility
        The term "regulated public utility" means - 
          (A) A corporation engaged in the furnishing or sale of - 
            (i) electric energy, gas, water, or sewerage disposal
          services, or
            (ii) transportation (not included in subparagraph (C)) on
          an intrastate, suburban, municipal, or interurban electric
          railroad, on an intrastate, municipal, or suburban trackless
          trolley system, or on a municipal or suburban bus system, or
            (iii) transportation (not included in clause (ii)) by motor
          vehicle - 

        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 an agency or instrumentality of the
        United States, by a public service or public utility commission
        or other similar body of the District of Columbia or of any
        State or political subdivision thereof, or by a foreign country
        or an agency or instrumentality or political subdivision
        thereof.
          (B) A corporation engaged as a common carrier in the
        furnishing or sale of transportation of gas by pipe line, if
        subject to the jurisdiction of the Federal Energy Regulatory
        Commission.
          (C) A corporation engaged as a common carrier (i) in the
        furnishing or sale of transportation by railroad, if subject to
        the jurisdiction of the Surface Transportation Board, or (ii)
        in the furnishing or sale of transportation of oil or other
        petroleum products (including shale oil) by pipe line, if
        subject to the jurisdiction of the Federal Energy Regulatory
        Commission or if the rates for such furnishing or sale are
        subject to the jurisdiction of a public service or public
        utility commission or other similar body of the District of
        Columbia or of any State.
          (D) A corporation engaged in the furnishing or sale of
        telephone or telegraph service, if the rates for such
        furnishing or sale meet the requirements of subparagraph (A).
          (E) A corporation engaged in the furnishing or sale of
        transportation as a common carrier by air, subject to the
        jurisdiction of the Secretary of Transportation.
          (F) A corporation engaged in the furnishing or sale of
        transportation by a water carrier subject to jurisdiction under
        subchapter II of chapter 135 of title 49.
          (G) A rail carrier subject to part A of subtitle IV of title
        49, if (i) substantially all of its railroad properties have
        been leased to another such railroad corporation or
        corporations by an agreement or agreements entered into before
        January 1, 1954, (ii) each lease is for a term of more than 20
        years, and (iii) at least 80 percent or more of its gross
        income (computed without regard to dividends and capital gains
        and losses) for the taxable year is derived from such leases
        and from sources described in subparagraphs (A) through (F),
        inclusive. For purposes of the preceding sentence, an agreement
        for lease of railroad properties entered into before January 1,
        1954, shall be considered to be a lease including such term as
        the total number of years of such agreement may, unless sooner
        terminated, be renewed or continued under the terms of the
        agreement, and any such renewal or continuance under such
        agreement shall be considered part of the lease entered into
        before January 1, 1954.
          (H) A common parent corporation which is a common carrier by
        railroad subject to part A of subtitle IV of title 49 if at
        least 80 percent of its gross income (computed without regard
        to capital gains or losses) is derived directly or indirectly
        from sources described in subparagraphs (A) through (F),
        inclusive. For purposes of the preceding sentence, dividends
        and interest, and income from leases described in subparagraph
        (G), received from a regulated public utility shall be
        considered as derived from sources described in subparagraphs
        (A) through (F), inclusive, if the regulated public utility is
        a member of an affiliated group (as defined in section 1504)
        which includes the common parent corporation.

      The term "regulated public utility" does not (except as provided
      in subparagraphs (G) and (H)) include a corporation described in
      subparagraphs (A) through (F), inclusive, unless 80 percent or
      more of its gross income (computed without regard to dividends
      and capital gains and losses) for the taxable year is derived
      from sources described in subparagraphs (A) through (F),
      inclusive. If the taxpayer establishes to the satisfaction of the
      Secretary that (i) its revenue from regulated rates described in
      subparagraph (A) or (D) and its revenue derived from unregulated
      rates are derived from the operation of a single interconnected
      and coordinated system or from the operation of more than one
      such system, and (ii) the unregulated rates have been and are
      substantially as favorable to users and consumers as are the
      regulated rates, then such revenue from such unregulated rates
      shall be considered, for purposes of the preceding sentence, as
      income derived from sources described in subparagraph (A) or (D).
      [(34) Repealed. Pub. L. 98-369, div. A, title IV, Sec.
        4112(b)(11), July 18, 1984, 98 Stat. 792]
      (35) Enrolled actuary
        The term "enrolled actuary" means a person who is enrolled by
      the Joint Board for the Enrollment of Actuaries established under
      subtitle C of the title III of the Employee Retirement Income
      Security Act of 1974.
      (36) Income tax return preparer
        (A) In general
          The term "income tax return preparer" means any person who
        prepares for compensation, or who employs one or more persons
        to prepare for compensation, any return of tax imposed by
        subtitle A or any claim for refund of tax imposed by subtitle
        A. For purposes of the preceding sentence, the preparation of a
        substantial portion of a return or claim for refund shall be
        treated as if it were the preparation of such return or claim
        for refund.
        (B) Exceptions
          A person shall not be an "income tax return preparer" merely
        because such person - 
            (i) furnishes typing, reproducing, or other mechanical
          assistance,
            (ii) prepares a return or claim for refund of the employer
          (or of an officer or employee of the employer) by whom he is
          regularly and continuously employed,
            (iii) prepares as a fiduciary a return or claim for refund
          for any person, or
            (iv) prepares a claim for refund for a taxpayer in response
          to any notice of deficiency issued to such taxpayer or in
          response to any waiver of restriction after the commencement
          of an audit of such taxpayer or another taxpayer if a
          determination in such audit of such other taxpayer directly
          or indirectly affects the tax liability of such taxpayer.
      (37) Individual retirement plan
        The term "individual retirement plan" means - 
          (A) an individual retirement account described in section
        408(a), and
          (B) an individual retirement annuity described in section
        408(b).
      (38) Joint return
        The term "joint return" means a single return made jointly
      under section 6013 by a husband and wife.
      (39) Persons residing outside United States
        If any citizen or resident of the United States does not reside
      in (and is not found in) any United States judicial district,
      such citizen or resident shall be treated as residing in the
      District of Columbia for purposes of any provision of this title
      relating to - 
          (A) jurisdiction of courts, or
          (B) enforcement of summons.
      (40) Indian tribal government
        (A) In general
          The term "Indian tribal government" means the governing body
        of any tribe, band, community, village, or group of Indians, or
        (if applicable) Alaska Natives, which is determined by the
        Secretary, after consultation with the Secretary of the
        Interior, to exercise governmental functions.
        (B) Special rule for Alaska Natives
          No determination under subparagraph (A) with respect to
        Alaska Natives shall grant or defer any status or powers other
        than those enumerated in section 7871. Nothing in the Indian
        Tribal Governmental Tax Status Act of 1982, or in the
        amendments made thereby, shall validate or invalidate any claim
        by Alaska Natives of sovereign authority over lands or people.
      (41) TIN
        The term "TIN" means the identifying number assigned to a
      person under section 6109.
      (42) Substituted basis property
        The term "substituted basis property" means property which is -
      
          (A) transferred basis property, or
          (B) exchanged basis property.
      (43) Transferred basis property
        The term "transferred basis property" means property having a
      basis determined under any provision of subtitle A (or under any
      corresponding provision of prior income tax law) providing that
      the basis shall be determined in whole or in part by reference to
      the basis in the hands of the donor, grantor, or other
      transferor.
      (44) Exchanged basis property
        The term "exchanged basis property" means property having a
      basis determined under any provision of subtitle A (or under any
      corresponding provision of prior income tax law) providing that
      the basis shall be determined in whole or in part by reference to
      other property held at any time by the person for whom the basis
      is to be determined.
      (45) Nonrecognition transaction
        The term "nonrecognition transaction" means any disposition of
      property in a transaction in which gain or loss is not recognized
      in whole or in part for purposes of subtitle A.
      (46) Determination of whether there is a collective bargaining
        agreement
        In determining whether there is a collective bargaining
      agreement between employee representatives and 1 or more
      employers, the term "employee representatives" shall not include
      any organization more than one-half of the members of which are
      employees who are owners, officers, or executives of the
      employer. An agreement shall not be treated as a collective
      bargaining agreement unless it is a bona fide agreement between
      bona fide employee representatives and 1 or more employers.
      (47) Executor
        The term "executor" means the executor or administrator of the
      decedent, or, if there is no executor or administrator appointed,
      qualified, and acting within the United States, then any person
      in actual or constructive possession of any property of the
      decedent.
      (48) Off-highway vehicles
        (A) Off-highway transportation vehicles
          (i) In general
            A vehicle shall not be treated as a highway vehicle if such
          vehicle is specially designed for the primary function of
          transporting a particular type of load other than over the
          public highway and because of this special design such
          vehicle's capability to transport a load over the public
          highway is substantially limited or impaired.
          (ii) Determination of vehicle's design
            For purposes of clause (i), a vehicle's design is
          determined solely on the basis of its physical
          characteristics.
          (iii) Determination of substantial limitation or impairment
            For purposes of clause (i), in determining whether
          substantial limitation or impairment exists, account may be
          taken of factors such as the size of the vehicle, whether
          such vehicle is subject to the licensing, safety, and other
          requirements applicable to highway vehicles, and whether such
          vehicle can transport a load at a sustained speed of at least
          25 miles per hour. It is immaterial that a vehicle can
          transport a greater load off the public highway than such
          vehicle is permitted to transport over the public highway.
        (B) Nontransportation trailers and semitrailers
          A trailer or semitrailer shall not be treated as a highway
        vehicle if it is specially designed to function only as an
        enclosed stationary shelter for the carrying on of an off-
        highway function at an off-highway site.
      (49) Qualified blood collector organization
        The term "qualified blood collector organization" means an
      organization which is - 
          (A) described in section 501(c)(3) and exempt from tax under
        section 501(a),
          (B) primarily engaged in the activity of the collection of
        human blood,
          (C) registered with the Secretary for purposes of excise tax
        exemptions, and
          (D) registered by the Food and Drug Administration to collect
        blood.
    (b) Definition of resident alien and nonresident alien
      (1) In general
        For purposes of this title (other than subtitle B) - 
        (A) Resident alien
          An alien individual shall be treated as a resident of the
        United States with respect to any calendar year if (and only
        if) such individual meets the requirements of clause (i), (ii),
        or (iii):
          (i) Lawfully admitted for permanent residence
            Such individual is a lawful permanent resident of the
          United States at any time during such calendar year.
          (ii) Substantial presence test
            Such individual meets the substantial presence test of
          paragraph (3).
          (iii) First year election
            Such individual makes the election provided in paragraph
          (4).
        (B) Nonresident alien
          An individual is a nonresident alien if such individual is
        neither a citizen of the United States nor a resident of the
        United States (within the meaning of subparagraph (A)).
      (2) Special rules for first and last year of residency
        (A) First year of residency
          (i) In general
            If an alien individual is a resident of the United States
          under paragraph (1)(A) with respect to any calendar year, but
          was not a resident of the United States at any time during
          the preceding calendar year, such alien individual shall be
          treated as a resident of the United States only for the
          portion of such calendar year which begins on the residency
          starting date.
          (ii) Residency starting date for individuals lawfully
            admitted for permanent residence
            In the case of an individual who is a lawfully permanent
          resident of the United States at any time during the calendar
          year, but does not meet the substantial presence test of
          paragraph (3), the residency starting date shall be the first
          day in such calendar year on which he was present in the
          United States while a lawful permanent resident of the United
          States.
          (iii) Residency starting date for individuals meeting
            substantial presence test
            In the case of an individual who meets the substantial
          presence test of paragraph (3) with respect to any calendar
          year, the residency starting date shall be the first day
          during such calendar year on which the individual is present
          in the United States.
          (iv) Residency starting date for individuals making first
            year election
            In the case of an individual who makes the election
          provided by paragraph (4) with respect to any calendar year,
          the residency starting date shall be the 1st day during such
          calendar year on which the individual is treated as a
          resident of the United States under that paragraph.
        (B) Last year of residency
          An alien individual shall not be treated as a resident of the
        United States during a portion of any calendar year if - 
            (i) such portion is after the last day in such calendar
          year on which the individual was present in the United States
          (or, in the case of an individual described in paragraph
          (1)(A)(i), the last day on which he was so described),
            (ii) during such portion the individual has a closer
          connection to a foreign country than to the United States,
          and
            (iii) the individual is not a resident of the United States
          at any time during the next calendar year.
        (C) Certain nominal presence disregarded
          (i) In general
            For purposes of subparagraphs (A)(iii) and (B), an
          individual shall not be treated as present in the United
          States during any period for which the individual establishes
          that he has a closer connection to a foreign country than to
          the United States.
          (ii) Not more than 10 days disregarded
            Clause (i) shall not apply to more than 10 days on which
          the individual is present in the United States.
      (3) Substantial presence test
        (A) In general
          Except as otherwise provided in this paragraph, an individual
        meets the substantial presence test of this paragraph with
        respect to any calendar year (hereinafter in this subsection
        referred to as the "current year") if - 
            (i) such individual was present in the United States on at
          least 31 days during the calendar year, and
            (ii) the sum of the number of days on which such individual
          was present in the United States during the current year and
          the 2 preceding calendar years (when multiplied by the
          applicable multiplier determined under the following table)
          equals or exceeds 183 days:

              The applicable
    In the case of days in:                               multiplier is:
       Current year                                                 1 
       1st preceding year                                         1/3 
       2nd preceding year                                         1/6 
        (B) Exception where individual is present in the United States
          during less than one-half of current year and closer
          connection to foreign country is established
          An individual shall not be treated as meeting the substantial
        presence test of this paragraph with respect to any current
        year if - 
            (i) such individual is present in the United States on
          fewer than 183 days during the current year, and
            (ii) it is established that for the current year such
          individual has a tax home (as defined in section 911(d)(3)
          without regard to the second sentence thereof) in a foreign
          country and has a closer connection to such foreign country
          than to the United States.
        (C) Subparagraph (B) not to apply in certain cases
          Subparagraph (B) shall not apply to any individual with
        respect to any current year if at any time during such year - 
            (i) such individual had an application for adjustment of
          status pending, or
            (ii) such individual took other steps to apply for status
          as a lawful permanent resident of the United States.
        (D) Exception for exempt individuals or for certain medical
          conditions
          An individual shall not be treated as being present in the
        United States on any day if - 
            (i) such individual is an exempt individual for such day,
          or
            (ii) such individual was unable to leave the United States
          on such day because of a medical condition which arose while
          such individual was present in the United States.
      (4) First-year election
        (A) An alien individual shall be deemed to meet the
      requirements of this subparagraph if such individual - 
          (i) is not a resident of the United States under clause (i)
        or (ii) of paragraph (1)(A) with respect to a calendar year
        (hereinafter referred to as the "election year"),
          (ii) was not a resident of the United States under paragraph
        (1)(A) with respect to the calendar year immediately preceding
        the election year,
          (iii) is a resident of the United States under clause (ii) of
        paragraph (1)(A) with respect to the calendar year immediately
        following the election year, and
          (iv) is both - 
            (I) present in the United States for a period of at least
          31 consecutive days in the election year, and
            (II) present in the United States during the period
          beginning with the first day of such 31-day period and ending
          with the last day of the election year (hereinafter referred
          to as the "testing period") for a number of days equal to or
          exceeding 75 percent of the number of days in the testing
          period (provided that an individual shall be treated for
          purposes of this subclause as present in the United States
          for a number of days during the testing period not exceeding
          5 days in the aggregate, notwithstanding his absence from the
          United States on such days).

        (B) An alien individual who meets the requirements of
      subparagraph (A) shall, if he so elects, be treated as a resident
      of the United States with respect to the election year.
        (C) An alien individual who makes the election provided by
      subparagraph (B) shall be treated as a resident of the United
      States for the portion of the election year which begins on the
      1st day of the earliest testing period during such year with
      respect to which the individual meets the requirements of clause
      (iv) of subparagraph (A).
        (D) The rules of subparagraph (D)(i) of paragraph (3) shall
      apply for purposes of determining an individual's presence in the
      United States under this paragraph.
        (E) An election under subparagraph (B) shall be made on the
      individual's tax return for the election year, provided that such
      election may not be made before the individual has met the
      substantial presence test of paragraph (3) with respect to the
      calendar year immediately following the election year.
        (F) An election once made under subparagraph (B) remains in
      effect for the election year, unless revoked with the consent of
      the Secretary.
      (5) Exempt individual defined
        For purposes of this subsection - 
        (A) In general
          An individual is an exempt individual for any day if, for
        such day, such individual is - 
            (i) a foreign government-related individual,
            (ii) a teacher or trainee,
            (iii) a student, or
            (iv) a professional athlete who is temporarily in the
          United States to compete in a charitable sports event
          described in section 274(l)(1)(B).
        (B) Foreign government-related individual
          The term "foreign government-related individual" means any
        individual temporarily present in the United States by reason
        of - 
            (i) diplomatic status, or a visa which the Secretary (after
          consultation with the Secretary of State) determines
          represents full-time diplomatic or consular status for
          purposes of this subsection,
            (ii) being a full-time employee of an international
          organization, or
            (iii) being a member of the immediate family of an
          individual described in clause (i) or (ii).
        (C) Teacher or trainee
          The term "teacher or trainee" means any individual - 
            (i) who is temporarily present in the United States under
          subparagraph (J) or (Q) of section 101(15) of the Immigration
          and Nationality Act (other than as a student), and
            (ii) who substantially complies with the requirements for
          being so present.
        (D) Student
          The term "student" means any individual - 
            (i) who is temporarily present in the United States - 
              (I) under subparagraph (F) or (M) of section 101(15) of
            the Immigration and Nationality Act, or
              (II) as a student under subparagraph (J) or (Q) of such
            section 101(15), and

            (ii) who substantially complies with the requirements for
          being so present.
        (E) Special rules for teachers, trainees, and students
          (i) Limitation on teachers and trainees
            An individual shall not be treated as an exempt individual
          by reason of clause (ii) of subparagraph (A) for the current
          year if, for any 2 calendar years during the preceding 6
          calendar years, such person was an exempt person under clause
          (ii) or (iii) of subparagraph (A). In the case of an
          individual all of whose compensation is described in section
          872(b)(3), the preceding sentence shall be applied by
          substituting "4 calendar years" for "2 calendar years".
          (ii) Limitation on students
            For any calendar year after the 5th calendar year for which
          an individual was an exempt individual under clause (ii) or
          (iii) of subparagraph (A), such individual shall not be
          treated as an exempt individual by reason of clause (iii) of
          subparagraph (A), unless such individual establishes to the
          satisfaction of the Secretary that such individual does not
          intend to permanently reside in the United States and that
          such individual meets the requirements of subparagraph
          (D)(ii).
      (6) Lawful permanent resident
        For purposes of this subsection, an individual is a lawful
      permanent resident of the United States at any time if - 
          (A) such individual has the status of having been lawfully
        accorded the privilege of residing permanently in the United
        States as an immigrant in accordance with the immigration laws,
        and
          (B) such status has not been revoked (and has not been
        administratively or judicially determined to have been
        abandoned).
      (7) Presence in the United States
        For purposes of this subsection - 
        (A) In general
          Except as provided in subparagraph (B), (C), or (D), an
        individual shall be treated as present in the United States on
        any day if such individual is physically present in the United
        States at any time during such day.
        (B) Commuters from Canada or Mexico
          If an individual regularly commutes to employment (or self-
        employment) in the United States from a place of residence in
        Canada or Mexico, such individual shall not be treated as
        present in the United States on any day during which he so
        commutes.
        (C) Transit between 2 foreign points
          If an individual, who is in transit between 2 points outside
        the United States, is physically present in the United States
        for less than 24 hours, such individual shall not be treated as
        present in the United States on any day during such transit.
        (D) Crew members temporarily present
          An individual who is temporarily present in the United States
        on any day as a regular member of the crew of a foreign vessel
        engaged in transportation between the United States and a
        foreign country or a possession of the United States shall not
        be treated as present in the United States on such day unless
        such individual otherwise engages in any trade or business in
        the United States on such day.
      (8) Annual statements
        The Secretary may prescribe regulations under which an
      individual who (but for subparagraph (B) or (D) of paragraph (3))
      would meet the substantial presence test of paragraph (3) is
      required to submit an annual statement setting forth the basis on
      which such individual claims the benefits of subparagraph (B) or
      (D) of paragraph (3), as the case may be.
      (9) Taxable year
        (A) In general
          For purposes of this title, an alien individual who has not
        established a taxable year for any prior period shall be
        treated as having a taxable year which is the calendar year.
        (B) Fiscal year taxpayer
          If - 
            (i) an individual is treated under paragraph (1) as a
          resident of the United States for any calendar year, and
            (ii) after the application of subparagraph (A), such
          individual has a taxable year other than a calendar year,

        he shall be treated as a resident of the United States with
        respect to any portion of a taxable year which is within such
        calendar year.
      (10) Coordination with section 877
        If - 
          (A) an alien individual was treated as a resident of the
        United States during any period which includes at least 3
        consecutive calendar years (hereinafter referred to as the
        "initial residency period"), and
          (B) such individual ceases to be treated as a resident of the
        United States but subsequently becomes a resident of the United
        States before the close of the 3rd calendar year beginning
        after the close of the initial residency period,

      such individual shall be taxable for the period after the close
      of the initial residency period and before the day on which he
      subsequently became a resident of the United States in the manner
      provided in section 877(b). The preceding sentence shall apply
      only if the tax imposed pursuant to section 877(b) exceeds the
      tax which, without regard to this paragraph, is imposed pursuant
      to section 871.
      (11) Regulations
        The Secretary shall prescribe such regulations as may be
      necessary or appropriate to carry out the purposes of this
      subsection.
    (c) Includes and including
      The terms "includes" and "including" when used in a definition
    contained in this title shall not be deemed to exclude other things
    otherwise within the meaning of the term defined.
    (d) Commonwealth of Puerto Rico
      Where not otherwise distinctly expressed or manifestly
    incompatible with the intent thereof, references in this title to
    possessions of the United States shall be treated as also referring
    to the Commonwealth of Puerto Rico.
    (e) Treatment of certain contracts for providing services, etc.
      For purposes of chapter 1 - 
      (1) In general
        A contract which purports to be a service contract shall be
      treated as a lease of property if such contract is properly
      treated as a lease of property, taking into account all relevant
      factors including whether or not - 
          (A) the service recipient is in physical possession of the
        property,
          (B) the service recipient controls the property,
          (C) the service recipient has a significant economic or
        possessory interest in the property,
          (D) the service provider does not bear any risk of
        substantially diminished receipts or substantially increased
        expenditures if there is nonperformance under the contract,
          (E) the service provider does not use the property
        concurrently to provide significant services to entities
        unrelated to the service recipient, and
          (F) the total contract price does not substantially exceed
        the rental value of the property for the contract period.
      (2) Other arrangements
        An arrangement (including a partnership or other pass-thru
      entity) which is not described in paragraph (1) shall be treated
      as a lease if such arrangement is properly treated as a lease,
      taking into account all relevant factors including factors
      similar to those set forth in paragraph (1).
      (3) Special rules for contracts or arrangements involving solid
        waste disposal, energy, and clean water facilities
        (A) In general
          Notwithstanding paragraphs (1) and (2), and except as
        provided in paragraph (4), any contract or arrangement between
        a service provider and a service recipient - 
            (i) with respect to - 
              (I) the operation of a qualified solid waste disposal
            facility,
              (II) the sale to the service recipient of electrical or
            thermal energy produced at a cogeneration or alternative
            energy facility, or
              (III) the operation of a water treatment works facility,
            and

            (ii) which purports to be a service contract,

        shall be treated as a service contract.
        (B) Qualified solid waste disposal facility
          For purposes of subparagraph (A), the term "qualified solid
        waste disposal facility" means any facility if such facility
        provides solid waste disposal services for residents of part or
        all of 1 or more governmental units and substantially all of
        the solid waste processed at such facility is collected from
        the general public.
        (C) Cogeneration facility
          For purposes of subparagraph (A), the term "cogeneration
        facility" means a facility which uses the same energy source
        for the sequential generation of electrical or mechanical power
        in combination with steam, heat, or other forms of useful
        energy.
        (D) Alternative energy facility
          For purposes of subparagraph (A), the term "alternative
        energy facility" means a facility for producing electrical or
        thermal energy if the primary energy source for the facility is
        not oil, natural gas, coal, or nuclear power.
        (E) Water treatment works facility
          For purposes of subparagraph (A), the term "water treatment
        works facility" means any treatment works within the meaning of
        section 212(2) of the Federal Water Pollution Control Act.
      (4) Paragraph (3) not to apply in certain cases
        (A) In general
          Paragraph (3) shall not apply to any qualified solid waste
        disposal facility, cogeneration facility, alternative energy
        facility, or water treatment works facility used under a
        contract or arrangement if - 
            (i) the service recipient (or a related entity) operates
          such facility,
            (ii) the service recipient (or a related entity) bears any
          significant financial burden if there is nonperformance under
          the contract or arrangement (other than for reasons beyond
          the control of the service provider),
            (iii) the service recipient (or a related entity) receives
          any significant financial benefit if the operating costs of
          such facility are less than the standards of performance or
          operation under the contract or arrangement, or
            (iv) the service recipient (or a related entity) has an
          option to purchase, or may be required to purchase, all or a
          part of such facility at a fixed and determinable price
          (other than for fair market value).

        For purposes of this paragraph, the term "related entity" has
        the same meaning as when used in section 168(h).
        (B) Special rules for application of subparagraph (A) with
          respect to certain rights and allocations under the contract
          For purposes of subparagraph (A), there shall not be taken
        into account - 
            (i) any right of a service recipient to inspect any
          facility, to exercise any sovereign power the service
          recipient may possess, or to act in the event of a breach of
          contract by the service provider, or
            (ii) any allocation of any financial burden or benefits in
          the event of any change in any law.
        (C) Special rules for application of subparagraph (A) in the
          case of certain events
          (i) Temporary shut-downs, etc.
            For purposes of clause (ii) of subparagraph (A), there
          shall not be taken into account any temporary shut-down of
          the facility for repairs, maintenance, or capital
          improvements, or any financial burden caused by the
          bankruptcy or similar financial difficulty of the service
          provider.
          (ii) Reduced costs
            For purposes of clause (iii) of subparagraph (A), there
          shall not be taken into account any significant financial
          benefit merely because payments by the service recipient
          under the contract or arrangement are decreased by reason of
          increased production or efficiency or the recovery of energy
          or other products.
      (5) Exception for certain low-income housing
        This subsection shall not apply to any property described in
      clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)
      (relating to low-income housing) if - 
          (A) such property is operated by or for an organization
        described in paragraph (3) or (4) of section 501(c), and
          (B) at least 80 percent of the units in such property are
        leased to low-income tenants (within the meaning of section
        167(k)(3)(B)) (as in effect on the day before the date of the
        enactment of the Revenue Reconcilation (!3) Act of 1990).

      (6) Regulations
        The Secretary may prescribe such regulations as may be
      necessary or appropriate to carry out the provisions of this
      subsection.
    (f) Use of related persons or pass-thru entities
      The Secretary shall prescribe such regulations as may be
    necessary or appropriate to prevent the avoidance of those
    provisions of this title which deal with - 
        (1) the linking of borrowing to investment, or
        (2) diminishing risks,

    through the use of related persons, pass-thru entities, or other
    intermediaries.
    (g) Clarification of fair market value in the case of nonrecourse
      indebtedness
      For purposes of subtitle A, in determining the amount of gain or
    loss (or deemed gain or loss) with respect to any property, the
    fair market value of such property shall be treated as being not
    less than the amount of any nonrecourse indebtedness to which such
    property is subject.
    (h) Motor vehicle operating leases
      (1) In general
        For purposes of this title, in the case of a qualified motor
      vehicle operating agreement which contains a terminal rental
      adjustment clause - 
          (A) such agreement shall be treated as a lease if (but for
        such terminal rental adjustment clause) such agreement would be
        treated as a lease under this title, and
          (B) the lessee shall not be treated as the owner of the
        property subject to an agreement during any period such
        agreement is in effect.
      (2) Qualified motor vehicle operating agreement defined
        For purposes of this subsection - 
        (A) In general
          The term "qualified motor vehicle operating agreement" means
        any agreement with respect to a motor vehicle (including a
        trailer) which meets the requirements of subparagraphs (B),
        (C), and (D) of this paragraph.
        (B) Minimum liability of lessor
          An agreement meets the requirements of this subparagraph if
        under such agreement the sum of - 
            (i) the amount the lessor is personally liable to repay,
          and
            (ii) the net fair market value of the lessor's interest in
          any property pledged as security for property subject to the
          agreement,

        equals or exceeds all amounts borrowed to finance the
        acquisition of property subject to the agreement. There shall
        not be taken into account under clause (ii) any property
        pledged which is property subject to the agreement or property
        directly or indirectly financed by indebtedness secured by
        property subject to the agreement.
        (C) Certification by lessee; notice of tax ownership
          An agreement meets the requirements of this subparagraph if
        such agreement contains a separate written statement separately
        signed by the lessee - 
            (i) under which the lessee certifies, under penalty of
          perjury, that it intends that more than 50 percent of the use
          of the property subject to such agreement is to be in a trade
          or business of the lessee, and
            (ii) which clearly and legibly states that the lessee has
          been advised that it will not be treated as the owner of the
          property subject to the agreement for Federal income tax
          purposes.
        (D) Lessor must have no knowledge that certification is false
          An agreement meets the requirements of this subparagraph if
        the lessor does not know that the certification described in
        subparagraph (C)(i) is false.
      (3) Terminal rental adjustment clause defined
        (A) In general
          For purposes of this subsection, 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.
        (B) Special rule for lessee dealers
          The term "terminal rental adjustment clause" 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 subparagraph (A).
    (i) Taxable mortgage pools
      (1) Treated as separate corporations
        A taxable mortgage pool shall be treated as a separate
      corporation which may not be treated as an includible corporation
      with any other corporation for purposes of section 1501.
      (2) Taxable mortgage pool defined
        For purposes of this title - 
        (A) In general
          Except as otherwise provided in this paragraph, a taxable
        mortgage pool is any entity (other than a REMIC) if - 
            (i) substantially all of the assets of such entity consists
          of debt obligations (or interests therein) and more than 50
          percent of such debt obligations (or interests) consists of
          real estate mortgages (or interests therein),
            (ii) such entity is the obligor under debt obligations with
          2 or more maturities, and
            (iii) under the terms of the debt obligations referred to
          in clause (ii) (or underlying arrangement), payments on such
          debt obligations bear a relationship to payments on the debt
          obligations (or interests) referred to in clause (i).
        (B) Portion of entities treated as pools
          Any portion of an entity which meets the definition of
        subparagraph (A) shall be treated as a taxable mortgage pool.
        (C) Exception for domestic building and loan
          Nothing in this subsection shall be construed to treat any
        domestic building and loan association (or portion thereof) as
        a taxable mortgage pool.
        (D) Treatment of certain equity interests
          To the extent provided in regulations, equity interest of
        varying classes which correspond to maturity classes of debt
        shall be treated as debt for purposes of this subsection.
      (3) Treatment of certain REIT's
        If - 
          (A) a real estate investment trust is a taxable mortgage
        pool, or
          (B) a qualified REIT subsidiary (as defined in section
        856(i)(2)) of a real estate investment trust is a taxable
        mortgage pool,

      under regulations prescribed by the Secretary, adjustments
      similar to the adjustments provided in section 860E(d) shall
      apply to the shareholders of such real estate investment trust.
    (j) Tax treatment of Federal Thrift Savings Fund
      (1) In general
        For purposes of this title - 
          (A) the Thrift Savings Fund shall be treated as a trust
        described in section 401(a) which is exempt from taxation under
        section 501(a);
          (B) any contribution to, or distribution from, the Thrift
        Savings Fund shall be treated in the same manner as
        contributions to or distributions from such a trust; and
          (C) subject to section 401(k)(4)(B) and any dollar limitation
        on the application of section 402(e)(3), contributions to the
        Thrift Savings Fund shall not be treated as distributed or made
        available to an employee or Member nor as a contribution made
        to the Fund by an employee or Member merely because the
        employee or Member has, under the provisions of subchapter III
        of chapter 84 of title 5, United States Code, and section 8351
        of such title 5, an election whether the contribution will be
        made to the Thrift Savings Fund or received by the employee or
        Member in cash.
      (2) Nondiscrimination requirements
        Notwithstanding any other provision of law, the Thrift Savings
      Fund is not subject to the nondiscrimination requirements
      applicable to arrangements described in section 401(k) or to
      matching contributions (as described in section 401(m)), so long
      as it meets the requirements of this section.
      (3) Coordination with Social Security Act
        Paragraph (1) shall not be construed to provide that any amount
      of the employee's or Member's basic pay which is contributed to
      the Thrift Savings Fund shall not be included in the term "wages"
      for the purposes of section 209 of the Social Security Act or
      section 3121(a) of this title.
      (4) Definitions
        For purposes of this subsection, the terms "Member",
      "employee", and "Thrift Savings Fund" shall have the same
      respective meanings as when used in subchapter III of chapter 84
      of title 5, United States Code.
      (5) Coordination with other provisions of law
        No provision of law not contained in this title shall apply for
      purposes of determining the treatment under this title of the
      Thrift Savings Fund or any contribution to, or distribution from,
      such Fund.
    (k) Treatment of certain amounts paid to charity
      In the case of any payment which, except for section 501(b) of
    the Ethics in Government Act of 1978, might be made to any officer
    or employee of the Federal Government but which is made instead on
    behalf of such officer or employee to an organization described in
    section 170(c) - 
        (1) such payment shall not be treated as received by such
      officer or employee for all purposes of this title and for all
      purposes of any tax law of a State or political subdivision
      thereof, and
        (2) no deduction shall be allowed under any provision of this
      title (or of any tax law of a State or political subdivision
      thereof) to such officer or employee by reason of having such
      payment made to such organization.

    For purposes of this subsection, a Senator, a Representative in, or
    a Delegate or Resident Commissioner to, the Congress shall be
    treated as an officer or employee of the Federal Government.
    (l) Regulations relating to conduit arrangements
      The Secretary may prescribe regulations recharacterizing any
    multiple-party financing transaction as a transaction directly
    among any 2 or more of such parties where the Secretary determines
    that such recharacterization is appropriate to prevent avoidance of
    any tax imposed by this title.
    (m) Designation of contract markets
      Any designation by the Commodity Futures Trading Commission of a
    contract market which could not have been made under the law in
    effect on the day before the date of the enactment of the Commodity
    Futures Modernization Act of 2000 shall apply for purposes of this
    title except to the extent provided in regulations prescribed by
    the Secretary.
    (n) Special rules for determining when an individual is no longer a
      United States citizen or long-term resident
      For purposes of this chapter - 
      (1) United States citizens
        An individual who would (but for this paragraph) cease to be
      treated as a citizen of the United States shall continue to be
      treated as a citizen of the United States until such individual -
      
          (A) gives notice of an expatriating act (with the requisite
        intent to relinquish citizenship) to the Secretary of State,
        and
          (B) provides a statement in accordance with section 6039G (if
        such a statement is otherwise required).
      (2) Long-term residents
        A long-term resident (as defined in section 877(e)(2)) who
      would (but for this paragraph) be described in section 877(e)(1)
      shall be treated as a lawful permanent resident of the United
      States and as not described in section 877(e)(1) until such
      individual - 
          (A) gives notice of termination of residency (with the
        requisite intent to terminate residency) to the Secretary of
        Homeland Security, and
          (B) provides a statement in accordance with section 6039G (if
        such a statement is otherwise required).
    (o) Convention or association of churches
      For purposes of this title, any organization which is otherwise a
    convention or association of churches shall not fail to so qualify
    merely because the membership of such organization includes
    individuals as well as churches or because individuals have voting
    rights in such organization.
    (p) Cross references
      (1) Other definitions
          For other definitions, see the following sections of Title 1
        of the United States Code:
            (1) Singular as including plural, section 1.
            (2) Plural as including singular, section 1.
            (3) Masculine as including feminine, section 1.
            (4) Officer, section 1.
            (5) Oath as including affirmation, section 1.
            (6) County as including parish, section 2.
            (7) Vessel as including all means of water transportation,
          section 3.
            (8) Vehicle as including all means of land transportation,
          section 4.
            (9) Company or association as including successors and
          assigns, section 5.
      (2) Effect of cross references
          For effect of cross references in this title, see section
        7806(a).

-SOURCE-
    (Aug. 16, 1954, ch. 736, 68A Stat. 911; Pub. L. 86-70, Sec. 22(g),
    (h), June 25, 1959, 73 Stat. 146; Pub. L. 86-624, Sec. 18(i), (j),
    July 12, 1960, 74 Stat. 416; Pub. L. 86-778, title I, Sec. 103(t),
    Sept. 13, 1960, 74 Stat. 941; Pub. L. 87-834, Secs. 6(c), 7(h),
    Oct. 16, 1962, 76 Stat. 982, 988; Pub. L. 87-870, Sec. 5(a), Oct.
    23, 1962, 76 Stat. 1161; Pub. L. 88-272, title II, Secs. 204(a)(3),
    234(b)(3), Feb. 26, 1964, 78 Stat. 36, 114; Pub. L. 89-368, title
    I, Sec. 102(b)(5), Mar. 15, 1966, 80 Stat. 64; Pub. L. 89-809,
    title I, Sec. 103(l)(1), Nov. 13, 1966, 80 Stat. 1554; Pub. L. 90-
    364, title I, Sec. 103(e)(6), June 28, 1968, 82 Stat. 264; Pub. L.
    91-172, title IV, Sec. 432(c), (d), title IX, Sec. 960(j), Dec. 30,
    1969, 83 Stat. 622, 623, 735; Pub. L. 92-606, Sec. 1(f)(4), Oct.
    31, 1972, 86 Stat. 1497; Pub. L. 93-406, title III, Sec. 3043,
    Sept. 2, 1974, 88 Stat. 1003; Pub. L. 94-455, title XII, Sec.
    1203(a), title XIX, Sec. 1906(a)(57), (b)(13)(A), (c)(3), Oct. 4,
    1976, 90 Stat. 1688, 1832, 1834, 1835; Pub. L. 95-600, title I,
    Sec. 157(k)(2), title VII, Sec. 701(cc)(2), Nov. 6, 1978, 92 Stat.
    2809, 2923; Pub. L. 97-34, title VII, Sec. 725(c)(4), Aug. 13,
    1981, 95 Stat. 346; Pub. L. 97-248, title II, Sec. 201(d)(10),
    formerly Sec. 201(c)(10), title III, Secs. 307(a)(17), 308(a),
    336(a), Sept. 3, 1982, 96 Stat. 421, 590, 591, 628, renumbered Sec.
    201(d)(10) and amended Pub. L. 97-448, title III, Sec.
    306(a)(1)(A)(i), (b)(3), Jan. 12, 1983, 96 Stat. 2400, 2406; Pub.
    L. 97-449, Sec. 5(e), Jan. 12, 1983, 96 Stat. 2442; Pub. L. 97-473,
    title II, Sec. 203, Jan. 14, 1983, 96 Stat. 2611; Pub. L. 98-67,
    title I, Secs. 102(a), 104(d)(1), Aug. 5, 1983, 97 Stat. 369, 379;
    Pub. L. 98-216, Sec. 3(c)(2), Feb. 14, 1984, 98 Stat. 6; Pub. L. 98-
    369, div. A, title I, Secs. 31(e), 43(a)(1), 53(c), 75(c), 138(a),
    title IV, Secs. 412(b)(11), 422(d)(3), 474(r)(29)(K), 491(d)(53),
    title V, Sec. 526(c)(1), July 18, 1984, 98 Stat. 518, 558, 567,
    595, 672, 792, 798, 845, 852, 874; Pub. L. 98-443, Sec. 9(q), Oct.
    4, 1984, 98 Stat. 1708; Pub. L. 99-514, title II, Sec. 201(c),
    (d)(14), title VI, Secs. 671(b)(3), 673, title XI, Secs. 1137,
    1147(a), 1166(a), title XVIII, Secs. 1802(a)(9)(C), 1810(l)(1)-
    (5)(A), 1842(d), 1899A(63), (64), Oct. 22, 1986, 100 Stat. 2138,
    2142, 2317, 2319, 2486, 2493, 2511, 2790, 2830-2832, 2853, 2962;
    Pub. L. 100-202, Sec. 101(m) [title VI, Sec. 624(a)], Dec. 22,
    1987, 101 Stat. 1329-390, 1329-429; Pub. L. 100-647, Sec. 1(c),
    title I, Secs. 1001(d)(2)(D), 1002(a)(2), 1006(t)(12), (25)(A),
    1011A(m)(1), 1011B(e), 1018(g)(3), Nov. 10, 1988, 102 Stat. 3342,
    3351, 3352, 3422, 3426, 3483, 3489, 3583; Pub. L. 101-194, title
    VI, Sec. 602, Nov. 30, 1989, 103 Stat. 1762; Pub. L. 101-508, title
    XI, Secs. 11704(a)(34), 11812(b)(13), Nov. 5, 1990, 104 Stat. 1388-
    519, 1388-536; Pub. L. 102-90, title III, Sec. 314(e), Aug. 14,
    1991, 105 Stat. 470; Pub. L. 102-318, title V, Sec. 521(b)(43),
    July 3, 1992, 106 Stat. 313; Pub. L. 103-66, title XIII, Sec.
    13238, Aug. 10, 1993, 107 Stat. 508; Pub. L. 103-296, title III,
    Sec. 320(a)(3), Aug. 15, 1994, 108 Stat. 1535; Pub. L. 104-88,
    title III, Sec. 304(e), Dec. 29, 1995, 109 Stat. 944; Pub. L. 104-
    188, title I, Secs. 1402(b)(3), 1621(b)(8), (9), 1907(a)(1), (2),
    Aug. 20, 1996, 110 Stat. 1790, 1867, 1916; Pub. L. 105-34, title
    XI, Secs. 1151(a), 1174(b), title XVI, Sec. 1601(i)(3)(A), Aug. 5,
    1997, 111 Stat. 986, 989, 1093; Pub. L. 106-554, Sec. 1(a)(7)
    [title IV, Sec. 401(i)], Dec. 21, 2000, 114 Stat. 2763, 2763A-650;
    Pub. L. 107-16, title V, Sec. 542(e)(3), June 7, 2001, 115 Stat.
    85; Pub. L. 108-311, title II, Sec. 207(24), Oct. 4, 2004, 118
    Stat. 1178; Pub. L. 108-357, title VIII, Secs. 804(b), 835(b)(10),
    (11), 852(a), Oct. 22, 2004, 118 Stat. 1570, 1594, 1609; Pub. L.
    109-135, title IV, Sec. 403(v)(2), Dec. 21, 2005, 119 Stat. 2628;
    Pub. L. 109-280, title XII, Secs. 1207(f), 1222, Aug. 17, 2006, 120
    Stat. 1071, 1089.)


-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 401 of the National Housing Act, referred to in subsec.
    (a)(19)(A), (32)(A)(i), which was classified to section 1724 of
    Title 12, Banks and Banking, was repealed by Pub. L. 101-73, title
    IV, Sec. 407, Aug. 9, 1989, 103 Stat. 363.
      Part A and part B of title I of the Housing Act of 1949, referred
    to in subsec. (a)(19)(C)(vi), which were classified generally to
    part A (Sec. 1450 et seq.) and part B (Sec. 1469 et seq.) of
    subchapter II of chapter 8A of Title 42, The Public Health and
    Welfare, were omitted from the Code pursuant to section 5316 of
    Title 42, which terminated authority to make new loans and grants
    under title I of that Act after Jan. 1, 1975.
      Section 103 of the Demonstration Cities and Metropolitan
    Development Act of 1966, referred to in subsec. (a)(19)(C)(vi),
    which was classified to section 3303 of Title 42, was omitted from
    the Code pursuant to section 5316 of Title 42, which terminated
    authority to make new loans and grants under title I (Sec. 101 et
    seq.) of that Act after Jan. 1, 1975.
      The Internal Revenue Code of 1939, referred to in subsec.
    (a)(29), is act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior
    to the enactment of the Internal Revenue Code of 1986 [formerly
    I.R.C. 1954], the 1939 Code was classified to former Title 26,
    Internal Revenue Code. The Internal Revenue Code of 1954 was
    redesignated The Internal Revenue Code of 1986 by Pub. L. 99-514,
    Sec. 2, Oct. 22, 1986, 100 Stat. 2095. For table of comparisons of
    the 1939 Code to the 1986 Code, see Table I preceding section 1 of
    this title.
      The Employee Retirement Income Security Act of 1974, referred to
    in subsec. (a)(35), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829,
    as amended. Subtitle C of title III of the Employee Retirement
    Income Security Act of 1974 is classified to subtitle C (Sec. 1241
    et seq.) of subchapter II of chapter 18 of Title 29, Labor and
    amended subsec. (a)(35) of this section. For complete
    classification of this Act to the Code, see Short Title note set
    out under section 1001 of Title 29 and Tables.
      The Indian Tribal Governmental Tax Status Act of 1982, referred
    to in subsec. (a)(40)(B), is title II of Pub. L. 97-473, Jan. 14,
    1983, 96 Stat. 2607, as amended, which is classified principally to
    subchapter C (Sec. 7871) of chapter 80 of this title. For complete
    classification of this Act to the Code, see Short Title of 1983
    Amendments note set out under section 1 of this title and Tables.
      Section 101(15) of the Immigration and Nationality Act, referred
    to in subsec. (b)(5)(C)(i), (D)(i), probably means section
    101(a)(15) of that Act, which is classified to section 1101(a)(15)
    of Title 8, Aliens and Nationality.
      Section 212(2) of the Federal Water Pollution Control Act,
    referred to in subsec. (e)(3)(E), is classified to section 1292(2)
    of Title 33, Navigation and Navigable Waters.
      The date of the enactment of the Revenue Reconciliation Act of
    1990, referred to in subsec. (e)(5)(B), is the date of enactment of
    Pub. L. 101-508, which was approved Nov. 5, 1990.
      Section 209 of the Social Security Act, referred to in subsec.
    (j)(3), is classified to section 409 of Title 42, The Public Health
    and Welfare.
      Section 501(b) of the Ethics in Government Act of 1978, referred
    to in subsec. (k), is section 501(b) of Pub. L. 95-521, which is
    set out in the Appendix to Title 5, Government Organization and
    Employees.
      The date of the enactment of the Commodity Futures Modernization
    Act of 2000, referred to in subsec. (m), is the date of enactment
    of Pub. L. 106-554, which was approved Dec. 21, 2000.

-COD-
                               CODIFICATION                           
      Sections 1207(f) and 1222 of Pub. L. 109-280, which directed the
    amendment of section 7701 without specifying the act to be amended,
    were executed to this section, which is section 7701 of the
    Internal Revenue Code of 1986, to reflect the probable intent of
    Congress. See 2006 Amendment notes below.


-MISC1-
                                AMENDMENTS                            
      2006 - Subsec. (a)(49). Pub. L. 109-280, Sec. 1207(f), added par.
    (49). See Codification note above.
      Subsecs. (o), (p). Pub. L. 109-280, Sec. 1222, added subsec. (o)
    and redesignated former subsec. (o) as (p). See Codification note
    above.
      2005 - Subsec. (n). Pub. L. 109-135 reenacted heading without
    change and amended text generally. Prior to amendment, text read as
    follows: "An individual who would (but for this subsection) cease
    to be treated as a citizen or resident of the United States shall
    continue to be treated as a citizen or resident of the United
    States, as the case may be, until such individual - 
        "(1) gives notice of an expatriating act or termination of
      residency (with the requisite intent to relinquish citizenship or
      terminate residency) to the Secretary of State or the Secretary
      of Homeland Security, and
        "(2) provides a statement in accordance with section 6039G."
      2004 - Subsec. (a)(17). Pub. L. 108-311 substituted "682" for
    "152(b)(4), 682,".
      Subsec. (a)(19)(C)(xi). Pub. L. 108-357, Sec. 835(b)(10), struck
    out "and any regular interest in a FASIT," after "residual interest
    in a REMIC," and struck out "or FASIT" after "entire interest in
    the REMIC" and after "such REMIC" in two places.
      Subsec. (a)(48). Pub. L. 108-357, Sec. 852(a), added par. (48).
      Subsec. (i)(2)(A). Pub. L. 108-357, Sec. 835(b)(11), struck out
    "or a FASIT" after "other than a REMIC" in introductory provisions.
      Subsecs. (n), (o). Pub. L. 108-357, Sec. 804(b), added subsec.
    (n) and redesignated former subsec. (n) as (o).
      2001 - Subsec. (a)(47). Pub. L. 107-16, Secs. 542(e)(3), 901,
    temporarily added par. (47). See Effective and Termination Dates of
    2001 Amendment note below.
      2000 - Subsecs. (m), (n). Pub. L. 106-554 added subsec. (m) and
    redesignated former subsec. (m) as (n).
      1997 - Subsec. (a)(4). Pub. L. 105-34, Sec. 1151(a), inserted
    before period at end "unless, in the case of a partnership, the
    Secretary provides otherwise by regulations".
      Subsec. (a)(30)(E)(ii). Pub. L. 105-34, Sec. 1601(i)(3)(A),
    substituted "persons" for "fiduciaries".
      Subsec. (b)(7)(A). Pub. L. 105-34, Sec. 1174(b)(2), substituted
    ", (C), or (D)" for "or (C)".
      Subsec. (b)(7)(D). Pub. L. 105-34, Sec. 1174(b)(1), added subpar.
    (D).
      1996 - Subsec. (a)(19)(C)(xi). Pub. L. 104-188, Sec. 1621(b)(8),
    amended cl. (xi) generally. Prior to amendment, cl. (xi) read as
    follows: "any regular or residual interest in a REMIC, but only in
    the proportion which the assets of such REMIC consist of property
    described in any of the preceding clauses of this subparagraph;
    except that if 95 percent or more of the assets of such REMIC are
    assets described in clauses (i) through (x), the entire interest in
    the REMIC shall qualify."
      Subsec. (a)(20). Pub. L. 104-188, Sec. 1402(b)(3), struck out ",
    for the purpose of applying the provisions of section 101(b) with
    respect to employees' death benefits" after "health plans".
      Subsec. (a)(30)(C) to (E). Pub. L. 104-188, Sec. 1907(a)(1),
    struck out "and" at end of subpar. (C), added subpars. (D) and (E),
    and struck out former subpar. (D) which read as follows: "any
    estate or trust (other than a foreign estate or foreign trust,
    within the meaning of section 7701(a)(31))."
      Subsec. (a)(31). Pub. L. 104-188, Sec. 1907(a)(2), reenacted
    heading without change and amended text generally. Prior to
    amendment, text read as follows: "The terms 'foreign estate' and
    'foreign trust' mean an estate or trust, as the case may be, the
    income of which, from sources without the United States which is
    not effectively connected with the conduct of a trade or business
    within the United States, is not includible in gross income under
    subtitle A."
      Subsec. (i)(2)(A). Pub. L. 104-188, Sec. 1621(b)(9), inserted "or
    a FASIT" after "a REMIC" in introductory provisions.
      1995 - Subsec. (a)(33)(B). Pub. L. 104-88, Sec. 304(e)(1),
    substituted "Federal Energy Regulatory Commission" for "Federal
    Power Commission".
      Subsec. (a)(33)(C)(i). Pub. L. 104-88, Sec. 304(e)(2),
    substituted "Surface Transportation Board" for "Interstate Commerce
    Commission".
      Subsec. (a)(33)(C)(ii). Pub. L. 104-88, Sec. 304(e)(3),
    substituted "Federal Energy Regulatory Commission" for "Interstate
    Commerce Commission".
      Subsec. (a)(33)(F). Pub. L. 104-88, Sec. 304(e)(4), substituted
    "a water carrier subject to jurisdiction under subchapter II of
    chapter 135 of title 49" for "common carrier by water, subject to
    the jurisdiction of the Interstate Commerce Commission under
    subchapter III of chapter 105 of title 49, or subject to the
    jurisdiction of the Federal Maritime Board under the Intercoastal
    Shipping Act, 1933".
      Subsec. (a)(33)(G). Pub. L. 104-88, Sec. 304(e)(5), substituted
    "rail carrier subject to part A of subtitle IV" for "railroad
    corporation subject to subchapter I of chapter 105".
      Subsec. (a)(33)(H). Pub. L. 104-88, Sec. 304(e)(6), substituted
    "part A of subtitle IV" for "subchapter I of chapter 105".
      1994 - Subsec. (b)(5)(C)(i), (D)(i)(II). Pub. L. 103-296
    substituted "(J) or (Q)" for "(J)".
      1993 - Subsecs. (l), (m). Pub. L. 103-66 added subsec. (l) and
    redesignated former subsec. (l) as (m).
      1992 - Subsec. (j)(1)(C). Pub. L. 102-318 substituted "402(e)(3)"
    for "402(a)(8)".
      1991 - Subsec. (k). Pub. L. 102-90 amended last sentence
    generally. Prior to amendment, last sentence read as follows: "For
    purposes of this subsection, a Representative in, or a Delegate or
    Resident Commissioner to, the Congress shall be treated as an
    officer or employee of the Federal Government and a Senator or
    officer (except the Vice President) or employee of the Senate shall
    not be treated as an officer or employee of the Federal
    Government."
      1990 - Subsec. (e)(5)(B). Pub. L. 101-508, Sec. 11812(b)(13),
    inserted before period at end "(as in effect on the day before the
    date of the enactment of the Revenue Reconcilation [sic] Act of
    1990)".
      Subsec. (j)(1)(C). Pub. L. 101-508, Sec. 11704(a)(34),
    substituted "(C) subject to section 401(k)(4)(B) and any dollar
    limitation on the application of section 402(a)(8)," for "(C)
    subject to, section 401(k)(4)(B), and any dollar limitation on the
    application of section 402(a)(8),".
      1989 - Subsecs. (k), (l). Pub. L. 101-194 added subsec. (k) and
    redesignated former subsec. (k) as (l).
      1988 - Subsec. (a)(19). Pub. L. 100-647, Sec. 1006(t)(25)(A),
    inserted at end "For purposes of determining whether any interest
    in a REMIC qualifies under clause (xi), any regular interest in
    another REMIC held by such REMIC shall be treated as a loan
    described in a preceding clause under principles similar to the
    principles of clause (xi); except that, if such REMIC's are part of
    a tiered structure, they shall be treated as 1 REMIC for purposes
    of clause (xi)."
      Subsec. (a)(19)(C)(xi). Pub. L. 100-647, Sec. 1006(t)(12),
    substituted "are assets described" for "are loans described".
      Subsec. (a)(20). Pub. L. 100-647, Sec. 1011B(e), substituted "and
    106" for "106, and 125" and inserted "and for purposes of applying
    section 125 with respect to cafeteria plans," before "the term".
      Subsec. (a)(29). Pub. L. 100-647, Sec. 1(c), substituted
    "Internal Revenue Code of 1986" for "Internal Revenue Code of
    1954".
      Subsec. (b)(5)(A)(iv). Pub. L. 100-647, Sec. 1018(g)(3),
    substituted "section 274(l)(1)(B)" for "section 274(k)(2)".
      Subsec. (b)(5)(D)(i)(I). Pub. L. 100-647, Sec. 1001(d)(2)(D),
    substituted "subparagraph (F) or (M)" for "subparagraph (F)".
      Subsec. (e)(5). Pub. L. 100-647, Sec. 1002(a)(2), made technical
    correction to language of Pub. L. 99-514, Sec. 201(d)(14)(B), see
    1986 Amendment note below.
      Subsec. (j)(1)(C). Pub. L. 100-647, Sec. 1011A(m)(1), inserted ",
    section 401(k)(4)(B)," after "the provisions of paragraph (2)" in
    subpar. (C), as it read before amendment by Pub. L. 100-202. See
    Effective Date of 1988 Amendment note below.
      1987 - Subsec. (j)(1)(C). Pub. L. 100-202, Sec. 101(m) [title VI,
    Sec. 624(a)(1)], which directed that "the provisions of paragraph
    (2) and" after "subject to" be struck out, was executed by striking
    out "the provisions of paragraph (2)" after "subject to" in view of
    the amendment by section 1011A(m)(1) of Pub. L. 100-647 which was
    effective as if it had been included in Pub. L. 99-514. See 1988
    Amendment note above.
      Subsec. (j)(2). Pub. L. 100-202, Sec. 101(m) [title VI, Sec.
    624(a)(2)], added par. (2) and struck out former par. (2) which
    read as follows: "Paragraph (1)(C) shall not apply to the Thrift
    Savings Fund unless the Fund meets the antidiscrimination
    requirements (other than any requirement relating to coverage)
    applicable to arrangements described in section 401(k) and to
    matching contributions. Rules similar to the rules of sections
    401(k)(8) and 401(m)(8) (relating to no disqualification if excess
    contributions distributed) shall apply for purposes of the
    preceding sentence."
      1986 - Subsec. (a)(17). Pub. L. 99-514, Sec. 1842(d), inserted
    reference to section 2516.
      Subsec. (a)(19)(C)(xi). Pub. L. 99-514, Sec. 671(b)(3), added cl.
    (xi).
      Subsec. (a)(20). Pub. L. 99-514, Sec. 1166(a), inserted reference
    to section 125.
      Subsec. (a)(46). Pub. L. 99-514, Sec. 1137, inserted last
    sentence.
      Subsec. (b)(1)(A). Pub. L. 99-514, Sec. 1810(l)(2), substituted
    "the requirements of clause (i), (ii), or (iii)" for "the
    requirements of clause (i) or (ii)" in introductory provisions and
    added cl. (iii).
      Subsec. (b)(2)(A)(iv). Pub. L. 99-514, Sec. 1810(l)(3), added cl.
    (iv).
      Subsec. (b)(4). Pub. L. 99-514, Sec. 1810(l)(4), added par. (4).
    Former par. (4) redesignated (5).
      Subsec. (b)(5). Pub. L. 99-514, Sec. 1810(l)(4), redesignated
    par. (4) as (5). Former par. (5) redesignated (6).
      Subsec. (b)(5)(A)(iv). Pub. L. 99-514, Sec. 1810(l)(5)(A), which
    directed that cl. (iv) be added to subpar. (4)(A), was executed by
    adding cl. (iv) to subpar. (5)(A) to reflect the probable intent of
    Congress and the intervening redesignation of par. (4) as (5) by
    section 1810(l)(4) of Pub. L. 99-514.
      Subsec. (b)(5)(E)(i). Pub. L. 99-514, Sec. 1810(l)(1), inserted
    last sentence.
      Pub. L. 99-514, Sec. 1899A(63), substituted "preceding" for
    "preceeding".
      Subsec. (b)(6) to (11). Pub. L. 99-514, Sec. 1810(l)(4),
    redesignated pars. (5) to (10) as pars. (6) to (11), respectively.
      Subsec. (e)(4)(A). Pub. L. 99-514, Sec. 201(d)(14)(A),
    substituted "section 168(h)" for "section 168(j)".
      Pub. L. 99-514, Sec. 1802(a)(9)(C), inserted at end "For purposes
    of this paragraph, the term 'related entity' has the same meaning
    as when used in section 168(j)."
      Subsec. (e)(5). Pub. L. 99-514, Sec. 201(d)(14)(B), as amended by
    Pub. L. 100-647, Sec. 1002(a)(2), substituted "property described
    in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)
    (relating to low-income housing)" for "low-income housing (within
    the meaning of section 168(c)(2)(F))".
      Pub. L. 99-514, Sec. 1899A(64), substituted "section
    168(c)(2)(F))" for "section 168(C)(2)(F))".
      Subsec. (h). Pub. L. 99-514, Sec. 201(c), added subsec. (h).
    Former subsec. (h), relating to cross references, was successively
    redesignated as (i), (j), and (k).
      Subsec. (i). Pub. L. 99-514, Sec. 673, added subsec. (i). Former
    subsec. (i), relating to cross references, as previously
    redesignated, was successively redesignated as (j) and (k).
      Subsec. (j). Pub. L. 99-514, Sec. 1147(a), added subsec. (j).
    Former subsec. (j), relating to cross references, as previously
    redesignated, was redesignated as (k).
      Subsec. (k). Pub. L. 99-514, Secs. 201(c), 673, 1147(a),
    successively redesignated subsec. (h), relating to cross
    references, as subsecs. (i), (j), and (k).
      1984 - Subsec. (a)(16). Pub. L. 98-369, Sec. 474(r)(29)(K),
    struck out "1451," after "1443".
      Subsec. (a)(17). Pub. L. 98-369, Sec. 422(d)(3), struck out
    reference to sections 71 and 215.
      Subsec. (a)(33)(E). Pub. L. 98-443 substituted "Secretary of
    Transportation" for "Civil Aeronautics Board".
      Subsec. (a)(33)(G). Pub. L. 98-216 substituted "subchapter I of
    chapter 105 of title 49" for "part I of the Interstate Commerce
    Act".
      Subsec. (a)(34). Pub. L. 98-369, Sec. 412(b)(11), repealed par.
    (34) which defined estimated income tax in the case of an
    individual or a corporation as the estimated tax defined in section
    6015(d) or 6154(c), respectively.
      Subsec. (a)(37)(C). Pub. L. 98-369, Sec. 491(d)(53), struck out
    subpar. (C) which included a retirement bond described in section
    409 within the term "individual plan".
      Subsec. (a)(42) to (45). Pub. L. 98-369, Sec. 43(a)(1), added
    pars. (42) to (45).
      Subsec. (a)(46). Pub. L. 98-369, Sec. 526(c)(1), added par. (46).
      Subsec. (b). Pub. L. 98-369, Sec. 138(a), added subsec. (b).
    Former subsec. (b), relating to includes and including,
    redesignated (c).
      Subsec. (c). Pub. L. 98-369, Sec. 138(a), redesignated former
    subsec. (b), relating to includes and including, as (c). Former
    subsec. (c), relating to Commonwealth of Puerto Rico, redesignated
    (d).
      Subsec. (d). Pub. L. 98-369, Sec. 138(a), redesignated former
    subsec. (c), relating to Commonwealth of Puerto Rico, as (d).
    Former subsec. (d), relating to cross references, redesignated (e).
      Subsec. (e). Pub. L. 98-369, Sec. 31(e), added subsec. (e).
    Former subsec. (e), relating to cross references, redesignated (f).
      Pub. L. 98-369, Sec. 138(a), redesignated former subsec. (d),
    relating to cross references, as (e).
      Subsec. (f). Pub. L. 98-369, Sec. 53(c), added subsec. (f).
    Former subsec. (f), relating to cross references, redesignated (g).
      Pub. L. 98-369, Sec. 31(e), redesignated former subsec. (e),
    relating to cross references, as (f).
      Subsec. (g). Pub. L. 98-369, Sec. 75(c), added subsec. (g).
    Former subsec. (g), relating to cross references, redesignated (h).
      Pub. L. 98-369, Sec. 53(c), redesignated former subsec. (f),
    relating to cross references, as (g).
      Subsec. (h). Pub. L. 98-369, Sec. 75(c), redesignated former
    subsec. (g), relating to cross references, as (h).
      1983 - Subsec. (a)(16). Pub. L. 98-67, Sec. 102(a), repealed
    amendments made by Pub. L. 97-248. See 1982 Amendment note below.
      Subsec. (a)(33)(F). Pub. L. 97-449, Sec. 5(e)(1), substituted
    "subchapter III of chapter 105 of title 49" for "part III of the
    Interstate Commerce Act".
      Subsec. (a)(33)(H). Pub. L. 97-449, Sec. 5(e)(2), substituted
    "subchapter I of chapter 105 of title 49" for "part I of the
    Interstate Commerce Act".
      Subsec. (a)(38), (39). Pub. L. 97-448, Sec. 306(b)(3),
    redesignated par. (38), as added by Pub. L. 97-248, Sec. 336(a),
    relating to persons residing outside the United States, as (39).
      Subsec. (a)(40). Pub. L. 97-473 added par. (40).
      Subsec. (a)(41). Pub. L. 98-67, Sec. 104(d)(1), added par. (41).
      1982 - Subsec. (a)(16). Pub. L. 97-248, Secs. 307(a)(17), 308(a),
    provided that, applicable to payments of interest, dividends, and
    patronage dividends paid or credited after June 30, 1983, par. (16)
    is amended by substituting "1461 or 3451" for "or 1461". Section
    102(a), (b) of Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369,
    repealed subtitle A (Secs. 301-308) of title III of Pub. L. 97-248
    as of the close of June 30, 1983, and provided that the Internal
    Revenue Code of 1954 [now 1986] [this title] shall be applied and
    administered (subject to certain exceptions) as if such subtitle A
    (and the amendments made by such subtitle A) had not been enacted.
      Subsec. (a)(38). Pub. L. 97-248, Sec. 201(d)(10), formerly Sec.
    201(c)(10), added par. (38) relating to joint return.
      Pub. L. 97-248, Sec. 336(a), added par. (38) relating to persons
    residing outside the United States.
      1981 - Subsec. (a)(34)(A). Pub. L. 97-34 substituted "section
    6015(d)" for "section 6015(c)".
      1978 - Subsec. (a)(36)(B)(iii). Pub. L. 95-600, Sec. 701(cc)(2),
    substituted "prepares as a fiduciary a return or claim for refund
    for any person, or" for "prepares a return or claim for refund for
    any trust or estate with respect to which he is a fiduciary, or".
      Subsec. (a)(37). Pub. L. 95-600, Sec. 157(k)(2), added par. (37).
      1976 - Subsec. (a)(4). Pub. L. 94-455, Sec. 1906(c)(3), struck
    out "or Territory" after "any State".
      Subsec. (a)(11). Pub. L. 94-455, Sec. 1906(a)(57)(A), substituted
    definitions of "Secretary of the Treasury" and "Secretary" for
    "Secretary. - The term 'Secretary' means the Secretary of the
    Treasury".
      Subsec. (a)(12)(A). Pub. L. 94-455, Sec. 1906(a)(57)(B),
    substituted definition of "or his delegate" for definition of
    "Secretary of his delegate".
      Subsec. (a)(19), (23), (33). Pub. L. 94-455, Sec. 1906(b)(13)(A),
    struck out "or his delegate" after "Secretary" wherever appearing.
      Subsec. (a)(36). Pub. L. 94-455, Sec. 1203(a), added par. (36).
      1974 - Subsec. (a)(35). Pub. L. 93-406 added par. (35).
      1972 - Subsec. (a)(12)(B). Pub. L. 92-606 inserted reference to
    chapter 1.
      1969 - Subsec. (a)(19)(A). Pub. L. 91-172, Sec. 432(c) reenacted
    subpar. (A) without change.
      Subsec. (a)(19)(B). Pub. L. 91-172, Sec. 432(c), struck out
    reference to subpar. (C).
      Subsec. (a)(19)(C). Pub. L. 91-172, Sec. 432(c), substituted 60
    percent for 90 percent in text preceding cl. (i), reenacted cl. (i)
    without change, in cl. (ii), excluded obligations the interest on
    which was excludible from gross income under section 103, expanded
    provisions of former cl. (iii) and transferred them to cl. (v),
    reenacted cl. (iv) without change, redesignated former cls. (v) and
    (vi) as cls. (viii) and (x) and added cls. (iii), (vi), (vii) and
    (ix), and text following cl. (x).
      Subsec. (a)(19)(D) to (F). Pub. L. 91-172, Sec. 432(c), struck
    out subpars. (D) to (F) and text following subpar. (F) which had
    further qualified the assets.
      Subsec. (a)(27). Pub. L. 91-172, Sec. 960(j), substituted "United
    States Tax Court" for "Tax Court of the United States".
      Subsec. (a)(32). Pub. L. 91-172, Sec. 432(d), struck out
    references to subpars. (D), (E) and (F) and struck out "determined
    with the application of the second, third, and fourth sentences of
    paragraph (19)." in subpar. (B) and, in text following subpar. (B),
    struck out provisions relating to the deduction allowable for a
    reasonable addition to the reserve for bad debts.
      1968 - Subsec. (a)(34)(B). Pub. L. 90-364 substituted "section
    6154(c)" for "section 6016(b)".
      1966 - Subsec. (a)(31). Pub. L. 89-809 substituted ", from
    sources without the United States which is not effectively
    connected with the conduct of a trade or business within the United
    States," for "from sources without the United States".
      Pub. L. 89-368 added par. (34).
      1964 - Subsec. (a)(20). Pub. L. 88-272 inserted "For the purpose
    of applying the provisions of section 79 with respect to group-term
    life insurance purchased for employees".
      Subsec. (a)(33). Pub. L. 88-272 added par. (33).
      1962 - Subsec. (a)(19). Pub. L. 87-834, Sec. 6(c), amended par.
    (19) generally. Prior to such amendment, subsection read as
    follows: "The term 'domestic building and loan association' means a
    domestic building and loan association, a domestic savings and loan
    association, and a Federal savings and loan association,
    substantially all the business of which is confined to making loans
    to members."
      Subsec. (a)(30), (31). Pub. L. 87-834, Sec. 7(h), added pars.
    (30), (31).
      Subsec. (a)(32). Pub. L. 87-870 added par. (32).
      1960 - Subsec. (a)(9), (10). Pub. L. 86-624, Sec. 18(i), (j),
    struck out reference to the Territory of Hawaii.
      Subsec. (a)(12). Pub. L. 86-778 designated existing provisions as
    par. (A) and added par. (B).
      1959 - Subsec. (a)(9). Pub. L. 86-70, Sec. 22(g), substituted
    "the Territory of Hawaii" for "the Territories of Alaska and
    Hawaii".
      Subsec. (a)(10). Pub. L. 86-70, Sec. 22(h), substituted
    "Territory of Hawaii" for "Territories".

                     EFFECTIVE DATE OF 2006 AMENDMENT                 
      Amendment by section 1207(f) of Pub. L. 109-280 effective Jan. 1,
    2007, see section 1207(g)(1) of Pub. L. 109-280, set out as a note
    under section 4041 of this title.

                     EFFECTIVE DATE OF 2005 AMENDMENT                 
      Amendment by Pub. L. 109-135 effective as if included in the
    provision of the American Jobs Creation Act of 2004, Pub. L. 108-
    357, to which such amendment relates, see section 403(nn) of Pub.
    L. 109-135, set out as a note under section 26 of this title.

                     EFFECTIVE DATE OF 2004 AMENDMENTS                 
      Amendment by section 804(b) of Pub. L. 108-357 applicable to
    individuals who expatriate after June 3, 2004, see section 804(f)
    of Pub. L. 108-357, set out as a note under section 877 of this
    title.
      Amendment by section 835(b)(10), (11) of Pub. L. 108-357
    effective Jan. 1, 2005, with exception for any FASIT in existence
    on Oct. 22, 2004, to the extent that regular interests issued by
    the FASIT before such date continue to remain outstanding in
    accordance with the original terms of issuance, see section 835(c)
    of Pub. L. 108-357, set out as a note under section 56 of this
    title.
      Pub. L. 108-357, title VIII, Sec. 852(c), Oct. 22, 2004, 118
    Stat. 1609, provided that:
      "(1) In general. - Except as provided in paragraph (2), the
    amendment made by this section [amending this section] shall take
    effect on the date of the enactment of this Act [Oct. 22, 2004].
      "(2) Fuel taxes. - With respect to taxes imposed under subchapter
    B of chapter 31 and part III of subchapter A of chapter 32, the
    amendment made by this section shall apply to taxable periods
    beginning after the date of the enactment of this Act."
      Amendment by Pub. L. 108-311 applicable to taxable years
    beginning after Dec. 31, 2004, see section 208 of Pub. L. 108-311,
    set out as a note under section 2 of this title

             EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT         
      Amendment by Pub. L. 107-16 applicable to estates of decedents
    dying after Dec. 31, 2009, see section 542(f)(1) of Pub. L. 107-16,
    set out as a note under section 121 of this title.
      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 1997 AMENDMENT                 
      Section 1151(b) of Pub. L. 105-34 provided that: "Any regulations
    issued with respect to the amendment made by subsection (a)
    [amending this section] shall apply to partnerships created or
    organized after the date determined under section 7805(b) of the
    Internal Revenue Code of 1986 (without regard to paragraph (2)
    thereof) with respect to such regulations."
      Section 1174(c) of Pub. L. 105-34 provided that:
      "(1) In general. - The amendments made by this section [amending
    this section and sections 861 and 863 of this title] shall apply to
    remuneration for services performed in taxable years beginning
    after December 31, 1997.
      "(2) Presence. - The amendment made by subsection (b) [amending
    this section] shall apply to taxable years beginning after December
    31, 1997."
      Amendment by section 1601(i)(3)(A) of 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 OF 1996 AMENDMENTS                 
      Section 1601(i)(4) of Pub. L. 105-34 provided that: "The
    Secretary of the Treasury may by regulations or other
    administrative guidance provide that the amendments made by section
    1907(a) of the Small Business Job Protection Act of 1996 [Pub. L.
    104-188, amending this section] shall not apply to a trust with
    respect to a reasonable period beginning on the date of the
    enactment of such Act [Aug. 20, 1996], if - 
        "(A) such trust is in existence on August 20, 1996, and is a
      United States person for purposes of the Internal Revenue Code of
      1986 on such date (determined without regard to such amendments),
        "(B) no election is in effect under section 1907(a)(3)(B) of
      such Act [set out as a note below] with respect to such trust,
        "(C) before the expiration of such reasonable period, such
      trust makes the modifications necessary to be treated as a United
      States person for purposes of such Code (determined with regard
      to such amendments), and
        "(D) such trust meets such other conditions as the Secretary
      may require."
      Amendment by section 1402(b)(3) of Pub. L. 104-188 applicable
    with respect to decedents dying after Aug. 20, 1996, see section
    1402(c) of Pub. L. 104-188, set out as a note under section 101 of
    this title.
      Amendment by section 1621(b)(8), (9) of Pub. L. 104-188 effective
    Sept. 1, 1997, see section 1621(d) of Pub. L. 104-188, set out as a
    note under section 26 of this title.
      Section 1907(a)(3) of Pub. L. 104-188, as amended by Pub. L. 105-
    34, title XI, Sec. 1161(a), Aug. 5, 1997, 111 Stat. 987, provided
    that: "The amendments made by this subsection [amending this
    section] shall apply - 
        "(A) to taxable years beginning after December 31, 1996, or
        "(B) at the election of the trustee of a trust, to taxable
      years ending after the date of the enactment of this Act [Aug.
      20, 1996].
    Such an election, once made, shall be irrevocable. To the extent
    prescribed in regulations by the Secretary of the Treasury or his
    delegate, a trust which was in existence on August 20, 1996 (other
    than a trust treated as owned by the grantor under subpart E of
    part I of subchapter J of chapter 1 of the Internal Revenue Code of
    1986), and which was treated as a United States person on the day
    before the date of the enactment of this Act may elect to continue
    to be treated as a United States person notwithstanding section
    7701(a)(30)(E) of such Code."
      [Section 1161(b) of Pub. L. 105-34 provided that: "The amendment
    made by subsection (a) [amending section 1907(a)(3) of Pub. L. 104-
    188, set out above] shall take effect as if included in the
    amendments made by section 1907(a) of the Small Business Job
    Protection Act of 1996 [Pub. L. 104-188]."]

                     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 1994 AMENDMENT                 
      Amendment by Pub. L. 103-296 effective with calendar quarter
    following Aug. 15, 1994, see section 320(c) of Pub. L. 103-296, set
    out as a note under section 871 of this title.

                     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 1991 AMENDMENT                 
      Amendment by Pub. L. 102-90 effective Jan. 1, 1992, see section
    314(g)(1) of Pub. L. 102-90, as amended, set out as a note under
    section 31-2 of Title 2, The Congress.

                     EFFECTIVE DATE OF 1990 AMENDMENT                 
      Amendment by section 11812(b)(13) 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.

                     EFFECTIVE DATE OF 1989 AMENDMENT                 
      Section 603 of title VI of Pub. L. 101-194 provided that: "The
    amendments made by this title [amending this section, sections 31-1
    and 441i of Title 2, The Congress, and title V of the Ethics in
    Government Act of 1978, Pub. L. 95-521, set out in the Appendix to
    Title 5, Government Organization and Employees] shall take effect
    on January 1, 1991. Such amendments shall cease to be effective if
    the provisions of section 703 [5 U.S.C. 5318 note] are subsequently
    repealed, in which case the laws in effect before such amendments
    shall be deemed to be reenacted."

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by title I 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 OF 1986 AMENDMENT                 
      Amendment by section 201(c), (d)(14) 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(c), (d)(14) 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 671(b)(3) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1986, see section 675 of
    Pub. L. 99-514, set out as an Effective Date note under section
    860A of this title.
      Amendment by section 673 of Pub. L. 99-514 effective Jan. 1,
    1992, but not applicable to any entity in existence on Dec. 31,
    1991, except with respect to any entity as of the first day after
    Dec. 31, 1991, on which there is a substantial transfer of cash or
    other property to such entity, and for purposes of applying section
    860F(d) of this title, applicable to taxable years beginning after
    Dec. 31, 1986, see section 675(c) of Pub. L. 99-514, set out as an
    Effective Date note under section 860A of this title.
      Section 1166(b) of Pub. L. 99-514 provided that: "The amendment
    made by subsection (a) [amending this section] shall apply to years
    beginning after December 31, 1985."
      Amendment by sections 1802(a)(9)(C), 1810(l)(1)-(4), 1842(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.
      Section 1810(l)(5)(B) of Pub. L. 99-514 provided that: "The
    amendments made by this paragraph [amending this section] shall
    apply to periods after the date of the enactment of this Act [Oct.
    22, 1986]."

                     EFFECTIVE DATE OF 1984 AMENDMENTS                 
      Amendment by Pub. L. 98-443 effective Jan. 1, 1985, see section
    9(v) of Pub. L. 98-443, set out as a note under section 5314 of
    Title 5, Government Organization and Employees.
      Amendment by section 31(e) of Pub. L. 98-369 effective, except as
    otherwise provided in section 31(g) of Pub. L. 98-369, as to
    property placed in service by the taxpayer after May 23, 1983, in
    taxable years ending after such date and 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, except
    that in the case of a service contract or other arrangement
    described in section 7701(e) of this title with respect to which no
    party is a tax-exempt entity, section 7701(e) shall not apply to
    (A) such contract or other arrangement if such contract or other
    arrangement was entered into before Nov. 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 Nov. 5, 1983, see section 31(g)(1), (13) of Pub. L.
    98-369, set out as a note under section 168 of this title.
      Amendment by section 43(a)(1) 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 53(c) of Pub. L. 98-369 effective July 18,
    1984, except as otherwise provided, see section 53(e)(3) of Pub. L.
    98-369, as amended, set out as an Effective Date note under section
    1059 of this title.
      Amendment by section 75(c) of Pub. L. 98-369 applicable to
    distributions, sales, and exchanges made after Mar. 31, 1984, in
    taxable years ending after such date, see section 75(e) of Pub. L.
    98-369, set out as an Effective Date note under section 386 of this
    title.
      Section 138(b) 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. - The amendment made by subsection (a) [amending
    this section] shall apply to taxable years beginning after December
    31, 1984.
      "(2) Transitional rule for applying substantial presence test. - 
        "(A) If an alien individual was not a resident of the United
      States as of the close of calendar year 1984, the determination
      of whether such individual meets the substantial presence test of
      section 7701(b)(3) of the Internal Revenue Code of 1986 [formerly
      I.R.C. 1954] (as added by this section) shall be made by only
      taking into account presence after 1984.
        "(B) If an alien individual was a resident of the United States
      as of the close of calendar year 1984, but was not a resident of
      the United States as of the close of calendar year 1983, the
      determination of whether such individual meets such substantial
      presence test shall be made by only taking into account presence
      in the United States after 1983.
      "(3) Transitional rule for applying lawful residence test. - In
    the case of any individual who - 
        "(A) was a lawful permanent resident of the United States
      (within the meaning of section 7701(b)(5) of the Internal Revenue
      Code of 1986, as added by this section) throughout calendar year
      1984, or
        "(B) was present in the United States at any time during 1984
      while such individual was a lawful permanent resident of the
      United States (within the meaning of such section 7701(b)(5)),
    for purposes of section 7701(b)(2)(A) of such Code (as so added),
    such individual shall be treated as a resident of the United States
    during 1984."
      Amendment by section 412(b)(11) of Pub. L. 98-369 applicable with
    respect to taxable years beginning after Dec. 31, 1984, see section
    414(a)(1) of Pub. L. 98-369, set out as a note under section 6654
    of this title.
      Amendment by section 422(d)(3) of Pub. L. 98-369 applicable with
    respect to divorce or separation instruments executed after Dec.
    31, 1984, or executed before Jan. 1, 1985, but modified on or after
    Jan. 1, 1985, with express provision for application of amendment
    to modification, see section 422(e)(1), (2) of Pub. L. 98-369, set
    out as a note under section 71 of this title.
      Amendment by section 474(r)(29)(K) of 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.
      Amendment by section 491(d)(53) 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.
      Section 526(c)(2) of Pub. L. 98-369 provided that: "The amendment
    made by this subsection [amending this section] shall take effect
    on April 1, 1984."

                     EFFECTIVE DATE OF 1983 AMENDMENTS                 
      Amendment by section 104(d)(1) of Pub. L. 98-67 applicable with
    respect to payments made after Dec. 31, 1983, see section 110(a) of
    Pub. L. 98-67, set out as a note under section 31 of this title.
      For effective date of amendment by Pub. L. 97-473, see section
    204 of Pub. L. 97-473, set out as an Effective Date note under
    section 7871 of this title.
      Amendment by Pub. L. 97-448 effective as if included in the
    provisions of the Tax Equity and Fiscal Responsibility Act of 1982,
    Pub. L. 97-248, to which such amendment relates, see section 311(d)
    of Pub. L. 97-448, set out as a note under section 31 of this
    title.

                     EFFECTIVE DATE OF 1982 AMENDMENT                 
      Amendment by section 201(d)(10) of Pub. L. 97-248 applicable to
    taxable years beginning after Dec. 31, 1982, see section 201(e)(1)
    of Pub. L. 97-248, set out as a note under section 5 of this title.
      Section 336(b) of Pub. L. 97-248 provided that: "The amendment
    made by subsection (a) [amending this section] shall take effect on
    the day after the date of the enactment of this Act [Sept. 3,
    1982]."

                     EFFECTIVE DATE OF 1981 AMENDMENT                 
      Amendment by Pub. L. 97-34 applicable to estimated tax for
    taxable years beginning after Dec. 31, 1980, see section 725(d) of
    Pub. L. 97-34, set out as a note under section 871 of this title.

                     EFFECTIVE DATE OF 1978 AMENDMENT                 
      Amendment by section 157(k)(2) of Pub. L. 95-600 applicable to
    taxable years beginning after Dec. 31, 1974, see section 157(k)(3)
    of Pub. L. 95-600, set out as a note under section 6058 of this
    title.
      Amendment by section 701(cc)(2) of Pub. L. 95-600 applicable to
    documents prepared after Dec. 31, 1976, see section 701(cc)(3) of
    Pub. L. 95-600, set out as a note under section 6695 of this title.

                     EFFECTIVE DATE OF 1976 AMENDMENT                 
      Section 1203(j) of Pub. L. 94-455 provided that: "The amendments
    made by this section [enacting sections 6060, 6107, 6694, 6695,
    6696, 7407, and 7427 of this title, renumbering former sections
    7407 and 7427 as 7408 and 7428 of this title, respectively, and
    amending this section and sections 6109, 6503, 6504, and 6511 of
    this title] shall apply to documents prepared after December 31,
    1976."
      Amendment by section 1906(a)(57), (b)(13)(A), (c)(3) of Pub. L.
    94-455 effective on first day of first month which begins more than
    ninety days after Oct. 4, 1976, see section 1906(d)(1) of Pub. L.
    94-455, set out as a note under section 6013 of this title.

                     EFFECTIVE DATE OF 1972 AMENDMENT                 
      Amendment by Pub. L. 92-606 applicable with respect to taxable
    years beginning after Dec. 31, 1972, see section 2 of Pub. L. 92-
    606, set out in part as an Effective Date note under section 931
    of this title.

                     EFFECTIVE DATE OF 1969 AMENDMENT                 
      Amendment by section 432(c), (d) of Pub. L. 91-172 effective for
    taxable years beginning after July 11, 1969, see section 432(e) of
    Pub. L. 91-172, set out as a note under section 593 of this title.
      Amendment by section 960(j) of Pub. L. 91-172 effective Dec. 30,
    1969, see section 962(a) of Pub. L. 91-172, set out as a note under
    section 7441 of this title.

                     EFFECTIVE DATE OF 1968 AMENDMENT                 
      Amendment by Pub. L. 90-364 applicable with respect to taxable
    years beginning after Dec. 31, 1967, except as provided by section
    104 of Pub. L. 90-364, see section 103(f) of Pub. L. 90-364, set
    out as a note under section 243 of this title.

                     EFFECTIVE DATE OF 1966 AMENDMENTS                 
      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.
      Amendment by Pub. L. 89-368 applicable with respect to taxable
    years beginning after Dec. 31, 1966, see section 102(d) of Pub. L.
    89-368, set out as a note under section 6654 of this title.

                     EFFECTIVE DATE OF 1964 AMENDMENT                 
      Amendment by section 204(a)(3) of Pub. L. 88-272 applicable to
    group-term life insurance provided after Dec. 31, 1963, in taxable
    years ending after such date, see section 204(d) of Pub. L. 88-272,
    set out as an Effective Date note under section 79 of this title.
      Amendment by section 234(b)(3) of Pub. L. 88-272 applicable to
    taxable years beginning after Dec. 31, 1963, see section 234(c) of
    Pub. L. 88-272, set out as a note under section 1503 of this title.

                     EFFECTIVE DATE OF 1962 AMENDMENTS                 
      Section 5(b) of Pub. L. 87-870 provided that: "The amendment made
    by subsection (a) of this section [amending this section] shall
    apply with respect to taxable years beginning after the date of the
    enactment of the Revenue Act of 1962 [Oct. 16, 1962]."
      Section 6(g)(3) of Pub. L. 87-834 provided that: "The amendment
    made by subsection (c) [amending this section] shall apply to
    taxable years beginning after the date of the enactment of this Act
    [Oct. 16, 1962]."

                     EFFECTIVE DATE OF 1960 AMENDMENTS                 
      Amendment by Pub. L. 86-778 effective Sept. 13, 1960, see section
    103(v)(1) of Pub. L. 86-778, set out as an Effective Date of 1960
    Amendment note under section 402 of Title 42, The Public Health and
    Welfare.
      Amendment by Pub. L. 86-624 effective August 21, 1959, see
    section 18(k) of Pub. L. 86-624, set out as a note under section
    3121 of this title.

                     EFFECTIVE DATE OF 1959 AMENDMENT                 
      Amendment by Pub. L. 86-70 effective Jan. 3, 1959, see section
    22(i) of Pub. L. 86-70, set out as a note under section 3121 of
    this title.

                             SAVINGS PROVISION                         
      For provisions that nothing in amendment by section 11812(b)(13)
    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 45K 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.
      Coast Guard transferred to Department of Transportation and all
    functions, powers, and duties, relating to Coast Guard, of
    Secretary of the Treasury and of other offices and officers of
    Department of the Treasury transferred to Secretary of
    Transportation by Pub. L. 89-670, Sec. 6(b)(1), Oct. 15, 1966, 80
    Stat. 938. Section 6(b)(2) of Pub. L. 89-670, however, provided
    that notwithstanding such transfer of functions, Coast Guard shall
    operate as part of Navy in time of war or when President directs as
    provided in section 3 of Title 14, Coast Guard. See section 108 of
    Title 49, Transportation.


-MISC2-
            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.

        AUTHORS OR ARTISTS PERFORMING SERVICES UNDER CONTRACT WITH
                                CORPORATION
      Pub. L. 96-605, title IV, Sec. 402, Dec. 28, 1980, 94 Stat. 3532,
    as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
    2095, provided that:
      "(a) In General. - An author or artist performing services under
    contract with a corporation shall be considered as an employee of
    the corporation for the purpose of applying the provisions
    specified in section 7701(a)(20) of the Internal Revenue Code of
    1986 [formerly I.R.C. 1954], if, on December 31, 1977, such author
    or artist was a participant in one or more of the pension, profit-
    sharing or annuity plans of such corporation which are described
    in subsection (b)(2).
      "(b) Definitions. - For purposes of this section - 
        "(1) Contract. - The term 'contract' means a contract which
      during its term - 
          "(A) requires such author or artist to give the corporation
        first reading or first refusal on writings or drawings of
        specified types, and prohibits him from offering any such
        writing or drawing to any other publication unless it has been
        offered to and rejected by the corporation; or
          "(B) requires such author or artist to use his best efforts
        to produce work of specified types for the corporation.
        "(2) Corporation. - The term 'corporation' means a corporation
      which for at least 15 years prior to January 1, 1978, had in
      effect one or more pension, profit-sharing and annuity plans,
      each of which - 
          "(A) had contained from its inception a definition of the
        term 'employee' that included the category of 'authors and
        artists under contract', and
          "(B) had been determined by the Secretary of the Treasury
        (taking into account the definition described in subparagraph
        (A)) to be a qualified plan within part I of subchapter D of
        chapter 1 of subtitle A of the Internal Revenue Code of 1986
        [section 401 et seq. of this title] for all of such years.
      "(c) Effective Date. - The provisions of this section shall apply
    to taxable years ending after December 31, 1980."

-FOOTNOTE-
    (!1) See References in Text note below.

    (!2) See References in Text note below.

    (!3) So in original. Probably should be "Reconciliation".


-End-



-CITE-
    26 USC Sec. 7702                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7702. Life insurance contract defined

-STATUTE-
    (a) General rule
      For purposes of this title, the term "life insurance contract"
    means any contract which is a life insurance contract under the
    applicable law, but only if such contract - 
        (1) meets the cash value accumulation test of subsection (b),
      or
        (2)(A) meets the guideline premium requirements of subsection
      (c), and
        (B) falls within the cash value corridor of subsection (d).
    (b) Cash value accumulation test for subsection (a)(1)
      (1) In general
        A contract meets the cash value accumulation test of this
      subsection if, by the terms of the contract, the cash surrender
      value of such contract may not at any time exceed the net single
      premium which would have to be paid at such time to fund future
      benefits under the contract.
      (2) Rules for applying paragraph (1)
        Determinations under paragraph (1) shall be made - 
          (A) on the basis of interest at the greater of an annual
        effective rate of 4 percent or the rate or rates guaranteed on
        issuance of the contract,
          (B) on the basis of the rules of subparagraph (B)(i) (and, in
        the case of qualified additional benefits, subparagraph
        (B)(ii)) of subsection (c)(3), and
          (C) by taking into account under subparagraphs (A) and (D) of
        subsection (e)(1) only current and future death benefits and
        qualified additional benefits.
    (c) Guideline premium requirements
      For purposes of this section - 
      (1) In general
        A contract meets the guideline premium requirements of this
      subsection if the sum of the premiums paid under such contract
      does not at any time exceed the guideline premium limitation as
      of such time.
      (2) Guideline premium limitation
        The term "guideline premium limitation" means, as of any date,
      the greater of - 
          (A) the guideline single premium, or
          (B) the sum of the guideline level premiums to such date.
      (3) Guideline single premium
        (A) In general
          The term "guideline single premium" means the premium at
        issue with respect to future benefits under the contract.
        (B) Basis on which determination is made
          The determination under subparagraph (A) shall be based on - 
            (i) reasonable mortality charges which meet the
          requirements (if any) prescribed in regulations and which
          (except as provided in regulations) do not exceed the
          mortality charges specified in the prevailing commissioners'
          standard tables (as defined in section 807(d)(5)) as of the
          time the contract is issued,
            (ii) any reasonable charges (other than mortality charges)
          which (on the basis of the company's experience, if any, with
          respect to similar contracts) are reasonably expected to be
          actually paid, and
            (iii) interest at the greater of an annual effective rate
          of 6 percent or the rate or rates guaranteed on issuance of
          the contract.
        (C) When determination made
          Except as provided in subsection (f)(7), the determination
        under subparagraph (A) shall be made as of the time the
        contract is issued.
        (D) Special rules for subparagraph (B)(ii)
          (i) Charges not specified in the contract
            If any charge is not specified in the contract, the amount
          taken into account under subparagraph (B)(ii) for such charge
          shall be zero.
          (ii) New companies, etc.
            If any company does not have adequate experience for
          purposes of the determination under subparagraph (B)(ii), to
          the extent provided in regulations, such determination shall
          be made on the basis of the industry-wide experience.
      (4) Guideline level premium
        The term "guideline level premium" means the level annual
      amount, payable over a period not ending before the insured
      attains age 95, computed on the same basis as the guideline
      single premium, except that paragraph (3)(B)(iii) shall be
      applied by substituting "4 percent" for "6 percent".
    (d) Cash value corridor for purposes of subsection (a)(2)(B)
      For purposes of this section - 
      (1) In general
        A contract falls within the cash value corridor of this
      subsection if the death benefit under the contract at any time is
      not less than the applicable percentage of the cash surrender
      value.
      (2) Applicable percentage


         In the case of an insured          The applicable percentage    
          with an attained age as              shall decrease by a       
          of the beginning of the            ratable portion for each    
             contract year of:                      full year:           

        More than:         2But not            From:             To:     
                          more than:                                     
    --------------------------------------------------------------------
    0                               40  250                           250
    40                              45  250                           215
    45                              50  215                           185
    50                              55  185                           150
    55                              60  150                           130
    60                              65  130                           120
    65                              70  120                           115
    70                              75  115                           105
    75                              90  105                           105
    90                              95  105                          100.
    --------------------------------------------------------------------

    (e) Computational rules
      (1) In general
        For purposes of this section (other than subsection (d)) - 
          (A) the death benefit (and any qualified additional benefit)
        shall be deemed not to increase,
          (B) the maturity date, including the date on which any
        benefit described in subparagraph (C) is payable, shall be
        deemed to be no earlier than the day on which the insured
        attains age 95, and no later than the day on which the insured
        attains age 100,
          (C) the death benefits shall be deemed to be provided until
        the maturity date determined by taking into account
        subparagraph (B), and
          (D) the amount of any endowment benefit (or sum of endowment
        benefits, including any cash surrender value on the maturity
        date determined by taking into account subparagraph (B)) shall
        be deemed not to exceed the least amount payable as a death
        benefit at any time under the contract.
      (2) Limited increases in death benefit permitted
        Notwithstanding paragraph (1)(A) - 
          (A) for purposes of computing the guideline level premium, an
        increase in the death benefit which is provided in the contract
        may be taken into account but only to the extent necessary to
        prevent a decrease in the excess of the death benefit over the
        cash surrender value of the contract,
          (B) for purposes of the cash value accumulation test, the
        increase described in subparagraph (A) may be taken into
        account if the contract will meet such test at all times
        assuming that the net level reserve (determined as if level
        annual premiums were paid for the contract over a period not
        ending before the insured attains age 95) is substituted for
        the net single premium, and
          (C) for purposes of the cash value accumulation test, the
        death benefit increases may be taken into account if the
        contract - 
            (i) has an initial death benefit of $5,000 or less and a
          maximum death benefit of $25,000 or less,
            (ii) provides for a fixed predetermined annual increase not
          to exceed 10 percent of the initial death benefit or 8
          percent of the death benefit at the end of the preceding
          year, and
            (iii) was purchased to cover payment of burial expenses or
          in connection with prearranged funeral expenses.

      For purposes of subparagraph (C), the initial death benefit of a
      contract shall be determined by treating all contracts issued to
      the same contract owner as 1 contract.
    (f) Other definitions and special rules
      For purposes of this section - 
      (1) Premiums paid
        (A) In general
          The term "premiums paid" means the premiums paid under the
        contract less amounts (other than amounts includible in gross
        income) to which section 72(e) applies and less any excess
        premiums with respect to which there is a distribution
        described in subparagraph (B) or (E) of paragraph (7) and any
        other amounts received with respect to the contract which are
        specified in regulations.
        (B) Treatment of certain premiums returned to policyholder
          If, in order to comply with the requirements of subsection
        (a)(2)(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, the amount so
        returned (excluding interest) shall be deemed to reduce the sum
        of the premiums paid under the contract during such year.
        (C) Interest returned includible in gross income
          Notwithstanding the provisions of section 72(e), the amount
        of any interest returned as provided in subparagraph (B) shall
        be includible in the gross income of the recipient.
      (2) Cash values
        (A) Cash surrender value
          The cash surrender value of any contract shall be its cash
        value determined without regard to any surrender charge, policy
        loan, or reasonable termination dividends.
        (B) Net surrender value
          The net surrender value of any contract shall be determined
        with regard to surrender charges but without regard to any
        policy loan.
      (3) Death benefit
        The term "death benefit" means the amount payable by reason of
      the death of the insured (determined without regard to any
      qualified additional benefits).
      (4) Future benefits
        The term "future benefits" means death benefits and endowment
      benefits.
      (5) Qualified additional benefits
        (A) In general
          The term "qualified additional benefits" means any - 
            (i) guaranteed insurability,
            (ii) accidental death or disability benefit,
            (iii) family term coverage,
            (iv) disability waiver benefit, or
            (v) other benefit prescribed under regulations.
        (B) Treatment of qualified additional benefits
          For purposes of this section, qualified additional benefits
        shall not be treated as future benefits under the contract, but
        the charges for such benefits shall be treated as future
        benefits.
        (C) Treatment of other additional benefits
          In the case of any additional benefit which is not a
        qualified additional benefit - 
            (i) such benefit shall not be treated as a future benefit,
          and
            (ii) any charge for such benefit which is not prefunded
          shall not be treated as a premium.
      (6) 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 subsection (a)(2) if the amount of
      such premium does not exceed the amount necessary to prevent the
      termination of the contract on or before the end of the contract
      year (but only if the contract will have no cash surrender value
      at the end of such extension period).
      (7) Adjustments
        (A) In general
          If there is a change in the benefits under (or in other terms
        of) the contract which was not reflected in any previous
        determination or adjustment made under this section, there
        shall be proper adjustments in future determinations made under
        this section.
        (B) Rule for certain changes during first 15 years
          If - 
            (i) a change described in subparagraph (A) reduces benefits
          under the contract,
            (ii) the change occurs during the 15-year period beginning
          on the issue date of the contract, and
            (iii) a cash distribution is made to the policyholder as a
          result of such change,

        section 72 (other than subsection (e)(5) thereof) shall apply
        to such cash distribution to the extent it does not exceed the
        recapture ceiling determined under subparagraph (C) or (D)
        (whichever applies).
        (C) Recapture ceiling where change occurs during first 5 years
          If the change referred to in subparagraph (B)(ii) occurs
        during the 5-year period beginning on the issue date of the
        contract, the recapture ceiling is - 
            (i) in the case of a contract to which subsection (a)(1)
          applies, the excess of - 
              (I) the cash surrender value of the contract, immediately
            before the reduction, over
              (II) the net single premium (determined under subsection
            (b)), immediately after the reduction, or

            (ii) in the case of a contract to which subsection (a)(2)
          applies, the greater of - 
              (I) the excess of the aggregate premiums paid under the
            contract, immediately before the reduction, over the
            guideline premium limitation for the contract (determined
            under subsection (c)(2), taking into account the adjustment
            described in subparagraph (A)), or
              (II) the excess of the cash surrender value of the
            contract, immediately before the reduction, over the cash
            value corridor of subsection (d) (determined immediately
            after the reduction).
        (D) Recapture ceiling where change occurs after 5th year and
          before 16th year
          If the change referred to in subparagraph (B) occurs after
        the 5-year period referred to under subparagraph (C), the
        recapture ceiling is the excess of the cash surrender value of
        the contract, immediately before the reduction, over the cash
        value corridor of subsection (d) (determined immediately after
        the reduction and whether or not subsection (d) applies to the
        contract).
        (E) Treatment of certain distributions made in anticipation of
          benefit reductions
          Under regulations prescribed by the Secretary, subparagraph
        (B) shall apply also to any distribution made in anticipation
        of a reduction in benefits under the contract. For purposes of
        the preceding sentence, appropriate adjustments shall be made
        in the provisions of subparagraphs (C) and (D); and any
        distribution which reduces the cash surrender value of a
        contract and which is made within 2 years before a reduction in
        benefits under the contract shall be treated as made in
        anticipation of such reduction.
      (8) Correction of errors
        If the taxpayer establishes to the satisfaction of the
      Secretary that - 
          (A) the requirements described in subsection (a) for any
        contract year were not satisfied due to reasonable error, and
          (B) reasonable steps are being taken to remedy the error,

      the Secretary may waive the failure to satisfy such requirements.
      (9) Special rule for variable life insurance contracts
        In the case of any contract which is a variable contract (as
      defined in section 817), the determination of whether such
      contract meets the requirements of subsection (a) shall be made
      whenever the death benefits under such contract change but not
      less frequently than once during each 12-month period.
    (g) Treatment of contracts which do not meet subsection (a) test
      (1) Income inclusion
        (A) In general
          If at any time any contract which is a life insurance
        contract under the applicable law does not meet the definition
        of life insurance contract under subsection (a), the income on
        the contract for any taxable year of the policyholder shall be
        treated as ordinary income received or accrued by the
        policyholder during such year.
        (B) Income on the contract
          For purposes of this paragraph, the term "income on the
        contract" means, with respect to any taxable year of the
        policyholder, the excess of - 
            (i) the sum of - 
              (I) the increase in the net surrender value of the
            contract during the taxable year, and
              (II) the cost of life insurance protection provided under
            the contract during the taxable year, over

            (ii) the premiums paid (as defined in subsection (f)(1))
          under the contract during the taxable year.
        (C) Contracts which cease to meet definition
          If, during any taxable year of the policyholder, a contract
        which is a life insurance contract under the applicable law
        ceases to meet the definition of life insurance contract under
        subsection (a), the income on the contract for all prior
        taxable years shall be treated as received or accrued during
        the taxable year in which such cessation occurs.
        (D) Cost of life insurance protection
          For purposes of this paragraph, the cost of life insurance
        protection provided under the contract shall be the lesser of -
        
            (i) the cost of individual insurance on the life of the
          insured as determined on the basis of uniform premiums
          (computed on the basis of 5-year age brackets) prescribed by
          the Secretary by regulations, or
            (ii) the mortality charge (if any) stated in the contract.
      (2) Treatment of amount paid on death of insured
        If any contract which is a life insurance contract under the
      applicable law does not meet the definition of life insurance
      contract under subsection (a), the excess of the amount paid by
      the reason of the death of the insured over the net surrender
      value of the contract shall be deemed to be paid under a life
      insurance contract for purposes of section 101 and subtitle B.
      (3) Contract continues to be treated as insurance contract
        If any contract which is a life insurance contract under the
      applicable law does not meet the definition of life insurance
      contract under subsection (a), such contract shall,
      notwithstanding such failure, be treated as an insurance contract
      for purposes of this title.
    (h) Endowment contracts receive same treatment
      (1) In general
        References in subsections (a) and (g) to a life insurance
      contract shall be treated as including references to a contract
      which is an endowment contract under the applicable law.
      (2) Definition of endowment contract
        For purposes of this title (other than paragraph (1)), the term
      "endowment contract" means a contract which is an endowment
      contract under the applicable law and which meets the
      requirements of subsection (a).
    (i) Transitional rule for certain 20-pay contracts
      (1) In general
        In the case of a qualified 20-pay contract, this section shall
      be applied by substituting "3 percent" for "4 percent" in
      subsection (b)(2).
      (2) Qualified 20-pay contract
        For purposes of paragraph (1), the term "qualified 20-pay
      contract" means any contract which - 
          (A) requires at least 20 nondecreasing annual premium
        payments, and
          (B) is issued pursuant to an existing plan of insurance.
      (3) Existing plan of insurance
        For purposes of this subsection, the term "existing plan of
      insurance" means, with respect to any contract, any plan of
      insurance which was filed by the company issuing such contract in
      1 or more States before September 28, 1983, and is on file in the
      appropriate State for such contract.
    (j) Certain church self-funded death benefit plans treated as life
      insurance
      (1) In general
        In determining whether any plan or arrangement described in
      paragraph (2) is a life insurance contract, the requirement of
      subsection (a) that the contract be a life insurance contract
      under applicable law shall not apply.
      (2) Description
        For purposes of this subsection, a plan or arrangement is
      described in this paragraph if - 
          (A) such plan or arrangement provides for the payment of
        benefits by reason of the death of the individuals covered
        under such plan or arrangement, and
          (B) such plan or arrangement is provided by a church for the
        benefit of its employees and their beneficiaries, directly or
        through an organization described in section 414(e)(3)(A) or an
        organization described in section 414(e)(3)(B)(ii).
      (3) Definitions
        For purposes of this subsection - 
        (A) Church
          The term "church" means a church or a convention or
        association of churches.
        (B) Employee
          The term "employee" includes an employee described in section
        414(e)(3)(B).
    (k) 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 II, Sec. 221(a), July 18,
    1984, 98 Stat. 767; amended Pub. L. 99-514, title XVIII, Sec.
    1825(a)-(c), Oct. 22, 1986, 100 Stat. 2846-2848; Pub. L. 100-647,
    title V, Sec. 5011(a), (b), title VI, Sec. 6078(a), Nov. 10, 1988,
    102 Stat. 3660, 3661, 3709.)


-MISC1-
                                AMENDMENTS                            
      1988 - Subsec. (c)(3)(B)(i), (ii). Pub. L. 100-647, Sec. 5011(a),
    added cls. (i) and (ii) and struck out former cls. (i) and (ii)
    which read as follows:
      "(i) the mortality charges specified in the contract (or, if none
    is specified, the mortality charges used in determining the
    statutory reserves for such contract),
      "(ii) any charges (not taken into account under clause (i))
    specified in the contract (the amount of any charge not so
    specified shall be treated as zero), and".
      Subsec. (c)(3)(D). Pub. L. 100-647, Sec. 5011(b), added subpar.
    (D).
      Subsecs. (j), (k). Pub. L. 100-647, Sec. 6078(a), added subsec.
    (j) and redesignated former subsec. (j) as (k).
      1986 - Subsec. (b)(2)(C). Pub. L. 99-514, Sec. 1825(a)(2),
    substituted "subparagraphs (A) and (D)" for "subparagraphs (A) and
    (C)".
      Subsec. (e)(1). Pub. L. 99-514, Sec. 1825(a)(3), inserted "(other
    than subsection (d))" after "section".
      Subsec. (e)(1)(B). Pub. L. 99-514, Sec. 1825(a)(1)(A),
    substituted "shall be deemed to be no earlier than" for "shall be
    no earlier than".
      Subsec. (e)(1)(C). Pub. L. 99-514, Sec. 1821(a)(1)(C), added
    subpar. (C). Former subpar. (C) redesignated (D).
      Subsec. (e)(1)(D). Pub. L. 99-514, Sec. 1821(a)(1)(C), (D),
    redesignated subpar. (C) as (D) and substituted "the maturity date
    determined by taking into account subparagraph (B)" for "the
    maturity date described in subparagraph (B)".
      Subsec. (e)(2)(C). Pub. L. 99-514, Sec. 1825(a)(4), added subpar.
    (C).
      Subsec. (f)(1)(A). Pub. L. 99-514, Sec. 1825(b)(2), substituted
    "less any excess premiums with respect to which there is a
    distribution described in subparagraph (B) or (E) of paragraph (7)
    and any other amounts received" for "less any other amounts
    received".
      Subsec. (f)(7). Pub. L. 99-514, Sec. 1825(b)(1), amended par. (7)
    generally. Prior to amendment, par. (7)(A), in general, read as
    follows: "In the event of a change in the future benefits or any
    qualified additional benefit (or in any other terms) under the
    contract which was not reflected in any previous determination made
    under this section, under regulations prescribed by the Secretary,
    there shall be proper adjustments in future determinations made
    under this section.", and par. (7)(B), certain changes treated as
    exchange, read as follows: "In the case of any change which reduces
    the future benefits under the contract, such change shall be
    treated as an exchange of the contract for another contract."
      Subsec. (g)(1)(B)(ii). Pub. L. 99-514, Sec. 1825(c), amended cl.
    (ii) generally. Prior to amendment, cl. (ii) read as follows: "the
    amount of premiums paid under the contract during the taxable year
    reduced by any policyholder dividends received during such taxable
    year."

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Section 5011(d) of Pub. L. 100-647 provided that: "The amendments
    made by this section [amending this section] shall apply to
    contracts entered into on or after October 21, 1988."
      Section 6078(b) of Pub. L. 100-647 provided that: "The amendment
    made by subsection (a) [amending this section] shall take effect as
    if included in the amendment made by section 221(a) of the Tax
    Reform Act of 1984 [Pub. L. 98-369, which enacted this section]."

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section 1825(a)(4) of Pub. L. 99-514, as amended by Pub. L. 100-
    647, title I, Sec. 1018(j), Nov. 10, 1988, 102 Stat. 3583,
    provided that the amendment made by that section is effective with
    respect to contracts entered into after Oct. 22, 1986.
      Amendment by section 1825(a)(1)-(3), (b), (c) 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                          
      Section 221(d) of Pub. L. 98-369, as amended by Pub. L. 99-514,
    Sec. 2, title XVIII, Secs. 1825(e), 1899A(69), Oct. 22, 1986, 100
    Stat. 2095, 2848, 2962, provided that:
      "(1) In general. - Except as otherwise provided in this
    subsection, the amendments made by this section [enacting this
    section and amending section 101 of this title and provisions set
    out as a note under section 101 of this title] shall apply to
    contracts issued after December 31, 1984, in taxable years ending
    after such date.
      "(2) Special rule for certain contracts issued after june 30,
    1984. - 
        "(A) General rule. - Except as otherwise provided in this
      paragraph, the amendments made by this section shall apply also
      to any contract issued after June 30, 1984, which provides an
      increasing death benefit and has premium funding more rapid than
      10-year level premium payments.
        "(B) Exception for certain contracts. - Subparagraph (A) shall
      not apply to any contract if - 
          "(i) such contract (whether or not a flexible premium
        contract) would meet the requirements of section 101(f) of the
        Internal Revenue Code of 1986 [formerly I.R.C. 1954],
          "(ii) such contract is not a flexible premium life insurance
        contract (within the meaning of section 101(f) of such Code)
        and would meet the requirements of section 7702 of such Code
        determined by - 
            "(I) substituting '3 percent' for '4 percent' in section
          7702(b)(2) of such Code, and
            "(II) treating subparagraph (B) of section 7702(e)(1) of
          such Code as if it read as follows: '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', or
          "(iii) under such contract - 
            "(I) the premiums (including any policy fees) will be
          adjusted from time-to-time to reflect the level amount
          necessary (but not less than zero) at the time of such
          adjustment to provide a level death benefit assuming interest
          crediting and an annual effective interest rate of not less
          than 3 percent, or
            "(II) at the option of the insured, in lieu of an
          adjustment under subclause (I) there will be a comparable
          adjustment in the amount of the death benefit.
        "(C) Certain contracts issued before october 1, 1984. - 
          "(i) In general. - Subparagraph (A) shall be applied by
        substituting 'September 30, 1984' for 'June 30, 1984' in the
        case of a contract - 
            "(I) which would meet the requirements of section 7702 of
          such Code if '3 percent' were substituted for '4 percent' in
          section 7702(b)(2) of such Code, and the rate or rates
          guaranteed on issuance of the contract were determined
          without regard to any mortality charges and any initial
          excess interest guarantees, and
            "(II) the cash surrender value of which does not at any
          time exceed the net single premium which would have to be
          paid at such time to fund future benefits under the contract.
          "(ii) Definitions. - For purposes of clause (i) - 
            "(I) In general. - Except as provided in subclause (II),
          terms used in clause (i) shall have the same meanings as when
          used in section 7702 of such Code.
            "(II) Net single premium. - The term 'net single premium'
          shall be determined by substituting '3 percent' for '4
          percent' in section 7702(b)(2) of such Code, by using the
          1958 standard ordinary mortality and morbidity tables of the
          National Association of Insurance Commissioners, and by
          assuming a level death benefit.
      "(3) Transitional rule for certain existing plans of insurance. -
    A plan of insurance on file in 1 or more States before September
    28, 1983, shall be treated for purposes of section 7702(i)(3) of
    such Code as a plan of insurance on file in 1 or more States before
    September 28, 1983, without regard to whether such plan of
    insurance is modified after September 28, 1983, to permit the
    crediting of excess interest or similar amounts annually and not
    monthly under contracts issued pursuant to such plan of insurance.
      "(4) Extension of flexible premium contract provisions. - The
    amendments made by subsection (b) [amending section 101 of this
    title and provisions set out as a note under section 101 of this
    title] shall take effect on January 1, 1984.
      "(5) Special rule for master contract. - For purposes of this
    subsection, in the case of a master contract, the date taken into
    account with respect to any insured shall be the first date on
    which such insured is covered under such contract."

       INTERIM RULES; REGULATIONS; STANDARDS BEFORE REGULATIONS TAKE
                                  EFFECT
      Section 5011(c) of Pub. L. 100-647 provided that:
      "(1) Regulations. - Not later than January 1, 1990, the Secretary
    of the Treasury (or his delegate) shall issue regulations under
    section 7702(c)(3)(B)(i) of the 1986 Code (as amended by subsection
    (a)).
      "(2) Standards before regulations take effect. - In the case of
    any contract to which the amendments made by this section [amending
    this section] apply and which is issued before the effective date
    of the regulations required under paragraph (1), mortality charges
    which do not differ materially from the charges actually expected
    to be imposed by the company (taking into account any relevant
    characteristic of the insured of which the company is aware) shall
    be treated as meeting the requirements of clause (i) of section
    7702(c)(3)(B) of the 1986 Code (as amended by subsection (a))."

            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 FLEXIBLE PREMIUM CONTRACTS ISSUED DURING 1984 WHICH
                           MEET NEW REQUIREMENTS
      Section 221(b)(3) of Pub. L. 98-369, as added by Pub. L. 99-514,
    title XVIII, Sec. 1825(d), Oct. 22, 1986, 100 Stat. 2848, provided
    that: "Any flexible premium contract issued during 1984 which meets
    the requirements of section 7702 of the Internal Revenue Code of
    1954 [now 1986] (as added by this section) shall be treated as
    meeting the requirements of section 101(f) of such Code."

-End-



-CITE-
    26 USC Sec. 7702A                                           01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7702A. Modified endowment contract defined

-STATUTE-
    (a) General rule
      For purposes of section 72, the term "modified endowment
    contract" means any contract meeting the requirements of section
    7702 - 
        (1) which - 
          (A) is entered into on or after June 21, 1988, and
          (B) fails to meet the 7-pay test of subsection (b), or

        (2) which is received in exchange for a contract described in
      paragraph (1) or this paragraph.
    (b) 7-pay test
      For purposes of subsection (a), a contract fails to meet the 7-
    pay test of this subsection if the accumulated amount paid under
    the contract at any time during the 1st 7 contract years exceeds
    the sum of the net level premiums which would have been paid on or
    before such time if the contract provided for paid-up future
    benefits after the payment of 7 level annual premiums.
    (c) Computational rules
      (1) In general
        Except as provided in this subsection, the determination under
      subsection (b) of the 7 level annual premiums shall be made - 
          (A) as of the time the contract is issued, and
          (B) by applying the rules of section 7702(b)(2) and of
        section 7702(e) (other than paragraph (2)(C) thereof), except
        that the death benefit provided for the 1st contract year shall
        be deemed to be provided until the maturity date without regard
        to any scheduled reduction after the 1st 7 contract years.
      (2) Reduction in benefits during 1st 7 years
        (A) In general
          If there is a reduction in benefits under the contract within
        the 1st 7 contract years, this section shall be applied as if
        the contract had originally been issued at the reduced benefit
        level.
        (B) Reductions attributable to nonpayment of premiums
          Any reduction in benefits attributable to the nonpayment of
        premiums due under the contract shall not be taken into account
        under subparagraph (A) if the benefits are reinstated within 90
        days after the reduction in such benefits.
      (3) Treatment of material changes
        (A) In general
          If there is a material change in the benefits under (or in
        other terms of) the contract which was not reflected in any
        previous determination under this section, for purposes of this
        section - 
            (i) such contract shall be treated as a new contract
          entered into on the day on which such material change takes
          effect, and
            (ii) appropriate adjustments shall be made in determining
          whether such contract meets the 7-pay test of subsection (b)
          to take into account the cash surrender value under the
          contract.
        (B) Treatment of certain benefit increases
          For purposes of subparagraph (A), the term "material change"
        includes any increase in the death benefit under the contract
        or any increase in, or addition of, a qualified additional
        benefit under the contract. Such term shall not include - 
            (i) any increase which is attributable to the payment of
          premiums necessary to fund the lowest level of the death
          benefit and qualified additional benefits payable in the 1st
          7 contract years (determined after taking into account death
          benefit increases described in subparagraph (A) or (B) of
          section 7702(e)(2)) or to crediting of interest or other
          earnings (including policyholder dividends) in respect of
          such premiums, and
            (ii) to the extent provided in regulations, any cost-of-
          living increase based on an established broad-based index if
          such increase is funded ratably over the remaining period
          during which premiums are required to be paid under the
          contract.
      (4) Special rule for contracts with death benefits of $10,000 or
        less
        In the case of a contract - 
          (A) which provides an initial death benefit of $10,000 or
        less, and
          (B) which requires at least 7 nondecreasing annual premium
        payments,

      each of the 7 level annual premiums determined under subsection
      (b) (without regard to this paragraph) shall be increased by $75.
      For purposes of this paragraph, the contract involved and all
      contracts previously issued to the same policyholder by the same
      company shall be treated as one contract.
      (5) Regulatory authority for certain collection expenses
        The Secretary may by regulations prescribe rules for taking
      into account expenses solely attributable to the collection of
      premiums paid more frequently than annually.
      (6) Treatment of certain contracts with more than one insured
        If - 
          (A) a contract provides a death benefit which is payable only
        upon the death of 1 insured following (or occurring
        simultaneously with) the death of another insured, and
          (B) there is a reduction in such death benefit below the
        lowest level of such death benefit provided under the contract
        during the 1st 7 contract years,

      this section shall be applied as if the contract had originally
      been issued at the reduced benefit level.
    (d) Distributions affected
      If a contract fails to meet the 7-pay test of subsection (b),
    such contract shall be treated as failing to meet such requirements
    only in the case of - 
        (1) distributions during the contract year in which the failure
      takes effect and during any subsequent contract year, and
        (2) under regulations prescribed by the Secretary,
      distributions (not described in paragraph (1)) in anticipation of
      such failure.

    For purposes of the preceding sentence, any distribution which is
    made within 2 years before the failure to meet the 7-pay test shall
    be treated as made in anticipation of such failure.
    (e) Definitions
      For purposes of this section - 
      (1) Amount paid
        (A) In general
          The term "amount paid" means - 
            (i) the premiums paid under the contract, reduced by
            (ii) amounts to which section 72(e) applies (determined
          without regard to paragraph (4)(A) thereof) but not including
          amounts includible in gross income.
        (B) Treatment of certain premiums returned
          If, in order to comply with the requirements of subsection
        (b), 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 such contract year, the amount so
        returned (excluding interest) shall be deemed to reduce the sum
        of the premiums paid under the contract during such contract
        year.
        (C) Interest returned includible in gross income
          Notwithstanding the provisions of section 72(e), the amount
        of any interest returned as provided in subparagraph (B) shall
        be includible in the gross income of the recipient.
      (2) Contract year
        The term "contract year" means the 12-month period beginning
      with the 1st month for which the contract is in effect, and each
      12-month period beginning with the corresponding month in
      subsequent calendar years.
      (3) Other terms
        Except as otherwise provided in this section, terms used in
      this section shall have the same meaning as when used in section
      7702.

-SOURCE-
    (Added Pub. L. 100-647, title V, Sec. 5012(c)(1), Nov. 10, 1988,
    102 Stat. 3662; amended Pub. L. 101-239, title VII, Secs. 7647(a),
    7815(a)(1), (4), Dec. 19, 1989, 103 Stat. 2382, 2414; Pub. L. 106-
    554, Sec. 1(a)(7) [title III, Sec. 318(a)(1), (2)], Dec. 21, 2000,
    114 Stat. 2763, 2763A-645; Pub. L. 107-147, title IV, Sec. 416(f),
    Mar. 9, 2002, 116 Stat. 55.)


-MISC1-
                                AMENDMENTS                            
      2002 - Subsec. (c)(3)(A)(ii). Pub. L. 107-147 repealed Pub. L.
    106-554, Sec. 1(a)(7) [title III, Sec. 318(a)(2)]. See 2000
    Amendment note below.
      2000 - Subsec. (a)(2). Pub. L. 106-554, Sec. 1(a)(7) [title III,
    Sec. 318(a)(1)], inserted "or this paragraph" before period at end.
      Subsec. (c)(3)(A)(ii). Pub. L. 106-554, Sec. 1(a)(7) [title III,
    Sec. 318(a)(2)], which substituted "under the old contract" for
    "under the contract", was repealed by Pub. L. 107-147. See
    Construction of 2002 Amendment note below.
      1989 - Subsec. (c)(3)(B). Pub. L. 101-239, Sec. 7815(a)(1),
    substituted "benefit increases" for "increases in future benefits"
    in heading and amended text generally. Prior to amendment, text
    read as follows: "For purposes of subparagraph (A), the term
    'material change' includes any increase in future benefits under
    the contract. Such term shall not include - 
        "(i) any increase which is attributable to the payment of
      premiums necessary to fund the lowest level of future benefits
      payable in the 1st 7 contract years (determined after taking into
      account death benefit increases described in subparagraph (A) or
      (B) of section 7702(e)(2)) or to crediting of interest or other
      earnings (including policyholder dividends) in respect of such
      premiums, and
        "(ii) to the extent provided in regulations, any cost-of-living
      increase based on an established broad-based index if such
      increase is funded ratably over the remaining life of the the
      contract."
      Subsec. (c)(4). Pub. L. 101-239, Sec. 7815(a)(4), substituted "of
    $10,000 or less" for "under $10,000" in heading and "the same
    policyholder" for "the same insurer" in concluding provisions.
      Subsec. (c)(6). Pub. L. 101-239, Sec. 7647(a), added par. (6).

                     EFFECTIVE DATE OF 2000 AMENDMENT                 
      Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 318(a)(3)], Dec.
    21, 2000, 114 Stat. 2763, 2763A-645, provided that: "The amendments
    made by this subsection [amending this section] shall take effect
    as if included in the amendments made by section 5012 of the
    Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100-647]."

                     EFFECTIVE DATE OF 1989 AMENDMENT                 
      Section 7647(b) of Pub. L. 101-239 provided that: "The amendment
    made by subsection (a) [amending this section] shall apply to
    contracts entered into on or after September 14, 1989."
      Amendment by section 7815(a)(1), (4) 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                          
      Section 5012(e) of Pub. L. 100-647, as amended by Pub. L. 101-
    239, title VII, Sec. 7815(a)(2), Dec. 19, 1989, 103 Stat. 2414,
    provided that:
      "(1) In general. - Except as otherwise provided in this
    subsection, the amendments made by this section [enacting this
    section and amending sections 26 and 72 of this title] shall apply
    to contracts entered into on or after June 21, 1988.
      "(2) Special rule where death benefit increases by more than
    $150,000. - If the death benefit under the contract increases by
    more than $150,000 over the death benefit under the contract in
    effect on October 20, 1988, the rules of section 7702A(c)(3) of the
    1986 Code (as added by this section) shall apply in determining
    whether such contract is issued on or after June 21, 1988. The
    preceding sentence shall not apply in the case of a contract which,
    as of June 21, 1988, required at least 7 level annual premium
    payments and under which the policyholder makes at least 7 level
    annual premium payments.
      "(3) Certain other material changes taken into account. - A
    contract entered into before June 21, 1988, shall be treated as
    entered into after such date if - 
        "(A) on or after June 21, 1988, the death benefit under the
      contract is increased (or a qualified additional benefit is
      increased or added) and before June 21, 1988, the owner of the
      contract did not have a unilateral right under the contract to
      obtain such increase or addition without providing additional
      evidence of insurability, or
        "(B) the contract is converted after June 20, 1988, from a term
      life insurance contract to a life insurance contract providing
      coverage other than term life insurance coverage without regard
      to any right of the owner of the contract to such conversion.
      "(4) Certain exchanges permitted. - In the case of a modified
    endowment contract which - 
        "(A) required at least 7 annual level premium payments,
        "(B) is entered into after June 20, 1988, and before the date
      of the enactment of this Act [Nov. 10, 1988], and
        "(C) is exchanged within 3 months after such date of enactment
      for a life insurance contract which meets the requirements of
      section 7702A(b),
    the contract which is received in exchange for such contract shall
    not be treated as a modified endowment contract if the taxpayer
    elects, notwithstanding section 1035 of the 1986 Code, to recognize
    gain on such exchange.
      "(5) Special rule for annuity contracts. - In the case of annuity
    contracts, the amendments made by subsection (d) [amending section
    72 of this title] shall apply to contracts entered into after
    October 21, 1988."

                      CONSTRUCTION OF 2002 AMENDMENT                  
      Pub. L. 107-147, title IV, Sec. 416(f), Mar. 9, 2002, 116 Stat.
    55, provided that: "Paragraph (2) of section 318(a) of the
    Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by
    section 1(a)(7) of Pub. L. 106-554](114 Stat. 2763A-645) [amending
    this section] is repealed, and clause (ii) of section
    7702A(c)(3)(A) shall read and be applied as if the amendment made
    by such paragraph had not been enacted."

-End-



-CITE-
    26 USC Sec. 7702B                                           01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7702B. Treatment of qualified long-term care insurance

-STATUTE-
    (a) In general
      For purposes of this title - 
        (1) a qualified long-term care insurance contract shall be
      treated as an accident and health insurance contract,
        (2) amounts (other than policyholder dividends, as defined in
      section 808, or premium refunds) received under a qualified long-
      term care insurance contract shall be treated as amounts
      received for personal injuries and sickness and shall be treated
      as reimbursement for expenses actually incurred for medical care
      (as defined in section 213(d)),
        (3) any plan of an employer providing coverage under a
      qualified long-term care insurance contract shall be treated as
      an accident and health plan with respect to such coverage,
        (4) except as provided in subsection (e)(3), amounts paid for a
      qualified long-term care insurance contract providing the
      benefits described in subsection (b)(2)(A) shall be treated as
      payments made for insurance for purposes of section 213(d)(1)(D),
      and
        (5) a qualified long-term care insurance contract shall be
      treated as a guaranteed renewable contract subject to the rules
      of section 816(e).
    (b) Qualified long-term care insurance contract
      For purposes of this title - 
      (1) In general
        The term "qualified long-term care insurance contract" means
      any insurance contract if - 
          (A) the only insurance protection provided under such
        contract is coverage of qualified long-term care services,
          (B) such contract does not pay or reimburse expenses incurred
        for services or items to the extent that such expenses are
        reimbursable under title XVIII of the Social Security Act or
        would be so reimbursable but for the application of a
        deductible or coinsurance amount,
          (C) such contract is guaranteed renewable,
          (D) such contract does not provide for a cash surrender value
        or other money that can be - 
            (i) paid, assigned, or pledged as collateral for a loan, or
            (ii) borrowed,

        other than as provided in subparagraph (E) or paragraph (2)(C),
          (E) all refunds of premiums, and all policyholder dividends
        or similar amounts, under such contract are to be applied as a
        reduction in future premiums or to increase future benefits,
        and
          (F) such contract meets the requirements of subsection (g).
      (2) Special rules
        (A) Per diem, etc. payments permitted
          A contract shall not fail to be described in subparagraph (A)
        or (B) of paragraph (1) by reason of payments being made on a
        per diem or other periodic basis without regard to the expenses
        incurred during the period to which the payments relate.
        (B) Special rules relating to medicare
          (i) Paragraph (1)(B) shall not apply to expenses which are
        reimbursable under title XVIII of the Social Security Act only
        as a secondary payor.
          (ii) No provision of law shall be construed or applied so as
        to prohibit the offering of a qualified long-term care
        insurance contract on the basis that the contract coordinates
        its benefits with those provided under such title.
        (C) Refunds of premiums
          Paragraph (1)(E) shall not apply to any refund on the death
        of the insured, or on a complete surrender or cancellation of
        the contract, which cannot exceed the aggregate premiums paid
        under the contract. Any refund on a complete surrender or
        cancellation of the contract shall be includible in gross
        income to the extent that any deduction or exclusion was
        allowable with respect to the premiums.
    (c) Qualified long-term care services
      For purposes of this section - 
      (1) In general
        The term "qualified long-term care services" means necessary
      diagnostic, preventive, therapeutic, curing, treating,
      mitigating, and rehabilitative services, and maintenance or
      personal care services, which - 
          (A) are required by a chronically ill individual, and
          (B) are provided pursuant to a plan of care prescribed by a
        licensed health care practitioner.
      (2) Chronically ill individual
        (A) In general
          The term "chronically ill individual" means any individual
        who has been certified by a licensed health care practitioner
        as - 
            (i) being unable to perform (without substantial assistance
          from another individual) at least 2 activities of daily
          living for a period of at least 90 days due to a loss of
          functional capacity,
            (ii) having a level of disability similar (as determined
          under regulations prescribed by the Secretary in consultation
          with the Secretary of Health and Human Services) to the level
          of disability described in clause (i), or
            (iii) requiring substantial supervision to protect such
          individual from threats to health and safety due to severe
          cognitive impairment.

        Such term shall not include any individual otherwise meeting
        the requirements of the preceding sentence unless within the
        preceding 12-month period a licensed health care practitioner
        has certified that such individual meets such requirements.
        (B) Activities of daily living
          For purposes of subparagraph (A), each of the following is an
        activity of daily living:
            (i) Eating.
            (ii) Toileting.
            (iii) Transferring.
            (iv) Bathing.
            (v) Dressing.
            (vi) Continence.

        A contract shall not be treated as a qualified long-term care
        insurance contract unless the determination of whether an
        individual is a chronically ill individual described in
        subparagraph (A)(i) takes into account at least 5 of such
        activities.
      (3) Maintenance or personal care services
        The term "maintenance or personal care services" means any care
      the primary purpose of which is the provision of needed
      assistance with any of the disabilities as a result of which the
      individual is a chronically ill individual (including the
      protection from threats to health and safety due to severe
      cognitive impairment).
      (4) Licensed health care practitioner
        The term "licensed health care practitioner" means any
      physician (as defined in section 1861(r)(1) of the Social
      Security Act) and any registered professional nurse, licensed
      social worker, or other individual who meets such requirements as
      may be prescribed by the Secretary.
    (d) Aggregate payments in excess of limits
      (1) In general
        If the aggregate of - 
          (A) the periodic payments received for any period under all
        qualified long-term care insurance contracts which are treated
        as made for qualified long-term care services for an insured,
        and
          (B) the periodic payments received for such period which are
        treated under section 101(g) as paid by reason of the death of
        such insured,

      exceeds the per diem limitation for such period, such excess
      shall be includible in gross income without regard to section 72.
      A payment shall not be taken into account under subparagraph (B)
      if the insured is a terminally ill individual (as defined in
      section 101(g)) at the time the payment is received.
      (2) Per diem limitation
        For purposes of paragraph (1), the per diem limitation for any
      period is an amount equal to the excess (if any) of - 
          (A) the greater of - 
            (i) the dollar amount in effect for such period under
          paragraph (4), or
            (ii) the costs incurred for qualified long-term care
          services provided for the insured for such period, over

          (B) the aggregate payments received as reimbursements
        (through insurance or otherwise) for qualified long-term care
        services provided for the insured during such period.
      (3) Aggregation rules
        For purposes of this subsection - 
          (A) all persons receiving periodic payments described in
        paragraph (1) with respect to the same insured shall be treated
        as 1 person, and
          (B) the per diem limitation determined under paragraph (2)
        shall be allocated first to the insured and any remaining
        limitation shall be allocated among the other such persons in
        such manner as the Secretary shall prescribe.
      (4) Dollar amount
        The dollar amount in effect under this subsection shall be $175
      per day (or the equivalent amount in the case of payments on
      another periodic basis).
      (5) Inflation adjustment
        In the case of a calendar year after 1997, the dollar amount
      contained in paragraph (4) shall be increased at the same time
      and in the same manner as amounts are increased pursuant to
      section 213(d)(10).
      (6) Periodic payments
        For purposes of this subsection, the term "periodic payment"
      means any payment (whether on a periodic basis or otherwise) made
      without regard to the extent of the costs incurred by the payee
      for qualified long-term care services.
    (e) Treatment of coverage provided as part of a life insurance
      contract
      Except as otherwise provided in regulations prescribed by the
    Secretary, in the case of any long-term care insurance coverage
    (whether or not qualified) provided by a rider on or as part of a
    life insurance contract - 
      (1) In general
        This title shall apply as if the portion of the contract
      providing such coverage is a separate contract.
      (2) Application of section 7702
        Section 7702(c)(2) (relating to the guideline premium
      limitation) shall be applied by increasing the guideline premium
      limitation with respect to a life insurance contract, as of any
      date - 
          (A) by the sum of any charges (but not premium payments)
        against the life insurance contract's cash surrender value
        (within the meaning of section 7702(f)(2)(A)) for such coverage
        made to that date under the contract, less
          (B) any such charges the imposition of which reduces the
        premiums paid for the contract (within the meaning of section
        7702(f)(1)).
      (3) Application of section 213
        No deduction shall be allowed under section 213(a) for charges
      against the life insurance contract's cash surrender value
      described in paragraph (2), unless such charges are includible in
      income as a result of the application of section 72(e)(10) and
      the rider is a qualified long-term care insurance contract under
      subsection (b).
      (4) Portion defined
        For purposes of this subsection, the term "portion" means only
      the terms and benefits under a life insurance contract that are
      in addition to the terms and benefits under the contract without
      regard to long-term care insurance coverage.
    (f) Treatment of certain State-maintained plans
      (1) In general
        If - 
          (A) an individual receives coverage for qualified long-term
        care services under a State long-term care plan, and
          (B) the terms of such plan would satisfy the requirements of
        subsection (b) were such plan an insurance contract,

      such plan shall be treated as a qualified long-term care
      insurance contract for purposes of this title.
      (2) State long-term care plan
        For purposes of paragraph (1), the term "State long-term care
      plan" means any plan - 
          (A) which is established and maintained by a State or an
        instrumentality of a State,
          (B) which provides coverage only for qualified long-term care
        services, and
          (C) under which such coverage is provided only to - 
            (i) employees and former employees of a State (or any
          political subdivision or instrumentality of a State),
            (ii) the spouses of such employees, and
            (iii) individuals bearing a relationship to such employees
          or spouses which is described in any of subparagraphs (A)
          through (G) of section 152(d)(2).
    (g) Consumer protection provisions
      (1) In general
        The requirements of this subsection are met with respect to any
      contract if the contract meets - 
          (A) the requirements of the model regulation and model Act
        described in paragraph (2),
          (B) the disclosure requirement of paragraph (3), and
          (C) the requirements relating to nonforfeitability under
        paragraph (4).
      (2) Requirements of model regulation and Act
        (A) In general
          The requirements of this paragraph are met with respect to
        any contract if such contract meets - 
          (i) Model regulation
            The following requirements of the model regulation:
              (I) Section 7A (relating to guaranteed renewal or
            noncancellability), and the requirements of section 6B of
            the model Act relating to such section 7A.
              (II) Section 7B (relating to prohibitions on limitations
            and exclusions).
              (III) Section 7C (relating to extension of benefits).
              (IV) Section 7D (relating to continuation or conversion
            of coverage).
              (V) Section 7E (relating to discontinuance and
            replacement of policies).
              (VI) Section 8 (relating to unintentional lapse).
              (VII) Section 9 (relating to disclosure), other than
            section 9F thereof.
              (VIII) Section 10 (relating to prohibitions against post-
            claims underwriting).
              (IX) Section 11 (relating to minimum standards).
              (X) Section 12 (relating to requirement to offer
            inflation protection), except that any requirement for a
            signature on a rejection of inflation protection shall
            permit the signature to be on an application or on a
            separate form.
              (XI) Section 23 (relating to prohibition against
            preexisting conditions and probationary periods in
            replacement policies or certificates).
          (ii) Model Act
            The following requirements of the model Act:
              (I) Section 6C (relating to preexisting conditions).
              (II) Section 6D (relating to prior hospitalization).
        (B) Definitions
          For purposes of this paragraph - 
          (i) Model provisions
            The terms "model regulation" and "model Act" mean the long-
          term care insurance model regulation, and the long-term care
          insurance model Act, respectively, promulgated by the
          National Association of Insurance Commissioners (as adopted
          as of January 1993).
          (ii) Coordination
            Any provision of the model regulation or model Act listed
          under clause (i) or (ii) of subparagraph (A) shall be treated
          as including any other provision of such regulation or Act
          necessary to implement the provision.
          (iii) Determination
            For purposes of this section and section 4980C, the
          determination of whether any requirement of a model
          regulation or the model Act has been met shall be made by the
          Secretary.
      (3) Disclosure requirement
        The requirement of this paragraph is met with respect to any
      contract if such contract meets the requirements of section
      4980C(d).
      (4) Nonforfeiture requirements
        (A) In general
          The requirements of this paragraph are met with respect to
        any level premium contract, if the issuer of such contract
        offers to the policyholder, including any group policyholder, a
        nonforfeiture provision meeting the requirements of
        subparagraph (B).
        (B) Requirements of provision
          The nonforfeiture provision required under subparagraph (A)
        shall meet the following requirements:
            (i) The nonforfeiture provision shall be appropriately
          captioned.
            (ii) The nonforfeiture provision shall provide for a
          benefit available in the event of a default in the payment of
          any premiums and the amount of the benefit may be adjusted
          subsequent to being initially granted only as necessary to
          reflect changes in claims, persistency, and interest as
          reflected in changes in rates for premium paying contracts
          approved by the appropriate State regulatory agency for the
          same contract form.
            (iii) The nonforfeiture provision shall provide at least
          one of the following:
              (I) Reduced paid-up insurance.
              (II) Extended term insurance.
              (III) Shortened benefit period.
              (IV) Other similar offerings approved by the appropriate
            State regulatory agency.
      (5) Cross reference
          For coordination of the requirements of this subsection with
        State requirements, see section 4980C(f).

-SOURCE-
    (Added and amended Pub. L. 104-191, title III, Secs. 321(a), 325,
    Aug. 21, 1996, 110 Stat. 2054, 2063; Pub. L. 105-34, title XVI,
    Sec. 1602(b), (e), Aug. 5, 1997, 111 Stat. 1094; Pub. L. 105-206,
    title VI, Sec. 6023(28), July 22, 1998, 112 Stat. 826; Pub. L. 108-
    311, title II, Sec. 207(25), Oct. 4, 2004, 118 Stat. 1178; Pub. L.
    109-280, title VIII, Sec. 844(c), (f), Aug. 17, 2006, 120 Stat.
    1011, 1013.)


-STATAMEND-
       ADJUSTMENT OF DOLLAR AMOUNT OF PER DIEM LIMITATION REGARDING
                 PERIODIC PAYMENTS FOR CALENDAR YEAR 2007
      For adjustment of dollar amount of per diem limitation on
    periodic payments received under qualified long-term care or
    certain life insurance contracts under subsection (d)(4) of this
    section for calendar year 2007, see section 3.41 of Revenue
    Procedure 2006-53, set out as a note under section 1 of this title.

                        AMENDMENT OF SUBSECTION (E)                    
      Pub. L. 109-280, title VIII, Sec. 844(c), (g)(1), Aug. 17, 2006,
    120 Stat. 1011, 1013, provided that, applicable to contracts issued
    after Dec. 31, 1996, but only with respect to taxable years
    beginning after Dec. 31, 2009, subsection (e) of this section is
    amended to read as follows:
    (e) Treatment of coverage provided as part of a life insurance or
      annuity contract
      Except as otherwise provided in regulations prescribed by the
    Secretary, in the case of any long-term care insurance coverage
    (whether or not qualified) provided by a rider on or as part of a
    life insurance contract or an annuity contract - 
      (1) In general
        This title shall apply as if the portion of the contract
      providing such coverage is a separate contract.
      (2) Denial of deduction under section 213
        No deduction shall be allowed under section 213(a) for any
      payment made for coverage under a qualified long-term care
      insurance contract if such payment is made as a charge against
      the cash surrender value of a life insurance contract or the cash
      value of an annuity contract.
      (3) Portion defined
        For purposes of this subsection, the term "portion" means only
      the terms and benefits under a life insurance contract or annuity
      contract that are in addition to the terms and benefits under the
      contract without regard to long-term care insurance coverage.
      (4) Annuity contracts to which paragraph (1) does not apply
        For purposes of this subsection, none of the following shall be
      treated as an annuity contract:
          (A) A trust described in section 401(a) which is exempt from
        tax under section 501(a).
          (B) A contract - 
            (i) purchased by a trust described in subparagraph (A),
            (ii) purchased as part of a plan described in section
          403(a),
            (iii) described in section 403(b),
            (iv) provided for employees of a life insurance company
          under a plan described in section 818(a)(3), or
            (v) from an individual retirement account or an individual
          retirement annuity.

          (C) A contract purchased by an employer for the benefit of
        the employee (or the employee's spouse).

      Any dividend described in section 404(k) which is received by a
      participant or beneficiary shall, for purposes of this paragraph,
      be treated as paid under a separate contract to which
      subparagraph (B)(i) applies.

-REFTEXT-
                            REFERENCES IN TEXT                        
      The Social Security Act, referred to in subsec. (b)(1)(B),
    (2)(B)(i), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended.
    Title XVIII of the Act is classified generally to subchapter XVIII
    (Sec. 1395 et seq.) of chapter 7 of Title 42, The Public Health and
    Welfare. Section 1861(r)(1) of the Act is classified to section
    1395x(r)(1) of Title 42. For complete classification of this Act to
    the Code, see section 1305 of Title 42 and Tables.


-MISC1-
                                AMENDMENTS                            
      2006 - Subsec. (e)(1). Pub. L. 109-280, Sec. 844(f), substituted
    "title" for "section".
      2004 - Subsec. (f)(2)(C)(iii). Pub. L. 108-311 substituted
    "subparagraphs (A) through (G) of section 152(d)(2)" for
    "paragraphs (1) through (8) of section 152(a)".
      1998 - Subsec. (e)(2). Pub. L. 105-206 inserted "section" after
    "Application of" in heading.
      1997 - Subsec. (c)(2)(B). Pub. L. 105-34, Sec. 1602(b), inserted
    "described in subparagraph (A)(i)" after "chronically ill
    individual" in concluding provisions.
      Subsec. (g)(4)(B)(ii), (iii)(IV). Pub. L. 105-34, Sec. 1602(e),
    substituted "appropriate State regulatory agency" for "Secretary".
      1996 - Subsec. (g). Pub. L. 104-191, Sec. 325, added subsec. (g).

                     EFFECTIVE DATE OF 2006 AMENDMENT                 
      Amendment by Pub. L. 109-280 applicable to contracts issued after
    Dec. 31, 1996, but only with respect to taxable years beginning
    after Dec. 31, 2009, except as otherwise provided, see section
    844(g)(1) of Pub. L. 109-280, set out as a note under section 72 of
    this title.
      Amendment by section 844(f) of Pub. L. 109-280 effective as if
    included in section 321(a) of Pub. L. 104-191, see section
    844(g)(5) of Pub. L. 109-280, set out as a note under section 72 of
    this title.

                     EFFECTIVE DATE OF 2004 AMENDMENT                 
      Amendment by Pub. L. 108-311 applicable to taxable years
    beginning after Dec. 31, 2004, see section 208 of Pub. L. 108-311,
    set out as a note under section 2 of this title.

                     EFFECTIVE DATE OF 1997 AMENDMENT                 
      Amendment by 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 AMENDMENT                 
      Amendment by section 325 of Pub. L. 104-191 applicable to
    contracts issued after Dec. 31, 1996, with provisions of section
    321(f) of Pub. L. 104-191, set out as an Effective Date note below,
    applicable to such contracts, see section 327 of Pub. L. 104-191,
    set out as an Effective Date note under section 4980C of this
    title.

                              EFFECTIVE DATE                          
      Section 321(f) of Pub. L. 104-191 provided that:
      "(1) General effective date. - 
        "(A) In general. - Except as provided in subparagraph (B), the
      amendments made by this section [enacting this section and
      amending sections 106, 125, 807, and 4980B of this title, section
      1167 of Title 29, Labor, and section 300bb-8 of Title 42, The
      Public Health and Welfare] shall apply to contracts issued after
      December 31, 1996.
        "(B) Reserve method. - The amendment made by subsection (b)
      [amending section 807 of this title] shall apply to contracts
      issued after December 31, 1997.
      "(2) Continuation of existing policies. - In the case of any
    contract issued before January 1, 1997, which met the long-term
    care insurance requirements of the State in which the contract was
    sitused [sic] at the time the contract was issued - 
        "(A) such contract shall be treated for purposes of the
      Internal Revenue Code of 1986 as a qualified long-term care
      insurance contract (as defined in section 7702B(b) of such Code),
      and
        "(B) services provided under, or reimbursed by, such contract
      shall be treated for such purposes as qualified long-term care
      services (as defined in section 7702B(c) of such Code).
    In the case of an individual who is covered on December 31, 1996,
    under a State long-term care plan (as defined in section
    7702B(f)(2) of such Code), the terms of such plan on such date
    shall be treated for purposes of the preceding sentence as a
    contract issued on such date which met the long-term care insurance
    requirements of such State.
      "(3) Exchanges of existing policies. - If, after the date of
    enactment of this Act [Aug. 21, 1996] and before January 1, 1998, a
    contract providing for long-term care insurance coverage is
    exchanged solely for a qualified long-term care insurance contract
    (as defined in section 7702B(b) of such Code), no gain or loss
    shall be recognized on the exchange. If, in addition to a qualified
    long-term care insurance contract, money or other property is
    received in the exchange, then any gain shall be recognized to the
    extent of the sum of the money and the fair market value of the
    other property received. For purposes of this paragraph, the
    cancellation of a contract providing for long-term care insurance
    coverage and reinvestment of the cancellation proceeds in a
    qualified long-term care insurance contract within 60 days
    thereafter shall be treated as an exchange.
      "(4) Issuance of certain riders permitted. - For purposes of
    applying sections 101(f), 7702, and 7702A of the Internal Revenue
    Code of 1986 to any contract - 
        "(A) the issuance of a rider which is treated as a qualified
      long-term care insurance contract under section 7702B, and
        "(B) the addition of any provision required to conform any
      other long-term care rider to be so treated,
    shall not be treated as a modification or material change of such
    contract.
      "(5) Application of per diem limitation to existing contracts. -
    The amount of per diem payments made under a contract issued on or
    before July 31, 1996, with respect to an insured which are
    excludable from gross income by reason of section 7702B of the
    Internal Revenue Code of 1986 (as added by this section) shall not
    be reduced under subsection (d)(2)(B) thereof by reason of
    reimbursements received under a contract issued on or before such
    date. The preceding sentence shall cease to apply as of the date
    (after July 31, 1996) such contract is exchanged or there is any
    contract modification which results in an increase in the amount of
    such per diem payments or the amount of such reimbursements."

                       LONG-TERM CARE STUDY REQUEST                   
      Section 321(g) of Pub. L. 104-191 provided that: "The Chairman of
    the Committee on Ways and Means of the House of Representatives and
    the Chairman of the Committee on Finance of the Senate shall
    jointly request the National Association of Insurance
    Commissioners, in consultation with representatives of the
    insurance industry and consumer organizations, to formulate,
    develop, and conduct a study to determine the marketing and other
    effects of per diem limits on certain types of long-term care
    policies. If the National Association of Insurance Commissioners
    agrees to the study request, the National Association of Insurance
    Commissioners shall report the results of its study to such
    committees not later than 2 years after accepting the request."

-End-



-CITE-
    26 USC Sec. 7703                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7703. Determination of marital status

-STATUTE-
    (a) General rule
      For purposes of part V of subchapter B of chapter 1 and those
    provisions of this title which refer to this subsection - 
        (1) the determination of whether an individual is married shall
      be made as of the close of his taxable year; except that if his
      spouse dies during his taxable year such determination shall be
      made as of the time of such death; and
        (2) an individual legally separated from his spouse under a
      decree of divorce or of separate maintenance shall not be
      considered as married.
    (b) Certain married individuals living apart
      For purposes of those provisions of this title which refer to
    this subsection, if - 
        (1) an individual who is married (within the meaning of
      subsection (a)) and who files a separate return maintains as his
      home a household which constitutes for more than one-half of the
      taxable year the principal place of abode of a child (within the
      meaning of section 152(f)(1)) with respect to whom such
      individual is entitled to a deduction for the taxable year under
      section 151 (or would be so entitled but for section 152(e)),
        (2) such individual furnishes over one-half of the cost of
      maintaining such household during the taxable year, and
        (3) during the last 6 months of the taxable year, such
      individual's spouse is not a member of such household,

    such individual shall not be considered as married.

-SOURCE-
    (Added Pub. L. 99-514, title XIII, Sec. 1301(j)(2)(A), Oct. 22,
    1986, 100 Stat. 2657; amended Pub. L. 100-647, title I, Sec.
    1018(u)(41), Nov. 10, 1988, 102 Stat. 3592; Pub. L. 108-311, title
    II, Sec. 207(26), Oct. 4, 2004, 118 Stat. 1178.)


-MISC1-
                             PRIOR PROVISIONS                         
      Provisions relating to determination of marital status were
    formerly contained in section 143 of this title, prior to enactment
    of this section by Pub. L. 99-514.

                                AMENDMENTS                            
      2004 - Subsec. (b)(1). Pub. L. 108-311 substituted "152(f)(1)"
    for "151(c)(3)" and struck out "paragraph (2) or (4) of" before
    "section 152(e)),".
      1988 - Subsec. (b)(1). Pub. L. 100-647 substituted "section
    151(c)(3)" for "section 151(e)(3)".

                     EFFECTIVE DATE OF 2004 AMENDMENT                 
      Amendment by Pub. L. 108-311 applicable to taxable years
    beginning after Dec. 31, 2004, see section 208 of Pub. L. 108-311,
    set out as a note under section 2 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                          
      Section 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. 7704                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
    CHAPTER 79 - DEFINITIONS

-HEAD-
    Sec. 7704. Certain publicly traded partnerships treated as
      corporations

-STATUTE-
    (a) General rule
      For purposes of this title, except as provided in subsection (c),
    a publicly traded partnership shall be treated as a corporation.
    (b) Publicly traded partnership
      For purposes of this section, the term "publicly traded
    partnership" means any partnership if - 
        (1) interests in such partnership are traded on an established
      securities market, or
        (2) interests in such partnership are readily tradable on a
      secondary market (or the substantial equivalent thereof).
    (c) Exception for partnerships with passive-type income
      (1) In general
        Subsection (a) shall not apply to any publicly traded
      partnership for any taxable year if such partnership met the
      gross income requirements of paragraph (2) for such taxable year
      and each preceding taxable year beginning after December 31,
      1987, during which the partnership (or any predecessor) was in
      existence. For purposes of the preceding sentence, a partnership
      shall not be treated as being in existence during any period
      before the 1st taxable year in which such partnership (or a
      predecessor) was a publicly traded partnership.
      (2) Gross income requirements
        A partnership meets the gross income requirements of this
      paragraph for any taxable year if 90 percent or more of the gross
      income of such partnership for such taxable year consists of
      qualifying income.
      (3) Exception not to apply to certain partnerships which could
        qualify as regulated investment companies
        This subsection shall not apply to any partnership which would
      be described in section 851(a) if such partnership were a
      domestic corporation. To the extent provided in regulations, the
      preceding sentence shall not apply to any partnership a principal
      activity of which is the buying and selling of commodities (not
      described in section 1221(a)(1)), or options, futures, or
      forwards with respect to commodities.
    (d) Qualifying income
      For purposes of this section - 
      (1) In general
        Except as otherwise provided in this subsection, the term
      "qualifying income" means - 
          (A) interest,
          (B) dividends,
          (C) real property rents,
          (D) gain from the sale or other disposition of real property
        (including property described in section 1221(a)(1)),
          (E) income and gains derived from the exploration,
        development, mining or production, processing, refining,
        transportation (including pipelines transporting gas, oil, or
        products thereof), or the marketing of any mineral or natural
        resource (including fertilizer, geothermal energy, and timber),
          (F) any gain from the sale or disposition of a capital asset
        (or property described in section 1231(b)) held for the
        production of income described in any of the foregoing
        subparagraphs of this paragraph, and
          (G) in the case of a partnership described in the second
        sentence of subsection (c)(3), income and gains from
        commodities (not described in section 1221(a)(1)) or futures,
        forwards, and options with respect to commodities.

      For purposes of subparagraph (E), the term "mineral or natural
      resource" means any product of a character with respect to which
      a deduction for depletion is allowable under section 611; except
      that such term shall not include any product described in
      subparagraph (A) or (B) of section 613(b)(7).
      (2) Certain interest not qualified
        Interest shall not be treated as qualifying income if - 
          (A) such interest is derived in the conduct of a financial or
        insurance business, or
          (B) such interest would be excluded from the term "interest"
        under section 856(f).
      (3) Real property rent
        The term "real property rent" means amounts which would qualify
      as rent from real property under section 856(d) if - 
          (A) such section were applied without regard to paragraph
        (2)(C) thereof (relating to independent contractor
        requirements), and
          (B) stock owned, directly or indirectly, by or for a partner
        would not be considered as owned under section 318(a)(3)(A) by
        the partnership unless 5 percent or more (by value) of the
        interests in such partnership are owned, directly or
        indirectly, by or for such partner.
      (4) Certain income qualifying under regulated investment company
        or real estate trust provisions
        The term "qualifying income" also includes any income which
      would qualify under section 851(b)(2)(A) or 856(c)(2).
      (5) Special rule for determining gross income from certain real
        property sales
        In the case of the sale or other disposition of real property
      described in section 1221(a)(1), gross income shall not be
      reduced by inventory costs.
    (e) Inadvertent terminations
      If - 
        (1) a partnership fails to meet the gross income requirements
      of subsection (c)(2),
        (2) the Secretary determines that such failure was inadvertent,
        (3) no later than a reasonable time after the discovery of such
      failure, steps are taken so that such partnership once more meets
      such gross income requirements, and
        (4) such partnership agrees to make such adjustments (including
      adjustments with respect to the partners) or to pay such amounts
      as may be required by the Secretary with respect to such period,

    then, notwithstanding such failure, such entity shall be treated as
    continuing to meet such gross income requirements for such period.
    (f) Effect of becoming corporation
      As of the 1st day that a partnership is treated as a corporation
    under this section, for purposes of this title, such partnership
    shall be treated as - 
        (1) transferring all of its assets (subject to its liabilities)
      to a newly formed corporation in exchange for the stock of the
      corporation, and
        (2) distributing such stock to its partners in liquidation of
      their interests in the partnership.
    (g) Exception for electing 1987 partnerships
      (1) In general
        Subsection (a) shall not apply to an electing 1987 partnership.
      (2) Electing 1987 partnership
        For purposes of this subsection, the term "electing 1987
      partnership" means any publicly traded partnership if - 
          (A) such partnership is an existing partnership (as defined
        in section 10211(c)(2) of the Revenue Reconciliation Act of
        1987),
          (B) subsection (a) has not applied (and without regard to
        subsection (c)(1) would not have applied) to such partnership
        for all prior taxable years beginning after December 31, 1987,
        and before January 1, 1998, and
          (C) such partnership elects the application of this
        subsection, and consents to the application of the tax imposed
        by paragraph (3), for its first taxable year beginning after
        December 31, 1997.

      A partnership which, but for this sentence, would be treated as
      an electing 1987 partnership shall cease to be so treated (and
      the election under subparagraph (C) shall cease to be in effect)
      as of the 1st day after December 31, 1997, on which there has
      been an addition of a substantial new line of business with
      respect to such partnership.
      (3) Additional tax on electing partnerships
        (A) Imposition of tax
          There is hereby imposed for each taxable year on the income
        of each electing 1987 partnership a tax equal to 3.5 percent of
        such partnership's gross income for the taxable year from the
        active conduct of trades and businesses by the partnership.
        (B) Adjustments in the case of tiered partnerships
          For purposes of this paragraph, in the case of a partnership
        which is a partner in another partnership, the gross income
        referred to in subparagraph (A) shall include the partnership's
        distributive share of the gross income of such other
        partnership from the active conduct of trades and businesses of
        such other partnership. A similar rule shall apply in the case
        of lower-tiered partnerships.
        (C) Treatment of tax
          For purposes of this title, the tax imposed by this paragraph
        shall be treated as imposed by chapter 1 other than for
        purposes of determining the amount of any credit allowable
        under chapter 1 and shall be paid by the partnership. Section
        6655 shall be applied to such partnership with respect to such
        tax in the same manner as if the partnership were a
        corporation, such tax were imposed by section 11, and
        references in such section to taxable income were references to
        the gross income referred to in subparagraph (A).
      (4) Election
        An election and consent under this subsection shall apply to
      the taxable year for which made and all subsequent taxable years
      unless revoked by the partnership. Such revocation may be made
      without the consent of the Secretary, but, once so revoked, may
      not be reinstated.

-SOURCE-
    (Added Pub. L. 100-203, title X, Sec. 10211(a), Dec. 22, 1987, 101
    Stat. 1330-403; amended Pub. L. 100-647, title II, Sec. 2004(f)(1),
    (3)-(5), Nov. 10, 1988, 102 Stat. 3602, 3603; Pub. L. 105-34, title
    IX, Sec. 964(a), Aug. 5, 1997, 111 Stat. 892; Pub. L. 105-206,
    title VI, Sec. 6009(b)(1), July 22, 1998, 112 Stat. 812; Pub. L.
    106-170, title V, Sec. 532(c)(2)(V)-(Y), Dec. 17, 1999, 113 Stat.
    1931; Pub. L. 108-357, title III, Sec. 331(e), Oct. 22, 2004, 118
    Stat. 1476.)

-REFTEXT-
                            REFERENCES IN TEXT                        
      Section 10211(c)(2) of the Revenue Reconciliation Act of 1987,
    referred to in subsec. (g)(2)(A), probably means section
    10211(c)(2) of the Revenue Act of 1987, title X of Pub. L. 100-203,
    which is set out as a note below.


-MISC1-
                                AMENDMENTS                            
      2004 - Subsec. (d)(4). Pub. L. 108-357 substituted "section
    851(b)(2)(A)" for "section 851(b)(2)".
      1999 - Subsecs. (c)(3), (d)(1)(D), (G), (5). Pub. L. 106-170
    substituted "section 1221(a)(1)" for "section 1221(1)".
      1998 - Subsec. (g)(3)(C). Pub. L. 105-206 inserted at end "and
    shall be paid by the partnership. Section 6655 shall be applied to
    such partnership with respect to such tax in the same manner as if
    the partnership were a corporation, such tax were imposed by
    section 11, and references in such section to taxable income were
    references to the gross income referred to in subparagraph (A)".
      1997 - Subsec. (g). Pub. L. 105-34 added subsec. (g).
      1988 - Subsec. (c)(1). Pub. L. 100-647, Sec. 2004(f)(3), inserted
    at end "For purposes of the preceding sentence, a partnership shall
    not be treated as being in existence during any period before the
    1st taxable year in which such partnership (or a predecessor) was a
    publicly traded partnership."
      Subsec. (d)(1). Pub. L. 100-647, Sec. 2004(f)(4), inserted at end
    "For purposes of subparagraph (E), the term 'mineral or natural
    resource' means any product of a character with respect to which a
    deduction for depletion is allowable under section 611; except that
    such term shall not include any product described in subparagraph
    (A) or (B) of section 613(b)(7)."
      Subsec. (d)(3). Pub. L. 100-647, Sec. 2004(f)(5), amended par.
    (3) generally. Prior to amendment, par. (3) read as follows: "The
    term 'real property rent' means amounts which would qualify as rent
    from real property under section 856(d) if such section were
    applied without regard to paragraph (2)(C) thereof (relating to
    independent contractor requirements)."
      Subsec. (e)(4). Pub. L. 100-647, Sec. 2004(f)(1), inserted "or to
    pay such amounts" before "as may be required".

                     EFFECTIVE DATE OF 2004 AMENDMENT                 
      Amendment by Pub. L. 108-357 applicable to taxable years
    beginning after Oct. 22, 2004, see section 331(h) of Pub. L. 108-
    357, set out as a note under section 469 of this title.

                     EFFECTIVE DATE OF 1999 AMENDMENT                 
      Amendment by Pub. L. 106-170 applicable to any instrument held,
    acquired, or entered into, any transaction entered into, and
    supplies held or acquired on or after Dec. 17, 1999, see section
    532(d) of Pub. L. 106-170, set out as a note under section 170 of
    this title.

                     EFFECTIVE DATE OF 1998 AMENDMENT                 
      Pub. L. 105-206, title VI, Sec. 6009(b)(2), July 22, 1998, 112
    Stat. 812, provided that: "The second sentence of section
    7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) shall
    apply to taxable years beginning after the date of the enactment of
    this Act [July 22, 1998]."

                     EFFECTIVE DATE OF 1997 AMENDMENT                 
      Section 964(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 1988 AMENDMENT                 
      Amendment by 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                          
      Section 10211(c) of Pub. L. 100-203, as amended by Pub. L. 100-
    647, title II, Sec. 2004(f)(2), Nov. 10, 1988, 102 Stat. 3602,
    provided that:
      "(1) In general. - The amendments made by this section [enacting
    this section] shall apply - 
        "(A) except as provided in subparagraph (B), to taxable years
      beginning after December 31, 1987, or
        "(B) in the case of an existing partnership, to taxable years
      beginning after December 31, 1997.
      "(2) Existing partnership. - For purposes of this subsection - 
        "(A) In general. - The term 'existing partnership' means any
      partnership if - 
          "(i) such partnership was a publicly traded partnership on
        December 17, 1987,
          "(ii) a registration statement indicating that such
        partnership was to be a publicly traded partnership was filed
        with the Securities and Exchange Commission with respect to
        such partnership on or before such date, or
          "(iii) with respect to such partnership, an application was
        filed with a State regulatory commission on or before such date
        seeking permission to restructure a portion of a corporation as
        a publicly traded partnership.
        "(B) Special rule where substantial new line of business added
      after december 17, 1987. - A partnership which, but for this
      subparagraph, would be treated as an existing partnership shall
      cease to be treated as an existing partnership as of the 1st day
      after December 17, 1987, on which there has been an addition of a
      substantial new line of business with respect to such
      partnership.
        "(C) Coordination with passive-type income requirements. - In
      the case of an existing partnership, paragraph (1) of section
      7704(c) of the Internal Revenue Code of 1986 (as added by this
      section) shall be applied by substituting for 'December 31, 1987'
      the earlier of - 
          "(i) December 31, 1997, or
          "(ii) the day (if any) as of which such partnership ceases to
        be treated as an existing partnership by reason of subparagraph
        (B)."

-End-