26 U.S.C. § 40 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 40: Alcohol, etc., used as fuel
Alcohol, etc., used as fuel
Status: in_force

(a) General rule

For purposes of section 38, the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of—

(1) the alcohol mixture credit,

(2) the alcohol credit,

(3) in the case of an eligible small ethanol producer, the small ethanol producer credit, plus

(4) the second generation biofuel producer credit.

(b) Definition of alcohol mixture credit, alcohol credit, and small ethanol producer credit

For purposes of this section, and except as provided in subsection (h)—

(1) Alcohol mixture credit

(A) In general

The alcohol mixture credit of any taxpayer for any taxable year is 60 cents for each gallon of alcohol used by the taxpayer in the production of a qualified mixture.

(B) Qualified mixture

The term "qualified mixture" means a mixture of alcohol and gasoline or of alcohol and a special fuel which—

(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or

(ii) is used as a fuel by the taxpayer producing such mixture.

(C) Sale or use must be in trade or business, etc.

Alcohol used in the production of a qualified mixture shall be taken into account—

(i) only if the sale or use described in subparagraph (B) is in a trade or business of the taxpayer, and

(ii) for the taxable year in which such sale or use occurs.

(D) Casual off-farm production not eligible

No credit shall be allowed under this section with respect to any casual off-farm production of a qualified mixture.

(2) Alcohol credit

(A) In general

The alcohol credit of any taxpayer for any taxable year is 60 cents for each gallon of alcohol which is not in a mixture with gasoline or a special fuel (other than any denaturant) and which during the taxable year—

(i) is used by the taxpayer as a fuel in a trade or business, or

(ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person's vehicle.

(B) User credit not to apply to alcohol sold at retail

No credit shall be allowed under subparagraph (A)(i) with respect to any alcohol which was sold in a retail sale described in subparagraph (A)(ii).

(3) Smaller credit for lower proof alcohol

In the case of any alcohol with a proof which is at least 150 but less than 190, paragraphs (1)(A) and (2)(A) shall be applied by substituting "45 cents" for "60 cents".

(4) Small ethanol producer credit

(A) In general

The small ethanol producer credit of any eligible small ethanol producer for any taxable year is 10 cents for each gallon of qualified ethanol fuel production of such producer.

(B) Qualified ethanol fuel production

For purposes of this paragraph, the term "qualified ethanol fuel production" means any alcohol which is ethanol which is produced by an eligible small ethanol producer, and which during the taxable year—

(i) is sold by such producer to another person—

(I) for use by such other person in the production of a qualified mixture in such other person's trade or business (other than casual off-farm production),

(II) for use by such other person as a fuel in a trade or business, or

(III) who sells such ethanol at retail to another person and places such ethanol in the fuel tank of such other person, or

(ii) is used or sold by such producer for any purpose described in clause (i).

(C) Limitation

The qualified ethanol fuel production of any producer for any taxable year shall not exceed 15,000,000 gallons (determined without regard to any qualified second generation biofuel production).

(D) Additional distillation excluded

The qualified ethanol fuel production of any producer for any taxable year shall not include any alcohol which is purchased by the producer and with respect to which such producer increases the proof of the alcohol by additional distillation.

(5) Adding of denaturants not treated as mixture

The adding of any denaturant to alcohol shall not be treated as the production of a mixture.

(6) Second generation biofuel producer credit

(A) In general

The second generation biofuel producer credit of any taxpayer is an amount equal to the applicable amount for each gallon of qualified second generation biofuel production.

(B) Applicable amount

For purposes of subparagraph (A), the applicable amount means $1.01, except that such amount shall, in the case of second generation biofuel which is alcohol, be reduced by the sum of—

(i) the amount of the credit in effect for such alcohol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified second generation biofuel production, plus

(ii) in the case of ethanol, the amount of the credit in effect under subsection (b)(4) at the time of such production.

(C) Qualified second generation biofuel production

For purposes of this section, the term "qualified second generation biofuel production" means any second generation biofuel which is produced by the taxpayer, and which during the taxable year—

(i) is sold by the taxpayer to another person—

(I) for use by such other person in the production of a qualified second generation biofuel mixture in such other person's trade or business (other than casual off-farm production),

(II) for use by such other person as a fuel in a trade or business, or

(III) who sells such second generation biofuel at retail to another person and places such second generation biofuel in the fuel tank of such other person, or

(ii) is used or sold by the taxpayer for any purpose described in clause (i).

The qualified second generation biofuel production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.

(D) Qualified second generation biofuel mixture

For purposes of this paragraph, the term "qualified second generation biofuel mixture" means a mixture of second generation biofuel and gasoline or of second generation biofuel and a special fuel which—

(i) is sold by the person producing such mixture to any person for use as a fuel, or

(ii) is used as a fuel by the person producing such mixture.

(E) Second generation biofuel

For purposes of this paragraph—

(i) In general

The term "second generation biofuel" means any liquid fuel which—

(I) is derived by, or from, qualified feedstocks, and

(II) meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545).

(ii) Exclusion of low-proof alcohol

The term "second generation biofuel" shall not include any alcohol with a proof of less than 150. The determination of the proof of any alcohol shall be made without regard to any added denaturants.

(iii) Exclusion of certain fuels

The term "second generation biofuel" shall not include any fuel if—

(I) more than 4 percent of such fuel (determined by weight) is any combination of water and sediment,

(II) the ash content of such fuel is more than 1 percent (determined by weight), or

(III) such fuel has an acid number greater than 25.

(F) Qualified feedstock

For purposes of this paragraph, the term "qualified feedstock" means—

(i) any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and

(ii) any cultivated algae, cyanobacteria, or lemna.

(G) Special rules for algae

In the case of fuel which is derived by, or from, feedstock described in subparagraph (F)(ii) and which is sold by the taxpayer to another person for refining by such other person into a fuel which meets the requirements of subparagraph (E)(i)(II) and the refined fuel is not excluded under subparagraph (E)(iii)—

(i) such sale shall be treated as described in subparagraph (C)(i),

(ii) such fuel shall be treated as meeting the requirements of subparagraph (E)(i)(II) and as not being excluded under subparagraph (E)(iii) in the hands of such taxpayer, and

(iii) except as provided in this subparagraph, such fuel (and any fuel derived from such fuel) shall not be taken into account under subparagraph (C) with respect to the taxpayer or any other person.

(H) Allocation of second generation biofuel producer credit to patrons of cooperative

Rules similar to the rules under subsection (g)(6) shall apply for purposes of this paragraph.

(I) Registration requirement

No credit shall be determined under this paragraph with respect to any taxpayer unless such taxpayer is registered with the Secretary as a producer of second generation biofuel under section 4101.

(J) Application of paragraph

(i) In general

This paragraph shall apply with respect to qualified second generation biofuel production after December 31, 2008, and before January 1, 2025.

(ii) No carryover to certain years after expiration

If this paragraph ceases to apply for any period by reason of clause (i), rules similar to the rules of subsection (e)(2) shall apply.

(c) Coordination with exemption from excise tax

The amount of the credit determined under this section with respect to any alcohol shall, under regulations prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such alcohol solely by reason of the application of section 4041(b)(2), section 6426, or section 6427(e).

(d) Definitions and special rules

For purposes of this section—

(1) Alcohol defined

(A) In general

The term "alcohol" includes methanol and ethanol but does not include—

(i) alcohol produced from petroleum, natural gas, or coal (including peat), or

(ii) alcohol with a proof of less than 150.

(B) Determination of proof

The determination of the proof of any alcohol shall be made without regard to any added denaturants.

(2) Special fuel defined

The term "special fuel" includes any liquid fuel (other than gasoline) which is suitable for use in an internal combustion engine.

(3) Mixture or alcohol not used as a fuel, etc.

(A) Mixtures

If—

(i) any credit was determined under this section with respect to alcohol used in the production of any qualified mixture, and

(ii) any person—

(I) separates the alcohol from the mixture, or

(II) without separation, uses the mixture other than as a fuel,

then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of alcohol in such mixture.

(B) Alcohol

If—

(i) any credit was determined under this section with respect to the retail sale of any alcohol, and

(ii) any person mixes such alcohol or uses such alcohol other than as a fuel,

then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of such alcohol.

(C) Small ethanol producer credit

If—

(i) any credit was determined under subsection (a)(3), and

(ii) any person does not use such fuel for a purpose described in subsection (b)(4)(B),

then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such alcohol.

(D) Second generation biofuel producer credit

If—

(i) any credit is allowed under subsection (a)(4), and

(ii) any person does not use such fuel for a purpose described in subsection (b)(6)(C),

then there is hereby imposed on such person a tax equal to the applicable amount (as defined in subsection (b)(6)(B)) for each gallon of such second generation biofuel.

(E) Applicable laws

All provisions of law, including penalties, shall, insofar as applicable and not inconsistent with this section, apply in respect of any tax imposed under subparagraph (A), (B), (C), or (D) as if such tax were imposed by section 4081 and not by this chapter.

(4) Volume of alcohol

For purposes of determining under subsection (a) the number of gallons of alcohol with respect to which a credit is allowable under subsection (a), the volume of alcohol shall include the volume of any denaturant (including gasoline) which is added under any formulas approved by the Secretary to the extent that such denaturants do not exceed 2 percent of the volume of such alcohol (including denaturants).

(5) Pass-thru in the case of estates and trusts

Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

(6) Special rule for second generation biofuel producer credit

No second generation biofuel producer credit shall be determined under subsection (a) with respect to any second generation biofuel unless such second generation biofuel is produced in the United States and used as a fuel in the United States. For purposes of this subsection, the term "United States" includes any possession of the United States.

(7) Limitation to alcohol with connection to the United States

No credit shall be determined under this section with respect to any alcohol which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term "United States" includes any possession of the United States.

(e) Termination

(1) In general

This section shall not apply to any sale or use—

(A) for any period after December 31, 2011, or

(B) for any period before January 1, 2012, during which the rates of tax under section 4081(a)(2)(A) are 4.3 cents per gallon.

(2) No carryovers to certain years after expiration

If this section ceases to apply for any period by reason of paragraph (1), no amount attributable to any sale or use before the first day of such period may be carried under section 39 by reason of this section (treating the amount allowed by reason of this section as the first amount allowed by this subpart) to any taxable year beginning after the 3-taxable-year period beginning with the taxable year in which such first day occurs.

(3) Exception for second generation biofuel producer credit

Paragraph (1) shall not apply to the portion of the credit allowed under this section by reason of subsection (a)(4).

(f) Election to have alcohol fuels credit not apply

(1) In general

A taxpayer may elect to have this section not apply for any taxable year.

(2) Time for making election

An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).

(3) Manner of making election

An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.

(g) Definitions and special rules for eligible small ethanol producer credit

For purposes of this section—

(1) Eligible small ethanol producer

The term "eligible small ethanol producer" means a person who, at all times during the taxable year, has a productive capacity for alcohol (as defined in subsection (d)(1)(A) without regard to clauses (i) and (ii)) not in excess of 60,000,000 gallons.

(2) Aggregation rule

For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(C) and the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.

(3) Partnership, S corporations, and other pass-thru entities

In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitations contained in subsection (b)(4)(C) and paragraph (1) shall be applied at the entity level and at the partner or similar level.

(4) Allocation

For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.

(5) Regulations

The Secretary may prescribe such regulations as may be necessary—

(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefiting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of alcohol during the taxable year, or

(B) to prevent any person from directly or indirectly benefiting with respect to more than 15,000,000 gallons during the taxable year.

(6) Allocation of small ethanol producer credit to patrons of cooperative

(A) Election to allocate

(i) In general

In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a)(3) for the taxable year may, at the election of the organization, be apportioned pro rata among patrons of the organization on the basis of the quantity or value of business done with or for such patrons for the taxable year.

(ii) Form and effect of election

An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

(B) Treatment of organizations and patrons

(i) Organizations

The amount of the credit not apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under subsection (a)(3) for the taxable year of the organization.

(ii) Patrons

The amount of the credit apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under such subsection for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

(iii) Special rules for decrease in credits for taxable year

If the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of—

(I) such reduction, over

(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,

 shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

(h) Reduced credit for ethanol blenders

(1) In general

In the case of any alcohol mixture credit or alcohol credit with respect to any sale or use of alcohol which is ethanol during calendar years 2001 through 2011—

(A) subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting "the blender amount" for "60 cents",

(B) subsection (b)(3) shall be applied by substituting "the low-proof blender amount" for "45 cents" and "the blender amount" for "60 cents", and

(C) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting "the blender amount" for "60 cents" and "the low-proof blender amount" for "45 cents".

(2) Amounts

For purposes of paragraph (1), the blender amount and the low-proof blender amount shall be determined in accordance with the following table:

 

In the case of any sale or use during calendar year:The blender amount is:The low-proof blender amount is:

2001 or 2002
 53 cents
39.26 cents  

2003 or 2004
 52 cents
38.52 cents  

2005, 2006, 2007, or 2008
 51 cents
37.78 cents  

2009 through 2011
 45 cents
33.33 cents.

(3) Reduction delayed until annual production or importation of 7,500,000,000 gallons

(A) In general

In the case of any calendar year beginning after 2008, if the Secretary makes a determination described in subparagraph (B) with respect to all preceding calendar years beginning after 2007, the last row in the table in paragraph (2) shall be applied by substituting "51 cents" for "45 cents".

(B) Determination

A determination described in this subparagraph with respect to any calendar year is a determination, in consultation with the Administrator of the Environmental Protection Agency, that an amount less than 7,500,000,000 gallons of ethanol (including cellulosic ethanol) has been produced in or imported into the United States in such year.

(Added Pub. L. 96–223, title II, §232(b)(1), Apr. 2, 1980, 94 Stat. 273, §44E; amended Pub. L. 97–34, title II §207(c)(3), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97–354, §5(a)(2), Oct. 19, 1982, 96 Stat. 1692; Pub. L. 97–424, title V, §511(b)(2), (d)(3), Jan. 6, 1983, 96 Stat. 2170, 2171; renumbered §40 and amended Pub. L. 98–369, div. A, title IV, §§471(c), 474(k), title IX, §§912(c), (f), 913(b), July 18, 1984, 98 Stat. 826, 832, 1007, 1008; Pub. L. 100–203, title X, §10502(d)(1), Dec. 22, 1987, 101 Stat. 1330–444; Pub. L. 101–508, title XI, §11502(a)–(f), Nov. 5, 1990, 104 Stat. 1388–480 to 1388–482; Pub. L. 104–188, title I, §1703(j), Aug. 20, 1996, 110 Stat. 1876; Pub. L. 105–178, title IX, §9003(a)(3), (b)(1), June 9, 1998, 112 Stat. 502; Pub. L. 108–357, title III, §§301(c)(1)–(4), 313(a), Oct. 22, 2004, 118 Stat. 1461, 1467; Pub. L. 109–58, title XIII, §1347(a), (b), Aug. 8, 2005, 119 Stat. 1056; Pub. L. 110–234, title XV, §§15321(a)–(b)(2), (3)(B), (c)–(e), 15331(a), 15332(a), May 22, 2008, 122 Stat. 1512–1516; Pub. L. 110–246, §4(a), title XV, §§15321(a)–(b)(2), (3)(B), (c)–(e), 15331(a), 15332(a), June 18, 2008, 122 Stat. 1664, 2274–2278; Pub. L. 110–343, div. B, title II, §203(a), Oct. 3, 2008, 122 Stat. 3833; Pub. L. 111–152, title I, §1408(a), Mar. 30, 2010, 124 Stat. 1067; Pub. L. 111–240, title II, §2121(a), Sept. 27, 2010, 124 Stat. 2567; Pub. L. 111–312, title VII, §708(a)(1), (2), Dec. 17, 2010, 124 Stat. 3312; Pub. L. 112–240, title IV, §404(a)(1), (2), (b)(1)–(3)(B), Jan. 2, 2013, 126 Stat. 2338, 2339; Pub. L. 113–295, div. A, title I, §152(a), Dec. 19, 2014, 128 Stat. 4021; Pub. L. 114–113, div. Q, title I, §184(a), Dec. 18, 2015, 129 Stat. 3073; Pub. L. 115–123, div. D, title I, §40406(a), Feb. 9, 2018, 132 Stat. 149; Pub. L. 115–141, div. U, title IV, §401(a)(9), Mar. 23, 2018, 132 Stat. 1184; Pub. L. 116–94, div. Q, title I, §122(a), Dec. 20, 2019, 133 Stat. 3231; Pub. L. 116–260, div. EE, title I, §140(a), Dec. 27, 2020, 134 Stat. 3054; Pub. L. 117–169, title I, §13202(a), Aug. 16, 2022, 136 Stat. 1932.)

Editorial Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Prior Provisions

A prior section 40, added Pub. L. 92–178, title VI, §601(a), Dec. 10, 1971, 85 Stat. 553; amended Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to allowance as a credit of expenses of work incentive programs, prior to repeal by Pub. L. 98–369, div. A, title IV, §474(m)(1), July 18, 1984, 98 Stat. 833.

Another prior section 40 was renumbered section 37 of this title.

Amendments

2022—Subsec. (b)(6)(J)(i). Pub. L. 117–169 substituted "2025" for "2022".

2020—Subsec. (b)(6)(J)(i). Pub. L. 116–260 substituted "January 1, 2022" for "January 1, 2021".

2019—Subsec. (b)(6)(J)(i). Pub. L. 116–94 substituted "January 1, 2021" for "January 1, 2018".

2018—Subsec. (b)(6)(J)(i). Pub. L. 115–123 substituted "January 1, 2018" for "January 1, 2017".

Subsec. (g)(2). Pub. L. 115–141 substituted "Aggregation" for "Aggregration" in heading.

2015—Subsec. (b)(6)(J)(i). Pub. L. 114–113 substituted "January 1, 2017" for "January 1, 2015".

2014—Subsec. (b)(6)(J)(i). Pub. L. 113–295 substituted "January 1, 2015" for "January 1, 2014".

2013—Pub. L. 112–240, §404(b)(3)(A)(i), substituted "second generation biofuel" for "cellulosic biofuel" wherever appearing in text in subsecs. (a)(4), (b)(4)(C), (6), and (d)(3)(D), (6).

Subsec. (b)(6). Pub. L. 112–240, §404(b)(3)(A)(ii), substituted "Second generation" for "Cellulosic" in heading.

Subsec. (b)(6)(C), (D). Pub. L. 112–240, §404(b)(3)(A)(iii), substituted "second generation" for "cellulosic" in heading.

Subsec. (b)(6)(E). Pub. L. 112–240, §404(b)(3)(A)(ii), substituted "Second generation" for "Cellulosic" in heading.

Subsec. (b)(6)(E)(i)(I). Pub. L. 112–240, §404(b)(1), amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: "is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and".

Subsec. (b)(6)(E)(ii). Pub. L. 112–240, §404(b)(3)(B), substituted "The term 'second generation biofuel' shall not" for "Such term shall not".

Subsec. (b)(6)(F), (G). Pub. L. 112–240, §404(b)(2), added subpars. (F) and (G). Former subpars. (F) and (G) redesignated as (H) and (I), respectively.

Subsec. (b)(6)(H). Pub. L. 112–240, §404(b)(3)(A)(iii), substituted "second generation" for "cellulosic" in heading.

Pub. L. 112–240, §404(b)(2), redesignated subpar. (F) as (H). Former subpar. (H) redesignated (J).

Pub. L. 112–240, §404(a)(1), amended subpar. (H) generally. Prior to amendment, text read as follows: "This paragraph shall apply with respect to qualified cellulosic biofuel production after December 31, 2008, and before January 1, 2013."

Subsec. (b)(6)(I), (J). Pub. L. 112–240, §404(b)(2), redesignated subpars. (G) and (H) as (I) and (J), respectively.

Subsec. (d)(3)(D). Pub. L. 112–240, §404(b)(3)(A)(ii), substituted "Second generation" for "Cellulosic" in heading.

Subsec. (d)(6). Pub. L. 112–240, §404(b)(3)(A)(iii), substituted "second generation" for "cellulosic" in heading.

Subsec. (e)(2). Pub. L. 112–240, §404(a)(2), struck out "or subsection (b)(6)(H)" after "paragraph (1)".

Subsec. (e)(3). Pub. L. 112–240, §404(b)(3)(A)(iii), substituted "second generation" for "cellulosic" in heading.

2010—Subsec. (b)(6)(E)(iii). Pub. L. 111–240, §2121(a)(4), substituted "certain" for "unprocessed" in heading.

Pub. L. 111–152 added cl. (iii).

Subsec. (b)(6)(E)(iii)(III). Pub. L. 111–240, §2121(a)(1)–(3), added subcl. (III).

Subsec. (e)(1)(A). Pub. L. 111–312, §708(a)(1)(A), substituted "December 31, 2011" for "December 31, 2010".

Subsec. (e)(1)(B). Pub. L. 111–312, §708(a)(1)(B), substituted "January 1, 2012" for "January 1, 2011".

Subsec. (h)(1), (2). Pub. L. 111–312, §708(a)(2), substituted "2011" for "2010".

2008—Pub. L. 110–246, §15321(b)(3)(B), inserted ", etc.," after "Alcohol" in section catchline.

Subsec. (a)(4). Pub. L. 110–246, §15321(a), added par. (4).

Subsec. (b)(4)(C). Pub. L. 110–246, §15321(e), inserted "(determined without regard to any qualified cellulosic biofuel production)" after "15,000,000 gallons".

Subsec. (b)(6). Pub. L. 110–246, §15321(b)(1), added par. (6).

Subsec. (d)(3)(C). Pub. L. 110–246, §15321(c)(2)(A), substituted "Small ethanol producer" for "Producer" in heading.

Subsec. (d)(3)(D). Pub. L. 110–246, §15321(c)(1), added subpar. (D). Former subpar. (D) redesignated (E).

Subsec. (d)(3)(E). Pub. L. 110–246, §15321(c)(2)(B), substituted "(C), or (D)" for "or (C)".

Pub. L. 110–246, §15321(c)(1), redesignated subpar. (D) as (E).

Subsec. (d)(4). Pub. L. 110–246, §15332(a), substituted "2 percent" for "5 percent".

Subsec. (d)(6). Pub. L. 110–246, §15321(d), added par. (6).

Subsec. (d)(7). Pub. L. 110–343 added par. (7).

Subsec. (e)(2). Pub. L. 110–246, §15321(b)(2)(A), inserted "or subsection (b)(6)(H)" after "by reason of paragraph (1)".

Subsec. (e)(3). Pub. L. 110–246, §15321(b)(2)(B), added par. (3).

Subsec. (h)(2). Pub. L. 110–246, §15331(a)(1), in table, substituted "2005, 2006, 2007, or 2008" for "2005 through 2010", struck out period after "37.78 cents", and inserted last row reading "2009 through 2010", "45 cents", and "33.33 cents."

Subsec. (h)(3). Pub. L. 110–246, §15331(a)(2), added par. (3).

2005—Subsec. (g)(1), (2), (5)(A). Pub. L. 109–58, §1347(a), substituted "60,000,000" for "30,000,000".

Subsec. (g)(6)(A)(ii). Pub. L. 109–58, §1347(b), inserted at end "Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d)."

2004—Subsec. (c). Pub. L. 108–357, §301(c)(1), substituted "section 4041(b)(2), section 6426, or section 6427(e)" for "subsection (b)(2), (k), or (m) of section 4041, section 4081(c), or section 4091(c)".

Subsec. (d)(4). Pub. L. 108–357, §301(c)(2), reenacted heading without change and amended text of par. (4) generally, substituting provisions relating to determination of the number of gallons of alcohol with respect to which a credit is allowable under subsec. (a) for provisions relating to determination of the number of gallons of alcohol with respect to which a credit is allowable under subsec. (a) or the percentage of any mixture which consists of alcohol under section 4041(k) or 4081(c).

Subsec. (e)(1)(A). Pub. L. 108–357, §301(c)(3)(A), substituted "2010" for "2007".

Subsec. (e)(1)(B). Pub. L. 108–357, §301(c)(3)(B), substituted "2011" for "2008".

Subsec. (g)(6). Pub. L. 108–357, §313(a), added par. (6).

Subsec. (h)(1). Pub. L. 108–357, §301(c)(4)(A), substituted "2010" for "2007" in introductory provisions.

Subsec. (h)(2). Pub. L. 108–357, §301(c)(4)(B), substituted "through 2010" for ", 2006, or 2007" in table.

1998—Subsec. (e)(1). Pub. L. 105–178, §9003(a)(3), substituted "December 31, 2007" for "December 31, 2000" in subpar. (A) and "January 1, 2008" for "January 1, 2001" in subpar. (B).

Subsec. (h). Pub. L. 105–178, §9003(b)(1), reenacted heading without change and amended text of subsec. (h) generally. Prior to amendment, text read as follows: "In the case of any alcohol mixture credit or alcohol credit with respect to any alcohol which is ethanol—

"(1) subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting '54 cents' for '60 cents';

"(2) subsection (b)(3) shall be applied by substituting '40 cents' for '45 cents' and '54 cents' for '60 cents'; and

"(3) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting '54 cents' for '60 cents' and '40 cents' for '45 cents'."

1996—Subsec. (e)(1)(B). Pub. L. 104–188 amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "for any period before January 1, 2001, during which the Highway Trust Fund financing rate under section 4081(a)(2) is not in effect."

1990—Subsec. (a)(2). Pub. L. 101–508, §11502(a)(1), substituted ", plus" for period at end.

Subsec. (a)(3). Pub. L. 101–508, §11502(a)(2), added par. (3).

Subsec. (b). Pub. L. 101–508, §11502(e)(2), which directed the insertion of ", and except as provided in subsection (h)" in introductory provisions without specifying the location of such insertion, was executed after "section" to reflect the probable intent of Congress.

Pub. L. 101–508, §11502(b)(3), substituted ", alcohol credit, and small ethanol producer credit" for "and alcohol credit" in heading.

Subsec. (b)(4), (5). Pub. L. 101–508, §11502(b)(1), (2), added par. (4) and redesignated former par. (4) as (5).

Subsec. (d)(3)(C), (D). Pub. L. 101–508, §11502(d)(1), (2), added subpar. (C), redesignated former subpar. (C) as (D), and substituted "subparagraph (A), (B), or (C)" for "subparagraph (A) or (B)".

Subsec. (e). Pub. L. 101–508, §11502(f), amended subsec. (e) generally, substituting present provisions for provisions prohibiting the applicability of this section to any sale or use after Dec. 31, 1992, and prohibiting carryovers to any taxable year beginning after Dec. 31, 1994.

Subsec. (g). Pub. L. 101–508, §11502(c), added subsec. (g).

Subsec. (h). Pub. L. 101–508, §11502(e)(1), added subsec. (h).

1987—Subsec. (c). Pub. L. 100–203 substituted ", section 4081(c), or section 4091(c)" for "or section 4081(c)".

1984—Pub. L. 98–369, §471(c), renumbered section 44E of this title as this section.

Subsec. (a). Pub. L. 98–369, §474(k)(1), substituted "For purposes of section 38, the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of" for "There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of" in introductory provisions.

Subsec. (b)(1)(A), (2)(A). Pub. L. 98–369, §912(c)(1), substituted "60 cents" for "50 cents".

Subsec. (b)(3). Pub. L. 98–369, §912(c), substituted "45 cents" for "37.5 cents" and "60 cents" for "50 cents".

Subsec. (c). Pub. L. 98–369, §913(b), substituted "(b)(2), (k), or (m)" for "(b)(2) or (k)".

Pub. L. 98–369, §474(k)(2), substituted "the credit determined under this section" for "the credit allowable under this section".

Subsec. (d)(1)(A)(i). Pub. L. 98–369, §912(f), substituted "coal (including peat)" for "coal".

Subsec. (d)(3)(A). Pub. L. 98–369, §912(c), substituted "60 cents" for "50 cents" and "45 cents" for "37.5 cents".

Subsec. (d)(3)(A)(i). Pub. L. 98–369, §474(k)(3), substituted "credit was determined" for "credit was allowable".

Subsec. (d)(3)(B). Pub. L. 98–369, §912(c), substituted "60 cents" for "50 cents" and "45 cents" for "37.5 cents".

Subsec. (d)(3)(B)(i). Pub. L. 98–369, §474(k)(3), substituted "credit was determined" for "credit was allowable".

Subsec. (e). Pub. L. 98–369, §474(k)(4), redesignated subsec. (f) as (e). Former subsec. (e), which had placed a limitation based on the amount of tax, was struck out.

Subsec. (e)(2). Pub. L. 98–369, §474(k)(5), substituted "section 39 by reason of this section (treating the amount allowed by reason of this section as the first amount allowed by this subpart)" for "subsection (e)(2)".

Subsec. (f). Pub. L. 98–369, §474(k)(6), added subsec. (f). Former subsec. (f) redesignated (e).

1983—Subsec. (b)(1)(A), (2)(A). Pub. L. 97–424, §511(d)(3)(A), substituted "50 cents" for "40 cents".

Subsec. (b)(3). Pub. L. 97–424, §511(d)(3), substituted "50 cents" for "40 cents" and "37.5 cents" for "30 cents".

Subsec. (c). Pub. L. 97–424, §511(b)(2), substituted "subsection (b)(2) or (k) of section 4041 or section 4081(c)" for "section 4041(k) or 4081(c)" after "reason of the application of".

Subsec. (d)(3)(A), (B). Pub. L. 97–424, §511(d)(3), substituted "50 cents" for "40 cents" and "37.5 cents" for "30 cents".

1982—Subsec. (d)(5). Pub. L. 97–354 substituted "Pass-thru in the case of estates and trusts" for "Pass-through in the case of subchapter S corporations, etc." in par. heading, and substituted provisions relating to the applicability of rules similar to rules of subsec. (d) of section 52 for provisions relating to the applicability of rules similar to rules of subsecs. (d) and (e) of section 52.

1981—Subsec. (e)(2)(A). Pub. L. 97–34 substituted "15" for "7" in two places, and "14" for "6" in one place.

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–169, title I, §13202(b), Aug. 16, 2022, 136 Stat. 1932, provided that: "The amendment made by subsection (a) [amending this section] shall apply to qualified second generation biofuel production after December 31, 2021."

Effective Date of 2020 Amendment

Pub. L. 116–260, div. EE, title I, §140(b), Dec. 27, 2020, 134 Stat. 3054, provided that: "The amendment made by this section [amending this section] shall apply to qualified second generation biofuel production after December 31, 2020."

Effective Date of 2019 Amendment

Pub. L. 116–94, div. Q, title I, §122(b), Dec. 20, 2019, 133 Stat. 3231, provided that: "The amendment made by this section [amending this section] shall apply to qualified second generation biofuel production after December 31, 2017."

Effective Date of 2018 Amendment

Pub. L. 115–123, div. D, title I, §40406(b), Feb. 9, 2018, 132 Stat. 149, provided that: "The amendment made by this section [amending this section] shall apply to qualified second generation biofuel production after December 31, 2016."

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, §184(b), Dec. 18, 2015, 129 Stat. 3073, provided that: "The amendment made by this subsection [probably means this section, amending this section] shall apply to qualified second generation biofuel production after December 31, 2014."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, §152(b), Dec. 19, 2014, 128 Stat. 4021, provided that: "The amendment made by this section [amending this section] shall apply to qualified second generation biofuel production after December 31, 2013."

Effective Date of 2013 Amendment

Pub. L. 112–240, title IV, §404(a)(3), Jan. 2, 2013, 126 Stat. 2338, provided that: "The amendments made by this subsection [amending this section] shall take effect as if included in section 15321(b) of the Heartland, Habitat, and Horticulture Act of 2008 [probably should be Heartland, Habitat, Harvest, and Horticulture Act of 2008, title XV of Pub. L. 110–246]."

Pub. L. 112–240, title IV, §404(b)(4), Jan. 2, 2013, 126 Stat. 2339, provided that: "The amendments made by this subsection [amending this section and section 4101 of this title] shall apply to fuels sold or used after the date of the enactment of this Act [Jan. 2, 2013]."

Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, §708(a)(3), Dec. 17, 2010, 124 Stat. 3312, provided that: "The amendments made by this subsection [amending this section] shall apply to periods after December 31, 2010."

Pub. L. 111–240, title II, §2121(b), Sept. 27, 2010, 124 Stat. 2567, provided that: "The amendments made by this section [amending this section] shall apply to fuels sold or used on or after January 1, 2010."

Pub. L. 111–152, title I, §1408(b), Mar. 30, 2010, 124 Stat. 1067, provided that: "The amendment made by this section [amending this section] shall apply to fuels sold or used on or after January 1, 2010."

Effective Date of 2008 Amendment

Pub. L. 110–343, div. B, title II, §203(d), Oct. 3, 2008, 122 Stat. 3834, provided that: "The amendments made by this section [amending this section and sections 40A, 6426, and 6427 of this title] shall apply to claims for credit or payment made on or after May 15, 2008."

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, except as otherwise provided, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of Title 7, Agriculture.

Pub. L. 110–234, title XV, §15321(g), May 22, 2008, 122 Stat. 1514, and Pub. L. 110–246, §4(a), title XV, §15321(g), June 18, 2008, 122 Stat. 1664, 2276, provided that: "The amendments made by this section [amending this section and sections 40A and 4101 of this title] shall apply to fuel produced after December 31, 2008."

[Pub. L. 110–234 and Pub. L. 110–246 enacted identical provisions. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246, set out as a note under section 8701 of Title 7, Agriculture.]

Pub. L. 110–234, title XV, §15331(c), May 22, 2008, 122 Stat. 1516, and Pub. L. 110–246, §4(a), title XV, §15331(c), June 18, 2008, 122 Stat. 1664, 2278, provided that: "The amendments made by this section [amending this section and section 6426 of this title] shall take effect on the date of the enactment of this Act [June 18, 2008]."

[Pub. L. 110–234 and Pub. L. 110–246 enacted identical provisions. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246, set out as a note under section 8701 of Title 7, Agriculture.]

Pub. L. 110–234, title XV, §15332(c), May 22, 2008, 122 Stat. 1516, and Pub. L. 110–246, §4(a), title XV, §15332(c), June 18, 2008, 122 Stat. 1664, 2278, provided that: "The amendments made by this section [amending this section and section 6426 of this title] shall apply to fuel sold or used after December 31, 2008."

[Pub. L. 110–234 and Pub. L. 110–246 enacted identical provisions. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246, set out as a note under section 8701 of Title 7, Agriculture.]

Effective Date of 2005 Amendment

Pub. L. 109–58, title XIII, §1347(c), Aug. 8, 2005, 119 Stat. 1056, provided that: "The amendments made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 8, 2005]."

Effective Date of 2004 Amendment

Pub. L. 108–357, title III, §301(d), Oct. 22, 2004, 118 Stat. 1463, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [enacting section 6426 of this title and amending this section and sections 4041, 4081, 4083, 4101, 6427, and 9503 of this title] shall apply to fuel sold or used after December 31, 2004.

"(2) Registration requirement.—The amendment made by subsection (b) [amending section 4101 of this title] shall take effect on April 1, 2005.

"(3) Extension of alcohol fuels credit.—The amendments made by paragraphs (3), (4), and (14) of subsection (c) [amending this section] shall take effect on the date of the enactment of this Act [Oct. 22, 2004].

"(4) Repeal of general fund retention of certain alcohol fuels taxes.—The amendments made by subsection (c)(12) [amending section 9503 of this title] shall apply to fuel sold or used after September 30, 2004."

Pub. L. 108–357, title III, §313(b), Oct. 22, 2004, 118 Stat. 1468, provided that: "The amendment made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 22, 2004]."

Effective Date of 1998 Amendment

Pub. L. 105–178, title IX, §9003(b)(3), June 9, 1998, 112 Stat. 503, provided that: "The amendments made by this subsection [amending this section and sections 4041, 4081, and 4091 of this title] shall take effect on January 1, 2001."

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103–66, §§13001–13444, to which such amendment relates, see section 1703(o) of Pub. L. 104–188, set out as a note under section 39 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11502(h), Nov. 5, 1990, 104 Stat. 1388–482, provided that:

"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to alcohol produced, and sold or used, in taxable years beginning after December 31, 1990.

"(2) The amendments made by subsection (g) [amending provisions not classified to the Code] shall apply to articles entered or withdrawn from warehouse on or after January 1, 1991."

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, §10502(e), Dec. 22, 1987, 101 Stat. 1330–445, provided that: "The amendments made by this section [enacting sections 4091 to 4093 of this title, amending this section and sections 4041, 4081, 4101, 4221, 6206, 6416, 6421, 6427, 6652, 9502, 9503, and 9508 of this title, and enacting provisions set out as notes under sections 4091 and 9502 of this title] shall apply to sales after March 31, 1988."

Effective Date of 1984 Amendment

Amendment by section 474(k) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.

Pub. L. 98–369, div. A, title IX, §912(g), July 18, 1984, 98 Stat. 1008, provided that: "The amendments made by this section [amending this section and sections 4041, 4081, and 6427 of this title] shall take effect on January 1, 1985."

Amendment by section 913(b) of Pub. L. 98–369 effective Aug. 1, 1984, see section 913(c) of Pub. L. 98–369, set out as a note under section 4041 of this title.

Effective Date of 1983 Amendment

Amendments by section 511(b)(2), (d)(3) of Pub. L. 97–424 effective Apr. 1, 1983, see section 511(h) of Pub. L. 97–424, set out as a note under section 4041 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–354 applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as an Effective Date note under section 1361 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to unused credit years ending after Sept. 30, 1980, see section 209(c)(2)(C) of Pub. L. 97–34, set out as an Effective Date note under section 168 of this title.

Effective Date

Pub. L. 96–223, title II, §232(h)(1), (4), Apr. 2, 1980, 94 Stat. 281, as amended by Pub. L. 97–448, title II, §202(e), Jan. 12, 1983, 96 Stat. 2396, provided that:

"(1) The amendments made by subsections (b) and (c) [enacting sections 44E [now 40] and 86 of this title and amending sections 55, 381, 383, 4081, and 6096 of this title] shall apply to sales or uses after September 30, 1980, in taxable years ending after such date.

"(4) Notwithstanding paragraph (1), the provisions of section 44E(d)(4)(B) [now 40(d)(4)(B)] of such Code, as added by this section, shall take effect on April 2, 1980."
26 U.S.C. § 2106 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 11 / Section 2106: Taxable estate
Taxable estate
Status: in_force

(a) Definition of taxable estate

For purposes of the tax imposed by section 2101, the value of the taxable estate of every decedent nonresident not a citizen of the United States shall be determined by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States—

(1) Expenses, losses, indebtedness, and taxes

That proportion of the deductions specified in sections 2053 and 2054 (other than the deductions described in the following sentence) which the value of such part bears to the value of his entire gross estate, wherever situated. Any deduction allowable under section 2053 in the case of a claim against the estate which was founded on a promise or agreement but was not contracted for an adequate and full consideration in money or money's worth shall be allowable under this paragraph to the extent that it would be allowable as a deduction under paragraph (2) if such promise or agreement constituted a bequest.

(2) Transfers for public, charitable, and religious uses

(A) In general

The amount of all bequests, legacies, devises, or transfers (including the interest which falls into any such bequest, legacy, devise, or transfer as a result of an irrevocable disclaimer of a bequest, legacy, devise, transfer, or power, if the disclaimer is made before the date prescribed for the filing of the estate tax return)—

(i) to or for the use of the United States, any State, any political subdivision thereof, or the District of Columbia, for exclusively public purposes;

(ii) to or for the use of any domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual, which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office; or

(iii) to a trustee or trustees, or a fraternal society, order, or association operating under the lodge system, but only if such contributions or gifts are to be used within the United States by such trustee or trustees, or by such fraternal society, order, or association, exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, such trust, fraternal society, order, or association would not be disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and such trustee or trustees, or such fraternal society, order, or association, does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office;

(B) Powers of appointment

Property includible in the decedent's gross estate under section 2041 (relating to powers of appointment) received by a donee described in this paragraph shall, for purposes of this paragraph, be considered a bequest of such decedent.

(C) Death taxes payable out of bequests

If the tax imposed by section 2101, or any estate, succession, legacy, or inheritance taxes, are, either by the terms of the will, by the law of the jurisdiction under which the estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devises otherwise deductible under this paragraph, then the amount deductible under this paragraph shall be the amount of such bequests, legacies, or devises reduced by the amount of such taxes.

(D) Limitation on deduction

The amount of the deduction under this paragraph for any transfer shall not exceed the value of the transferred property required to be included in the gross estate.

(E) Disallowance of deductions in certain cases

The provisions of section 2055(e) shall be applied in the determination of the amount allowable as a deduction under this paragraph.

(F) Cross references

(i) For option as to time for valuation for purposes of deduction under this section, see section 2032.

(ii) For exemption of certain bequests for the benefit of the United States and for rules of construction for certain bequests, see section 2055(g).

(iii) For treatment of gifts and bequests to or for the use of Indian tribal governments (or their subdivisions), see section 7871.

(3) Marital deduction

The amount which would be deductible with respect to property situated in the United States at the time of the decedent's death under the principles of section 2056.

(4) State death taxes

The amount which bears the same ratio to the State death taxes as the value of the property, as determined for purposes of this chapter, upon which State death taxes were paid and which is included in the gross estate under section 2103 bears to the value of the total gross estate under section 2103. For purposes of this paragraph, the term "State death taxes" means the taxes described in section 2058(a).

(b) Condition of allowance of deductions

No deduction shall be allowed under paragraphs (1) and (2) of subsection (a) in the case of a nonresident not a citizen of the United States unless the executor includes in the return required to be filed under section 6018 the value at the time of his death of that part of the gross estate of such nonresident not situated in the United States.

(Aug. 16, 1954, ch. 736, 68A Stat. 398; Pub. L. 85–866, title I, §30(d), Sept. 2, 1958, 72 Stat. 1631; Pub. L. 86–779, §4(c), Sept. 14, 1960, 74 Stat. 1000; Pub. L. 89–809, title I, §108(e), Nov. 13, 1966, 80 Stat. 1572; Pub. L. 91–172, title II, §201(d)(2), (4)(B), Dec. 30, 1969, 83 Stat. 561; Pub. L. 94–455, title XIII, §1307(d)(1)(B)(iii), (C), title XIX, §1902(a)(5), (12)(A), title XX, § 2001(c)(1)(F), Oct. 4, 1976, 90 Stat. 1727, 1805, 1852; Pub. L. 97–473, title II, §202(b)(6), Jan. 14, 1983, 96 Stat. 2610; Pub. L. 99–514, title XIV, §1422(c), Oct. 22, 1986, 100 Stat. 2717; Pub. L. 100–203, title X, §10711(a)(4), Dec. 22, 1987, 101 Stat. 1330–464; Pub. L. 100–647, title V, §5033(c), Nov. 10, 1988, 102 Stat. 3672; Pub. L. 101–239, title VII, §7815(d)(3), Dec. 19, 1989, 103 Stat. 2415; Pub. L. 107–16, title V, §532(c)(8), June 7, 2001, 115 Stat. 75; Pub. L. 113–295, div. A, title II, §221(a)(95)(A)(ii), Dec. 19, 2014, 128 Stat. 4051; Pub. L. 115–141, div. U, title IV, §401(a)(203), Mar. 23, 2018, 132 Stat. 1194.)

Editorial Notes

Amendments

2018—Subsec. (a)(4). Pub. L. 115–141 inserted "section" before "2058(a)."

2014—Subsec. (a)(4). Pub. L. 113–295 substituted "2058(a)" for "section 2011(a)".

2001—Subsec. (a)(4). Pub. L. 107–16 added par. (4).

1989—Subsec. (a)(3). Pub. L. 101–239 struck out "allowed where spouse is citizen" after "deduction" in heading.

1988—Subsec. (a)(3). Pub. L. 100–647 added par. (3).

1987—Subsec. (a)(2)(A)(ii), (iii). Pub. L. 100–203 inserted "(or in opposition to)" after "on behalf of".

1986—Subsec. (a)(2)(F)(ii). Pub. L. 99–514 substituted "section 2055(g)" for "section 2055(f)".

1983—Subsec. (a)(2)(F). Pub. L. 97–473 substituted "(i)" and "(ii)" for "(1)" and "(2)", respectively, and added cl. (iii).

1976—Subsec. (a)(2)(A)(i). Pub. L. 94–455, §1902(a)(12)(A), struck out "Territory" after "any State".

Subsec. (a)(2)(A)(ii). Pub. L. 94–455, §1307(d)(1)(B)(iii), substituted "which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation" for "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation" after "stockholder or individual".

Subsec. (a)(2)(A)(iii). Pub. L. 94–455, §1307(d)(1)(C), substituted "such trust, fraternal society, order, or association would not be disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation" for "no substantial part of the activities of such trustee or trustees, or of such fraternal society, order, or association, is carrying on propaganda, or otherwise attempting, to influence legislation" after "children or animals".

Subsec. (a)(2)(F). Pub. L. 94–455, §1902(a)(5)(A), substituted "Cross references" for "Other cross references" after "(F)", in cl. (1) "purposes of deduction under this section" for "purpose of deduction under this paragraph" after "valuation for", in cl. (2) provision for exemption of certain bequests for benefit of United States and for rules of construction for certain bequests, for provisions of cls. (2) to (11) relating to bequests to; Library of Congress, Post Office Department, Office of Naval Records and Library, National Park Service, Department of State, Department of Justice, payment of tax on bequests of United States obligations, Naval Academy, Naval Academy Museum, and National Archives Trust Fund Board, respectively.

Subsec. (a)(3). Pub. L. 94–455, §2001(c)(1)(F), struck out par. (3) relating to specific exemption in case of decedents nonresidents not citizens.

Subsec. (c). Pub. L. 94–455, §1902(a)(5)(B), struck out subsec. (c) relating to treatment of United States bonds in determining gross estate of a decedent who was not engaged in business in the United States at the time of his death.

1969—Subsec. (a)(2)(A)(ii), (iii). Pub. L. 91–172, §201(d)(4)(B), inserted non-participation and non-intervention in political campaigns as an additional qualification.

Subsec. (a)(2)(E). Pub. L. 91–172, §201(d)(2), substituted substantive provisions for simple reference to sections 503 and 681 of this title in which such substantive provisions were formerly set out.

1966—Subsec. (a)(3). Pub. L. 89–809 substituted "$30,000" for "$2,000" as size of exemption in subpar. (A) and "$30,000" for "$2,000" as item (i) in formula set out in subpar. (B).

1960—Subsec. (a)(3). Pub. L. 86–779 designated existing provisions as subpar. (A) and added subpar. (B).

1958—Subsec. (a)(2)(E). Pub. L. 85–866 substituted "503" for "504".

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to estates of decedents dying, and generation-skipping transfers, after Dec. 31, 2004, see section 532(d) of Pub. L. 107–16, set out as a note under section 2012 of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 applicable to estates of decedents dying after Nov. 10, 1988, see section 5033(d)(1) of Pub. L. 100–647, set out as a note under section 2056 of this title.

Effective Date of 1987 Amendment

Amendment by Pub. L. 100–203 applicable with respect to activities after Dec. 22, 1987, see section 10711(c) of Pub. L. 100–203, set out as a note under section 170 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to transfers and contributions made after Dec. 31, 1986, see section 1422(e) of Pub. L. 99–514, set out as a note under section 2055 of this title.

Effective Date of 1983 Amendment

For effective date of amendment by Pub. L. 97–473, see section 204(3) of Pub. L. 97–473, set out as an Effective Date note under section 7871 of this title.

Effective Date of 1976 Amendment

Amendment by section 1902(a)(5), (12)(A) of Pub. L. 94–455 applicable in the case of estates of decedents dying after Oct. 4, 1976, see section 1902(c)(1) of Pub. L. 94–455, set out as a note under section 2012 of this title.

Amendment by section 2001(c)(1)(F) of Pub. L. 94–455 applicable to estates of decedents dying after Dec. 31, 1976, see section 2001(d)(1) of Pub. L. 94–455, set out as a note under section 2001 of this title.

Effective Date of 1969 Amendment

Amendment by section 201(d)(2) of Pub. L. 91–172 applicable in the case of decedents dying after Dec. 31, 1969, with specified exceptions, see section 201(g)(4) of Pub. L. 91–172, set out as a note under section 170 of this title.

Amendment by section 201(d)(4)(B) of Pub. L. 91–172 applicable to gifts and transfers made after Dec. 31, 1969, see section 201(g)(4) of Pub. L. 91–172, set out as a note under section 170 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to estates of decedents dying after Nov. 13, 1966, see section 108(i) of Pub. L. 89–809, set out as a note under section 2101 of this title.

Effective Date of 1960 Amendment

Pub. L. 86–779, §4(e)(2), Sept. 14, 1960, 74 Stat. 1000, provided that: "The amendments made by subsections (b) and (c) [enacting section 2209 of this title and amending this section] shall apply with respect to estates of decedents dying after the date of the enactment of this Act [Sept. 14, 1960]."

Application of Amendments by Section 5033 of Pub. L. 100–647 to Estates of, or Gifts by, Noncitizen and Nonresident Individuals

For provisions directing that in the case of the estate of, or gift by, an individual who was not a citizen or resident of the United States but was a resident of a foreign country with which the United States has a tax treaty with respect to estate, inheritance, or gift taxes, the amendments made by section 5033 of Pub. L. 100–647 shall not apply to the extent such amendments would be inconsistent with the provisions of such treaty relating to estate, inheritance, or gift tax marital deductions, but that in the case of the estate of an individual dying before the date 3 years after Dec. 19, 1989, or a gift by an individual before the date 3 years after Dec. 19, 1989, the requirement of the preceding provision that the individual not be a citizen or resident of the United States shall not apply, see section 7815(d)(14) of Pub. L. 101–239, set out as a note under section 2056 of this title.
26 U.S.C. § 723 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 723: Basis of property contributed to partnership
Basis of property contributed to partnership
Status: in_force

The basis of property contributed to a partnership by a partner shall be the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.

(Aug. 16, 1954, ch. 736, 68A Stat. 245; Pub. L. 94–455, title XXI, §2131(c), Oct. 4, 1976, 90 Stat. 1924; Pub. L. 98–369, div. A, title VII, §722(f)(1), July 18, 1984, 98 Stat. 974.)

Editorial Notes

Amendments

1984—Pub. L. 98–369 inserted "under section 721(b)" after "gain recognized".

1976—Pub. L. 94–455 inserted "increased by the amount (if any) of gain recognized to the contributing partner at such time" after "at the time of the contribution".

Statutory Notes and Related Subsidiaries

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 effective as if included in amendments made by section 2131 of the Tax Reform Act of 1976, Pub. L. 94–455, see section 722(f)(2) of Pub. L. 98–369, set out as a note under section 722 of this title.

Effective Date of 1976 Amendment

For effective date of amendment made by Pub. L. 94–455, see section 2131(f)(3)–(5) of Pub. L. 94–455, set out as a note under section 721 of this title.
26 U.S.C. § 6059 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 61 / Section 6059: Periodic report of actuary
Periodic report of actuary
Status: in_force

(a) General rule

The actuarial report described in subsection (b) shall be filed by the plan administrator (as defined in section 414(g) of each defined benefit plan to which section 412 applies, for the first plan year for which section 412 applies to the plan and for each third plan year thereafter (or more frequently if the Secretary determines that more frequent reports are necessary).

(b) Actuarial report

The actuarial report of a plan required by subsection (a) shall be prepared and signed by an enrolled actuary (within the meaning of section 7701(a)(35)) and shall contain—

(1) a description of the funding method and actuarial assumptions used to determine costs under the plan,

(2) a certification of the contribution necessary to reduce the minimum required contribution determined under section 430, the accumulated funding deficiency under section 433, or the accumulated funding deficiency determined under section 431, to zero,

(3) a statement—

(A) that to the best of his knowledge the report is complete and accurate, and

(B) that the requirements for reasonable actuarial assumptions under section 430(h)(1), 431(c)(3), or 433(c)(3), whichever are applicable, have been complied with,

(4) such other information as may be necessary to fully and fairly disclose the actuarial position of the plan, and

(5) such other information regarding the plan as the Secretary may by regulations require.

(c) Time and manner of filing

The actuarial report and statement required by this section shall be filed at the time and in the manner provided by regulations prescribed by the Secretary.

(d) Cross reference

For coordination between the Department of the Treasury and the Department of Labor with respect to the report required to be filed under this section, see section 3004 of title III of the Employee Retirement Income Security Act of 1974.

(Added Pub. L. 93–406, title II, §1033(a), Sept. 2, 1974, 88 Stat. 947; amended Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 109–280, title I, §114(f), Aug. 17, 2006, 120 Stat. 855; Pub. L. 113–97, title II, §202(c)(10), Apr. 7, 2014, 128 Stat. 1138; Pub. L. 115–141, div. U, title IV, §401(a)(265), Mar. 23, 2018, 132 Stat. 1197.)

Editorial Notes

References in Text

Section 3004 of title III of the Employee Retirement Income Security Act of 1974, referred to in subsec. (d), is classified to section 1204 of Title 29, Labor.

Amendments

2018—Subsec. (b)(3)(B). Pub. L. 115–141 substituted "that the requirements" for "the requirements" and "with," for "with."

2014—Subsec. (b)(2). Pub. L. 113–97, §202(c)(10)(A), substituted "430, the accumulated funding deficiency under section 433," for "430,".

Subsec. (b)(3)(B). Pub. L. 113–97, §202(c)(10)(B), substituted "430(h)(1), 431(c)(3), or 433(c)(3)" for "430(h)(1) or 431(c)(3)".

2006—Subsec. (b)(2). Pub. L. 109–280, §114(f)(1), substituted "the minimum required contribution determined under section 430, or the accumulated funding deficiency determined under section 431," for "the accumulated funding deficiency (as defined in section 412(a))".

Subsec. (b)(3)(B). Pub. L. 109–280, §114(f)(2), added subpar. (B) and struck out former subpar. (B) which read as follows: "the requirements of section 412(c) (relating to reasonable actuarial assumptions) have been complied with,".

1976—Pub. L. 94–455 struck out "or his delegate" after "Secretary" wherever appearing.

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–97 applicable to years beginning after Dec. 31, 2013, see section 3 of Pub. L. 113–97, set out as a note under section 401 of this title.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to plan years beginning after 2007, see section 114(g)(1) of Pub. L. 109–280, as added by Pub. L. 110–458, set out as a note under section 401 of this title.

Effective Date

Requirements of section applicable only with respect to plan years to which part I of subtitle A of title II of Pub. L. 93–406 applies, see section 1034(1) of Pub. L. 93–406, set out as an note under section 6057 of this title. For a description of the plan years to which part 1 applies, see section 1017 of Pub. L. 93–406, set out as an Effective Date; Transitional Rules note under section 410 of this title.

Applicability of Amendments by Subtitles A and B of Title I of Pub. L. 109–280

For special rules on applicability of amendments by subtitles A (§§101–108) and B (§§111–116) of title I of Pub. L. 109–280 to certain eligible cooperative plans, PBGC settlement plans, and eligible government contractor plans, see sections 104, 105, and 106 of Pub. L. 109–280, set out as notes under section 401 of this title.

Consolidation of Actuarial Reports

Pub. L. 93–406, title X, §1033(c), Sept. 2, 1974, 88 Stat. 948, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The Secretary of the Treasury and the Secretary of Labor shall take such steps as may be necessary to assure coordination to the maximum extent feasible between the actuarial reports required by section 6059 of the Internal Revenue Code of 1986 and by section 103(d) of title I of the Employee Retirement Income Security Act of 1974 [section 1023(d) of Title 29, Labor]."
26 U.S.C. § 7482 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 76 / Subchapter D / Section 7482: Courts of review
Courts of review
Status: in_force

(a) Jurisdiction

(1) In general

The United States Courts of Appeals (other than the United States Court of Appeals for the Federal Circuit) shall have exclusive jurisdiction to review the decisions of the Tax Court, except as provided in section 1254 of Title 28 of the United States Code, in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury; and the judgment of any such court shall be final, except that it shall be subject to review by the Supreme Court of the United States upon certiorari, in the manner provided in section 1254 of Title 28 of the United States Code.

(2) Interlocutory orders

(A) In general

When any judge of the Tax Court includes in an interlocutory order a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation, the United States Court of Appeals may, in its discretion, permit an appeal to be taken from such order, if application is made to it within 10 days after the entry of such order. Neither the application for nor the granting of an appeal under this paragraph shall stay proceedings in the Tax Court, unless a stay is ordered by a judge of the Tax Court or by the United States Court of Appeals which has jurisdiction of the appeal or a judge of that court.

(B) Order treated as Tax Court decision

For purposes of subsections (b) and (c), an order described in this paragraph shall be treated as a decision of the Tax Court.

(C) Venue for review of subsequent proceedings

If a United States Court of Appeals permits an appeal to be taken from an order described in subparagraph (A), except as provided in subsection (b)(2), any subsequent review of the decision of the Tax Court in the proceeding shall be made by such Court of Appeals.

(3) Certain orders entered under section 6213(a)

An order of the Tax Court which is entered under authority of section 6213(a) and which resolves a proceeding to restrain assessment or collection shall be treated as a decision of the Tax Court for purposes of this section and shall be subject to the same review by the United States Court of Appeals as a similar order of a district court.

(b) Venue

(1) In general

Except as otherwise provided in paragraphs (2) and (3), such decisions may be reviewed by the United States court of appeals for the circuit in which is located—

(A) in the case of a petitioner seeking redetermination of tax liability other than a corporation, the legal residence of the petitioner,

(B) in the case of a corporation seeking redetermination of tax liability, the principal place of business or principal office or agency of the corporation, or, if it has no principal place of business or principal office or agency in any judicial circuit, then the office to which was made the return of the tax in respect of which the liability arises,

(C) in the case of a person seeking a declaratory decision under section 7476, the principal place of business, or principal office or agency of the employer,

(D) in the case of an organization seeking a declaratory decision under section 7428, the principal office or agency of the organization,

(E) in the case of a petition under section 6234, the principal place of business of the partnership,

(F) in the case of a petition under section 6015(e), the legal residence of the petitioner, or

(G) in the case of a petition under section 6320 or 6330—

(i) the legal residence of the petitioner if the petitioner is an individual, and

(ii) the principal place of business or principal office or agency if the petitioner is an entity other than an individual.

If for any reason no subparagraph of the preceding sentence applies, then such decisions may be reviewed by the Court of Appeals for the District of Columbia. For purposes of this paragraph, the legal residence, principal place of business, or principal office or agency referred to herein shall be determined as of the time the petition seeking redetermination of tax liability was filed with the Tax Court or as of the time the petition seeking a declaratory decision under section 7428 or 7476, or the petition under section 6234, was filed with the Tax Court.

(2) By agreement

Notwithstanding the provisions of paragraph (1), such decisions may be reviewed by any United States Court of Appeals which may be designated by the Secretary and the taxpayer by stipulation in writing.

(3) Declaratory judgment actions relating to status of certain governmental obligations

In the case of any decision of the Tax Court in a proceeding under section 7478, such decision may only be reviewed by the Court of Appeals for the District of Columbia.

(c) Powers

(1) To affirm, modify, or reverse

Upon such review, such courts shall have power to affirm or, if the decision of the Tax Court is not in accordance with law, to modify or to reverse the decision of the Tax Court, with or without remanding the case for a rehearing, as justice may require.

(2) To make rules

Rules for review of decisions of the Tax Court shall be those prescribed by the Supreme Court under section 2072 of title 28 of the United States Code.

(3) To require additional security

Nothing in section 7483 shall be construed as relieving the petitioner from making or filing such undertakings as the court may require as a condition of or in connection with the review.

(4) To impose penalties

The United States Court of Appeals and the Supreme Court shall have the power to require the taxpayer to pay to the United States a penalty in any case where the decision of the Tax Court is affirmed and it appears that the appeal was instituted or maintained primarily for delay or that the taxpayer's position in the appeal is frivolous or groundless.

(Aug. 16, 1954, ch. 736, 68A Stat. 890; Pub. L. 89–713, §3(c), Nov. 2, 1966, 80 Stat. 1109; Pub. L. 91–172, title IX, §960(h)(2), Dec. 30, 1969, 83 Stat 735; Pub. L. 93–406, title II, §1041(b)(3), Sept. 2, 1974, 88 Stat. 950; Pub. L. 94–455, title X, §1042(d)(2)(A), (B), title XIII, §1306(b)(4), (5), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1638, 1639, 1719, 1834; Pub. L. 95–600, title III, §336(c)(1), Nov. 6, 1978, 92 Stat. 2842; Pub. L. 97–164, title I, §154, Apr. 2, 1982, 96 Stat. 47; Pub. L. 97–248, title IV, §402(c)(15), Sept. 3, 1982, 96 Stat. 668; Pub. L. 98–369, div. A, title I, §131(e)(2)(A), July 18, 1984, 98 Stat. 665; Pub. L. 99–514, title XV, §1558(a), (b), title XVIII, §§1810(g)(2), 1899A(60), Oct. 22, 1986, 100 Stat. 2757, 2758, 2828, 2962; Pub. L. 100–647, title VI, §6243(b), Nov. 10, 1988, 102 Stat. 3750; Pub. L. 101–239, title VII, §7731(b), Dec. 19, 1989, 103 Stat. 2401; Pub. L. 105–34, title XII, §§1222(b)(3), 1239(d), Aug. 5, 1997, 111 Stat. 1019, 1028; Pub. L. 114–74, title XI, §1101(f)(13), Nov. 2, 2015, 129 Stat. 638; Pub. L. 114–113, div. Q, title IV, §423(a), Dec. 18, 2015, 129 Stat. 3123.)

Editorial Notes

Amendments

2015—Subsec. (b)(1). Pub. L. 114–74, §1101(f)(13)(C), substituted "section 6234" for "section 6226, 6228(a), or 6234(c)" in concluding provisions.

Subsec. (b)(1)(E). Pub. L. 114–74, §1101(f)(13)(A), which directed amendment of subpar. (E) by substituting "section 6234" for "section 6226, 6228, 6247, or 6252", was executed by making the substitution for "section 6226, 6228(a), 6247, or 6252" to reflect the probable intent of Congress.

Subsec. (b)(1)(F). Pub. L. 114–113, §423(a), added subpar. (F).

Pub. L. 114–74, §1101(f)(13)(B), struck out subpar. (F) which read as follows: "in the case of a petition under section 6234(c)—

"(i) the legal residence of the petitioner if the petitioner is not a corporation, and

"(ii) the place or office applicable under subparagraph (B) if the petitioner is a corporation."

Subsec. (b)(1)(G). Pub. L. 114–113, §423(a), added subpar. (G).

1997—Subsec. (b)(1). Pub. L. 105–34, §1239(d)(2), substituted ", 6228(a), or 6234(c)" for "or 6228(a)" in concluding provisions.

Subsec. (b)(1)(E). Pub. L. 105–34, §1222(b)(3), substituted ", 6228(a), 6247, or 6252" for "or 6228(a)".

Subsec. (b)(1)(F). Pub. L. 105–34, §1239(d)(1), added subpar. (F).

1989—Subsec. (c)(4). Pub. L. 101–239 substituted "penalties" for "damages" in heading and amended text generally. Prior to amendment, text read as follows: "The United States Court of Appeals and the Supreme Court shall have power to impose damages in any case where the decision of the Tax Court is affirmed and it appears that the notice of appeal was filed merely for delay."

1988—Subsec. (a)(3). Pub. L. 100–647 added par. (3).

1986—Subsec. (a). Pub. L. 99–514, §1558(a), (b), inserted par. (1) designation and heading "In general" before existing text and realigned its margin, and added par. (2).

Subsec. (b)(1). Pub. L. 99–514, §1810(g)(2), substituted "section 7428 or 7476" for "section 7428, 7476, or 7477" in last sentence.

Subsec. (b)(1)(E). Pub. L. 99–514, §1899A(60), substituted "partnership." for "partnership,".

1984—Subsec. (b)(1)(D) to (F). Pub. L. 98–369 struck out subpar. (D) which provided that venue in the case of a person seeking declaratory judgment under section 7477 be the legal residence of such person if such person is not a corporation, or the principal place of business or principal office or agency of such person if such person is a corporation, and redesignated subpars. (E) and (F) as (D) and (E), respectively.

1982—Subsec. (a). Pub. L. 97–164 inserted "(other than the United States Court of Appeals for the Federal Circuit)" after "The United States Courts of Appeals".

Subsec. (b)(1). Pub. L. 97–248 added subpar. (F), and in provisions following subpar. (F) inserted ", or the petition under section 6226 or 6228(a)," after "or 7477".

1978—Subsec. (b)(1). Pub. L. 95–600, §336(c)(1)(A), substituted "provided in paragraphs (2) and (3)" for "provided in paragraph (2)".

Subsec. (b)(3). Pub. L. 95–600, §336(c)(1)(B), added par. (3).

1976—Subsec. (b)(1)(D). Pub. L. 94–455, §1042(d)(2)(A), added subpar. (D).

Subsec. (b)(1)(E). Pub. L. 94–455, §1306(b)(4), added subpar. (E).

Subsec. (b)(1). Pub. L. 94–455, §§1042(d)(2)(B), 1306(b)(5), in provisions following subpar. (E), substituted "no subparagraph of the preceding sentence applies" for "subparagraph (A), (B), and (C) do not apply" and "section 7428, 7476, or 7477" for "section 7476".

Subsec. (b)(2). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

1974—Subsec. (b)(1). Pub. L. 93–406 added subpar. (C) and, in provisions following subpar. (C), substituted "If for any reason subparagraph (A), (B), and (C) do not apply" for "If for any reason neither subparagraph (A) nor (B) applies", and inserted provisions referring to the time the petition seeking a declaratory decision under section 7476 was filed with the Tax Court.

1969—Subsec. (c). Pub. L. 91–172 substituted "section 2072 of title 28" for "section 2074 of title 28" in par. (2) and struck out provision for the applicability of rules adopted under authority of section 1141(c)(2) of the Internal Revenue Act of 1939 until such time as rules prescribed by the Supreme Court under section 2072 of title 28 become effective and, in par. (4), substituted "notice of appeal" for "petition".

1966—Subsec. (b)(1). Pub. L. 89–713 substituted provisions requiring that appeals from Tax Court decisions be made to the Court of Appeals for the circuit in which the taxpayer resides, in the case of a taxpayer other than a corporation, and, in the case of appeals by corporations, to the Court of Appeals for the circuit in which the corporation has its principal place of business or principal office or agency for provisions prescribing review by the Court of Appeals for the circuit in which was located the office to which was made the return of the tax in respect of which the liability arose, and inserted provision for the time of determining legal residence, place of business, or principal office or agency.

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title IV, §423(b), Dec. 18, 2015, 129 Stat. 3124, provided that:

"(1) In general.—The amendments made by this section [amending this section] shall apply to petitions filed after the date of enactment of this Act [Dec. 18, 2015].

"(2) Effect on existing proceedings.—Nothing in this section shall be construed to create any inference with respect to the application of section 7482 of the Internal Revenue Code of 1986 with respect to court proceedings filed on or before the date of the enactment of this Act."

Amendment by Pub. L. 114–74 applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of Pub. L. 114–74, set out as an Effective Date note under section 6221 of this title.

Effective Date of 1997 Amendment

Amendment by section 1222(b)(3) of Pub. L. 105–34 applicable to partnership taxable years beginning after Dec. 31, 1997, see section 1226 of Pub. L. 105–34, as amended, set out as a note under section 6011 of this title.

Amendment by section 1239(d) of Pub. L. 105–34 applicable to partnership taxable years ending after Aug. 5, 1997, see section 1239(f) of Pub. L. 105–34, set out as a note under section 6501 of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 applicable to positions taken after Dec. 31, 1989, in proceedings which are pending on, or commenced after such date, see section 7731(d) of Pub. L. 101–239, set out as a note under section 6673 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 applicable to orders entered after Nov. 10, 1988, see section 6243(c) of Pub. L. 100–647, set out as a note under section 6213 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XV, §1558(c), Oct. 22, 1986, 100 Stat. 2758, provided that: "The amendments made by this section [amending this section] shall apply to any order of the Tax Court entered after the date of the enactment of this Act [Oct. 22, 1986]."

Amendment by section 1810(g)(2) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to transfers or exchanges after Dec. 31, 1984, in taxable years ending after such date, with special rules for certain transfers and ruling requests before Mar. 1, 1984, see section 131(g) of Pub. L. 98–369, set out as a note under section 367 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to partnership taxable years beginning after Sept. 3, 1982, with provision for the applicability of the amendment to any partnership taxable year ending after Sept. 3, 1982, if the partnership, each partner, and each indirect partner requests such application and the Secretary of the Treasury or his delegate consents to such application, see section 407(a)(1), (3) of Pub. L. 97–248, set out as a note under section 702 of this title.

Amendment by Pub. L. 97–164 effective Oct. 1, 1982, see section 402 of Pub. L. 97–164, set out as a note under section 171 of Title 28, Judiciary and Judicial Procedure.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–600 applicable to requests for determinations made after Dec. 31, 1978, see section 336(d) of Pub. L. 95–600, set out as an Effective Date note under section 7478 of this title.

Effective Date of 1976 Amendment

Amendment by section 1042(d)(2)(A), (B) of Pub. L. 94–455 applicable with respect to pleadings filed with the Tax Court after Oct. 4, 1976, but only with respect to transfers beginning after Oct. 9, 1975, see section 1042(e)(1) of Pub. L. 94–455, set out as a note under section 367 of this title.

Amendment by section 1306(b)(4), (5) of Pub. L. 94–455 applicable with respect to pleadings filed with the United States Tax Court, the district court of the United States for the District of Columbia, or the United States Court of Claims more than 6 months after Oct. 4, 1976 but only with respect to determinations (or requests for determinations) made after Jan. 1, 1976, see section 1306(c) of Pub. L. 94–455, set out as an Effective Date note under section 7428 of this title.

Effective Date of 1974 Amendment

Amendment by Pub. L. 93–406 applicable to pleadings filed more than one year after Sept. 2, 1974, see section 1041(d) of Pub. L. 93–406, set out as an Effective Date note under section 7476 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 effective 30 days after Dec. 30, 1969, see section 962(f) of Pub. L. 91–172, set out as a note under section 7483 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–713 applicable to all decisions of the Tax Court entered after Nov. 2, 1966, see section 3(d) of Pub. L. 89–713, set out as a note under section 7422 of this title.
26 U.S.C. § 56 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 56: Adjustments in computing alternative minimum taxable income
Adjustments in computing alternative minimum taxable income
Status: in_force

(a) Adjustments applicable to all taxpayers

In determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

(1) Depreciation

(A) In general

(i) Property other than certain personal property

Except as provided in clause (ii), the depreciation deduction allowable under section 167 with respect to any tangible property placed in service after December 31, 1986, shall be determined under the alternative system of section 168(g). In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply.

(ii) 150-percent declining balance method for certain property

The method of depreciation used shall be—

(I) the 150 percent declining balance method,

(II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.

 The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method.

(B) Exception for certain property

This paragraph shall not apply to property described in paragraph (1), (2), (3), or (4) of section 168(f), or in section 168(e)(3)(C)(iv).

(C) Coordination with transitional rules

(i) In general

This paragraph shall not apply to property placed in service after December 31, 1986, to which the amendments made by section 201 of the Tax Reform Act of 1986 do not apply by reason of section 203, 204, or 251(d) of such Act.

(ii) Treatment of certain property placed in service before 1987

This paragraph shall apply to any property to which the amendments made by section 201 of the Tax Reform Act of 1986 apply by reason of an election under section 203(a)(1)(B) of such Act without regard to the requirement of subparagraph (A) that the property be placed in service after December 31, 1986.

(D) Normalization rules

With respect to public utility property described in section 168(i)(10), the Secretary shall prescribe the requirements of a normalization method of accounting for this section.

(2) Mining exploration and development costs

(A) In general

With respect to each mine or other natural deposit (other than an oil, gas, or geothermal well) of the taxpayer, the amount allowable as a deduction under section 616(a) or 617(a) (determined without regard to section 291(b)) in computing the regular tax for costs paid or incurred after December 31, 1986, shall be capitalized and amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made.

(B) Loss allowed

If a loss is sustained with respect to any property described in subparagraph (A), a deduction shall be allowed for the expenditures described in subparagraph (A) for the taxable year in which such loss is sustained in an amount equal to the lesser of—

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(3) Treatment of certain long-term contracts

In the case of any long-term contract entered into by the taxpayer on or after March 1, 1986, the taxable income from such contract shall be determined under the percentage of completion method of accounting (as modified by section 460(b)). For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(1) by using the simplified procedures for allocation of costs prescribed under section 460(b)(3). The first sentence of this paragraph shall not apply to any home construction contract (as defined in section 460(e)(6)).1

(4) Alternative tax net operating loss deduction

The alternative tax net operating loss deduction shall be allowed in lieu of the net operating loss deduction allowed under section 172.

(5) Pollution control facilities

In the case of any certified pollution control facility placed in service after December 31, 1986, the deduction allowable under section 169 (without regard to section 291) shall be determined under the alternative system of section 168(g). In the case of such a facility placed in service after December 31, 1998, such deduction shall be determined under section 168 using the straight line method.

(6) Adjusted basis

The adjusted basis of any property to which paragraph (1) or (5) applies (or with respect to which there are any expenditures to which paragraph (2) or subsection (b)(2) applies) shall be determined on the basis of the treatment prescribed in paragraph (1), (2), or (5), or subsection (b)(2), whichever applies.

(7) Section 87 not applicable

Section 87 (relating to alcohol fuel credit) shall not apply.

(b) Adjustments applicable to individuals

In determining the amount of the alternative minimum taxable income of any taxpayer (other than a corporation), the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

(1) Limitation on deductions

(A) In general

No deduction shall be allowed—

(i) for any miscellaneous itemized deduction (as defined in section 67(b)), or

(ii) for any taxes described in paragraph (1), (2), or (3) of section 164(a) or clause (ii) of section 164(b)(5)(A).

Clause (ii) shall not apply to any amount allowable in computing adjusted gross income.

(B) Interest

In determining the amount allowable as a deduction for interest, subsections (d) and (h) of section 163 shall apply, except that—

(i) in lieu of the exception under section 163(h)(2)(D), the term "personal interest" shall not include any qualified housing interest (as defined in subsection (e)),

(ii) interest on any specified private activity bond (and any amount treated as interest on a specified private activity bond under section 57(a)(5)(B)), and any deduction referred to in section 57(a)(5)(A), shall be treated as includible in gross income (or as deductible) for purposes of applying section 163(d),

(iii) in lieu of the exception under section 163(d)(3)(B)(i), the term "investment interest" shall not include any qualified housing interest (as defined in subsection (e)), and

(iv) the adjustments of this section and sections 57 and 58 shall apply in determining net investment income under section 163(d).

(C) Treatment of certain recoveries

No recovery of any tax to which subparagraph (A)(ii) applied shall be included in gross income for purposes of determining alternative minimum taxable income.

(D) Standard deduction and deduction for personal exemptions not allowed

The standard deduction under section 63(c), the deduction for personal exemptions under section 151, and the deduction under section 642(b) shall not be allowed.

(E) Section 68 not applicable

Section 68 shall not apply.

(2) Circulation and research and experimental expenditures

(A) In general

The amount allowable as a deduction under section 173 or 174(a) in computing the regular tax for amounts paid or incurred after December 31, 1986, shall be capitalized and—

(i) in the case of circulation expenditures described in section 173, shall be amortized ratably over the 3-year period beginning with the taxable year in which the expenditures were made, or

(ii) in the case of research and experimental expenditures described in section 174(a), shall be amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made.

(B) Loss allowed

If a loss is sustained with respect to any property described in subparagraph (A), a deduction shall be allowed for the expenditures described in subparagraph (A) for the taxable year in which such loss is sustained in an amount equal to the lesser of—

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(C) Exception for certain research and experimental expenditures

If the taxpayer materially participates (within the meaning of section 469(h)) in an activity, this paragraph shall not apply to any amount allowable as a deduction under section 174(a) for expenditures paid or incurred in connection with such activity.

(3) Treatment of incentive stock options

Section 421 shall not apply to the transfer of stock acquired pursuant to the exercise of an incentive stock option (as defined in section 422). Section 422(c)(2) shall apply in any case where the disposition and the inclusion for purposes of this part are within the same taxable year and such section shall not apply in any other case. The adjusted basis of any stock so acquired shall be determined on the basis of the treatment prescribed by this paragraph.

[(c) Repealed. Pub. L. 115–97, title I, §12001(b)(8)(A), Dec. 22, 2017, 131 Stat. 2093]

(d) Alternative tax net operating loss deduction defined

(1) In general

For purposes of subsection (a)(4), the term "alternative tax net operating loss deduction" means the net operating loss deduction allowable for the taxable year under section 172, except that—

(A) the amount of such deduction shall not exceed the sum of—

(i) the lesser of—

(I) the amount of such deduction attributable to net operating losses (other than the deduction described in clause (ii)(I)), or

(II) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under section 199,1 plus

(ii) the lesser of—

(I) the amount of such deduction attributable to an applicable net operating loss with respect to which an election is made under section 172(b)(1)(H) (as in effect before its repeal by the Tax Increase Prevention Act of 2014), or

(II) alternative minimum taxable income determined without regard to such deduction and the deduction under section 199 1 reduced by the amount determined under clause (i), and

(B) in determining the amount of such deduction—

(i) the net operating loss (within the meaning of section 172(c)) for any loss year shall be adjusted as provided in paragraph (2), and

(ii) appropriate adjustments in the application of section 172(b)(2) shall be made to take into account the limitation of subparagraph (A).

(2) Adjustments to net operating loss computation

(A) Post-1986 loss years

In the case of a loss year beginning after December 31, 1986, the net operating loss for such year under section 172(c) shall—

(i) be determined with the adjustments provided in this section and section 58, and

(ii) be reduced by the items of tax preference determined under section 57 for such year.

An item of tax preference shall be taken into account under clause (ii) only to the extent such item increased the amount of the net operating loss for the taxable year under section 172(c).

(B) Pre-1987 years

In the case of loss years beginning before January 1, 1987, the amount of the net operating loss which may be carried over to taxable years beginning after December 31, 1986, for purposes of paragraph (2), shall be equal to the amount which may be carried from the loss year to the first taxable year of the taxpayer beginning after December 31, 1986.

(e) Qualified housing interest

For purposes of this part—

(1) In general

The term "qualified housing interest" means interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued during the taxable year on indebtedness which is incurred in acquiring, constructing, or substantially improving any property which—

(A) is the principal residence (within the meaning of section 121) of the taxpayer at the time such interest accrues, or

(B) is a qualified dwelling which is a qualified residence (within the meaning of section 163(h)(4)).

Such term also includes interest on any indebtedness resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence; but only to the extent that the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness immediately before the refinancing.

(2) Qualified dwelling

The term "qualified dwelling" means any—

(A) house,

(B) apartment,

(C) condominium, or

(D) mobile home not used on a transient basis (within the meaning of section 7701(a)(19)(C)(v)),

including all structures or other property appurtenant thereto.

(3) Special rule for indebtedness incurred before July 1, 1982

The term "qualified housing interest" includes interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued on indebtedness which—

(A) was incurred by the taxpayer before July 1, 1982, and

(B) is secured by property which, at the time such indebtedness was incurred, was—

(i) the principal residence (within the meaning of section 121) of the taxpayer, or

(ii) a qualified dwelling used by the taxpayer (or any member of his family (within the meaning of section 267(c)(4))).

(Added Pub. L. 99–514, title VII, §701(a), Oct. 22, 1986, 100 Stat. 2322; amended Pub. L. 100–203, title X, §§10202(d), 10243(a), Dec. 22, 1987, 101 Stat. 1330–392, 1330–423; Pub. L. 100–647, title I, §§1002(a)(12), 1007(b)(1)–(14)(A), (15)–(19), title II, §§2001(c)(3)(A), 2004(b)(2), (3), title V, §5041(b)(4), title VI, §§6079(a)(1), 6303(a), Nov. 10, 1988, 102 Stat. 3355, 3428–3432, 3594, 3599, 3674, 3709, 3755; Pub. L. 101–239, title VII, §§7205(b), 7611(a)–(f)(4), 7612(c)(1), (d)(1), 7811(d)(3), 7815(e)(2), (4), Dec. 19, 1989, 103 Stat. 2335, 2371–2374, 2408, 2419; Pub. L. 101–508, title XI, §§11103(b), 11301(b), 11531(a), (b)(1), 11704(a)(1), 11801(a)(3), (c)(2)(A)–(C), (9)(G), 11812(b)(4), Nov. 5, 1990, 104 Stat. 1388–406, 1388–449, 1388–488, 1388–490, 1388–518, 1388–520, 1388–522, 1388–523, 1388–526, 1388–535; Pub. L. 102–486, title XIX, §1915(a)(2), (b)(2), (c)(1), (2), Oct. 24, 1992, 106 Stat. 3023, 3024; Pub. L. 103–66, title XIII, §§13115(a), 13171(b), 13227(c), Aug. 10, 1993, 107 Stat. 432, 454, 493; Pub. L. 104–188, title I, §§1601(b)(2)(B), (C), 1621(b)(2), 1702(c)(1), (e)(1)(A), (g)(4), (h)(12), 1704(t)(1), (48), Aug. 20, 1996, 110 Stat. 1832, 1833, 1867, 1869, 1870, 1873, 1874, 1887, 1889; Pub. L. 105–34, title III, §312(d)(1), title IV, §§402, 403(a), title XII, §1212(a), Aug. 5, 1997, 111 Stat. 839, 844, 1000; Pub. L. 105–277, div. J, title IV, §4006(c)(2), Oct. 21, 1998, 112 Stat. 2681–912; Pub. L. 106–519, §4(1), Nov. 15, 2000, 114 Stat. 2432; Pub. L. 106–554, §1(a)(7) [title III, §314(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–643; Pub. L. 107–147, title I, §102(c)(1), title IV, §417(5), Mar. 9, 2002, 116 Stat. 26, 56; Pub. L. 108–173, title XII, §1202(b), Dec. 8, 2003, 117 Stat. 2480; Pub. L. 108–311, title IV, §403(b)(4), Oct. 4, 2004, 118 Stat. 1187; Pub. L. 108–357, title I, §§101(b)(4), 102(b), title II, §248(b)(1), title IV, §422(b), title VIII, §835(b)(1), Oct. 22, 2004, 118 Stat. 1423, 1428, 1457, 1519, 1593; Pub. L. 109–58, title XIII, §1326(d), Aug. 8, 2005, 119 Stat. 1017; Pub. L. 109–135, title IV, §403(a)(14), (r)(2), Dec. 21, 2005, 119 Stat. 2619, 2628; Pub. L. 109–304, §17(e)(1), Oct. 6, 2006, 120 Stat. 1707; Pub. L. 110–172, §11(g)(1), (2), Dec. 29, 2007, 121 Stat. 2489, 2490; Pub. L. 110–289, div. C, title I, §3022(a)(2), July 30, 2008, 122 Stat. 2894; Pub. L. 110–343, div. C, title VII, §§706(b)(3), 708(c), Oct. 3, 2008, 122 Stat. 3922, 3925; Pub. L. 111–5, div. B, title I, §§1008(d), 1503(b), Feb. 17, 2009, 123 Stat. 318, 354; Pub. L. 111–92, §13(b), Nov. 6, 2009, 123 Stat. 2993; Pub. L. 111–148, title IX, §9013(c), Mar. 23, 2010, 124 Stat. 868; Pub. L. 113–295, div. A, title II, §§215(b), 221(a)(9), (25)(B), (30)(C), Dec. 19, 2014, 128 Stat. 4034, 4038, 4040, 4042; Pub. L. 115–97, title I, §§11027(b), 12001(b)(7), (8)(A), Dec. 22, 2017, 131 Stat. 2077, 2093; Pub. L. 115–141, div. U, title IV, §401(b)(7), (8), Mar. 23, 2018, 132 Stat. 1202; Pub. L. 116–94, div. Q, title I, §103(b), Dec. 20, 2019, 133 Stat. 3228.)

Editorial Notes

References in Text

Section 201 of the Tax Reform Act of 1986, referred to in subsecs. (a)(1)(C) and (g)(4)(A)(ii), is section 201 of Pub. L. 99–514, which amended sections 46, 167, 168, 178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701 of this title.

Sections 203, 204, and 251(d) of such Act, referred to in subsec. (a)(1)(C), are sections 203, 204, and 251(d) of the Tax Reform Act of 1986, Pub. L. 99–514. Sections 203 and 204 are set out as notes under section 168 of this title. Section 251(d) is set out as a note under section 46 of this title.

Section 460(e)(6), referred to in subsec. (a)(3), was redesignated section 460(e)(5) by Pub. L. 115–97, title I, §13102(d)(2), Dec. 22, 2017, 131 Stat. 2104.

Section 199, referred to in subsec. (d)(1)(A)(i)(II), (ii)(II), was repealed by Pub. L. 115–97, title I, §13305(a), Dec. 22, 2017, 131 Stat. 2126.

Section 172(b)(1)(H) (as in effect before its repeal by the Tax Increase Prevention Act of 2014), referred to subsec. (d)(1)(A)(ii)(I), means subpar. (H) of section 172(b)(1) of this title prior to its repeal by Pub. L. 113–295, div. A, title II, §221(a)(30)(A)(i), Dec. 19, 2014, 128 Stat. 4041.

The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (g)(4)(A)(iii), is the date of enactment of Pub. L. 99–514, which was approved Oct. 22, 1986.

The FSC Repeal and Extraterritorial Income Exclusion Act of 2000, referred to in subsec. (g)(4)(C)(ii)(I), is Pub. L. 106–519, Nov. 15, 2000, 114 Stat. 2423. For complete classification of this Act to the Code, see Short Title of 2000 Amendments note set out under section 1 of this title and Tables.

Prior Provisions

A prior section 56, added Pub. L. 91–172, title III, §301(a), Dec. 30, 1969, 83 Stat. 580; amended Pub. L. 91–614, title V, §501(a), Dec. 31, 1970, 84 Stat. 1846; Pub. L. 92–178, title VI, §601(c)(4), (5), Dec. 10, 1971, 85 Stat. 558; Pub. L. 93–406, title II, §§2001(g)(2)(D), 2002(g)(4), 2005(c)(7), Sept. 2, 1974, 88 Stat. 957, 968, 991; Pub. L. 94–12, title II, §§203(b)(2), (3), 208(d)(2), (3), Mar. 29, 1975, 89 Stat. 30, 35; Pub. L. 94–455, title III, §301(a), (b), (c)(4)(B), Oct. 4, 1976, 90 Stat. 1549, 1552; Pub. L. 95–30, title II, §202(d)(2), May 23, 1977, 91 Stat. 148; Pub. L. 95–600, title I, §141(d), Nov. 6, 1978, 92 Stat. 2794; Pub. L. 95–618, title I, §101(b)(2), Nov. 9, 1978, 92 Stat. 3179; Pub. L. 96–222, title I, §101(a)(7)(L)(iii)(IV), Apr. 1, 1980, 94 Stat. 200; Pub. L. 97–34, title III, §331(c)(2), Aug. 13, 1981, 95 Stat. 293; Pub. L. 97–248, title II, §201(d)(1), formerly §201(c)(1), Sept. 3, 1982, 96 Stat. 419, renumbered §201(d)(1), Pub. L. 97–448, title III, §306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 98–369, div. A, title IV, §474(r)(1), July 18, 1984, 98 Stat. 839; Pub. L. 99–514, title XI, §1171(b)(3), Oct. 22, 1986, 100 Stat. 2513, related to a corporate minimum tax, prior to the general revision of this part by Pub. L. 99–514, §701(a).

Amendments

2019—Subsec. (b)(1)(B) to (F). Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: "In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019".

2018—Subsec. (b)(1)(E). Pub. L. 115–141, §401(b)(7), struck out at end "The preceding sentence shall not apply to so much of the standard deduction as is determined under subparagraphs (D) and (E) of section 63(c)(1)."

Subsec. (d)(1)(A)(ii)(I). Pub. L. 115–141, §401(b)(8), inserted "(as in effect before its repeal by the Tax Increase Prevention Act of 2014)" after "section 172(b)(1)(H)".

2017—Subsec. (b)(1)(B). Pub. L. 115–97, §11027(b), inserted at end "This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019".

Subsec. (b)(2)(C), (D). Pub. L. 115–97, §12001(b)(7), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows: "In the case of circulation expenditures described in section 173, the adjustments provided in this paragraph shall apply also to a personal holding company (as defined in section 542)."

Subsec. (c). Pub. L. 115–97, §12001(b)(8)(A), struck out subsec. (c) which related to adjustments applicable to corporations.

Subsec. (g). Pub. L. 115–97, §12001(b)(8)(A), struck out subsec. (g) which related to adjustments based on adjusted current earnings.

2014—Subsec. (b)(1)(C)(ii) to (v). Pub. L. 113–295, §221(a)(25)(B), redesignated cls. (iii) to (v) as (ii) to (iv), respectively, and struck out former cl. (ii) which read as follows: "sections 163(d)(6) and 163(h)(5) (relating to phase-ins) shall not apply,".

Subsec. (d)(3). Pub. L. 113–295, §221(a)(30)(C), struck out par. (3). Text read as follows: "In the case of a taxpayer which has a qualified disaster loss (as defined by section 172(b)(1)(J)) for the taxable year, paragraph (1) shall be applied by increasing the amount determined under subparagraph (A)(ii)(I) thereof by the sum of the carrybacks and carryovers of such loss."

Subsec. (g)(4)(C)(iv). Pub. L. 113–295, §215(b), substituted "an organization to which part I of subchapter T (relating to tax treatment of cooperatives) applies which is engaged in the marketing of agricultural or horticultural products" for "a cooperative described in section 927(a)(4)". See 2007 Amendment note below.

Subsec. (g)(4)(F)(ii). Pub. L. 113–295, §221(a)(9), substituted "Clause (i)" for "In the case of any taxable year beginning after December 31, 1992, clause (i)".

2010—Subsec. (b)(1)(B). Pub. L. 111–148 substituted "without regard to subsection (f) of such section" for "by substituting '10 percent' for '7.5 percent' ".

2009—Subsec. (b)(1)(E). Pub. L. 111–5, §1008(d), substituted "subparagraphs (D) and (E) of section 63(c)(1)" for "section 63(c)(1)(D)".

Subsec. (d)(1)(A)(ii)(I). Pub. L. 111–92 amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: "the amount of such deduction attributable to the sum of carrybacks of net operating losses from taxable years ending during 2001 or 2002 and carryovers of net operating losses to taxable years ending during 2001 and 2002, or".

Subsec. (g)(4)(B)(iv). Pub. L. 111–5, §1503(b), added cl. (iv).

2008—Subsec. (b)(1)(E). Pub. L. 110–343, §706(b)(3), inserted at end "The preceding sentence shall not apply to so much of the standard deduction as is determined under section 63(c)(1)(D)."

Subsec. (d)(3). Pub. L. 110–343, §708(c), added par. (3).

Subsec. (g)(4)(B)(iii). Pub. L. 110–289 added cl. (iii).

2007—Subsec. (g)(4)(C)(ii)(I). Pub. L. 110–172, §11(g)(1), substituted "921 (as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000)" for "921".

Subsec. (g)(4)(C)(iv). Pub. L. 110–172, §11(g)(2), which purported to amend subsec. (g)(4)(C)(iv) of this section, but directed the amendment of section 54(g)(4)(C)(iv) of this title, by substituting "an organization to which part I of subchapter T (relating to tax treatment of cooperatives) applies which is engaged in the marketing of agricultural or horticultural products" for "a cooperative described in section 927(a)(4)", was not executed in light of the identical amendment made by Pub. L. 113–295, §215(b), effective as if included in Pub. L. 110–172. See 2014 Amendment note above.

2006—Subsec. (c)(2). Pub. L. 109–304, in introductory provisions, substituted "chapter 535 of title 46, United States Code" for "section 607 of the Merchant Marine Act, 1936 (46 U.S.C. 1177)", and, in subpars. (A) and (B), substituted "such chapter 535" for "such section 607".

2005—Subsec. (a)(1)(B). Pub. L. 109–58 inserted ", or in section 168(e)(3)(C)(iv)" before period at end.

Subsec. (b)(1)(A)(ii). Pub. L. 109–135, §403(r)(2), inserted "or clause (ii) of section 164(b)(5)(A)" before period at end.

Subsec. (d)(1)(A)(i)(II), (ii)(II). Pub. L. 109–135, §403(a)(14), substituted "such deduction and the deduction under section 199" for "such deduction".

2004—Subsec. (d)(1)(A)(i)(I). Pub. L. 108–311, §403(b)(4)(A), struck out "attributable to carryovers" after "other than the deduction".

Subsec. (d)(1)(A)(ii)(I). Pub. L. 108–311, §403(b)(4)(B), substituted "from taxable years" for "for taxable years" and "carryovers" for "carryforwards".

Subsec. (g)(4)(B)(i). Pub. L. 108–357, §248(b)(1), inserted "or 1357" after "section 139A" in concluding provisions.

Pub. L. 108–357, §101(b)(4), struck out "114 or" before "139A" in concluding provisions.

Subsec. (g)(4)(C)(v). Pub. L. 108–357, §102(b), added cl. (v).

Subsec. (g)(4)(C)(vi). Pub. L. 108–357, §422(b), added cl. (vi).

Subsec. (g)(6). Pub. L. 108–357, §835(b)(1), substituted "or REMIC" for "REMIC, or FASIT".

2003—Subsec. (g)(4)(B)(i). Pub. L. 108–173 inserted "or 139A" after "section 114" in concluding provisions.

2002—Subsec. (a)(1)(A)(ii). Pub. L. 107–147, §417(5), substituted "such section 1250" for "such 1250" in concluding provisions.

Subsec. (d)(1)(A). Pub. L. 107–147, §102(c)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "the amount of such deduction shall not exceed 90 percent of alternate minimum taxable income determined without regard to such deduction, and".

2000—Subsec. (a)(1)(A)(ii). Pub. L. 106–554 inserted "(and the straight line method shall be used for such 1250 property)" before "or to any other property" in concluding provisions.

Subsec. (g)(4)(B)(i). Pub. L. 106–519 inserted "or under section 114" before the period at end of first sentence in concluding provisions.

1998—Subsec. (a)(3). Pub. L. 105–277 substituted "section 460(b)(1)" for "section 460(b)(2)" and "section 460(b)(3)" for "section 460(b)(4)".

1997—Subsec. (a)(1)(A)(i). Pub. L. 105–34, §402(a), inserted at end "In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply."

Subsec. (a)(5). Pub. L. 105–34, §402(b), inserted at end "In the case of such a facility placed in service after December 31, 1998, such deduction shall be determined under section 168 using the straight line method."

Subsec. (a)(6) to (8). Pub. L. 105–34, §403(a), redesignated pars. (7) and (8) as (6) and (7), respectively, and struck out former par. (6) which read as follows:

"(6) Installment sales of certain property.—In the case of any disposition after March 1, 1986, of any property described in section 1221(1), income from such disposition shall be determined without regard to the installment method under section 453. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453(l)(2)(B)."

Subsec. (e)(1)(A), (3)(B)(i). Pub. L. 105–34, §312(d)(1), substituted "section 121" for "section 1034".

Subsec. (g)(4)(B)(i). Pub. L. 105–34, §1212(a), inserted at end of concluding provisions "In the case of any insurance company taxable under section 831(b), this clause shall not apply to any amount not described in section 834(b)."

1996—Subsec. (b)(3). Pub. L. 104–188, §1702(h)(12), provided that the amendment made by section 11801(c)(9)(G)(ii) of Pub. L. 101–508 shall be applied as if it struck "Section 422A(c)(2)" and inserted "Section 422(c)(2)". See 1990 Amendment note below.

Subsec. (d)(1)(B)(ii). Pub. L. 101–508, §1702(e)(1)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "in the case of taxable years beginning after December 31, 1986, section 172(b)(2) shall be applied by substituting '90 percent of alternative minimum taxable income determined without regard to the alternative tax net operating loss deduction' for 'taxable income' each place it appears."

Subsec. (g)(1), (2)(A). Pub. L. 104–188, §1704(t)(48), provided that section 11801(c)(2)(B) of Pub. L. 101–508 shall be applied as if "section 56(g)" appeared instead of "section 59(g)". See 1990 Amendment note below.

Subsec. (g)(4)(C)(ii)(I). Pub. L. 104–188, §1601(b)(2)(B), inserted "30A," before "936" and substituted ", (i), and (j)" for "and (i)".

Subsec. (g)(4)(C)(ii)(II). Pub. L. 104–188, §1704(t)(1), substituted "of subclause" for "of the subclause".

Subsec. (g)(4)(C)(iii)(VI). Pub. L. 104–188, §1601(b)(2)(C), added subcl. (VI).

Subsec. (g)(4)(D)(iii). Pub. L. 104–188, §1702(g)(4), inserted ", but only with respect to taxable years beginning after December 31, 1989" before period at end.

Subsec. (g)(4)(H) to (J). Pub. L. 104–188, §1702(c)(1), redesignated subpars. (I) and (J) as (H) and (I), respectively.

Subsec. (g)(6). Pub. L. 104–188, §1621(b)(2), substituted "REMIC, or FASIT" for "or REMIC".

1993—Subsec. (g)(4)(A)(i). Pub. L. 103–66, §13115(a), inserted at end "The preceding sentence shall not apply to any property placed in service after December 31, 1993, and the depreciation deduction with respect to such property shall be determined under the rules of subsection (a)(1)(A)."

Subsec. (g)(4)(C)(ii)(I). Pub. L. 103–66, §13227(c)(1), substituted "sections 936 (including subsections (a)(4) and (i) thereof) and 921" for "sections 936 and 921".

Subsec. (g)(4)(C)(iii)(IV), (V). Pub. L. 103–66, §13227(c)(2), added subcls. (IV) and (V).

Subsec. (g)(4)(J). Pub. L. 103–66, §13171(b), added subpar. (J).

1992—Subsec. (d)(1)(A). Pub. L. 102–486, §1915(c)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "the amount of such deduction shall not exceed the excess (if any) of—

"(i) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under subsection (h), over

"(ii) the deduction under subsection (h), and".

Subsec. (g)(4)(D)(i). Pub. L. 102–486, §1915(b)(2), inserted at end "In the case of a taxpayer other than an integrated oil company (as defined in section 291(b)(4)), in the case of any oil or gas well, this clause shall not apply in the case of amounts paid or incurred in taxable years beginning after December 31, 1992."

Subsec. (g)(4)(F). Pub. L. 102–486, §1915(a)(2), amended subpar. (F) generally. Prior to amendment, subpar. (F) read as follows: "The allowance for depletion with respect to any property placed in service in a taxable year beginning after 1989 shall be cost depletion determined under section 611."

Subsec. (h). Pub. L. 102–486, §1915(c)(1), struck out subsec. (h) which related to adjustment based on energy preferences.

1990—Subsec. (a)(1)(D). Pub. L. 101–508, §11812(b)(4), substituted "section 168(i)(10)" for "section 167(l)(3)(A)".

Subsec. (b)(1)(F). Pub. L. 101–508, §11103(b), added subpar. (F).

Subsec. (b)(3). Pub. L. 101–508, §11801(c)(9)(G)(i), substituted "section 422" for "section 422A".

Pub. L. 101–508, §11801(c)(9)(G)(ii), which directed the substitution of "section 422(c)(2)" for "section 422A(c)(2)", was executed by substituting "Section 422(c)(2)" for "Section 422A(c)(2)". See 1996 Amendment note above.

Subsec. (c)(1). Pub. L. 101–508, §11801(c)(2)(A), substituted heading for one which read: "Adjustment for book income or adjusted current earnings" and amended text generally. Prior to amendment, text read as follows:

"(A) Book income adjustment.—For taxable years beginning in 1987, 1988, and 1989, alternative minimum taxable income shall be adjusted as provided under subsection (f).

"(B) Adjusted current earnings.—For taxable years beginning after 1989, alternative minimum taxable income shall be adjusted as provided under subsection (g)."

Subsec. (d)(1)(A). Pub. L. 101–508, §11531(b)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "the amount of such deduction shall not exceed 90 percent of alternative minimum taxable income determined without regard to such deduction, and".

Subsec. (f). Pub. L. 101–508, §11801(a)(3), struck out subsec. (f) which related to adjustments for book income of corporations with respect to minimum taxable income, adjusted net book income, adjustments for certain taxes, special rules for related corporations for consolidated returns, treatment of dividends, statements covering different periods, special rule for cooperatives, treatment and limitation of taxes on dividends from 936 corporations, rules for Alaska native corporations, special rules for life insurance companies, exclusion of certain income from transfer of stock for debt, secretarial authority to adjust items, applicable financial statements, earnings and profits used, special rules for more than one statement and exception for certain corporations.

Subsec. (g)(1), (2)(A). Pub. L. 101–508, §11801(c)(2)(B), which directed that pars. (1) and (2) "of section 59(g) are each amended by striking 'beginning after 1989' ", was executed to pars. (1) and (2)(A) of subsec. (g) of this section after "any taxable year". See 1996 Amendment note above.

Subsec. (g)(4)(C)(iii). Pub. L. 101–508, §11801(c)(2)(C), substituted heading for one which read: "Special rule for dividends from section 936 companies" and amended text generally. Prior to amendment, text read as follows: "In the case of any dividend received from a corporation eligible for the credit provided by section 936, rules similar to the rules of subparagraph (F) of subsection (f)(1) shall apply, except that '75 percent' shall be substituted for '50 percent' in clause (i) thereof."

Subsec. (g)(4)(D)(ii). Pub. L. 101–508, §11704(a)(1), substituted "years" for "year".

Subsec. (g)(4)(F) to (H). Pub. L. 101–508, §11301(b), redesignated subpars. (G) and (H) as (F) and (G), respectively, and struck out former subpar. (F) which provided that acquisition expenses for life insurance companies be capitalized and amortized in accordance with the treatment generally required under generally accepted accounting principles as if this subparagraph applied to all taxable years.

Subsec. (h). Pub. L. 101–508, §11531(a), added subsec. (h).

1989—Subsec. (a)(3). Pub. L. 101–239, §7815(e)(2)(B), substituted "The first sentence of this paragraph shall not" for "The preceding sentence shall not".

Pub. L. 101–239, §7815(e)(2)(A), made clarifying amendment to directory language of Pub. L. 100–647, §5041(b)(4), see 1988 Amendment note below.

Pub. L. 101–239, §7612(c)(1), struck out "with respect to which the requirements of clauses (i) and (ii) of section 460(e)(1)(B) are met" after "section 460(e)(6))".

Subsec. (b)(2)(D). Pub. L. 101–239, §7612(d)(1), added subpar. (D).

Subsec. (b)(3). Pub. L. 101–239, §7811(d)(3), inserted after first sentence "Section 422A(c)(2) shall apply in any case where the disposition and the inclusion for purposes of this part are within the same taxable year and such section shall not apply in any other case." and substituted "this paragraph" for "the preceding sentence" in last sentence.

Subsec. (g)(4)(A)(i). Pub. L. 101–239, §7611(a)(1)(A), amended cl. (i) generally. Prior to amendment cl. (i) read as follows: "The depreciation deduction with respect to any property placed in service in a taxable year beginning after 1989 shall be determined under whichever of the following methods yields deductions with a smaller present value:

"(I) The alternative system of section 168(g), or

"(II) The method used for book purposes."

Subsec. (g)(4)(A)(iii). Pub. L. 101–239, §7611(a)(2), inserted "and which is placed in service in a taxable year beginning before 1990" after "thereof) applies".

Subsec. (g)(4)(A)(v) to (vii). Pub. L. 101–239, §7611(a)(1)(B), redesignated cl. (vii) as (v), and struck out former cl. (v), which related to use of slower method if used for book purposes, and cl. (vi), which related to election to have cumulative limitation.

Subsec. (g)(4)(B)(i). Pub. L. 101–239, §7611(f)(2), inserted at end "The preceding sentence shall not apply in the case of any amount excluded from gross income under section 108 (or the corresponding provisions of prior law)."

Subsec. (g)(4)(B)(iii). Pub. L. 101–239, §7611(f)(3), repealed cl. (iii) which read as follows: "In the case of any annuity contract, the income on such contract (as determined under section 72(u)(2)) shall be treated as includible in gross income for such year. The preceding sentence shall not apply to any annuity contract which is held under a plan described in section 403(a) or which is described in section 72(u)(3)(C)."

Subsec. (g)(4)(C)(ii). Pub. L. 101–239, §7611(d), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "Clause (i) shall not apply to any deduction allowable under section 243 or 245 for a 100-percent dividend—

"(I) if the corporation receiving such dividend and the corporation paying such dividend could not be members of the same affiliated group under section 1504 by reason of section 1504(b),

"(II) but only to the extent such dividend is attributable to income of the paying corporation which is subject to tax under this chapter (determined after the application of sections 936 and 921).

For purposes of the preceding sentence, the term '100 percent dividend' means any dividend if the percentage used for purposes of determining the amount allowable as a deduction under section 243 or 245 with respect to such dividend is 100 percent."

Subsec. (g)(4)(C)(iv). Pub. L. 101–239, §7611(e), added cl. (iv).

Subsec. (g)(4)(D). Pub. L. 101–239, §7611(b), amended subpar. (D) generally, in cl. (i), substituting provisions directing that adjustments in section 312(n)(2)(A) be applied, for provisions directing adjustments in section 312(n) be applied, with certain exceptions, in cl. (ii), substituting provisions directing that sections 173 and 248 not apply to expenditures paid or incurred in taxable years beginning after December 31, 1989, for material relating to special rule for intangible drilling costs and mineral exploration and development costs, and adding cls. (iii) and (iv).

Subsec. (g)(4)(D)(i)(IV), (V). Pub. L. 101–239, §7815(e)(4), added subcl. (IV) relating to inapplicability of pars. (6) to (8) and struck out former subcls. (IV) and (V), which read as follows:

"(IV) paragraph (6) shall apply only to contracts entered into on or after March 1, 1986, and

"(V) paragraphs (7) and (8) shall not apply."

Subsec. (g)(4)(G). Pub. L. 101–239, §7611(c), amended subpar. (G) generally. Prior to amendment, subpar. (G) read as follows: "The allowances for depletion with respect to any property placed in service in a taxable year beginning after 1989, shall be determined under whichever of the following methods yields deductions with a smaller present value:

"(i) cost depletion determined under section 611, or

"(ii) the method used for book purposes."

Subsec. (g)(4)(H). Pub. L. 101–239, §7205(b), added cl. (ii) and concluding provision and struck out former cl. (ii) and concluding provision which read as follows:

"(ii)(I) the aggregate adjusted bases of the assets of such corporation (immediately after the change), exceed

"(II) the value of the stock of such corporation (as determined for purposes of section 382), properly adjusted for liabilities and other relevant items,

then the adjusted basis of each asset of such corporation (as of such time) shall be its proportionate share (determined on the basis of respective fair market values) of the amount referred to in clause (ii)(II)."

Subsec. (g)(4)(H)(i). Pub. L. 101–239, §7611(f)(1), substituted "in a taxable year beginning after 1989" for "after the date of the enactment of the Tax Reform Act of 1986".

Subsec. (g)(5)(A). Pub. L. 101–239, §7611(f)(4), redesignated subpar. (B) as (A) and struck out former subpar. (A) which defined "book purposes".

Subsec. (g)(5)(B). Pub. L. 101–239, §7611(f)(4), redesignated subpar. (D) as (B). Former subpar. (B) redesignated (A).

Subsec. (g)(5)(C). Pub. L. 101–239, §7611(f)(4), struck out subpar. (C) which read as follows: "Present value.—Present value shall be determined as of the time the property is placed in service (or, if later, as of the beginning of the first taxable year beginning after 1989) and under regulations prescribed by the Secretary."

Subsec. (g)(5)(D). Pub. L. 101–239, §7611(f)(4), redesignated subpar. (D) as (B).

1988—Subsec. (a)(1)(A)(i). Pub. L. 100–647, §1007(b)(15), substituted "personal" for "real" in heading.

Subsec. (a)(1)(C)(i). Pub. L. 100–647, §1002(a)(12), inserted "by reason of section 203, 204, or 251(d) of such Act" after "do not apply".

Subsec. (a)(3). Pub. L. 100–647, §5041(b)(4), as amended by Pub. L. 101–239, §7815(e)(2)(A), inserted at end "The preceding sentence shall not apply to any home construction contract (as defined in section 460(e)(6)) with respect to which the requirements of clauses (i) and (ii) of section 460(e)(1)(B) are met."

Pub. L. 100–647, §1007(b)(1), inserted at end "For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(2) by using the simplified procedures for allocation of costs prescribed under section 460(b)(4)."

Subsec. (a)(8). Pub. L. 100–647, §1007(b)(19), added par. (8).

Subsec. (b)(1). Pub. L. 100–647, §1007(b)(16), struck out "itemized" after "Limitation on" in heading.

Subsec. (b)(1)(C)(ii). Pub. L. 100–647, §2004(b)(2), substituted "163(h)(5)" for "163(h)(6)".

Subsec. (b)(1)(C)(iii). Pub. L. 100–647, §1007(b)(4), substituted "specified private activity bond" for "specified activity bond" before "under", and "57(a)(5)(B)" for "56(a)(5)(B)".

Subsec. (b)(1)(C)(iv), (v). Pub. L. 100–647, §1007(b)(3), added cls. (iv) and (v).

Subsec. (b)(1)(E). Pub. L. 100–647, §1007(b)(2), substituted "and deduction for personal exemptions not allowed" for "not allowed" in heading and amended text generally. Prior to amendment, text read as follows: "The standard deduction provided in section 63(c) shall not be allowed."

Subsec. (b)(3). Pub. L. 100–647, §1007(b)(14)(A), added par. (3).

Subsec. (c)(1). Pub. L. 100–647, §1007(b)(13)(A), substituted "adjusted current earnings" for "adjusted earnings and profits" in heading.

Subsec. (c)(1)(B). Pub. L. 100–647, §1007(b)(13)(B), substituted "Adjusted current earnings" for "Adjusted earnings and profits" in heading.

Subsec. (d)(2)(A). Pub. L. 100–647, §1007(b)(5), struck out "(other than subsection (a)(6) thereof)" after "for such year" in cl. (ii) and inserted sentence at end providing that an item of tax preference shall be taken into account under clause (ii).

Subsec. (e)(1). Pub. L. 100–647, §2004(b)(3)(A), substituted "improving" for "rehabilitating" in introductory text.

Pub. L. 100–647, §1007(b)(6)(A)(i), inserted "qualified residence interest (as defined in section 163(h)(3)) and is" after "interest which is" in introductory text.

Subsec. (e)(1)(A). Pub. L. 100–647, §2004(b)(3)(B), struck out "or is paid" after "accrues".

Subsec. (e)(1)(B). Pub. L. 100–647, §1007(b)(6)(A)(ii), substituted "section 163(h)(4)" for "section 163(h)(3)".

Subsec. (e)(3). Pub. L. 100–647, §1007(b)(6)(B), substituted "interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued" for "interest paid or accrued".

Subsec. (f)(2)(B). Pub. L. 100–647, §2001(c)(3)(A), inserted at end "No adjustment shall be made under this subparagraph for the tax imposed by section 59A."

Pub. L. 100–647, §1007(b)(7), inserted "(otherwise eligible for the credit provided by section 901 without regard to section 901(j))" after "any such taxes".

Subsec. (f)(2)(F). Pub. L. 100–647, §1007(b)(11)(A), substituted "Treatment of taxes on dividends from 936 corporations" for "Treatment of dividends from 936 corporations" in heading and amended text generally, substituting cls. (i) to (iii) for former cls. (i) and (ii).

Subsec. (f)(2)(I), (J). Pub. L. 100–647, §6303(a), added subpar. (I) and redesignated former subpar. (I) as (J).

Subsec. (f)(3)(A)(iii). Pub. L. 100–647, §1007(b)(8), inserted "for a substantial nontax purpose" after "an income statement".

Subsec. (f)(3)(B). Pub. L. 100–647, §1007(b)(9), substituted "this subsection" for "paragraph (3)(A)" in penultimate sentence.

Subsec. (f)(3)(C). Pub. L. 100–647, §1007(b)(10), inserted at end "If the taxpayer has 2 or more statements described in the clause (or subclause) with the lowest number designation, the applicable financial statement shall be the one of such statements specified in regulations."

Subsec. (g)(4)(A)(vi), (vii). Pub. L. 100–647, §1007(b)(17), added cls. (vi) and (vii).

Subsec. (g)(4)(B)(iii). Pub. L. 100–647, §6079(a)(1), amended last sentence generally, inserting "which is" after "any annuity contract" and "or which is described in section 72(u)(3)(C)" after "in section 403(a)".

Pub. L. 100–647, §1007(b)(12), inserted at end "The preceding sentence shall not apply to any annuity contract held under a plan described in section 403(a)."

Subsec. (g)(4)(C)(iii). Pub. L. 100–647, §1007(b)(11)(B), substituted "clause (i)" for "clause (ii)(I)".

Subsec. (g)(4)(I). Pub. L. 100–647, §1007(b)(18), added subpar. (I).

1987—Subsec. (a)(6). Pub. L. 100–203, §10202(d), amended par. (6) generally. Prior to amendment, par. (6) read as follows: "In the case of any—

"(A) disposition after March 1, 1986, of property described in section 1221(1), or

"(B) other disposition if an obligation arising from such disposition would be an applicable installment obligation (as defined in section 453C(e)) to which section 453C applies,

income from such disposition shall be determined without regard to the installment method under section 453 or 453A and all payments to be received for the disposition shall be deemed received in the taxable year of the disposition. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453C(e)(4)."

Subsec. (f)(2)(H), (I). Pub. L. 100–203, §10243(a), added subpar. (H) and redesignated former subpar. (H) as (I).

Statutory Notes and Related Subsidiaries

Effective Date of 2019 Amendment

Pub. L. 116–94, div. Q, title I, §103(c), Dec. 20, 2019, 133 Stat. 3228, provided that: "The amendments made by this section [amending this section and section 213 of this title] shall apply to taxable years ending after December 31, 2018."

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §11027(c), Dec. 22, 2017, 131 Stat. 2077, provided that: "The amendment made by this section [amending this section and section 213 of this title] shall apply to taxable years beginning after December 31, 2016."

Amendment by section 12001(b)(7), (8)(A) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title.

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title II, §215(c), Dec. 19, 2014, 128 Stat. 4034, provided that: "The amendments made by this section [amending this section and section 911 of this title] shall take effect as if included in the provisions of the Tax Technical Corrections Act of 2007 [Pub. L. 110–172] to which they relate."

Amendment by section 221(a)(9), (25)(B), (30)(C) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2010 Amendment

Pub. L. 111–148, title IX, §9013(d), Mar. 23, 2010, 124 Stat. 868, provided that: "The amendments made by this section [amending this section and section 213 of this title] shall apply to taxable years beginning after December 31, 2012."

Effective Date of 2009 Amendment

Pub. L. 111–92, §13(e), (f), Nov. 6, 2009, 123 Stat. 2994, 2995, as amended by Pub. L. 113–295, div. A, title II, §220(bb), Dec. 19, 2014, 128 Stat. 4037, provided that:

"(e) Effective Dates.—

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 172 and 810 of this title] shall apply to net operating losses arising in taxable years ending after December 31, 2007.

"(2) Alternative tax net operating loss deduction.—The amendment made by subsection (b) [amending this section] shall apply to taxable years ending after December 31, 2002.

"(3) Loss from operations of life insurance companies.—The amendment made by subsection (c) [amending section 810 of this title] shall apply to losses from operations arising in taxable years ending after December 31, 2007.

"(4) Transitional rule.—In the case of any net operating loss (or, in the case of a life insurance company, any loss from operations) for a taxable year ending before the date of the enactment of this Act [Nov. 6, 2009]—

"(A) any election made under section 172(b)(3) or [former] 810(b)(3) of the Internal Revenue Code of 1986 with respect to such loss may (notwithstanding such section) be revoked before the due date (including extension of time) for filing the return for the taxpayer's last taxable year beginning in 2009, and

"(B) any application under section 6411(a) of such Code with respect to such loss shall be treated as timely filed if filed before such due date.

"(f) Exception for TARP Recipients.—The amendments made by this section [amending this section and sections 172 and 810 of this title] shall not apply to—

"(1) any taxpayer if—

"(A) the Federal Government acquired before the date of the enactment of this Act [Nov. 6, 2009] an equity interest in the taxpayer pursuant to the Emergency Economic Stabilization Act of 2008 [div. A of Pub. L. 110–343, see Tables for classification],

"(B) the Federal Government acquired before such date of enactment any warrant (or other right) to acquire any equity interest with respect to the taxpayer pursuant to the Emergency Economic Stabilization Act of 2008, or

"(C) such taxpayer receives after such date of enactment funds from the Federal Government in exchange for an interest described in subparagraph (A) or (B) pursuant to a program established under title I of division A of the Emergency Economic Stabilization Act of 2008 [see Tables for classification] (unless such taxpayer is a financial institution (as defined in section 3 of such Act [12 U.S.C. 5202]) and the funds are received pursuant to a program established by the Secretary of the Treasury for the stated purpose of increasing the availability of credit to small businesses using funding made available under such Act [Pub. L. 110–343, see Tables for classification]), or

"(2) the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, and

"(3) any taxpayer which at any time in 2008 or 2009 was or is a member of the same affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986, determined without regard to subsection (b) thereof) as a taxpayer described in paragraph (1) or (2)."

Pub. L. 111–5, div. B, title I, §1008(e), Feb. 17, 2009, 123 Stat. 318, provided that: "The amendments made by this section [amending this section and sections 63 and 164 of this title] shall apply to purchases on or after the date of the enactment of this Act [Feb. 17, 2009] in taxable years ending after such date."

Pub. L. 111–5, div. B, title I, §1503(c), Feb. 17, 2009, 123 Stat. 355, provided that: "The amendments made by this section [amending this section and section 57 of this title] shall apply to obligations issued after December 31, 2008."

Effective Date of 2008 Amendment

Pub. L. 110–343, div. C, title VII, §706(d), Oct. 3, 2008, 122 Stat. 3923, provided that:

"(1) In general.—Except as provided by paragraph (2), the amendments made by this section [amending this section and sections 63, 139, 165, 172, 1033, and 7508A of this title] shall apply to disasters declared in taxable years beginning after December 31, 2007.

"(2) Increase in limitation on individual loss per casualty.—The amendment made by subsection (c) [amending section 165 of this title] shall apply to taxable years beginning after December 31, 2008."

Pub. L. 110–343, div. C, title VII, §708(e), Oct. 3, 2008, 122 Stat. 3925, provided that: "The amendments made by this section [amending this section and section 172 of this title] shall apply to losses arising in taxable years beginning after December 31, 2007, in connection with disasters declared after such date."

Pub. L. 110–289, div. C, title I, §3022(d)(1), July 30, 2008, 122 Stat. 2894, provided that: "The amendments made by subsection (a) [amending this section and section 57 of this title] shall apply to bonds issued after the date of the enactment of this Act [July 30, 2008]."

Effective Date of 2005 Amendments

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.

Pub. L. 109–58, title XIII, §1326(e), Aug. 8, 2005, 119 Stat. 1017, provided that:

"(1) In general.—The amendments made by this section [amending this section and section 168 of this title] shall apply to property placed in service after April 11, 2005.

"(2) Exception.—The amendments made by this section [amending this section and section 168 of this title] shall not apply to any property with respect to which the taxpayer or a related party has entered into a binding contract for the construction thereof on or before April 11, 2005, or, in the case of self-constructed property, has started construction on or before such date."

Effective Date of 2004 Amendments

Pub. L. 108–357, title I, §101(c), Oct. 22, 2004, 118 Stat. 1423, provided that: "The amendments made by this section [amending this section and sections 275, 864, 903, and 999 of this title and repealing sections 114 and 941 to 943 of this title] shall apply to transactions after December 31, 2004."

Pub. L. 108–357, title I, §102(e), Oct. 22, 2004, 118 Stat. 1429, as amended by Pub. L. 109–135, title IV, §403(a)(19), Dec. 21, 2005, 119 Stat. 2619, provided that:

"(1) In general.—The amendments made by this section [enacting section 199 of this title and amending this section and sections 86, 135, 137, 219, 221, 222, 246, 469, 613, and 1402 of this title] shall apply to taxable years beginning after December 31, 2004.

"(2) Application to pass-thru entities, etc.—In determining the deduction under [former] section 199 of the Internal Revenue Code of 1986 (as added by this section), items arising from a taxable year of a partnership, S corporation, estate, or trust beginning before January 1, 2005, shall not be taken into account for purposes of subsection (d)(1) of such section."

Pub. L. 108–357, title II, §248(c), Oct. 22, 2004, 118 Stat. 1457, provided that: "The amendments made by this section [enacting subchapter R of this chapter and amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Oct. 22, 2004]."

Pub. L. 108–357, title IV, §422(d), Oct. 22, 2004, 118 Stat. 1519, provided that: "The amendments made by this section [enacting section 965 of this title and amending this section] shall apply to taxable years ending on or after the date of the enactment of this Act [Oct. 22, 2004]."

Pub. L. 108–357, title VIII, §835(c), Oct. 22, 2004, 118 Stat. 1594, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 382, 582, 856, 860G, 1202, and 7701 of this title and repealing part V of subchapter M of this chapter] shall take effect on January 1, 2005.

"(2) Exception for existing fasits.—Paragraph (1) shall not apply to any FASIT in existence on the date of the enactment of this Act [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."

Pub. L. 108–311, title IV, §403(f), Oct. 4, 2004, 118 Stat. 1188, provided that: "The amendments made by this section [amending this section, sections 137, 168, 172, and 1400L of this title, section 1306 of Title 29, Labor, and provisions set out as a note under this section] shall take effect as if included in the provisions of the Job Creation and Worker Assistance Act of 2002 [Pub. L. 107–147] to which they relate."

Effective Date of 2003 Amendment

Pub. L. 108–173, title XII, §1202(d), Dec. 8, 2003, 117 Stat. 2480, provided that: "The amendments made by this section [enacting section 139A of this title and amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Dec. 8, 2003]."

Effective Date of 2002 Amendment

Pub. L. 107–147, title I, §102(c)(2), Mar. 9, 2002, 116 Stat. 26, as amended Pub. L. 108–311, title IV, §403(b)(3), Oct. 4, 2004, 118 Stat. 1187, provided that: "The amendment made by this subsection [amending this section] shall apply to taxable years ending after December 31, 1990."

Effective Date of 2000 Amendments

Pub. L. 106–554, §1(a)(7) [title III, §314(g)], Dec. 21, 2000, 114 Stat. 2763, 2763A–643, provided that: "The amendments made by this section [amending this section and sections 403, 414, 415, 3405, 6211 and 7436 of this title and provisions set out as a note under section 1 of this title] shall take effect as if included in the provisions of the Taxpayer Relief [Act] of 1997 [Pub. L. 105–34] to which they relate."

Pub. L. 106–519, §5, Nov. 15, 2000, 114 Stat. 2433, as amended by Pub. L. 109–222, title V, §513(a), May 17, 2006, 120 Stat. 366, provided that:

"(a) In General.—The amendments made by this Act [enacting sections 114 and 941 to 943 of this title, amending this section and sections 275, 864, 903, and 999 of this title, and repealing sections 921 to 927 of this title] shall apply to transactions after September 30, 2000.

"(b) No New FSCs; Termination of Inactive FSCs.—

"(1) No new fscs.—No corporation may elect after September 30, 2000, to be a FSC (as defined in section 922 of the Internal Revenue Code of 1986, as in effect before the amendments made by this Act).

"(2) Termination of inactive fscs.—If a FSC has no foreign trade income (as defined in section 923(b) of such Code, as so in effect) for any period of 5 consecutive taxable years beginning after December 31, 2001, such FSC shall cease to be treated as a FSC for purposes of such Code for any taxable year beginning after such period.

"(c) Transition Period for Existing Foreign Sales Corporations.—

"(1) In general.—In the case of a FSC (as so defined) in existence on September 30, 2000, and at all times thereafter, the amendments made by this Act shall not apply to any transaction in the ordinary course of trade or business involving a FSC which occurs before January 1, 2002.

"(2) Election to have amendments apply earlier.—A taxpayer may elect to have the amendments made by this Act apply to any transaction by a FSC or any related person to which such amendments would apply but for the application of paragraph (1). Such election shall be effective for the taxable year for which made and all subsequent taxable years, and, once made, may be revoked only with the consent of the Secretary of the Treasury.

"(3) Exception for old earnings and profits of certain corporations.—

"(A) In general.—In the case of a foreign corporation to which this paragraph applies—

"(i) earnings and profits of such corporation accumulated in taxable years ending before October 1, 2000, shall not be included in the gross income of the persons holding stock in such corporation by reason of section 943(e)(4)(B)(i); and

"(ii) rules similar to the rules of clauses (ii), (iii), and (iv) of section 953(d)(4)(B) shall apply with respect to such earnings and profits.

  The preceding sentence shall not apply to earnings and profits acquired in a transaction after September 30, 2000, to which section 381 applies unless the distributor or transferor corporation was immediately before the transaction a foreign corporation to which this paragraph applies.

"(B) Existing fscs.—This paragraph shall apply to any controlled foreign corporation (as defined in section 957) if—

"(i) such corporation is a FSC (as so defined) in existence on September 30, 2000;

"(ii) such corporation is eligible to make the election under section 943(e) by reason of being described in paragraph (2)(B) of such section; and

"(iii) such corporation makes such election not later than for its first taxable year beginning after December 31, 2001.

"(C) Other corporations.—This paragraph shall apply to any controlled foreign corporation (as defined in section 957), and such corporation shall (notwithstanding any provision of section 943(e)) be treated as an applicable foreign corporation for purposes of section 943(e), if—

"(i) such corporation is in existence on September 30, 2000;

"(ii) as of such date, such corporation is wholly owned (directly or indirectly) by a domestic corporation (determined without regard to any election under section 943(e));

"(iii) for each of the 3 taxable years preceding the first taxable year to which the election under section 943(e) by such controlled foreign corporation applies—

     "(I) all of the gross income of such corporation is subpart F income (as defined in section 952), including by reason of section 954(b)(3)(B); and

     "(II) in the ordinary course of such corporation's trade or business, such corporation regularly sold (or paid commissions) to a FSC which on September 30, 2000, was a related person to such corporation;

"(iv) such corporation has never made an election under section 922(a)(2) (as in effect before the date of the enactment of this paragraph [Nov. 15, 2000]) to be treated as a FSC; and

"(v) such corporation makes the election under section 943(e) not later than for its first taxable year beginning after December 31, 2001.

  The preceding sentence shall cease to apply as of the date that the domestic corporation referred to in clause (ii) ceases to wholly own (directly or indirectly) such controlled foreign corporation.

"(4) Related person.—For purposes of this subsection, the term 'related person' has the meaning given to such term by section 943(b)(3).

"(5) Section references.—Except as otherwise expressly provided, any reference in this subsection to a section or other provision shall be considered to be a reference to a section or other provision of the Internal Revenue Code of 1986, as amended by this Act.

"(d) Special Rules Relating to Leasing Transactions.—

"(1) Sales income.—If foreign trade income in connection with the lease or rental of property described in section 927(a)(1)(B) of such Code (as in effect before the amendments made by this Act) is treated as exempt foreign trade income for purposes of section 921(a) of such Code (as so in effect), such property shall be treated as property described in section 941(c)(1)(B) of such Code (as added by this Act) for purposes of applying section 941(c)(2) of such Code (as so added) to any subsequent transaction involving such property to which the amendments made by this Act apply.

"(2) Limitation on use of gross receipts method.—If any person computed its foreign trade income from any transaction with respect to any property on the basis of a transfer price determined under the method described in section 925(a)(1) of such Code (as in effect before the amendments made by this Act), then the qualifying foreign trade income (as defined in section 941(a) of such Code, as in effect after such amendment) of such person (or any related person) with respect to any other transaction involving such property (and to which the amendments made by this Act apply) shall be zero."

[Pub. L. 109–222, title V, §513(c), May 17, 2006, 120 Stat. 366, provided that: "The amendments made by this section [amending section 5 of Pub. L. 106–519, set out above, and provisions set out as a note under section 114 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [May 17, 2006]."]

Effective Date of 1997 Amendment

Amendment by section 312(d)(1) of Pub. L. 105–34 applicable to sales and exchanges after May 6, 1997, with certain exceptions, see section 312(d) of Pub. L. 105–34, set out as a note under section 121 of this title.

Pub. L. 105–34, title IV, §403(b), Aug. 5, 1997, 111 Stat. 844, provided that:

"(1) In general.—The amendment made by this section [amending this section] shall apply to dispositions in taxable years beginning after December 31, 1987.

"(2) Special rule for 1987.—In the case of taxable years beginning in 1987, the last sentence of section 56(a)(6) of the Internal Revenue Code of 1986 (as in effect for such taxable years) shall be applied by inserting 'or in the case of a taxpayer using the cash receipts and disbursements method of accounting, any disposition described in section 453C(e)(1)(B)(ii)' after 'section 453C(e)(4)'."

Pub. L. 105–34, title XII, §1212(b), Aug. 5, 1997, 111 Stat. 1000, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1997."

Effective Date of 1996 Amendment

Amendment by section 1601(b)(2)(B), (C) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, except as otherwise provided, see section 1601(c) of Pub. L. 104–188, set out as a note under section 55 of this title.

Amendment by section 1621(b)(2) 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.

Amendment by section 1702(c)(1), (e)(1)(A), (g)(4), and (h)(12) of Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, §13115(b), Aug. 10, 1993, 107 Stat. 432, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to property placed in service after December 31, 1993.

"(2) Coordination with transitional rules.—The amendments made by this section shall not apply to any property to which paragraph (1) of section 56(a) of the Internal Revenue Code of 1986 does not apply by reason of subparagraph (C)(i) thereof."

Amendment by section 13171(b) of Pub. L. 103–66 applicable to contributions made after June 30, 1992, except that in case of any contribution of capital gain property which is not tangible personal property, such amendment applicable only if the contribution is made after Dec. 31, 1992, see section 13171(d) of Pub. L. 103–66, set out as a note under section 53 of this title.

Pub. L. 103–66, title XIII, §13227(f), Aug. 10, 1993, 107 Stat. 494, provided that: "The amendments made by this section [amending this section and sections 904, 936, and 7652 of this title] shall apply to taxable years beginning after December 31, 1993; except that the amendment made by subsection (e) [amending section 7652 of this title] shall take effect on October 1, 1993."

Effective Date of 1992 Amendment

Pub. L. 102–486, title XIX, §1915(d), Oct. 24, 1992, 106 Stat. 3024, provided that: "The amendments made by this section [amending this section and sections 57, 59, and 59A of this title] shall apply to taxable years beginning after December 31, 1992."

Effective Date of 1990 Amendment

Amendment by section 11103(b) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11103(e) of Pub. L. 101–508, set out as a note under section 1 of this title.

Pub. L. 101–508, title XI, §11301(d)(2), Nov. 5, 1990, 104 Stat. 1388–449, provided that:

"(A) In general.—The amendment made by subsection (b) [amending this section] shall apply to taxable years beginning on or after September 30, 1990, except that, in the case of a small insurance company, such amendment shall apply to taxable years beginning after December 31, 1989. For purposes of this paragraph, the term 'small insurance company' means any insurance company which meets the requirements of [former] section 806(a)(3) of the Internal Revenue Code of 1986; except that paragraph (2) of [former] section 806(c) of such Code shall not apply.

"(B) Special rules for year which includes september 30, 1990.—In the case of any taxable year which includes September 30, 1990, the amount of acquisition expenses which is required to be capitalized under [former] section 56(g)(4)(F) of the Internal Revenue Code of 1986 (as in effect before the amendment made by subsection (b)) by a company which is not a small insurance company shall be the amount which bears the same ratio to the amount which (but for this subparagraph) would be so required to be capitalized as the number of days in such taxable year before September 30, 1990, bears to the total number of days in such taxable year. A similar reduction shall be made in the amount amortized for such taxable year under such [former] section 56(g)(4)(F)."

Pub. L. 101–508, title XI, §11531(c), Nov. 5, 1990, 104 Stat. 1388–490, provided that: "The amendments made by this section [amending this section and sections 59 and 59A of this title] shall apply to taxable years beginning after December 31, 1990."

Pub. L. 101–508, title XI, §11704(b), Nov. 5, 1990, 104 Stat. 1388–520, provided that: "The amendments made by this section [amending this section, sections 172, 351, 413, 461, 469, 597, 857, 860D, 860G, 892, 927, 936, 1017, 1245, 1441, 2056A, 2642, 3231, 4091, 4093, 5061, 6013, 6038A, 6039D, 6045, 6323, 6332, 6655, 7519, 7522, 7608, and 7701 of this title, and provisions set out as a note under section 231n of Title 45, Railroads] shall take effect on the date of the enactment of this Act."

Amendment by section 11812(b)(4) 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

Pub. L. 101–239, title VII, §7205(c), Dec. 19, 1989, 103 Stat. 2336, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 382 of this title] shall apply to ownership changes and acquisitions after October 2, 1989, in taxable years ending after such date.

"(2) Binding contract.—The amendments made by this section shall not apply to any ownership change or acquisition pursuant to a written binding contract in effect on October 2, 1989, and at all times thereafter before such change or acquisition.

"(3) Bankruptcy proceedings.—In the case of a reorganization described in section 368(a)(1)(G) of the Internal Revenue Code of 1986, or an exchange of debt for stock in a title 11 or similar case (as defined in section 368(a)(3) of such Code), the amendments made by this section shall not apply to any ownership change resulting from such a reorganization or proceeding if a petition in such case was filed with the court before October 3, 1989.

"(4) Subsidiaries of bankrupt parent.—The amendments made by this section shall not apply to any built-in loss of a corporation which is a member (on October 2, 1989) of an affiliated group the common parent of which (on such date) was subject to title 11 or similar case (as defined in section 368(a)(3) of such Code). The preceding sentence shall apply only if the ownership change or acquisition is pursuant to the plan approved in such proceeding and is before the date 2 years after the date on which the petition which commenced such proceeding was filed."

Pub. L. 101–239, title VII, §7611(g), Dec. 19, 1989, 103 Stat. 2373, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 59 and 312 of this title] shall apply to taxable years beginning after December 31, 1989.

"(2) Intangible drilling costs.—The amendments made by subsection (f)(5) [amending sections 59 and 312 of this title] shall apply to costs paid or incurred in taxable years beginning after December 31, 1989.

"(3) Regulations on earnings and profits rules.—Not later than March 15, 1991, the Secretary of the Treasury or his delegate shall prescribe initial regulations providing guidance as to which items of income are included in adjusted current earnings under [former] section 56(g)(4)(B)(i) of the Internal Revenue Code of 1986 and which items of deduction are disallowed under [former] section 56(g)(4)(C) of such Code."

Pub. L. 101–239, title VII, §7612(c)(2), Dec. 19, 1989, 103 Stat. 2374, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to contracts entered into in taxable years beginning after September 30, 1990."

Pub. L. 101–239, title VII, §7612(d)(2), Dec. 19, 1989, 103 Stat. 2374, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1990."

Amendment by sections 7811(d)(3) and 7815(e)(2), (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 of 1988 Amendment

Pub. L. 100–647, title I, §1007(b)(14)(C), Nov. 10, 1988, 102 Stat. 3430, provided that: "The amendments made by this paragraph [amending this section and section 57 of this title] shall apply with respect to options exercised after December 31, 1987."

Amendment by sections 1002(a)(12) and 1007(b)(1)–(13), (15)–(19) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title II, §2001(e), Nov. 10, 1988, 102 Stat. 3597, provided that: "Except as otherwise provided in this section, the amendments made by this section [amending this section, sections 59A, 882, 4041, 4081, 4091, 4662, 4672, 6416, 6421, and 6427 of this title, and provisions set out as a note under section 4081 of this title] shall take effect as if included in the provision of the Superfund Revenue Act of 1986 [Pub. L. 99–499, title V] to which it relates."

Pub. L. 100–647, title II, §2004(u), Nov. 10, 1988, 102 Stat. 3610, provided that: "Except as otherwise provided in this section, any amendment made by this section [amending this section, sections 163, 244, 280H, 301, 304, 355, 384, 444, 453, 453A, 469, 514, 811, 812, 816, 842, 904, 1201, 1363, 1503, 1561, 4093, 5113, 5123, 5276, 5881, 6427, 6655, 7519, and 7704 of this title, and provisions set out as notes under sections 21, 219, 243, 301, 304, 444, 453, 1503, and 7704 of this title] shall take effect as if included in the provisions of the Revenue Act of 1987 [Pub. L. 100–203, title X] to which such amendment relates."

Amendment by section 5041(b)(4) of Pub. L. 100–647 applicable to contracts entered into on or after June 21, 1988, but not applicable to any contract resulting from the acceptance of a bid made before June 21, 1988, if the bid could not have been revoked or altered at any time on or after June 21, 1988, and not applicable in the case of a qualified ship contract (as defined in section 10203(b)(2)(B) of Pub. L. 100–203, set out as a note under section 460 of this title), see section 5041(e) of Pub. L. 100–647, set out as a note under section 460 of this title.

Pub. L. 100–647, title VI, §6079(a)(2), Nov. 10, 1988, 102 Stat. 3709, provided that: "The amendment made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 701 of the Reform Act [Pub. L. 99–514]."

Pub. L. 100–647, title VI, §6303(b), Nov. 10, 1988, 102 Stat. 3756, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1986."

Effective Date of 1987 Amendment

Amendment by section 10202(d) of Pub. L. 100–203 applicable to dispositions in taxable years beginning after Dec. 31, 1986, with coordination with Tax Reform Act of 1986, see section 10202(e)(4), (5) of Pub. L. 100–203, set out as a note under section 453 of this title.

Pub. L. 100–203, title X, §10243(b), Dec. 22, 1987, 101 Stat. 1330–424, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1987."

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as a note under section 55 of this title.

Savings Provision

For provisions that nothing in amendment by Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.

For provisions that nothing in amendment by sections 11801 and 11812 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.

Coordination With Heartland Disaster Relief

Pub. L. 110–343, div. C, title VII, §712, Oct. 3, 2008, 122 Stat. 3929, as amended by Pub. L. 113–295, div. A, title II, §211(c)(3), Dec. 19, 2014, 128 Stat. 4033, provided that: "The amendments made by this subtitle [subtitle B (§§706–712) of title VII of div. C of Pub. L. 110–343, enacting section 198A of this title and amending this section and sections 63, 139, 143, 165, 168, 172, 179, 1033, and 7508A of this title], other than the amendments made by sections 706(a)(2) [amending sections 139, 165, 172, 1033, and 7508A of this title], 710 [amending section 168 of this title], and 711 [amending section 179 of this title], shall not apply to any disaster described in section 702(b)(1)(A) [122 Stat. 3912], or to any expenditure or loss resulting from such disaster."

Application of Former Subsection (g)(1) and (3) to Taxable Years Beginning in 1991 and 1992

Pub. L. 104–188, title I, §1702(e)(1)(B), Aug. 20, 1996, 110 Stat. 1870, provided that: "For purposes of applying [former] sections 56(g)(1) and 56(g)(3) of the Internal Revenue Code of 1986 with respect to taxable years beginning in 1991 and 1992, the reference in such sections to the alternative tax net operating loss deduction shall be treated as including a reference to the deduction under [former] section 56(h) of such Code as in effect before the amendments made by section 1915 of the Energy Policy Act of 1992 [Pub. L. 102–486]."

Installment Sales; Taxable Years Beginning in 1987

Pub. L. 101–239, title VII, §7821(a)(5), Dec. 19, 1989, 103 Stat. 2424, provided that: "In the case of taxable years beginning in 1987, the reference to section 453 contained in section 56(a)(6) of the Internal Revenue Code of 1986 shall be treated as including a reference to section 453A."

Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States

For applicability of amendment by section 701(a) of Pub. L. 99–514 [enacting this section] notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.

Study of Book and Earnings and Profits Adjustments

Pub. L. 99–514, title VII, §702, Oct. 22, 1986, 100 Stat. 2345, required Secretary of the Treasury or his delegate to conduct a study of operation and effect of provisions of section 56(f) and former section 56(g) of the Internal Revenue Code of 1986, prior to repeal by Pub. L. 101–508, title XI, §11832(4), Nov. 5, 1990, 104 Stat. 1388–559.

1 See References in Text note below.
26 U.S.C. § 2702 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 14 / Section 2702: Special valuation rules in case of transfers of interests in trusts
Special valuation rules in case of transfers of interests in trusts
Status: in_force

(a) Valuation rules

(1) In general

Solely for purposes of determining whether a transfer of an interest in trust to (or for the benefit of) a member of the transferor's family is a gift (and the value of such transfer), the value of any interest in such trust retained by the transferor or any applicable family member (as defined in section 2701(e)(2)) shall be determined as provided in paragraph (2).

(2) Valuation of retained interests

(A) In general

The value of any retained interest which is not a qualified interest shall be treated as being zero.

(B) Valuation of qualified interest

The value of any retained interest which is a qualified interest shall be determined under section 7520.

(3) Exceptions

(A) In general

This subsection shall not apply to any transfer—

(i) if such transfer is an incomplete gift,

(ii) if such transfer involves the transfer of an interest in trust all the property in which consists of a residence to be used as a personal residence by persons holding term interests in such trust, or

(iii) to the extent that regulations provide that such transfer is not inconsistent with the purposes of this section.

(B) Incomplete gift

For purposes of subparagraph (A), the term "incomplete gift" means any transfer which would not be treated as a gift whether or not consideration was received for such transfer.

(b) Qualified interest

For purposes of this section, the term "qualified interest" means—

(1) any interest which consists of the right to receive fixed amounts payable not less frequently than annually,

(2) any interest which consists of the right to receive amounts which are payable not less frequently than annually and are a fixed percentage of the fair market value of the property in the trust (determined annually), and

(3) any noncontingent remainder interest if all of the other interests in the trust consist of interests described in paragraph (1) or (2).

(c) Certain property treated as held in trust

For purposes of this section—

(1) In general

The transfer of an interest in property with respect to which there is 1 or more term interests shall be treated as a transfer of an interest in a trust.

(2) Joint purchases

If 2 or more members of the same family acquire interests in any property described in paragraph (1) in the same transaction (or a series of related transactions), the person (or persons) acquiring the term interests in such property shall be treated as having acquired the entire property and then transferred to the other persons the interests acquired by such other persons in the transaction (or series of transactions). Such transfer shall be treated as made in exchange for the consideration (if any) provided by such other persons for the acquisition of their interests in such property.

(3) Term interest

The term "term interest" means—

(A) a life interest in property, or

(B) an interest in property for a term of years.

(4) Valuation rule for certain term interests

If the nonexercise of rights under a term interest in tangible property would not have a substantial effect on the valuation of the remainder interest in such property—

(A) subparagraph (A) of subsection (a)(2) shall not apply to such term interest, and

(B) the value of such term interest for purposes of applying subsection (a)(1) shall be the amount which the holder of the term interest establishes as the amount for which such interest could be sold to an unrelated third party.

(d) Treatment of transfers of interests in portion of trust

In the case of a transfer of an income or remainder interest with respect to a specified portion of the property in a trust, only such portion shall be taken into account in applying this section to such transfer.

(e) Member of the family

For purposes of this section, the term "member of the family" shall have the meaning given such term by section 2704(c)(2).

(Added Pub. L. 101–508, title XI, §11602(a), Nov. 5, 1990, 104 Stat. 1388–497; amended Pub. L. 104–188, title I, §1702(f)(11), Aug. 20, 1996, 110 Stat. 1872.)

Editorial Notes

Amendments

1996—Subsec. (a)(3)(A)(i). Pub. L. 104–188, §1702(f)(11)(A)(i), (ii), (B)(i), substituted "if" for "to the extent" and "incomplete gift" for "incomplete transfer", and struck out "or" at end.

Subsec. (a)(3)(A)(ii). Pub. L. 104–188, §1702(f)(11)(A)(iii), substituted ", or" for period at end.

Subsec. (a)(3)(A)(iii). Pub. L. 104–188, §1702(f)(11)(A)(iv), added cl. (iii).

Subsec. (a)(3)(B). Pub. L. 104–188, §1702(f)(11)(B), substituted "incomplete gift" for "incomplete transfer" in heading and text.

Statutory Notes and Related Subsidiaries

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.