26 U.S.C. § 51 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 51: Amount of credit
Amount of credit
Status: in_force

(a) Determination of amount

For purposes of section 38, the amount of the work opportunity credit determined under this section for the taxable year shall be equal to 40 percent of the qualified first-year wages for such year.

(b) Qualified wages defined

For purposes of this subpart—

(1) In general

The term "qualified wages" means the wages paid or incurred by the employer during the taxable year to individuals who are members of a targeted group.

(2) Qualified first-year wages

The term "qualified first-year wages" means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer.

(3) Limitation on wages per year taken into account

The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed $6,000 per year ($12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I), $14,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv), and $24,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II)).

(c) Wages defined

For purposes of this subpart—

(1) In general

Except as otherwise provided in this subsection and subsection (h)(2), the term "wages" has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section).

(2) On-the-job training and work supplementation payments

(A) Exclusion for employers receiving on-the-job training payments

The term "wages" shall not include any amounts paid or incurred by an employer for any period to any individual for whom the employer receives federally funded payments for on-the-job training of such individual for such period.

(B) Reduction for work supplementation payments to employers

The amount of wages which would (but for this subparagraph) be qualified wages under this section for an employer with respect to an individual for a taxable year shall be reduced by an amount equal to the amount of the payments made to such employer (however utilized by such employer) with respect to such individual for such taxable year under a program established under section 482(e) 1 of the Social Security Act.

(3) Payments for services during labor disputes

If—

(A) the principal place of employment of an individual with the employer is at a plant or facility, and

(B) there is a strike or lockout involving employees at such plant or facility,

the term "wages" shall not include any amount paid or incurred by the employer to such individual for services which are the same as, or substantially similar to, those services performed by employees participating in, or affected by, the strike or lockout during the period of such strike or lockout.

(4) Termination

The term "wages" shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 2025.

(5) Coordination with payroll tax forgiveness

The term "wages" shall not include any amount paid or incurred to a qualified individual (as defined in section 3111(d)(3)) 1 during the 1-year period beginning on the hiring date of such individual by a qualified employer (as defined in section 3111(d)) 1 unless such qualified employer makes an election not to have section 3111(d) 1 apply.

(d) Members of targeted groups

For purposes of this subpart—

(1) In general

An individual is a member of a targeted group if such individual is—

(A) a qualified IV–A recipient,

(B) a qualified veteran,

(C) a qualified ex-felon,

(D) a designated community resident,

(E) a vocational rehabilitation referral,

(F) a qualified summer youth employee,

(G) a qualified supplemental nutrition assistance program benefits recipient,

(H) a qualified SSI recipient,

(I) a long-term family assistance recipient, or

(J) a qualified long-term unemployment recipient.

(2) Qualified IV–A recipient

(A) In general

The term "qualified IV–A recipient" means any individual who is certified by the designated local agency as being a member of a family receiving assistance under a IV–A program for any 9 months during the 18-month period ending on the hiring date.

(B) IV–A program

For purposes of this paragraph, the term "IV–A program" means any program providing assistance under a State program funded under part A of title IV of the Social Security Act and any successor of such program.

(3) Qualified veteran

(A) In general

The term "qualified veteran" means any veteran who is certified by the designated local agency as—

(i) being a member of a family receiving assistance under a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for at least a 3-month period ending during the 12-month period ending on the hiring date,

(ii) entitled to compensation for a service-connected disability, and—

(I) having a hiring date which is not more that 1 year after having been discharged or released from active duty in the Armed Forces of the United States, or

(II) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 6 months,

(iii) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 4 weeks (but less than 6 months), or

(iv) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 6 months.

(B) Veteran

For purposes of subparagraph (A), the term "veteran" means any individual who is certified by the designated local agency as—

(i)(I) having served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days, or

(II) having been discharged or released from active duty in the Armed Forces of the United States for a service-connected disability, and

(ii) not having any day during the 60-day period ending on the hiring date which was a day of extended active duty in the Armed Forces of the United States.

For purposes of clause (ii), the term "extended active duty" means a period of more than 90 days during which the individual was on active duty (other than active duty for training).

(C) Other definitions

For purposes of subparagraph (A), the terms "compensation" and "service-connected" have the meanings given such terms under section 101 of title 38, United States Code.

(4) Qualified ex-felon

The term "qualified ex-felon" means any individual who is certified by the designated local agency—

(A) as having been convicted of a felony under any statute of the United States or any State, and

(B) as having a hiring date which is not more than 1 year after the last date on which such individual was so convicted or was released from prison.

(5) Designated community residents

(A) In general

The term "designated community resident" means any individual who is certified by the designated local agency—

(i) as having attained age 18 but not age 40 on the hiring date, and

(ii) as having his principal place of abode within an empowerment zone, enterprise community, renewal community, or rural renewal county.

(B) Individual must continue to reside in zone, community, or county

In the case of a designated community resident, the term "qualified wages" shall not include wages paid or incurred for services performed while the individual's principal place of abode is outside an empowerment zone, enterprise community, renewal community, or rural renewal county.

(C) Rural renewal county

For purposes of this paragraph, the term "rural renewal county" means any county which—

(i) is outside a metropolitan statistical area (defined as such by the Office of Management and Budget), and

(ii) during the 5-year periods 1990 through 1994 and 1995 through 1999 had a net population loss.

(6) Vocational rehabilitation referral

The term "vocational rehabilitation referral" means any individual who is certified by the designated local agency as—

(A) having a physical or mental disability which, for such individual, constitutes or results in a substantial handicap to employment, and

(B) having been referred to the employer upon completion of (or while receiving) rehabilitative services pursuant to—

(i) an individualized written plan for employment under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973,

(ii) a program of vocational rehabilitation carried out under chapter 31 of title 38, United States Code, or

(iii) an individual work plan developed and implemented by an employment network pursuant to subsection (g) of section 1148 of the Social Security Act with respect to which the requirements of such subsection are met.

(7) Qualified summer youth employee

(A) In general

The term "qualified summer youth employee" means any individual—

(i) who performs services for the employer between May 1 and September 15,

(ii) who is certified by the designated local agency as having attained age 16 but not 18 on the hiring date (or if later, on May 1 of the calendar year involved),

(iii) who has not been an employee of the employer during any period prior to the 90-day period described in subparagraph (B)(i), and

(iv) who is certified by the designated local agency as having his principal place of abode within an empowerment zone, enterprise community, or renewal community.

(B) Special rules for determining amount of credit

For purposes of applying this subpart to wages paid or incurred to any qualified summer youth employee—

(i) subsection (b)(2) shall be applied by substituting "any 90-day period between May 1 and September 15" for "the 1-year period beginning with the day the individual begins work for the employer", and

(ii) subsection (b)(3) shall be applied by substituting "$3,000" for "$6,000".

The preceding sentence shall not apply to an individual who, with respect to the same employer, is certified as a member of another targeted group after such individual has been a qualified summer youth employee.

(C) Youth must continue to reside in zone or community

Paragraph (5)(B) shall apply for purposes of subparagraph (A)(iv).

(8) Qualified supplemental nutrition assistance program benefits recipient

(A) In general

The term "qualified supplemental nutrition assistance program benefits recipient" means any individual who is certified by the designated local agency—

(i) as having attained age 18 but not age 40 on the hiring date, and

(ii) as being a member of a family—

(I) receiving assistance under a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for the 6-month period ending on the hiring date, or

(II) receiving such assistance for at least 3 months of the 5-month period ending on the hiring date, in the case of a member of a family who ceases to be eligible for such assistance under section 6(o) of the Food and Nutrition Act of 2008.

(B) Participation information

Notwithstanding any other provision of law, the Secretary of the Treasury and the Secretary of Agriculture shall enter into an agreement to provide information to designated local agencies with respect to participation in the supplemental nutrition assistance program.

(9) Qualified SSI recipient

The term "qualified SSI recipient" means any individual who is certified by the designated local agency as receiving supplemental security income benefits under title XVI of the Social Security Act (including supplemental security income benefits of the type described in section 1616 of such Act or section 212 of Public Law 93–66) for any month ending within the 60-day period ending on the hiring date.

(10) Long-term family assistance recipient

The term "long-term family assistance recipient" means any individual who is certified by the designated local agency—

(A) as being a member of a family receiving assistance under a IV–A program (as defined in paragraph (2)(B)) for at least the 18-month period ending on the hiring date,

(B)(i) as being a member of a family receiving such assistance for 18 months beginning after August 5, 1997, and

(ii) as having a hiring date which is not more than 2 years after the end of the earliest such 18-month period, or

(C)(i) as being a member of a family which ceased to be eligible for such assistance by reason of any limitation imposed by Federal or State law on the maximum period such assistance is payable to a family, and

(ii) as having a hiring date which is not more than 2 years after the date of such cessation.

(11) Hiring date

The term "hiring date" means the day the individual is hired by the employer.

(12) Designated local agency

The term "designated local agency" means a State employment security agency established in accordance with the Act of June 6, 1933, as amended (29 U.S.C. 49–49n).

(13) Special rules for certifications

(A) In general

An individual shall not be treated as a member of a targeted group unless—

(i) on or before the day on which such individual begins work for the employer, the employer has received a certification from a designated local agency that such individual is a member of a targeted group, or

(ii)(I) on or before the day the individual is offered employment with the employer, a pre-screening notice is completed by the employer with respect to such individual, and

(II) not later than the 28th day after the individual begins work for the employer, the employer submits such notice, signed by the employer and the individual under penalties of perjury, to the designated local agency as part of a written request for such a certification from such agency.

For purposes of this paragraph, the term "pre-screening notice" means a document (in such form as the Secretary shall prescribe) which contains information provided by the individual on the basis of which the employer believes that the individual is a member of a targeted group.

(B) Incorrect certifications

If—

(i) an individual has been certified by a designated local agency as a member of a targeted group, and

(ii) such certification is incorrect because it was based on false information provided by such individual,

the certification shall be revoked and wages paid by the employer after the date on which notice of revocation is received by the employer shall not be treated as qualified wages.

(C) Explanation of denial of request

If a designated local agency denies a request for certification of membership in a targeted group, such agency shall provide to the person making such request a written explanation of the reasons for such denial.

(D) Credit for unemployed veterans

(i) In general

Notwithstanding subparagraph (A), for purposes of paragraph (3)(A)—

(I) a veteran will be treated as certified by the designated local agency as having aggregate periods of unemployment meeting the requirements of clause (ii)(II) or (iv) of such paragraph (whichever is applicable) if such veteran is certified by such agency as being in receipt of unemployment compensation under State or Federal law for not less than 6 months during the 1-year period ending on the hiring date, and

(II) a veteran will be treated as certified by the designated local agency as having aggregate periods of unemployment meeting the requirements of clause (iii) of such paragraph if such veteran is certified by such agency as being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks (but less than 6 months) during the 1-year period ending on the hiring date.

(ii) Regulatory authority

The Secretary may provide alternative methods for certification of a veteran as a qualified veteran described in clause (ii)(II), (iii), or (iv) of paragraph (3)(A), at the Secretary's discretion.

(14) Credit allowed for unemployed veterans and disconnected youth hired in 2009 or 2010

(A) In general

Any unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010 shall be treated as a member of a targeted group for purposes of this subpart.

(B) Definitions

For purposes of this paragraph—

(i) Unemployed veteran

The term "unemployed veteran" means any veteran (as defined in paragraph (3)(B), determined without regard to clause (ii) thereof) who is certified by the designated local agency as—

(I) having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date, and

(II) being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1-year period ending on the hiring date.

(ii) Disconnected youth

The term "disconnected youth" means any individual who is certified by the designated local agency—

(I) as having attained age 16 but not age 25 on the hiring date,

(II) as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date,

(III) as not regularly employed during such 6-month period, and

(IV) as not readily employable by reason of lacking a sufficient number of basic skills.

(15) Qualified long-term unemployment recipient

The term "qualified long-term unemployment recipient" means any individual who is certified by the designated local agency as being in a period of unemployment which—

(A) is not less than 27 consecutive weeks, and

(B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.

(e) Credit for second-year wages for employment of long-term family assistance recipients

(1) In general

With respect to the employment of a long-term family assistance recipient—

(A) the amount of the work opportunity credit determined under this section for the taxable year shall include 50 percent of the qualified second-year wages for such year, and

(B) in lieu of applying subsection (b)(3), the amount of the qualified first-year wages, and the amount of qualified second-year wages, which may be taken into account with respect to such a recipient shall not exceed $10,000 per year.

(2) Qualified second-year wages

For purposes of this subsection, the term "qualified second-year wages" means qualified wages—

(A) which are paid to a long-term family assistance recipient, and

(B) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such recipient determined under subsection (b)(2).

(3) Special rules for agricultural and railway labor

If such recipient is an employee to whom subparagraph (A) or (B) of subsection (h)(1) applies, rules similar to the rules of such subparagraphs shall apply except that—

(A) such subparagraph (A) shall be applied by substituting "$10,000" for "$6,000", and

(B) such subparagraph (B) shall be applied by substituting "$833.33" for "$500".

(f) Remuneration must be for trade or business employment

(1) In general

For purposes of this subpart, remuneration paid by an employer to an employee during any taxable year shall be taken into account only if more than one-half of the remuneration so paid is for services performed in a trade or business of the employer.

(2) Special rule for certain determination

Any determination as to whether paragraph (1), or subparagraph (A) or (B) of subsection (h)(1), applies with respect to any employee for any taxable year shall be made without regard to subsections (a) and (b) of section 52.

(g) United States Employment Service to notify employers of availability of credit

The United States Employment Service, in consultation with the Internal Revenue Service, shall take such steps as may be necessary or appropriate to keep employers apprised of the availability of the work opportunity credit determined under this subpart.

(h) Special rules for agricultural labor and railway labor

For purposes of this subpart—

(1) Unemployment insurance wages

(A) Agricultural labor

If the services performed by any employee for an employer during more than one-half of any pay period (within the meaning of section 3306(d)) taken into account with respect to any year constitute agricultural labor (within the meaning of section 3306(k)), the term "unemployment insurance wages" means, with respect to the remuneration paid by the employer to such employee for such year, an amount equal to so much of such remuneration as constitutes "wages" within the meaning of section 3121(a), except that the contribution and benefit base for each calendar year shall be deemed to be $6,000.

(B) Railway labor

If more than one-half of remuneration paid by an employer to an employee during any year is remuneration for service described in section 3306(c)(9), the term "unemployment insurance wages" means, with respect to such employee for such year, an amount equal to so much of the remuneration paid to such employee during such year which would be subject to contributions under section 8(a) of the Railroad Unemployment Insurance Act (45 U.S.C. 358(a)) if the maximum amount subject to such contributions were $500 per month.

(2) Wages

In any case to which subparagraph (A) or (B) of paragraph (1) applies, the term "wages" means unemployment insurance wages (determined without regard to any dollar limitation).

(i) Certain individuals ineligible

(1) Related individuals

No wages shall be taken into account under subsection (a) with respect to an individual who—

(A) bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity (determined with the application of section 267(c)),

(B) if the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to a grantor, beneficiary, or fiduciary of the estate or trust, or

(C) is a dependent (described in section 152(d)(2)(H)) of the taxpayer, or, if the taxpayer is a corporation, of an individual described in subparagraph (A), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.

(2) Nonqualifying rehires

No wages shall be taken into account under subsection (a) with respect to any individual if, prior to the hiring date of such individual, such individual had been employed by the employer at any time.

(3) Individuals not meeting minimum employment periods

(A) Reduction of credit for individuals performing fewer than 400 hours of service

In the case of an individual who has performed at least 120 hours, but less than 400 hours, of service for the employer, subsection (a) shall be applied by substituting "25 percent" for "40 percent".

(B) Denial of credit for individuals performing fewer than 120 hours of service

No wages shall be taken into account under subsection (a) with respect to any individual unless such individual has performed at least 120 hours of service for the employer.

(j) Election to have work opportunity 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.

(k) Treatment of successor employers; treatment of employees performing services for other persons

(1) Treatment of successor employers

Under regulations prescribed by the Secretary, in the case of a successor employer referred to in section 3306(b)(1), the determination of the amount of the credit under this section with respect to wages paid by such successor employer shall be made in the same manner as if such wages were paid by the predecessor employer referred to in such section.

(2) Treatment of employees performing services for other persons

No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by such employee for another person unless the amount reasonably expected to be received by the employer for such services from such other person exceeds the remuneration paid by the employer to such employee for such services.

(Added Pub. L. 95–30, title II, §202(b), May 23, 1977, 91 Stat. 141; amended Pub. L. 95–600, title III, §321(a), Nov. 6, 1978, 92 Stat. 2830; Pub. L. 96–222, title I, §103(a)(6)(A), (E), (F), (G)(iii)–(ix), Apr. 1, 1980, 94 Stat. 209, 210; Pub. L. 97–34, title II, §261(a)–(b)(2)(A), (B)(ii)–(f)(1), Aug. 13, 1981, 95 Stat. 260–262; Pub. L. 97–248, title II, §233(a)–(d), (f), Sept. 3, 1982, 96 Stat. 501, 502; Pub. L. 97–448, title I, §102(l)(1), (3), (4), Jan. 12, 1983, 96 Stat. 2374; Pub. L. 98–369, div. A, title IV, §474(p)(1)–(3), title VII, §712(n), title X, §1041(a), (c)(1)–(4), div. B, title VI, §§2638(b), 2663(j)(5)(A), July 18, 1984, 98 Stat. 837, 955, 1042, 1043, 1144, 1171; Pub. L. 99–514, title XVII, §1701(a)–(c), title XVIII, §1878(f)(1), Oct. 22, 1986, 100 Stat. 2772, 2904; Pub. L. 100–203, title X, §10601(a), Dec. 22, 1987, 101 Stat. 1330–451; Pub. L. 100–485, title II, §202(c)(6), Oct. 13, 1988, 102 Stat. 2378; Pub. L. 100–647, title I, §1017(a), title IV, §4010(a), (c)(1), (d)(1), Nov. 10, 1988, 102 Stat. 3575, 3655; Pub. L. 101–239, title VII, §7103(a), (c)(1), Dec. 19, 1989, 103 Stat. 2305; Pub. L. 101–508, title XI, §11405(a), Nov. 5, 1990, 104 Stat. 1388–473; Pub. L. 102–227, title I, §105(a), Dec. 11, 1991, 105 Stat. 1687; Pub. L. 103–66, title XIII, §§13102(a), 13302(d), Aug. 10, 1993, 107 Stat. 420, 556; Pub. L. 104–188, title I, §1201(a)–(e)(1), (5), (f), Aug. 20, 1996, 110 Stat. 1768–1772; Pub. L. 104–193, title I, §110(l)(1), Aug. 22, 1996, 110 Stat. 2173; Pub. L. 105–33, title V, §5514(a)(1), Aug. 5, 1997, 111 Stat. 620; Pub. L. 105–34, title VI, §603(a)–(d), Aug. 5, 1997, 111 Stat. 862; Pub. L. 105–277, div. J, title I, §1002(a), title IV, §4006(c)(1), Oct. 21, 1998, 112 Stat. 2681–888, 2681–912; Pub. L. 106–170, title V, §505(a), (b), Dec. 17, 1999, 113 Stat. 1921; Pub. L. 106–554, §1(a)(7) [title I, §102(a)–(c), title III, §316(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–600, 2763A–644; Pub. L. 107–147, title VI, §604(a), Mar. 9, 2002, 116 Stat. 59; Pub. L. 108–311, title II, §207(5), title III, §303(a)(1), Oct. 4, 2004, 118 Stat. 1177, 1179; Pub. L. 109–432, div. A, title I, §105(a)–(e)(3), Dec. 20, 2006, 120 Stat. 2936, 2937; Pub. L. 110–28, title VIII, §8211(a)–(d), May 25, 2007, 121 Stat. 191; Pub. L. 110–234, title IV, §4002(b)(1)(A), (B), (D), (2)(O), May 22, 2008, 122 Stat. 1095–1097; Pub. L. 110–246, §4(a), title IV, §4002(b)(1)(A), (B), (D), (2)(O), June 18, 2008, 122 Stat. 1664, 1857, 1858; Pub. L. 111–5, div. B, title I, §1221(a), Feb. 17, 2009, 123 Stat. 337; Pub. L. 111–147, title I, §101(b), Mar. 18, 2010, 124 Stat. 74; Pub. L. 111–312, title VII, §757(a), Dec. 17, 2010, 124 Stat. 3322; Pub. L. 112–56, title II, §261(a)–(d), Nov. 21, 2011, 125 Stat. 729, 730; Pub. L. 112–240, title III, §309(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, §119(a), Dec. 19, 2014, 128 Stat. 4015; Pub. L. 114–113, div. Q, title I, §142(a), (b), Dec. 18, 2015, 129 Stat. 3056; Pub. L. 115–141, div. U, title IV, §401(a)(26)–(29), Mar. 23, 2018, 132 Stat. 1185; Pub. L. 116–94, div. Q, title I, §143(a), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, §113(a), Dec. 27, 2020, 134 Stat. 3050.)

Editorial Notes

References in Text

The Social Security Act, referred to in subsecs. (c)(2)(B) and (d)(2)(B), (6)(B)(iii), (9), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Part A of title IV of the Act is classified generally to part A (§601 et seq.) of subchapter IV of chapter 7 of Title 42, The Public Health and Welfare. Title XVI of the Act is classified generally to subchapter XVI (§1381 et seq.) of chapter 7 of Title 42. Section 482 of the Act, which was classified to section 682 of Title 42, was repealed by Pub. L. 104–193, title I, §108(e), Aug. 22, 1996, 110 Stat. 2167. Sections 1148(g) and 1616 of the Act are classified to sections 1320b–19(g) and 1382e, respectively, of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.

Section 3111(d), referred to in subsec. (c)(5), was repealed by Pub. L. 115–141, div. U, title IV, §401(b)(34), Mar. 23, 2018, 132 Stat. 1204.

The Food and Nutrition Act of 2008, referred to in subsec. (d)(3)(A)(i), (8)(A)(ii), is Pub. L. 88–525, Aug. 31, 1964, 78 Stat. 703, which is classified generally to chapter 51 (§2011 et seq.) of Title 7, Agriculture. Section 6(o) of the Act is classified to section 2015(o) of Title 7. For complete classification of this Act to the Code, see Short Title note set out under section 2011 of Title 7 and Tables.

The Rehabilitation Act of 1973, referred to in subsec. (d)(6)(B)(i), is Pub. L. 93–112, Sept. 26, 1973, 87 Stat. 355, which is classified generally to chapter 16 (§701 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 701 of Title 29 and Tables.

Section 212 of Public Law 93–66, referred to in subsec. (d)(9), is set out as a note under section 1382 of Title 42, The Public Health and Welfare.

Act of June 6, 1933, referred to in subsec. (d)(12), is act June 6, 1933, ch. 49, 48 Stat. 113, popularly known as the Wagner-Peyser Act, which is classified generally to chapter 4B (§49 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 49 of Title 29 and Tables.

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 51, added Pub. L. 90–364, title I, §102(a), June 28, 1968, 82 Stat. 252; amended Pub. L. 91–53, §5(a), Aug. 7, 1969, 83 Stat. 93; Pub. L. 91–172, title III, §301(b)(5), title VII, §701(a), Dec. 30, 1969, 83 Stat. 585, 657, related to the imposition of a tax surcharge, prior to repeal by Pub. L. 94–455, title XIX, §1901(a)(7), Oct. 4, 1976, 90 Stat. 1765.

Amendments

2020—Subsec. (c)(4). Pub. L. 116–260 substituted "December 31, 2025" for "December 31, 2020".

2019—Subsec. (c)(4). Pub. L. 116–94 substituted "December 31, 2020" for "December 31, 2019".

2018—Subsec. (c)(4). Pub. L. 115–141, §401(a)(26), inserted period at end.

Subsec. (d)(3)(A)(ii)(II). Pub. L. 115–141, §401(a)(27), inserted comma at end.

Subsec. (d)(8). Pub. L. 115–141, §401(a)(28), substituted "supplemental nutrition assistance program benefits recipient" for "food stamp recipient" in heading.

Subsec. (i)(1)(A). Pub. L. 115–141, §401(a)(29), substituted "entity" for "entity,".

2015—Subsec. (c)(4). Pub. L. 114–113, §142(a), substituted "December 31, 2019" for "December 31, 2014".

Subsec. (d)(1)(J). Pub. L. 114–113, §142(b)(1), added subpar. (J).

Subsec. (d)(15). Pub. L. 114–113, §142(b)(2), added par. (15).

2014—Subsec. (c)(4). Pub. L. 113–295 substituted "for the employer after December 31, 2014" for "for the employer—

"(A) after December 31, 1994, and before October 1, 1996, or

"(B) after December 31, 2013".

2013—Subsec. (c)(4)(B). Pub. L. 112–240 substituted "after December 31, 2013" for "after—

"(i) December 31, 2012, in the case of a qualified veteran, and

"(ii) December 31, 2011, in the case of any other individual."

2011—Subsec. (b)(3). Pub. L. 112–56, §261(a), substituted "($12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I), $14,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv), and $24,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II))" for "($12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii))".

Subsec. (c)(4)(B). Pub. L. 112–56, §261(d), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "after December 31, 2011."

Subsec. (d)(3)(A)(iii), (iv). Pub. L. 112–56, §261(b), added cls. (iii) and (iv).

Subsec. (d)(13)(D). Pub. L. 112–56, §261(c), added subpar. (D).

2010—Subsec. (c)(4)(B). Pub. L. 111–312 substituted "December 31, 2011" for "August 31, 2011".

Subsec. (c)(5). Pub. L. 111–147 added par. (5).

2009—Subsec. (d)(14). Pub. L. 111–5 added par. (14).

2008—Subsec. (d)(1)(G). Pub. L. 110–246, §4002(b)(1)(D), (2)(O), substituted "supplemental nutrition assistance program benefits" for "food stamp".

Subsec. (d)(3)(A)(i). Pub. L. 110–246, §4002(b)(1)(A), (B), (2)(O), substituted "Food and Nutrition Act of 2008" for "Food Stamp Act of 1977" and "supplemental nutrition assistance program" for "food stamp program".

Subsec. (d)(8)(A). Pub. L. 110–246, §4002(b)(1)(D), (2)(O), substituted "supplemental nutrition assistance program benefits" for "food stamp" in introductory provisions.

Subsec. (d)(8)(A)(ii)(I). Pub. L. 110–246, §4002(b)(1)(A), (B), (2)(O), substituted "Food and Nutrition Act of 2008" for "Food Stamp Act of 1977" and "supplemental nutrition assistance program" for "food stamp program".

Subsec. (d)(8)(A)(ii)(II). Pub. L. 110–246, §4002(b)(1)(B), (2)(O), substituted "Food and Nutrition Act of 2008" for "Food Stamp Act of 1977".

Subsec. (d)(8)(B). Pub. L. 110–246, §4002(b)(1)(A), (2)(O), substituted "supplemental nutrition assistance program" for "food stamp program".

2007—Subsec. (b)(3). Pub. L. 110–28, §8211(d)(2), substituted "Limitation on" for "Only first $6,000 of" in heading and inserted "($12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii))" before period at end.

Subsec. (c)(4)(B). Pub. L. 110–28, §8211(a), substituted "August 31, 2011" for "December 31, 2007".

Subsec. (d)(1)(D). Pub. L. 110–28, §8211(b)(2), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows: "a high-risk youth,".

Subsec. (d)(3)(A). Pub. L. 110–28, §8211(d)(1)(A), substituted "agency as—" and cls. (i) and (ii) for "agency as being a member of a family receiving assistance under a food stamp program under the Food Stamp Act of 1977 for at least a 3-month period ending during the 12-month period ending on the hiring date."

Subsec. (d)(3)(C). Pub. L. 110–28, §8211(d)(1)(B), added subpar. (C).

Subsec. (d)(5). Pub. L. 110–28, §8211(b)(1), amended heading and text of par. (5) generally. Prior to amendment, text read as follows:

"(A) In general.—The term 'high-risk youth' means any individual who is certified by the designated local agency—

"(i) as having attained age 18 but not age 25 on the hiring date, and

"(ii) as having his principal place of abode within an empowerment zone, enterprise community, or renewal community.

"(B) Youth must continue to reside in zone or community.—In the case of a high-risk youth, the term 'qualified wages' shall not include wages paid or incurred for services performed while such youth's principal place of abode is outside an empowerment zone, enterprise community, or renewal community."

Subsec. (d)(6)(B)(iii). Pub. L. 110–28, §8211(c), added cl. (iii).

2006—Subsec. (c)(4)(B). Pub. L. 109–432, §105(a), substituted "2007" for "2005".

Subsec. (d)(1)(I). Pub. L. 109–432, §105(e)(1), added subpar. (I).

Subsec. (d)(4). Pub. L. 109–432, §105(b), inserted "and" at end of subpar. (A), substituted a period for ", and" at end of subpar. (B), and struck out subpar. (C) and concluding provisions which read as follows:

"(C) as being a member of a family which had an income during the 6 months immediately preceding the earlier of the month in which such income determination occurs or the month in which the hiring date occurs, which, on an annual basis, would be 70 percent or less of the Bureau of Labor Statistics lower living standard.

Any determination under subparagraph (C) shall be valid for the 45-day period beginning on the date such determination is made."

Subsec. (d)(8)(A)(i). Pub. L. 109–432, §105(c), substituted "40" for "25".

Subsec. (d)(10) to (12). Pub. L. 109–432, §105(e)(2), added par. (10) and redesignated former pars. (10) and (11) as (11) and (12), respectively. Former par. (12) redesignated (13).

Subsec. (d)(12)(A)(ii)(II). Pub. L. 109–432, §105(d), substituted "28th day" for "21st day".

Subsec. (d)(13). Pub. L. 109–432, §105(e)(2), redesignated par. (12) as (13).

Subsec. (e). Pub. L. 109–432, §105(e)(3), added subsec. (e).

2004—Subsec. (c)(4)(B). Pub. L. 108–311, §303(a)(1), substituted "2005" for "2003".

Subsec. (i)(1)(A), (B). Pub. L. 108–311, §207(5)(A), substituted "subparagraphs (A) through (G) of section 152(d)(2)" for "paragraphs (1) through (8) of section 152(a)".

Subsec. (i)(1)(C). Pub. L. 108–311, §207(5)(B), substituted "152(d)(2)(H)" for "152(a)(9)".

2002—Subsec. (c)(4)(B). Pub. L. 107–147 substituted "2003" for "2001".

2000—Subsec. (d)(2)(B). Pub. L. 106–554, §1(a)(7) [title III, §316(a)], substituted "program funded" for "plan approved" and struck out "(relating to assistance for needy families with minor children)" after "Social Security Act".

Subsec. (d)(5)(A)(ii). Pub. L. 106–554, §1(a)(7) [title I, §102(a)], substituted "empowerment zone, enterprise community, or renewal community" for "empowerment zone or enterprise community".

Subsec. (d)(5)(B). Pub. L. 106–554, §1(a)(7) [title I, §102(a), (c)], inserted "or community" after "zone" in heading and substituted "empowerment zone, enterprise community, or renewal community" for "empowerment zone or enterprise community" in text.

Subsec. (d)(7)(A)(iv). Pub. L. 106–554, §1(a)(7) [title I, §102(b)], substituted "empowerment zone, enterprise community, or renewal community" for "empowerment zone or enterprise community".

Subsec. (d)(7)(C). Pub. L. 106–554, §1(a)(7) [title I, §102(c)], inserted "or community" after "zone" in heading.

1999—Subsec. (c)(4)(B). Pub. L. 106–170, §505(a), substituted "December 31, 2001" for "June 30, 1999".

Subsec. (i)(2). Pub. L. 106–170, §505(b), struck out "during which he was not a member of a targeted group" before period at end.

1998—Subsec. (c)(4)(B). Pub. L. 105–277, §1002(a), substituted "June 30, 1999" for "June 30, 1998".

Subsec. (d)(6)(B)(i). Pub. L. 105–277, §4006(c)(1), substituted "plan for employment" for "rehabilitation plan".

1997—Subsec. (a). Pub. L. 105–34, §603(d)(1), substituted "40 percent" for "35 percent".

Subsec. (c)(4)(B). Pub. L. 105–34, §603(a), substituted "June 30, 1998" for "September 30, 1997".

Subsec. (d)(1)(H). Pub. L. 105–34, §603(c)(1), added subpar. (H).

Subsec. (d)(2)(A). Pub. L. 105–34, §603(b)(1), substituted "for any 9 months during the 18-month period ending on the hiring date" for "for at least a 9-month period ending during the 9-month period ending on the hiring date".

Subsec. (d)(3)(A). Pub. L. 105–34, §603(b)(2), amended heading and text of subpar. (A) generally. Prior to amendment, text read as follows: "The term 'qualified veteran' means any veteran who is certified by the designated local agency as being—

"(i) a member of a family receiving assistance under a IV–A program (as defined in paragraph (2)(B)) for at least a 9-month period ending during the 12-month period ending on the hiring date, or

"(ii) a member of a family receiving assistance under a food stamp program under the Food Stamp Act of 1977 for at least a 3-month period ending during the 12-month period ending on the hiring date."

Subsec. (d)(9). Pub. L. 105–34, §603(c)(2), added par. (9). Former par. (9) redesignated (10).

Pub. L. 105–33 repealed Pub. L. 104–193, §110(l)(1). See 1996 Amendment note below.

Subsec. (d)(10) to (12). Pub. L. 105–34, §603(c)(2), redesignated pars. (9) to (11) as (10) to (12), respectively.

Subsec. (i)(3). Pub. L. 105–34, §603(d)(2), amended heading and text of par. (3) generally. Prior to amendment, text read as follows: "No wages shall be taken into account under subsection (a) with respect to any individual unless such individual either—

"(A) is employed by the employer at least 180 days (20 days in the case of a qualified summer youth employee), or

"(B) has completed at least 400 hours (120 hours in the case of a qualified summer youth employee) of services performed for the employer."

1996—Subsec. (a). Pub. L. 104–188, §1201(a), (e)(1), substituted "work opportunity credit" for "targeted jobs credit" and "35 percent" for "40 percent".

Subsec. (c)(1). Pub. L. 104–188, §1201(f), struck out ", subsection (d)(8)(D)," after "this subsection".

Subsec. (c)(4). Pub. L. 104–188, §1201(d), amended par. (4) generally. Prior to amendment, par. (4) read as follows: "Termination.—The term 'wages' shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 1994."

Subsec. (d). Pub. L. 104–188, §1201(b), reenacted heading without change and amended text generally, revising and restating as pars. (1) to (11) provisions formerly contained in pars. (1) to (16).

Subsec. (d)(9). Pub. L. 104–193, §110(l)(1), which directed amendment of par. (9) by striking all that follows "agency as" and inserting "being eligible for financial assistance under part A of title IV of the Social Security Act and as having continually received such financial assistance during the 90-day period which immediately precedes the date on which such individual is hired by the employer.", was repealed by Pub. L. 105–33.

Subsec. (g). Pub. L. 104–188, §1201(e)(1), substituted "work opportunity credit" for "targeted jobs credit".

Subsec. (i)(3). Pub. L. 104–188, §1201(c), amended par. (3) generally. Prior to amendment, par. (3) read as follows: "Individuals not meeting minimum employment period.—No wages shall be taken into account under subsection (a) with respect to any individual unless such individual either—

"(A) is employed by the employer at least 90 days (14 days in the case of an individual described in subsection (d)(12)), or

"(B) has completed at least 120 hours (20 hours in the case of an individual described in subsection (d)(12)) of services performed for the employer."

Subsec. (j). Pub. L. 104–188, §1201(e)(5), substituted "Work opportunity credit" for "Targeted jobs credit" in heading.

1993—Subsec. (c)(4). Pub. L. 103–66, §13102(a), substituted "December 31, 1994" for "June 30, 1992".

Subsec. (i)(1)(A). Pub. L. 103–66, §13302(d), inserted ", or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity," after "of the corporation".

1991—Subsec. (c)(4). Pub. L. 102–227 substituted "June 30, 1992" for "December 31, 1991".

1990—Subsec. (c)(4). Pub. L. 101–508 substituted "December 31, 1991" for "September 30, 1990".

1989—Subsec. (c)(4). Pub. L. 101–239, §7103(a), substituted "September 30, 1990" for "December 31, 1989".

Subsec. (d)(16)(C). Pub. L. 101–239, §7103(c)(1), added subpar. (C).

1988—Subsec. (c)(2)(B). Pub. L. 100–485 substituted "section 482(e)" for "section 414".

Subsec. (c)(4). Pub. L. 100–647, §4010(a), substituted "1989" for "1988".

Subsec. (d)(3)(B). Pub. L. 100–647, §4010(c)(1), substituted "age 23" for "age 25".

Subsec. (d)(12)(B). Pub. L. 100–647, §4010(d)(1), redesignated former cls. (ii) and (iii) as (i) and (ii), respectively, and struck out former cl. (i) which provided that subsection (a) shall be applied by substituting "85 percent" for "40 percent".

Pub. L. 100–647, §1017(a), substituted "subsection (a)" for "subsection (a)(1)" in cl. (i).

1987—Subsec. (c)(3), (4). Pub. L. 100–203 added par. (3) and redesignated former par. (3) as (4).

1986—Subsec. (a). Pub. L. 99–514, §1701(b)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: "For purposes of section 38, the amount of the targeted jobs credit determined under this section for the taxable year shall be the sum of—

"(1) 50 percent of the qualified first-year wages for such year, and

"(2) 25 percent of the qualified second-year wages for such year."

Subsec. (b)(3), (4). Pub. L. 99–514, §1701(b)(2)(A), redesignated par. (4) as (3) and struck out ", and the amount of the qualified second-year wages," after "first-year wages" and struck out par. (3) which defined "qualified second-year wages".

Subsec. (c)(3). Pub. L. 99–514, §1701(a), substituted "December 31, 1988" for "December 31, 1985".

Subsec. (d)(12)(B). Pub. L. 99–514, §1701(b)(2)(B), in cl. (i), substituted "40 percent" for "50 percent", struck out cl. (ii) which directed that subsecs. (a)(2) and (b)(3) were not to apply, redesignated cl. (iii) as cl. (ii), redesignated cl. (iv) as cl. (iii), and in cl. (iii) as so redesignated substituted "subsection (b)(3)" for "subsection (b)(4)".

Subsec. (i)(3). Pub. L. 99–514, §1701(c), added par. (3).

Subsec. (k). Pub. L. 99–514, §1878(f)(1), redesignated subsec. (j) added by section 1041(c)(1) of Pub. L. 98–369 and relating to treatment of successor employers, and employees performing services for other persons, as subsec. (k).

1984—Subsec. (a). Pub. L. 98–369, §474(p)(1), substituted "For purposes of section 38, the amount of the targeted jobs credit determined under this section" for "The amount of the credit allowable by section 44B" in introductory provisions.

Subsec. (b)(2). Pub. L. 98–369, §1041(c)(4), struck out "(or, in the case of a vocational rehabilitation referral, the day the individual begins work for the employer on or after the beginning of such individual's rehabilitation plan)" after "begins work for the employer".

Subsec. (c)(2). Pub. L. 98–369, §2638(b), designated existing provisions as subpar. (A), inserted par. (2) heading, and added subpar. (B).

Subsec. (c)(3). Pub. L. 98–369, §1041(a), substituted "December 31, 1985" for "December 31, 1984".

Subsec. (d)(6)(B)(ii). Pub. L. 98–369, §2663(j)(5)(A), substituted "Secretary of Health and Human Services" for "Secretary of Health Education and Welfare".

Subsec. (d)(11). Pub. L. 98–369, §712(n), made determination respecting membership of a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to an employer applicable for purposes of determining whether such individual is a member of another targeted group with respect to such employer.

Subsec. (d)(12)(A)(ii). Pub. L. 98–369, §1041(c)(3), substituted "(or if later, on May 1 of the calendar year involved)" for "(as defined in paragraph (14))".

Subsec. (d)(16)(A). Pub. L. 98–369, §1041(c)(2), inserted "For purposes of the preceding sentence, if on or before the day on which such individual begins work for the employer, such individual has received from a designated local agency (or other agency or organization designated pursuant to a written agreement with such designated local agency) a written preliminary determination that such individual is a member of a targeted group, then 'the fifth day' shall be substituted for 'the day' in such sentence."

Subsec. (g). Pub. L. 98–369, §474(p)(2), substituted "the targeted jobs credit determined under this subpart" for "the credit provided by section 44B".

Subsec. (j). Pub. L. 98–369, §1041(c)(1), added subsec. (j) relating to treatment of successor employers, and employees performing services for other persons.

Pub. L. 98–369, §474(p)(3), added subsec. (j) relating to election to have targeted jobs credit not apply.

1983—Subsec. (d)(8)(D). Pub. L. 97–448, §102(l)(1), substituted "clauses (i), (ii), and (iii) of subparagraph (A)" for "subparagraph (A)".

Subsec. (d)(9)(B). Pub. L. 97–448, §102(l)(3), substituted "section 432(b)(1) or 445" for "section 432(b)(1)".

Subsec. (d)(11). Pub. L. 97–448, §102(l)(4), substituted "the earlier of the month in which such determination occurs or the month in which the hiring date occurs" for "the month in which such determination occurs".

1982—Subsec. (c)(3). Pub. L. 97–248, §233(a), substituted "1984" for "1982".

Subsec. (d)(1)(J). Pub. L. 97–248, §233(b)(3), added subpar. (J).

Subsec. (d)(6)(B)(i)(II). Pub. L. 97–248, §233(d), substituted "consists of money payments or voucher or scrip, and" for "consists of money payments".

Subsec. (d)(10). Pub. L. 97–248, §233(c), inserted provision respecting nonapplicability of paragraph to individuals who begin work for the employer after December 31, 1982.

Subsec. (d)(12) to (15). Pub. L. 97–248, §233(b)(4), (5), added par. (12) and redesignated former pars. (12) to (15) as (13) to (16), respectively.

Subsec. (d)(16). Pub. L. 97–248, §233(b)(4), redesignated former par. (15) as (16).

Pub. L. 97–248, §233(f), substituted "on or before" for "before" in subpar. (A).

1981—Subsec. (c)(3), (4). Pub. L. 97–34, §261(b)(2)(B)(ii), redesignated par. (4) as (3). Former par. (3), which excluded from term "wages" any amount paid or incurred by the employer to an individual with respect to whom the employer claims credit under section 40 of this title, was struck out.

Pub. L. 97–34, §261(a), extended termination date to Dec. 31, 1982, from Dec. 31, 1981, and inserted "to an individual who begins work for the employer" after "paid or incurred".

Subsec. (d)(1)(H), (I). Pub. L. 97–34, §261(b)(1), added subpars. (H) and (I).

Subsec. (d)(3)(A)(ii). Pub. L. 97–34, §261(b)(2)(B)(iii), substituted "paragraph (11)" for "paragraph (9)".

Subsec. (d)(4). Pub. L. 97–34, §261(b)(2)(B)(iii), (3), in subpar. (B) inserted "and" after "States," in subpar. (C) substituted "paragraph (11)" for "paragraph (9)", and struck out "(D) not having attained the age of 35 on the hiring date."

Subsec. (d)(7)(B). Pub. L. 97–34, §261(b)(2)(B)(iii), substituted "paragraph (11)" for "paragraph (9)".

Subsec. (d)(8)(A)(iv). Pub L. 97–34, §261(b)(4), added cl. (iv).

Subsec. (d)(9), (10). Pub. L. 97–34, §261(b)(2)(A), added pars. (9) and (10) and redesignated former pars. (9) and (10) as (11) and (12), respectively.

Subsec. (d)(11). Pub. L. 97–34, §261(b)(2)(A), (c)(2), redesignated former par. (9) as (11), substituted "70 percent or less" for "less than 70 percent", and provided for validity of any determination for 45-day period beginning on the date the determination is made. Former par. (11) redesignated (13).

Subsec. (d)(12), (13). Pub. L. 97–34, §261(b)(2)(A), redesignated former pars. (10) and (11) as pars. (12) and (13), respectively. Former par. (12) redesignated (14).

Subsec. (d)(14). Pub. L. 97–34, §261(f)(1)(A), substituted as definition for term " 'designated local agency' means a State employment security agency established in accordance with the Act of June 6, 1933, as amended (29 U.S.C. 49–49n)" for " 'designated local agency' means the agency for any locality designated jointly by the Secretary and the Secretary of Labor to perform certification of employees for employers in that locality".

Pub. L. 97–34, §261(b)(2)(A), redesignated former par. (12) as (14).

Subsec. (d)(15). Pub. L. 97–34, §261(c)(1), added par. (15).

Subsec. (e). Pub. L. 97–34, §261(e)(1), struck out subsec. (e) which set forth limitation that qualified first-year wages could not exceed 30 percent of FUTA wages for all employees.

Subsec. (f). Pub. L. 97–34, §261(e)(2), substituted "any taxable year" for "any year" in pars. (1) and (2) and struck out par. (3), defining "year" which is covered in pars. (1) and (2).

Subsec. (g). Pub. L. 97–34, §261(f)(1)(B), substituted "United States Employment Service" for "Secretary of Labor" in heading and text.

Subsec. (i). Pub. L. 97–34, §261(d), added subsec. (i).

1980—Subsec. (c)(1). Pub. L. 96–222, §103(a)(6)(E)(ii), substituted ", subsection (d)(8)(D), and subsection (h)(2)" for "subsection (h)(2)".

Subsec. (c)(2). Pub. L. 96–222, §103(a)(6)(G)(iii), inserted "or incurred" after "amounts paid".

Subsec. (c)(4). Pub. L. 96–222, §103(a)(6)(A), substituted "December 31, 1981" for "December 31, 1980".

Subsec. (d)(1)(E). Pub. L. 96–222, §103(a)(6)(G)(iv), struck out "or" after "recipient,".

Subsec. (d)(4)(A)(i). Pub. L. 96–222, §103(a)(6)(G)(v), substituted "active duty" for "active day".

Subsec. (d)(4)(B). Pub. L. 96–222, §103(a)(6)(G)(vi), substituted "preemployment" for "premployment".

Subsec. (d)(5). Pub. L. 96–222, §103(a)(6)(G)(vii), substituted "preemployment" for "pre-employment".

Subsec. (d)(8)(A). Pub. L. 96–222, §103(a)(6)(F), substituted "age 20" for "age 19".

Subsec. (d)(8)(D). Pub. L. 96–222, §103(a)(6)(E)(i), in heading substituted "Wages" for "Individual must be currently pursuing program" and in text substituted "In the case of remuneration" for "Wages shall be taken into account with respect to a qualified cooperative education program only if the wages are" and inserted ", wages, and unemployment insurance wages, shall be determined without regard to section 3306(c)(10)(C)".

Subsec. (d)(12). Pub. L. 96–222, §103(a)(6)(G)(viii), substituted "employers" for "employer".

Subsec. (e). Pub. L. 96–222, §103(a)(6)(G)(ix), inserted "except as provided in subsection (h)(1)" after "the preceding sentence,".

1978—Pub. L. 95–600 amended section generally and limited allowance of credit to the hiring of seven target groups with high unemployment rates.

Statutory Notes and Related Subsidiaries

Effective Date of 2020 Amendment

Pub. L. 116–260, div. EE, title I, §113(b), Dec. 27, 2020, 134 Stat. 3050, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2020."

Effective Date of 2019 Amendment

Pub. L. 116–94, div. Q, title I, §143(b), Dec. 20, 2019, 133 Stat. 3234, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2019."

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, §142(c), Dec. 18, 2015, 129 Stat. 3056, provided that:

"(1) Extension.—The amendment made by subsection (a) [amending this section] shall apply to individuals who begin work for the employer after December 31, 2014.

"(2) Modification.—The amendments made by subsection (b) [amending this section] shall apply to individuals who begin work for the employer after December 31, 2015."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, §119(b), Dec. 19, 2014, 128 Stat. 4015, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2013."

Effective Date of 2013 Amendment

Pub. L. 112–240, title III, §309(b), Jan. 2, 2013, 126 Stat. 2329, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2011."

Effective Date of 2011 Amendment

Pub. L. 112–56, title II, §261(g), Nov. 21, 2011, 125 Stat. 732, provided that: "The amendments made by this section [amending this section and sections 52 and 3111 of this title] shall apply to individuals who begin work for the employer after the date of the enactment of this Act [Nov. 21, 2011]."

Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, §757(b), Dec. 17, 2010, 124 Stat. 3322, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after the date of the enactment of this Act [Dec. 17, 2010]."

Pub. L. 111–147, title I, §101(e), Mar. 18, 2010, 124 Stat. 75, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this subsection [probably should be "section", amending this section and sections 3111 and 3221 of this title] shall apply to wages paid after the date of the enactment of this Act [Mar. 18, 2010].

"(2) Railroad retirement taxes.—The amendments made by subsection (d) [amending section 3221 of this title] shall apply to compensation paid after the date of the enactment of this Act."

Effective Date of 2009 Amendment

Pub. L. 111–5, div. B, title I, §1221(b), Feb. 17, 2009, 123 Stat. 338, provided that: "The amendments made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2008."

Effective Date of 2008 Amendment

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.

Amendment by section 4002(b)(1)(A), (B), (D), (2)(O) of Pub. L. 110–246 effective Oct. 1, 2008, see section 4407 of Pub. L. 110–246, set out as a note under section 1161 of Title 2, The Congress.

Effective Date of 2007 Amendment

Pub. L. 110–28, title VIII, §8211(e), May 25, 2007, 121 Stat. 192, provided that: "The amendments made by this section [amending this section] shall apply to individuals who begin work for the employer after the date of the enactment of this Act [May 25, 2007]."

Effective Date of 2006 Amendment

Pub. L. 109–432, div. A, title I, §105(f), Dec. 20, 2006, 120 Stat. 2938, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and section 51A of this title and repealing section 51A of this title] shall apply to individuals who begin work for the employer after December 31, 2005.

"(2) Consolidation.—The amendments made by subsections (b), (c), (d), and (e) [amending this section and repealing section 51A of this title] shall apply to individuals who begin work for the employer after December 31, 2006."

Effective Date of 2004 Amendment

Amendment by section 207(5) of Pub. L. 108–311 applicable to taxable years beginning after Dec. 31, 2004, see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title.

Pub. L. 108–311, title III, §303(b), Oct. 4, 2004, 118 Stat. 1179, provided that:"The amendments made by this section [amending this section and section 51A of this title] shall apply to individuals who begin work for the employer after December 31, 2003."

Effective Date of 2002 Amendment

Pub. L. 107–147, title VI, §604(b), Mar. 9, 2002, 116 Stat. 59, provided that: "The amendment made by subsection (a) [amending this section] shall apply to individuals who begin work for the employer after December 31, 2001."

Effective Date of 2000 Amendment

Pub. L. 106–554, §1(a)(7) [title I, §102(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–600, provided that: "The amendments made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 2001."

Pub. L. 106–554, §1(a)(7) [title III, §316(e)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645, provided that: "The amendments made by this section [amending this section and sections 219, 401 and 1361 of this title] shall take effect as if included in the provisions of the Small Business Job Protection Act of 1996 [Pub. L. 104–188] to which they relate."

Effective Date of 1999 Amendment

Pub. L. 106–170, title V, §505(c), Dec. 17, 1999, 113 Stat. 1921, provided that: "The amendments made by this section [amending this section and section 51A of this title] shall apply to individuals who begin work for the employer after June 30, 1999."

Effective Date of 1998 Amendment

Pub. L. 105–277, div. J, title I, §1002(b), Oct. 21, 1998, 112 Stat. 2681–888, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after June 30, 1998."

Effective Date of 1997 Amendment

Pub. L. 105–34, title VI, §603(e), Aug. 5, 1997, 111 Stat. 863, provided that: "The amendments made by this section [amending this section] shall apply to individuals who begin work for the employer after September 30, 1997."

Pub. L. 105–33, title V, §5518(c), Aug. 5, 1997, 111 Stat. 621, provided that: "The amendments made by section 5514(a) of this Act [amending this section and sections 3304, 6103, 6334, 6402, and 7523 of this title] shall take effect as if the amendments had been included in section 110 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 [Pub. L. 104–193] at the time such section 110 became law."

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–193 effective July 1, 1997, with transition rules relating to State options to accelerate such date, rules relating to claims, actions, and proceedings commenced before such date, rules relating to closing out of accounts for terminated or substantially modified programs and continuance in office of Assistant Secretary for Family Support, and provisions relating to termination of entitlement under AFDC program, see section 116 of Pub. L. 104–193, as amended, set out as an Effective Date note under section 601 of Title 42, The Public Health and Welfare.

Amendment by Pub. L. 104–188 applicable to individuals who begin work for the employer after Sept. 30, 1996, see section 1201(g) 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, §13102(b), Aug. 10, 1993, 107 Stat. 420, provided that: "The amendment made by subsection (a) [amending this section] shall apply to individuals who begin work for the employer after June 30, 1992."

Effective Date of 1991 Amendment

Pub. L. 102–227, title I, §105(b), Dec. 11, 1991, 105 Stat. 1687, provided that: "The amendment made by this section [amending this section] shall apply to individuals who begin work for the employer after December 31, 1991."

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11405(c), Nov. 5, 1990, 104 Stat. 1388–473, provided that:

"(1) Credit.—The amendment made by subsection (a) [amending this section] shall apply to individuals who begin work for the employer after September 30, 1990.

"(2) Authorization.—The amendment made by subsection (b) [amending provisions set out below] shall apply to fiscal years beginning after 1990."

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, §7103(c)(2), Dec. 19, 1989, 103 Stat. 2305, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to individuals who begin work for the employer after December 31, 1989."

Effective Date of 1988 Amendment

Amendment by section 1017(a) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title IV, §4010(c)(2), Nov. 10, 1988, 102 Stat. 3655, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to individuals who begin work for the employer after December 31, 1988."

Pub. L. 100–647, title IV, §4010(d)(2), Nov. 10, 1988, 102 Stat. 3655, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to individuals who begin work for the employer after December 31, 1988."

Amendment by Pub. L. 100–485 effective Oct. 1, 1990, with provision for earlier effective dates in case of States making certain changes in their State plans and formally notifying the Secretary of Health and Human Services of their desire to become subject to the amendments made by title II of Pub. L. 100–485 on the earlier effective dates, see section 204 of Pub. L. 100–485, set out as a note under section 671 of Title 42, The Public Health and Welfare.

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, §10601(b), Dec. 22, 1987, 101 Stat. 1330–451, provided that: "The amendment made by subsection (a) [amending this section] shall apply to amounts paid or incurred on or after January 1, 1987, for services rendered on or after such date."

Effective Date of 1986 Amendment

Pub. L. 99–514, title XVII, §1701(e), Oct. 22, 1986, 100 Stat. 2772, provided that: "The amendments made by this section [amending this section and provisions set out below] shall apply with respect to individuals who begin work for the employer after December 31, 1985."

Amendment by section 1878(f)(1) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by section 474(p)(1)–(3) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.

Amendment by section 712 of Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.

Pub. L. 98–369, div. A, title X, §1041(c)(5), July 18, 1984, 98 Stat. 1043, as amended by Pub. L. 99–514, §2, title XVIII, §1878(f)(2), Oct. 22, 1986, 100 Stat. 2095, 2904, provided that:

"(A) In general.—Except as provided in subparagraph (B), the amendments made by this section [amending this section] shall apply to individuals who begin work for the employer after the date of the enactment of this Act [July 18, 1984].

"(B) Special rule for employees performing services for other persons.—Paragraph (2) of section 51(k) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this subsection) and the amendment made by paragraph (3) of this subsection [amending this section] shall apply to individuals who begin work for the employer after December 31, 1984."

Pub. L. 98–369, div. B, title VI, §2638(c)(2), July 18, 1984, 98 Stat. 1144, provided that: "The amendments made by subsection (b) [amending this section] shall apply with respect to payments made on or after the date of the enactment of this Act [July 18, 1984]."

Amendment by section 2663 of Pub. L. 98–369 effective July 18, 1984, but not to be construed as changing or affecting any right, liability, status or interpretation which existed (under the provisions of law involved) before that date, see section 2664(b) of Pub. L. 98–369, set out as a note under section 401 of Title 42, The Public Health and Welfare.

Effective Date of 1983 Amendment

Pub. L. 97–448, title I, §102(l)(4), Jan. 12, 1983, 96 Stat. 2374, provided that the amendment made by that section is effective with respect to certifications made after Jan. 12, 1983, with respect to individuals beginning work for an employer after May 11, 1982.

Amendment by title I of Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Effective Date of 1982 Amendment

Pub. L. 97–248, title II, §233(f), Sept. 3, 1982, 96 Stat. 502, provided that the amendments made by that section are effective only with respect to individuals who begin work for the taxpayer after May 11, 1982.

Pub. L. 97–248, title II, §233(g), Sept. 3, 1982, 96 Stat. 503, provided that:

"(1) Subsection (b).—The amendments made by subsection (b) [amending this section] shall apply to amounts paid or incurred after April 30, 1983, to individuals beginning work for the employer after such date.

"(2) Subsection (d).—The amendments made by subsection (d) [amending this section] shall apply to amounts paid or incurred after July 1, 1982, to individuals beginning work for the employer after such date."

Effective Date of 1981 Amendment

Pub. L. 97–34, title II, §261(g), Aug. 13, 1981, 95 Stat. 263, as amended by Pub. L. 97–448, title I, §102(l)(2), Jan. 12, 1983, 96 Stat. 2374; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) Amendments relating to members of targeted groups.—

"(A) In general.—Except as provided in subparagraphs (B), (C), and (D), the amendments made by subsections (b), (c)(2), and (d) [amending this section and section 50B of this title] shall apply to wages paid or incurred with respect to individuals first beginning work for an employer after the date of the enactment of this Act [Aug. 13, 1981] in taxable years ending after such date.

"(B) Eligible work incentive employees.—The amendments made by subsection (b)(2) [amending this section] to the extent relating to the designation of eligible work incentive employees (within the meaning of section 51(d)(9) [now 51(d)(10)] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) as members of a targeted group and subsection (b)(2)(B)(ii) [amending this section] shall apply to taxable years beginning after December 31, 1981. In the case of an eligible work incentive employee, subsections (a) and (b) of section 51 of such Code shall be applied for taxable years beginning after December 31, 1981, as if such employees had been members of a targeted group for taxable years beginning before January 1, 1982.

"(C) Cooperative education program participants.—The amendments made by subsection (b)(4) [amending this section] shall apply to wages paid or incurred after December 31, 1981, in taxable years ending after such date.

"(D) Designated local agency.—The amendments made by subsection (f)(1) [amending this section] shall take effect on the date 60 days after the date of the enactment of this act [Aug. 13, 1981].

"(2) Certifications.—

"(A) In general.—The amendment made by subsection (c)(1) [amending this section] shall apply to all individuals whether such individuals began work for their employer before, on, or after the date of the enactment of this Act [Aug. 13, 1981].

"(B) Special rule for individuals who began work for the employer before 45th day before date of enactment.—In the case of any individual (other than an individual described in section 51(d)(8) of the Internal Revenue Code of 1986) who began work for the employer before the date 45 days before the date of the enactment of this Act [Aug. 13, 1981], paragraph (15) of section 51(d) of the Internal Revenue Code of 1986 (as added by subsection (c)(1)) shall be applied by substituting 'July 23, 1981,' for the day on which such individual begins work for the employer.

"(C) Individuals who begin work for employer within 45 days before or after date of enactment.—In the case of any individual (other than an individual described in section 51(d)(8) of the Internal Revenue Code of 1986) who begins work for the employer during the 90-day period beginning with the date 45 days before the date of the enactment of this Act [Aug. 13, 1981], and in the case of an individual described in section 51(d)(8) of such Code who begins work before the end of such 90-day period, paragraph (15) of section 51(d) of such Code (as added by subsection (c)(1)) shall be applied by substituting 'the last day of the 90-day period beginning with the date 45 days before the date of the enactment of this Act' for the day on which such individual begins work for the employer.

"(3) Limitation on qualified first-year wages.—The amendment made by subsection (e) [amending this section] shall apply to taxable years beginning after December 31, 1981."

Effective Date of 1980 Amendment

Pub. L. 96–222, title I, §103(b)(1), Apr. 1, 1980, 94 Stat. 214, provided that: "The amendment made by subsection (a)(5)(F) [probably means subsec. (a)(6)(F), amending this section] shall apply to wages paid or incurred on or after November 27, 1979, in taxable years ending on or after such date."

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §321(d)(1), Nov. 6, 1978, 92 Stat. 2835, provided that: "Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 44B, 52, 53, and 6501 of this title] shall apply to amounts paid or incurred after December 31, 1978, in taxable years ending after such date."

Effective Date

Pub. L. 95–30, title II, §202(e), May 23, 1977, 91 Stat. 151, provided that: "The amendments made by this section [enacting this section and sections 44B, 52, 53, and 280C of this title and amending sections 56, 381, 383, 6096, 6411, 6501, 6511, 6601, and 6611 of this title] shall apply to taxable years beginning after December 31, 1976, and to credit carrybacks from such years."

Returning Heroes and Wounded Warriors Work Opportunity Tax Credits; Treatment of Possessions of United States

Pub. L. 112–56, title II, §261(f), Nov. 21, 2011, 125 Stat. 731, provided that:

"(1) Payments to possessions.—

"(A) Mirror code possessions.—The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the amendments made by this section [amending this section and sections 52 and 3111 of this title]. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession of the United States.

"(B) Other possessions.—The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system the amount estimated by the Secretary of the Treasury as being equal to the loss to that possession that would have occurred by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply with respect to any possession of the United States unless such possession establishes to the satisfaction of the Secretary that the possession has implemented (or, at the discretion of the Secretary, will implement) an income tax benefit which is substantially equivalent to the income tax credit in effect after the amendments made by this section.

"(2) Coordination with credit allowed against united states income taxes.—The credit allowed against United States income taxes for any taxable year under the amendments made by this section to section 51 of the Internal Revenue Code of 1986 [26 U.S.C. 51] to any person with respect to any qualified veteran shall be reduced by the amount of any credit (or other tax benefit described in paragraph (1)(B)) allowed to such person against income taxes imposed by the possession of the United States by reason of this subsection with respect to such qualified veteran for such taxable year.

"(3) Definitions and special rules.—

"(A) Possession of the united states.—For purposes of this subsection, the term 'possession of the United States' includes American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, and the United States Virgin Islands.

"(B) Mirror code tax system.—For purposes of this subsection, the term 'mirror code tax system' means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

"(C) Treatment of payments.—For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from credit provisions described in such section."

Reference to Plan for Employment

Pub. L. 105–277, div. J, title IV, §4006(c)(1), Oct. 21, 1998, 112 Stat. 2681–912, provided that: "The reference to 'plan for employment' in such clause [26 U.S.C. 51(d)(6)(B)(i)] shall be treated as including a reference to the rehabilitation plan referred to in such clause as in effect before the amendment made by the preceding sentence."

Authorization of Appropriations

Pub. L. 97–34, title II, §261(f)(2), Aug. 13, 1981, 95 Stat. 263, as amended by Pub. L. 97–248, title II, §233(e), Sept. 3, 1982, 96 Stat. 502; Pub. L. 98–369, div. A, title X, §1041(b), July 18, 1984, 98 Stat. 1042; Pub. L. 99–514, title XVII, §1701(d), Oct. 22, 1986, 100 Stat. 2772; Pub. L. 100–647, title IV, §4010(b), Nov. 10, 1988, 102 Stat. 3655; Pub. L. 101–239, title VII, §7103(b), Dec. 19, 1989, 103 Stat. 2305; Pub. L. 101–508, title XI, §11405(b), Nov. 5, 1990, 104 Stat. 1388–473, provided that: "There is authorized to be appropriated for each fiscal year such sums as may be necessary, to carry out the functions described by the amendments made by paragraph (1) [amending this section], except that, of the amounts appropriated pursuant to this paragraph—

"(A) $5,000,000 shall be used to test whether individuals certified as members of targeted groups under section 51 of such Code are eligible for such certification (including the use of statistical sampling techniques), and

"(B) the remainder shall be distributed under performance standards prescribed by the Secretary of Labor.

The Secretary of Labor shall each calendar year beginning with calendar year 1983 report to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate with respect to the results of the testing conducted under subparagraph (A) during the preceding calendar year."

[For termination, effective May 15, 2000, of reporting provisions in section 261(f)(2) of Pub. L. 97–34, set out above, see section 3003 of Pub. L. 104–66, as amended, set out as a note under section 1113 of Title 31, Money and Finance, and page 124 of House Document No. 103–7.]

[Amendment by Pub. L. 101–508 applicable to fiscal years beginning after 1990, see section 11405(c)(2) of Pub. L. 101–508, set out as an Effective Date of 1990 Amendment note above.]

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Special Rules for Newly Targeted Groups

Pub. L. 95–600, title III, §321(d)(2), Nov. 6, 1978, 92 Stat. 2835, as amended by Pub. L. 96–222, title I, §103(a)(6)(C), (G)(xi), Apr. 1, 1980, 94 Stat. 209, 211; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(A) Individual must be hired after september 26, 1978.—In the case of a member of a newly targeted group, for purposes of applying the amendments made by this section—

"(i) such individual shall be taken into account for purposes of the credit allowable by section 44B of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] only if such individual is first hired by the employer after September 26, 1978, and

"(ii) such individual shall be treated for purposes of such credit as having first begun work for the employer not earlier than January 1, 1979.

"(B) Member of newly targeted group defined.—For purposes of subparagraph (A), an individual is a member of a newly targeted group if—

"(i) such individual meets the requirements of paragraph (1) of section 51(d) of such Code, and

"(ii) in the case of an individual meeting the requirements of subparagraph (A) of such paragraph (1), a credit was not claimed for such individual by the taxpayer for a taxable year beginning before January 1, 1979."

Credit Allowable by Section 44B in Case of Taxable Year Beginning in 1978 and Ending After December 31, 1978

Pub. L. 95–600, title III, §321(d)(3), Nov. 6, 1978, 92 Stat. 2836, as amended by Pub. L. 96–222, title I, §103(a)(6)(D), Apr. 1, 1980, 94 Stat. 209; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the case of a taxable year which begins in 1978 and ends after December 31, 1978, the amount of the credit determined under section 51 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall be the sum of—

"(A) the amount of the credit which would be so determined without regard to the amendments made by this section, plus

"(B) the amount of the credit which would be so determined by reason of the amendments made by this section."

1 See References in Text note below.
26 U.S.C. § 7602 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 78 / Section 7602: Examination of books and witnesses
Examination of books and witnesses
Status: in_force

(a) Authority to summon, etc.

For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary is authorized—

(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper, to appear before the Secretary at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and

(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.

(b) Purpose may include inquiry into offense

The purposes for which the Secretary may take any action described in paragraph (1), (2), or (3) of subsection (a) include the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws.

(c) Notice of contact of third parties

(1) General notice

An officer or employee of the Internal Revenue Service may not contact any person other than the taxpayer with respect to the determination or collection of the tax liability of such taxpayer unless such contact occurs during a period (not greater than 1 year) which is specified in a notice which—

(A) informs the taxpayer that contacts with persons other than the taxpayer are intended to be made during such period, and

(B) except as otherwise provided by the Secretary, is provided to the taxpayer not later than 45 days before the beginning of such period.

Nothing in the preceding sentence shall prevent the issuance of notices to the same taxpayer with respect to the same tax liability with periods specified therein that, in the aggregate, exceed 1 year. A notice shall not be issued under this paragraph unless there is an intent at the time such notice is issued to contact persons other than the taxpayer during the period specified in such notice. The preceding sentence shall not prevent the issuance of a notice if the requirement of such sentence is met on the basis of the assumption that the information sought to be obtained by such contact will not be obtained by other means before such contact.

(2) Notice of specific contacts

The Secretary shall periodically provide to a taxpayer a record of persons contacted during such period by the Secretary with respect to the determination or collection of the tax liability of such taxpayer. Such record shall also be provided upon request of the taxpayer.

(3) Exceptions

This subsection shall not apply—

(A) to any contact which the taxpayer has authorized;

(B) if the Secretary determines for good cause shown that such notice would jeopardize collection of any tax or such notice may involve reprisal against any person; or

(C) with respect to any pending criminal investigation.

(d) No administrative summons when there is Justice Department referral

(1) Limitation of authority

No summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons, with respect to any person if a Justice Department referral is in effect with respect to such person.

(2) Justice Department referral in effect

For purposes of this subsection—

(A) In general

A Justice Department referral is in effect with respect to any person if—

(i) the Secretary has recommended to the Attorney General a grand jury investigation of, or the criminal prosecution of, such person for any offense connected with the administration or enforcement of the internal revenue laws, or

(ii) any request is made under section 6103(h)(3)(B) for the disclosure of any return or return information (within the meaning of section 6103(b)) relating to such person.

(B) Termination

A Justice Department referral shall cease to be in effect with respect to a person when—

(i) the Attorney General notifies the Secretary, in writing, that—

(I) he will not prosecute such person for any offense connected with the administration or enforcement of the internal revenue laws,

(II) he will not authorize a grand jury investigation of such person with respect to such an offense, or

(III) he will discontinue such a grand jury investigation,

(ii) a final disposition has been made of any criminal proceeding pertaining to the enforcement of the internal revenue laws which was instituted by the Attorney General against such person, or

(iii) the Attorney General notifies the Secretary, in writing, that he will not prosecute such person for any offense connected with the administration or enforcement of the internal revenue laws relating to the request described in subparagraph (A)(ii).

(3) Taxable years, etc., treated separately

For purposes of this subsection, each taxable period (or, if there is no taxable period, each taxable event) and each tax imposed by a separate chapter of this title shall be treated separately.

(e) Limitation on examination on unreported income

The Secretary shall not use financial status or economic reality examination techniques to determine the existence of unreported income of any taxpayer unless the Secretary has a reasonable indication that there is a likelihood of such unreported income.

(f) Limitation on access of persons other than Internal Revenue Service officers and employees

The Secretary shall not, under the authority of section 6103(n), provide any books, papers, records, or other data obtained pursuant to this section to any person authorized under section 6103(n), except when such person requires such information for the sole purpose of providing expert evaluation and assistance to the Internal Revenue Service. No person other than an officer or employee of the Internal Revenue Service or the Office of Chief Counsel may, on behalf of the Secretary, question a witness under oath whose testimony was obtained pursuant to this section.

(Aug. 16, 1954, ch. 736, 68A Stat. 901; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97–248, title III, §333(a), Sept. 3, 1982, 96 Stat. 622; Pub. L. 105–206, title III, §§3412, 3417(a), July 22, 1998, 112 Stat. 751, 757; Pub. L. 116–25, title I, §§1206(a), 1208(a), July 1, 2019, 133 Stat. 990, 991.)

Editorial Notes

Amendments

2019—Subsec. (c)(1). Pub. L. 116–25, §1206(a), amended par. (1) generally. Prior to amendment, text read as follows: "An officer or employee of the Internal Revenue Service may not contact any person other than the taxpayer with respect to the determination or collection of the tax liability of such taxpayer without providing reasonable notice in advance to the taxpayer that contacts with persons other than the taxpayer may be made."

Subsec. (f). Pub. L. 116–25, §1208(a), added subsec. (f).

1998—Subsec. (c). Pub. L. 105–206, §3417(a), added subsec. (c). Former subsec. (c) redesignated (d).

Subsec. (d). Pub. L. 105–206, §3417(a), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e).

Pub. L. 105–206, §3412, added subsec. (d).

Subsec. (e). Pub. L. 105–206, §3417(a), redesignated subsec. (d) as (e).

1982—Pub. L. 97–248 redesignated existing provisions as subsec. (a), added subsec. (a) heading, and added subsecs. (b) and (c).

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

Statutory Notes and Related Subsidiaries

Effective Date of 2019 Amendment

Pub. L. 116–25, title I, §1206(b), July 1, 2019, 133 Stat. 990, provided that: "The amendment made by this section [amending this section] shall apply to notices provided, and contacts of persons made, after the date which is 45 days after the date of the enactment of this Act [July 1, 2019]."

Pub. L. 116–25, title I, §1208(b), July 1, 2019, 133 Stat. 991, provided that: "The amendment made by this section [amending this section]—

"(1) shall take effect on the date of the enactment of this Act [July 1, 2019]; and

"(2) shall not fail to apply to a contract in effect under section 6103(n) of the Internal Revenue Code of 1986 merely because such contract was in effect before the date of the enactment of this Act."

Effective Date of 1998 Amendment

Pub. L. 105–206, title III, §3417(b), July 22, 1998, 112 Stat. 758, provided that: "The amendments made by subsection (a) [amending this section] shall apply to contacts made after the 180th day after the date of the enactment of this Act [July 22, 1998]."

Effective Date of 1982 Amendment

Pub. L. 97–248, title III, §333(b), Sept. 3, 1982, 96 Stat. 623, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982]."
26 U.S.C. § 4980H (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 43 / Section 4980H: Shared responsibility for employers regarding health coverage
Shared responsibility for employers regarding health coverage
Status: in_force

(a) Large employers not offering health coverage

If—

(1) any applicable large employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and

(2) at least one full-time employee of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,

then there is hereby imposed on the employer an assessable payment equal to the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month.

(b) Large employers offering coverage with employees who qualify for premium tax credits or cost-sharing reductions

(1) In general

If—

(A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and

(B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,

then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1/12 of $3,000.

(2) Overall limitation

The aggregate amount of tax determined under paragraph (1) with respect to all employees of an applicable large employer for any month shall not exceed the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month.

(c) Definitions and special rules

For purposes of this section—

(1) Applicable payment amount

The term "applicable payment amount" means, with respect to any month, 1/12 of $2,000.

(2) Applicable large employer

(A) In general

The term "applicable large employer" means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.

(B) Exemption for certain employers

(i) In general

An employer shall not be considered to employ more than 50 full-time employees if—

(I) the employer's workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and

(II) the employees in excess of 50 employed during such 120-day period were seasonal workers.

(ii) Definition of seasonal workers

The term "seasonal worker" means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons.

(C) Rules for determining employer size

For purposes of this paragraph—

(i) Application of aggregation rule for employers

All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as 1 employer.

(ii) Employers not in existence in preceding year

In the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is an applicable large employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.

(iii) Predecessors

Any reference in this subsection to an employer shall include a reference to any predecessor of such employer.

(D) Application of employer size to assessable penalties

(i) In general

The number of individuals employed by an applicable large employer as full-time employees during any month shall be reduced by 30 solely for purposes of calculating—

(I) the assessable payment under subsection (a), or

(II) the overall limitation under subsection (b)(2).

(ii) Aggregation

In the case of persons treated as 1 employer under subparagraph (C)(i), only 1 reduction under subclause (I) or (II) 1 shall be allowed with respect to such persons and such reduction shall be allocated among such persons ratably on the basis of the number of full-time employees employed by each such person.

(E) Full-time equivalents treated as full-time employees

Solely for purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.

(F) Exemption for health coverage under TRICARE or the Department of Veterans Affairs

Solely for purposes of determining whether an employer is an applicable large employer under this paragraph for any month, an individual shall not be taken into account as an employee for such month if such individual has medical coverage for such month under—

(i) chapter 55 of title 10, United States Code, including coverage under the TRICARE program, or

(ii) under a health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary.

(3) Applicable premium tax credit and cost-sharing reduction

The term "applicable premium tax credit and cost-sharing reduction" means—

(A) any premium tax credit allowed under section 36B,

(B) any cost-sharing reduction under section 1402 of the Patient Protection and Affordable Care Act, and

(C) any advance payment of such credit or reduction under section 1412 of such Act.

(4) Full-time employee

(A) In general

The term "full-time employee" means, with respect to any month, an employee who is employed on average at least 30 hours of service per week.

(B) Hours of service

The Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis.

(5) Inflation adjustment

(A) In general

In the case of any calendar year after 2014, each of the dollar amounts in subsection (b) and paragraph (1) shall be increased by an amount equal to the product of—

(i) such dollar amount, and

(ii) the premium adjustment percentage (as defined in section 1302(c)(4) of the Patient Protection and Affordable Care Act) for the calendar year.

(B) Rounding

If the amount of any increase under subparagraph (A) is not a multiple of $10, such increase shall be rounded to the next lowest multiple of $10.

(6) Other definitions

Any term used in this section which is also used in the Patient Protection and Affordable Care Act shall have the same meaning as when used in such Act.

(7) Tax nondeductible

For denial of deduction for the tax imposed by this section, see section 275(a)(6).

(d) Administration and procedure

(1) In general

Any assessable payment provided by this section shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.

(2) Time for payment

The Secretary may provide for the payment of any assessable payment provided by this section on an annual, monthly, or other periodic basis as the Secretary may prescribe.

(3) Coordination with credits, etc.

The Secretary shall prescribe rules, regulations, or guidance for the repayment of any assessable payment (including interest) if such payment is based on the allowance or payment of an applicable premium tax credit or cost-sharing reduction with respect to an employee, such allowance or payment is subsequently disallowed, and the assessable payment would not have been required to be made but for such allowance or payment.

(4) Time for response

The Secretary shall allow an applicable large employer at least 90 days from the date of the first letter which informs the employer of a proposed assessment of the employer shared responsibility payment under this section to respond to the proposed assessment before taking any further action with respect to such proposed assessment.

(Added and amended Pub. L. 111–148, title I, §1513(a), title X, §§10106(e)–(f)(2), 10108(i)(1)(A), Mar. 23, 2010, 124 Stat. 253, 910, 914; Pub. L. 111–152, title I, §1003, Mar. 30, 2010, 124 Stat. 1033; Pub. L. 112–10, div. B, title VIII, §1858(b)(4), Apr. 15, 2011, 125 Stat. 169; Pub. L. 114–41, title IV, §4007(a)(1), July 31, 2015, 129 Stat. 465; Pub. L. 115–141, div. U, title IV, §401(a)(2)(B), Mar. 23, 2018, 132 Stat. 1184; Pub. L. 118–168, §4(a), Dec. 23, 2024, 138 Stat. 2587.)

Editorial Notes

References in Text

The Patient Protection and Affordable Care Act, referred to in subsecs. (a)(2), (b)(1)(B), and (c)(3)(B), (C), (5)(A)(ii), (6), is Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 119. Sections 1302(c)(4), 1402, 1411, and 1412 of the Act are classified to sections 18022(c)(4), 18071, 18081, and 18082, respectively, of Title 42, The Public Health and Welfare. Section 10108 of the Act enacted former section 139D of this title and section 18101 of Title 42, amended sections 36B, 162, 4980H, 6056, and 6724 of this title and section 218b of Title 29, Labor, and enacted provisions set out as notes under sections 36B, 162, 4980H, and 6056 of this title and former section 139D of this title. For complete classification of this Act to the Code, see Short Title note set out under section 18001 of Title 42 and Tables.

Amendments

2024—Subsec. (d)(4). Pub. L. 118–168 added par. (4).

2018—Subsec. (c)(2)(F). Pub. L. 115–141 substituted "Department of Veterans Affairs" for "Veterans Administration" in heading.

2015—Subsec. (c)(2)(F). Pub. L. 114–41 added subpar. (F).

2011—Subsec. (b)(3). Pub. L. 112–10 struck out par. (3). Text read as follows: "No assessable payment shall be imposed under paragraph (1) for any month with respect to any employee to whom the employer provides a free choice voucher under section 10108 of the Patient Protection and Affordable Care Act for such month."

2010—Subsec. (b). Pub. L. 111–152, §1003(d), redesignated subsec. (c) as (b) and struck out former subsec. (b) which related to large employers with enrollment waiting periods exceeding 60 days.

Pub. L. 111–148, §10106(e), amended subsec. (b) generally. Prior to amendment, subsec. (b) related to large employers with enrollment waiting periods exceeding 30 days.

Subsec. (c). Pub. L. 111–152, §1003(d), redesignated subsec. (d) as (c). Former subsec. (c) redesignated (b).

Subsec. (c)(1). Pub. L. 111–152, §1003(b)(1), substituted "an amount equal to 1/12 of $3,000" for "400 percent of the applicable payment amount" in concluding provisions.

Subsec. (c)(3). Pub. L. 111–148, §10108(i)(1)(A), added par. (3).

Subsec. (d). Pub. L. 111–152, §1003(d), redesignated subsec. (e) as (d). Former subsec. (d) redesignated (c).

Subsec. (d)(1). Pub. L. 111–152, §1003(b)(2), substituted "$2,000" for "$750".

Subsec. (d)(2)(D). Pub. L. 111–152, §1003(a), amended subpar. (D) generally. Prior to amendment, text read as follows: "In the case of any employer the substantial annual gross receipts of which are attributable to the construction industry—

"(i) subparagraph (A) shall be applied by substituting 'who employed an average of at least 5 full-time employees on business days during the preceding calendar year and whose annual payroll expenses exceed $250,000 for such preceding calendar year' for 'who employed an average of at least 50 full-time employees on business days during the preceding calendar year', and

"(ii) subparagraph (B) shall be applied by substituting '5' for '50'."

Pub. L. 111–148, §10106(f)(2), added subpar. (D).

Subsec. (d)(2)(E). Pub. L. 111–152, §1003(c), added subpar. (E).

Subsec. (d)(4)(A). Pub. L. 111–148, §10106(f)(1), inserted ", with respect to any month," after "means".

Subsec. (d)(5)(A). Pub. L. 111–152, §1003(b)(3), substituted "subsection (b) and paragraph (1)" for "subsection (b)(2) and (d)(1)" in introductory provisions.

Subsec. (e). Pub. L. 111–152, §1003(d), redesignated subsec. (e) as (d).

Statutory Notes and Related Subsidiaries

Effective Date of 2024 Amendment

Pub. L. 118–168, §4(b), Dec. 23, 2024, 138 Stat. 2587, provided that: "The amendment made by this section [amending this section] shall apply to assessments proposed in taxable years beginning after the date of the enactment of this Act [Dec. 23, 2024]."

Effective Date of 2015 Amendment

Pub. L. 114–41, title IV, §4007(a)(2), July 31, 2015, 129 Stat. 466, provided that: "The amendment made by this subsection [amending this section] shall apply to months beginning after December 31, 2013."

Effective Date of 2011 Amendment

Amendment by Pub. L. 112–10 effective as if included in the provisions of, and the amendments made by, the provisions of Pub. L. 111–148 to which it relates, see section 1858(d) of Pub. L. 112–10, set out as a note under section 36B of this title.

Effective Date of 2010 Amendment

Pub. L. 111–148, title X, §10106(f)(3), Mar. 23, 2010, 124 Stat. 911, provided that: "The amendment made by paragraph (2) [amending this section] shall apply to months beginning after December 31, 2013."

Pub. L. 111–148, title X, §10108(i)(1)(B), Mar. 23, 2010, 124 Stat. 914, provided that: "The amendment made by this paragraph [amending this section] shall apply to months beginning after December 31, 2013."

Effective Date

Pub. L. 111–148, title I, §1513(d), Mar. 23, 2010, 124 Stat. 256, provided that: "The amendments made by this section [enacting this section] shall apply to months beginning after December 31, 2013."

1 So in original. Probably means subclause (I) or (II) of clause (i).
26 U.S.C. § 382 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 382: Limitation on net operating loss carryforwards and certain built-in losses following ownership change
Limitation on net operating loss carryforwards and certain built-in losses following ownership change
Status: in_force

(a) General rule

The amount of the taxable income of any new loss corporation for any post-change year which may be offset by pre-change losses shall not exceed the section 382 limitation for such year.

(b) Section 382 limitation

For purposes of this section—

(1) In general

Except as otherwise provided in this section, the section 382 limitation for any post-change year is an amount equal to—

(A) the value of the old loss corporation, multiplied by

(B) the long-term tax-exempt rate.

(2) Carryforward of unused limitation

If the section 382 limitation for any post-change year exceeds the taxable income of the new loss corporation for such year which was offset by pre-change losses, the section 382 limitation for the next post-change year shall be increased by the amount of such excess.

(3) Special rule for post-change year which includes change date

In the case of any post-change year which includes the change date—

(A) Limitation does not apply to taxable income before change

Subsection (a) shall not apply to the portion of the taxable income for such year which is allocable to the period in such year on or before the change date. Except as provided in subsection (h)(5) and in regulations, taxable income shall be allocated ratably to each day in the year.

(B) Limitation for period after change

For purposes of applying the limitation of subsection (a) to the remainder of the taxable income for such year, the section 382 limitation shall be an amount which bears the same ratio to such limitation (determined without regard to this paragraph) as—

(i) the number of days in such year after the change date, bears to

(ii) the total number of days in such year.

(c) Carryforwards disallowed if continuity of business requirements not met

(1) In general

Except as provided in paragraph (2), if the new loss corporation does not continue the business enterprise of the old loss corporation at all times during the 2-year period beginning on the change date, the section 382 limitation for any post-change year shall be zero.

(2) Exception for certain gains

The section 382 limitation for any post-change year shall not be less than the sum of—

(A) any increase in such limitation under—

(i) subsection (h)(1)(A) for recognized built-in gains for such year, and

(ii) subsection (h)(1)(C) for gain recognized by reason of an election under section 338, plus

(B) any increase in such limitation under subsection (b)(2) for amounts described in subparagraph (A) which are carried forward to such year.

(d) Pre-change loss and post-change year

For purposes of this section—

(1) Pre-change loss

The term "pre-change loss" means—

(A) any net operating loss carryforward of the old loss corporation to the taxable year ending with the ownership change or in which the change date occurs, and

(B) the net operating loss of the old loss corporation for the taxable year in which the ownership change occurs to the extent such loss is allocable to the period in such year on or before the change date.

Except as provided in subsection (h)(5) and in regulations, the net operating loss shall, for purposes of subparagraph (B), be allocated ratably to each day in the year.

(2) Post-change year

The term "post-change year" means any taxable year ending after the change date.

(3) Application to carryforward of disallowed interest

The term "pre-change loss" shall include any carryover of disallowed interest described in section 163(j)(2) under rules similar to the rules of paragraph (1).

(e) Value of old loss corporation

For purposes of this section—

(1) In general

Except as otherwise provided in this subsection, the value of the old loss corporation is the value of the stock of such corporation (including any stock described in section 1504(a)(4)) immediately before the ownership change.

(2) Special rule in the case of redemption or other corporate contraction

If a redemption or other corporate contraction occurs in connection with an ownership change, the value under paragraph (1) shall be determined after taking such redemption or other corporate contraction into account.

(3) Treatment of foreign corporations

Except as otherwise provided in regulations, in determining the value of any old loss corporation which is a foreign corporation, there shall be taken into account only items treated as connected with the conduct of a trade or business in the United States.

(f) Long-term tax-exempt rate

For purposes of this section—

(1) In general

The long-term tax-exempt rate shall be the highest of the adjusted Federal long-term rates in effect for any month in the 3-calendar-month period ending with the calendar month in which the change date occurs.

(2) Adjusted Federal long-term rate

For purposes of paragraph (1), the term "adjusted Federal long-term rate" means the Federal long-term rate determined under section 1274(d), except that—

(A) paragraphs (2) and (3) thereof shall not apply, and

(B) such rate shall be properly adjusted for differences between rates on long-term taxable and tax-exempt obligations.

(g) Ownership change

For purposes of this section—

(1) In general

There is an ownership change if, immediately after any owner shift involving a 5-percent shareholder or any equity structure shift—

(A) the percentage of the stock of the loss corporation owned by 1 or more 5-percent shareholders has increased by more than 50 percentage points, over

(B) the lowest percentage of stock of the loss corporation (or any predecessor corporation) owned by such shareholders at any time during the testing period.

(2) Owner shift involving 5-percent shareholder

There is an owner shift involving a 5-percent shareholder if—

(A) there is any change in the respective ownership of stock of a corporation, and

(B) such change affects the percentage of stock of such corporation owned by any person who is a 5-percent shareholder before or after such change.

(3) Equity structure shift defined

(A) In general

The term "equity structure shift" means any reorganization (within the meaning of section 368). Such term shall not include—

(i) any reorganization described in subparagraph (D) or (G) of section 368(a)(1) unless the requirements of section 354(b)(1) are met, and

(ii) any reorganization described in subparagraph (F) of section 368(a)(1).

(B) Taxable reorganization-type transactions, etc.

To the extent provided in regulations, the term "equity structure shift" includes taxable reorganization-type transactions, public offerings, and similar transactions.

(4) Special rules for application of subsection

(A) Treatment of less than 5-percent shareholders

Except as provided in subparagraphs (B)(i) and (C), in determining whether an ownership change has occurred, all stock owned by shareholders of a corporation who are not 5-percent shareholders of such corporation shall be treated as stock owned by 1 5-percent shareholder of such corporation.

(B) Coordination with equity structure shifts

For purposes of determining whether an equity structure shift (or subsequent transaction) is an ownership change—

(i) Less than 5-percent shareholders

Subparagraph (A) shall be applied separately with respect to each group of shareholders (immediately before such equity structure shift) of each corporation which was a party to the reorganization involved in such equity structure shift.

(ii) Acquisitions of stock

Unless a different proportion is established, acquisitions of stock after such equity structure shift shall be treated as being made proportionately from all shareholders immediately before such acquisition.

(C) Coordination with other owner shifts

Except as provided in regulations, rules similar to the rules of subparagraph (B) shall apply in determining whether there has been an owner shift involving a 5-percent shareholder and whether such shift (or subsequent transaction) results in an ownership change.

(D) Treatment of worthless stock

If any stock held by a 50-percent shareholder is treated by such shareholder as becoming worthless during any taxable year of such shareholder and such stock is held by such shareholder as of the close of such taxable year, for purposes of determining whether an ownership change occurs after the close of such taxable year, such shareholder—

(i) shall be treated as having acquired such stock on the 1st day of his 1st succeeding taxable year, and

(ii) shall not be treated as having owned such stock during any prior period.

For purposes of the preceding sentence, the term "50-percent shareholder" means any person owning 50 percent or more of the stock of the corporation at any time during the 3-year period ending on the last day of the taxable year with respect to which the stock was so treated.

(h) Special rules for built-in gains and losses and section 338 gains

For purposes of this section—

(1) In general

(A) Net unrealized built-in gain

(i) In general

If the old loss corporation has a net unrealized built-in gain, the section 382 limitation for any recognition period taxable year shall be increased by the recognized built-in gains for such taxable year.

(ii) Limitation

The increase under clause (i) for any recognition period taxable year shall not exceed—

(I) the net unrealized built-in gain, reduced by

(II) recognized built-in gains for prior years ending in the recognition period.

(B) Net unrealized built-in loss

(i) In general

If the old loss corporation has a net unrealized built-in loss, the recognized built-in loss for any recognition period taxable year shall be subject to limitation under this section in the same manner as if such loss were a pre-change loss.

(ii) Limitation

Clause (i) shall apply to recognized built-in losses for any recognition period taxable year only to the extent such losses do not exceed—

(I) the net unrealized built-in loss, reduced by

(II) recognized built-in losses for prior taxable years ending in the recognition period.

(C) Special rules for certain section 338 gains

If an election under section 338 is made in connection with an ownership change and the net unrealized built-in gain is zero by reason of paragraph (3)(B), then, with respect to such change, the section 382 limitation for the post-change year in which gain is recognized by reason of such election shall be increased by the lesser of—

(i) the recognized built-in gains by reason of such election, or

(ii) the net unrealized built-in gain (determined without regard to paragraph (3)(B)).

(2) Recognized built-in gain and loss

(A) Recognized built-in gain

The term "recognized built-in gain" means any gain recognized during the recognition period on the disposition of any asset to the extent the new loss corporation establishes that—

(i) such asset was held by the old loss corporation immediately before the change date, and

(ii) such gain does not exceed the excess of—

(I) the fair market value of such asset on the change date, over

(II) the adjusted basis of such asset on such date.

(B) Recognized built-in loss

The term "recognized built-in loss" means any loss recognized during the recognition period on the disposition of any asset except to the extent the new loss corporation establishes that—

(i) such asset was not held by the old loss corporation immediately before the change date, or

(ii) such loss exceeds the excess of—

(I) the adjusted basis of such asset on the change date, over

(II) the fair market value of such asset on such date.

Such term includes any amount allowable as depreciation, amortization, or depletion for any period within the recognition period except to the extent the new loss corporation establishes that the amount so allowable is not attributable to the excess described in clause (ii).

(3) Net unrealized built-in gain and loss defined

(A) Net unrealized built-in gain and loss

(i) In general

The terms "net unrealized built-in gain" and "net unrealized built-in loss" mean, with respect to any old loss corporation, the amount by which—

(I) the fair market value of the assets of such corporation immediately before an ownership change is more or less, respectively, than

(II) the aggregate adjusted basis of such assets at such time.

(ii) Special rule for redemptions or other corporate contractions

If a redemption or other corporate contraction occurs in connection with an ownership change, to the extent provided in regulations, determinations under clause (i) shall be made after taking such redemption or other corporate contraction into account.

(B) Threshold requirement

(i) In general

If the amount of the net unrealized built-in gain or net unrealized built-in loss (determined without regard to this subparagraph) of any old loss corporation is not greater than the lesser of—

(I) 15 percent of the amount determined for purposes of subparagraph (A)(i)(I), or

(II) $10,000,000,

 the net unrealized built-in gain or net unrealized built-in loss shall be zero.

(ii) Cash and cash items not taken into account

In computing any net unrealized built-in gain or net unrealized built-in loss under clause (i), except as provided in regulations, there shall not be taken into account—

(I) any cash or cash item, or

(II) any marketable security which has a value which does not substantially differ from adjusted basis.

(4) Disallowed loss allowed as a carryforward

If a deduction for any portion of a recognized built-in loss is disallowed for any post-change year, such portion—

(A) shall be carried forward to subsequent taxable years under rules similar to the rules for the carrying forward of net operating losses (or to the extent the amount so disallowed is attributable to capital losses, under rules similar to the rules for the carrying forward of net capital losses), but

(B) shall be subject to limitation under this section in the same manner as a pre-change loss.

(5) Special rules for post-change year which includes change date

For purposes of subsection (b)(3)—

(A) in applying subparagraph (A) thereof, taxable income shall be computed without regard to recognized built-in gains to the extent such gains increased the section 382 limitation for the year (or recognized built-in losses to the extent such losses are treated as pre-change losses), and gain described in paragraph (1)(C), for the year, and

(B) in applying subparagraph (B) thereof, the section 382 limitation shall be computed without regard to recognized built-in gains, and gain described in paragraph (1)(C), for the year.

(6) Treatment of certain built-in items

(A) Income items

Any item of income which is properly taken into account during the recognition period but which is attributable to periods before the change date shall be treated as a recognized built-in gain for the taxable year in which it is properly taken into account.

(B) Deduction items

Any amount which is allowable as a deduction during the recognition period (determined without regard to any carryover) but which is attributable to periods before the change date shall be treated as a recognized built-in loss for the taxable year for which it is allowable as a deduction.

(C) Adjustments

The amount of the net unrealized built-in gain or loss shall be properly adjusted for amounts which would be treated as recognized built-in gains or losses under this paragraph if such amounts were properly taken into account (or allowable as a deduction) during the recognition period.

(7) Recognition period, etc.

(A) Recognition period

The term "recognition period" means, with respect to any ownership change, the 5-year period beginning on the change date.

(B) Recognition period taxable year

The term "recognition period taxable year" means any taxable year any portion of which is in the recognition period.

(8) Determination of fair market value in certain cases

If 80 percent or more in value of the stock of a corporation is acquired in 1 transaction (or in a series of related transactions during any 12-month period), for purposes of determining the net unrealized built-in loss, the fair market value of the assets of such corporation shall not exceed the grossed up amount paid for such stock properly adjusted for indebtedness of the corporation and other relevant items.

(9) Tax-free exchanges or transfers

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection where property held on the change date was acquired (or is subsequently transferred) in a transaction where gain or loss is not recognized (in whole or in part).

(i) Testing period

For purposes of this section—

(1) 3-year period

Except as otherwise provided in this section, the testing period is the 3-year period ending on the day of any owner shift involving a 5-percent shareholder or equity structure shift.

(2) Shorter period where there has been recent ownership change

If there has been an ownership change under this section, the testing period for determining whether a 2nd ownership change has occurred shall not begin before the 1st day following the change date for such earlier ownership change.

(3) Shorter period where all losses arise after 3-year period begins

The testing period shall not begin before the earlier of the 1st day of the 1st taxable year from which there is a carryforward of a loss or of an excess credit to the 1st post-change year or the taxable year in which the transaction being tested occurs. Except as provided in regulations, this paragraph shall not apply to any loss corporation which has a net unrealized built-in loss (determined after application of subsection (h)(3)(B)).

(j) Change date

For purposes of this section, the change date is—

(1) in the case where the last component of an ownership change is an owner shift involving a 5-percent shareholder, the date on which such shift occurs, and

(2) in the case where the last component of an ownership change is an equity structure shift, the date of the reorganization.

(k) Definitions and special rules

For purposes of this section—

(1) Loss corporation

The term "loss corporation" means a corporation entitled to use a net operating loss carryover or having a net operating loss for the taxable year in which the ownership change occurs. Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20). Except to the extent provided in regulations, such term includes any corporation with a net unrealized built-in loss.

(2) Old loss corporation

The term "old loss corporation" means any corporation—

(A) with respect to which there is an ownership change, and

(B) which (before the ownership change) was a loss corporation.

(3) New loss corporation

The term "new loss corporation" means a corporation which (after an ownership change) is a loss corporation. Nothing in this section shall be treated as implying that the same corporation may not be both the old loss corporation and the new loss corporation.

(4) Taxable income

Taxable income shall be computed with the modifications set forth in section 172(d).

(5) Value

The term "value" means fair market value.

(6) Rules relating to stock

(A) Preferred stock

Except as provided in regulations and subsection (e), the term "stock" means stock other than stock described in section 1504(a)(4).

(B) Treatment of certain rights, etc.

The Secretary shall prescribe such regulations as may be necessary—

(i) to treat warrants, options, contracts to acquire stock, convertible debt interests, and other similar interests as stock, and

(ii) to treat stock as not stock.

(C) Determinations on basis of value

Determinations of the percentage of stock of any corporation held by any person shall be made on the basis of value.

(7) 5-percent shareholder

The term "5-percent shareholder" means any person holding 5 percent or more of the stock of the corporation at any time during the testing period.

(l) Certain additional operating rules

For purposes of this section—

(1) Certain capital contributions not taken into account

(A) In general

Any capital contribution received by an old loss corporation as part of a plan a principal purpose of which is to avoid or increase any limitation under this section shall not be taken into account for purposes of this section.

(B) Certain contributions treated as part of plan

For purposes of subparagraph (A), any capital contribution made during the 2-year period ending on the change date shall, except as provided in regulations, be treated as part of a plan described in subparagraph (A).

(2) Ordering rules for application of section

(A) Coordination with section 172(b) carryover rules

In the case of any pre-change loss for any taxable year (hereinafter in this subparagraph referred to as the "loss year") subject to limitation under this section, for purposes of determining under the 2nd sentence of section 172(b)(2) the amount of such loss which may be carried to any taxable year, taxable income for any taxable year shall be treated as not greater than—

(i) the section 382 limitation for such taxable year, reduced by

(ii) the unused pre-change losses for taxable years preceding the loss year.

Similar rules shall apply in the case of any credit or loss subject to limitation under section 383.

(B) Ordering rule for losses carried from same taxable year

In any case in which—

(i) a pre-change loss of a loss corporation for any taxable year is subject to a section 382 limitation, and

(ii) a net operating loss of such corporation from such taxable year is not subject to such limitation,

taxable income shall be treated as having been offset first by the loss subject to such limitation.

(3) Operating rules relating to ownership of stock

(A) Constructive ownership

Section 318 (relating to constructive ownership of stock) shall apply in determining ownership of stock, except that—

(i) paragraphs (1) and (5)(B) of section 318(a) shall not apply and an individual and all members of his family described in paragraph (1) of section 318(a) shall be treated as 1 individual for purposes of applying this section,

(ii) paragraph (2) of section 318(a) shall be applied—

(I) without regard to the 50-percent limitation contained in subparagraph (C) thereof, and

(II) except as provided in regulations, by treating stock attributed thereunder as no longer being held by the entity from which attributed,

(iii) paragraph (3) of section 318(a) shall be applied only to the extent provided in regulations,

(iv) except to the extent provided in regulations, an option to acquire stock shall be treated as exercised if such exercise results in an ownership change, and

(v) in attributing stock from an entity under paragraph (2) of section 318(a), there shall not be taken into account—

(I) in the case of attribution from a corporation, stock which is not treated as stock for purposes of this section, or

(II) in the case of attribution from another entity, an interest in such entity similar to stock described in subclause (I).

A rule similar to the rule of clause (iv) shall apply in the case of any contingent purchase, warrant, convertible debt, put, stock subject to a risk of forfeiture, contract to acquire stock, or similar interests.

(B) Stock acquired by reason of death, gift, divorce, separation, etc.

If—

(i) the basis of any stock in the hands of any person is determined—

(I) under section 1014 (relating to property acquired from a decedent),

(II) section 1015 (relating to property acquired by a gift or transfer in trust), or

(III) section 1041(b)(2) (relating to transfers of property between spouses or incident to divorce),

(ii) stock is received by any person in satisfaction of a right to receive a pecuniary bequest, or

(iii) stock is acquired by a person pursuant to any divorce or separation instrument (within the meaning of section 121(d)(3)(C)),

such person shall be treated as owning such stock during the period such stock was owned by the person from whom it was acquired.

(C) Certain changes in percentage ownership which are attributable to fluctuations in value not taken into account

Except as provided in regulations, any change in proportionate ownership which is attributable solely to fluctuations in the relative fair market values of different classes of stock shall not be taken into account.

(4) Reduction in value where substantial nonbusiness assets

(A) In general

If, immediately after an ownership change, the new loss corporation has substantial nonbusiness assets, the value of the old loss corporation shall be reduced by the excess (if any) of—

(i) the fair market value of the nonbusiness assets of the old loss corporation, over

(ii) the nonbusiness asset share of indebtedness for which such corporation is liable.

(B) Corporation having substantial nonbusiness assets

For purposes of subparagraph (A)—

(i) In general

The old loss corporation shall be treated as having substantial nonbusiness assets if at least 1/3 of the value of the total assets of such corporation consists of nonbusiness assets.

(ii) Exception for certain investment entities

A regulated investment company to which part I of subchapter M applies, a real estate investment trust to which part II of subchapter M applies, or a REMIC to which part IV of subchapter M applies, shall not be treated as a new loss corporation having substantial nonbusiness assets.

(C) Nonbusiness assets

For purposes of this paragraph, the term "nonbusiness assets" means assets held for investment.

(D) Nonbusiness asset share

For purposes of this paragraph, the nonbusiness asset share of the indebtedness of the corporation is an amount which bears the same ratio to such indebtedness as—

(i) the fair market value of the nonbusiness assets of the corporation, bears to

(ii) the fair market value of all assets of such corporation.

(E) Treatment of subsidiaries

For purposes of this paragraph, stock and securities in any subsidiary corporation shall be disregarded and the parent corporation shall be deemed to own its ratable share of the subsidiary's assets. For purposes of the preceding sentence, a corporation shall be treated as a subsidiary if the parent owns 50 percent or more of the combined voting power of all classes of stock entitled to vote, and 50 percent or more of the total value of shares of all classes of stock.

(5) Title 11 or similar case

(A) In general

Subsection (a) shall not apply to any ownership change if—

(i) the old loss corporation is (immediately before such ownership change) under the jurisdiction of the court in a title 11 or similar case, and

(ii) the shareholders and creditors of the old loss corporation (determined immediately before such ownership change) own (after such ownership change and as a result of being shareholders or creditors immediately before such change) stock of the new loss corporation (or stock of a controlling corporation if also in bankruptcy) which meets the requirements of section 1504(a)(2) (determined by substituting "50 percent" for "80 percent" each place it appears).

(B) Reduction for interest payments to creditors becoming shareholders

In any case to which subparagraph (A) applies, the pre-change losses and excess credits (within the meaning of section 383(a)(2)) which may be carried to a post-change year shall be computed as if no deduction was allowable under this chapter for the interest paid or accrued by the old loss corporation on indebtedness which was converted into stock pursuant to title 11 or similar case during—

(i) any taxable year ending during the 3-year period preceding the taxable year in which the ownership change occurs, and

(ii) the period of the taxable year in which the ownership change occurs on or before the change date.

(C) Coordination with section 108

In applying section 108(e)(8) to any case to which subparagraph (A) applies, there shall not be taken into account any indebtedness for interest described in subparagraph (B).

(D) Section 382 limitation zero if another change within 2 years

If, during the 2-year period immediately following an ownership change to which this paragraph applies, an ownership change of the new loss corporation occurs, this paragraph shall not apply and the section 382 limitation with respect to the 2nd ownership change for any post-change year ending after the change date of the 2nd ownership change shall be zero.

(E) Only certain stock taken into account

For purposes of subparagraph (A)(ii), stock transferred to a creditor shall be taken into account only to the extent such stock is transferred in satisfaction of indebtedness and only if such indebtedness—

(i) was held by the creditor at least 18 months before the date of the filing of the title 11 or similar case, or

(ii) arose in the ordinary course of the trade or business of the old loss corporation and is held by the person who at all times held the beneficial interest in such indebtedness.

(F) Title 11 or similar case

For purposes of this paragraph, the term "title 11 or similar case" has the meaning given such term by section 368(a)(3)(A).

(G) Election not to have paragraph apply

A new loss corporation may elect, subject to such terms and conditions as the Secretary may prescribe, not to have the provisions of this paragraph apply.

(6) Special rule for insolvency transactions

If paragraph (5) does not apply to any reorganization described in subparagraph (G) of section 368(a)(1) or any exchange of debt for stock in a title 11 or similar case (as defined in section 368(a)(3)(A)), the value under subsection (e) shall reflect the increase (if any) in value of the old loss corporation resulting from any surrender or cancellation of creditors' claims in the transaction.

(7) Coordination with alternative minimum tax

The Secretary shall by regulation provide for the application of this section to the alternative tax net operating loss deduction under section 56(d).

(8) Predecessor and successor entities

Except as provided in regulations, any entity and any predecessor or successor entities of such entity shall be treated as 1 entity.

(m) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section and section 383, including (but not limited to) regulations—

(1) providing for the application of this section and section 383 where an ownership change with respect to the old loss corporation is followed by an ownership change with respect to the new loss corporation, and

(2) providing for the application of this section and section 383 in the case of a short taxable year,

(3) providing for such adjustments to the application of this section and section 383 as is necessary to prevent the avoidance of the purposes of this section and section 383, including the avoidance of such purposes through the use of related persons, pass-thru entities, or other intermediaries,

(4) providing for the application of subsection (g)(4) where there is only 1 corporation involved, and

(5) providing, in the case of any group of corporations described in section 1563(a) (determined by substituting "50 percent" for "80 percent" each place it appears and determined without regard to paragraph (4) thereof), appropriate adjustments to value, built-in gain or loss, and other items so that items are not omitted or taken into account more than once.

(n) Special rule for certain ownership changes

(1) In general

The limitation contained in subsection (a) shall not apply in the case of an ownership change which is pursuant to a restructuring plan of a taxpayer which—

(A) is required under a loan agreement or a commitment for a line of credit entered into with the Department of the Treasury under the Emergency Economic Stabilization Act of 2008, and

(B) is intended to result in a rationalization of the costs, capitalization, and capacity with respect to the manufacturing workforce of, and suppliers to, the taxpayer and its subsidiaries.

(2) Subsequent acquisitions

Paragraph (1) shall not apply in the case of any subsequent ownership change unless such ownership change is described in such paragraph.

(3) Limitation based on control in corporation

(A) In general

Paragraph (1) shall not apply in the case of any ownership change if, immediately after such ownership change, any person (other than a voluntary employees' beneficiary association under section 501(c)(9)) owns stock of the new loss corporation possessing 50 percent or more of the total combined voting power of all classes of stock entitled to vote, or of the total value of the stock of such corporation.

(B) Treatment of related persons

(i) In general

Related persons shall be treated as a single person for purposes of this paragraph.

(ii) Related persons

For purposes of clause (i), a person shall be treated as related to another person if—

(I) such person bears a relationship to such other person described in section 267(b) or 707(b), or

(II) such persons are members of a group of persons acting in concert.

(Aug. 16, 1954, ch. 736, 68A Stat. 129; Pub. L. 88–554, §4(b)(3), Aug. 31, 1964, 78 Stat. 763; Pub. L. 94–455, title VIII, §806(e), Oct. 4, 1976, 90 Stat. 1599; Pub. L. 96–589, §2(d), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 97–34, title II, §242, Aug. 13, 1981, 95 Stat. 255; Pub. L. 98–369, div. A, title I, §62(b)(1), July 18, 1984, 98 Stat. 583; Pub. L. 99–514, title VI, §621(a), (e)(1), Oct. 22, 1986, 100 Stat. 2254, 2266; Pub. L. 100–203, title X, §10225(a), (b), Dec. 22, 1987, 101 Stat. 1330–413; Pub. L. 100–647, title I, §1006(d)(1)(A)–(C), (2)–(10), (17)(A), (18)–(28)(A), (29), (t)(22)(A), title IV, §4012(a)(3), (b)(1)(B), title V, §5077(a), Nov. 10, 1988, 102 Stat. 3395–3400, 3426, 3656, 3657, 3683; Pub. L. 101–73, title XIV, §1401(a)(2), Aug. 9, 1989, 103 Stat. 548; Pub. L. 101–239, title VII, §§7205(a), 7304(d)(1), 7811(c)(5)(A), 7815(h), 7841(d)(11), Dec. 19, 1989, 103 Stat. 2335, 2354, 2407, 2420, 2428; Pub. L. 103–66, title XIII, §13226(a)(2)(A), Aug. 10, 1993, 107 Stat. 487; Pub. L. 104–188, title I, §1621(b)(3), Aug. 20, 1996, 110 Stat. 1867; Pub. L. 108–357, title VIII, §835(b)(2), Oct. 22, 2004, 118 Stat. 1593; Pub. L. 111–5, div. B, title I, §1262(a), Feb. 17, 2009, 123 Stat. 343; Pub. L. 113–295, div. A, title II, §221(a)(30)(D), Dec. 19, 2014, 128 Stat. 4042; Pub. L. 115–97, title I, §§11051(b)(3)(F), 13301(b)(2), (3), Dec. 22, 2017, 131 Stat. 2090, 2121.)

Editorial Notes

References in Text

The Emergency Economic Stabilization Act of 2008, referred to in subsec. (n)(1)(A), is div. A of Pub. L. 110–343, Oct. 3, 2008, 122 Stat. 3765, which is classified principally to chapter 52 (§5201 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 5201 of Title 12 and Tables.

Amendments

2017—Subsec. (d)(3). Pub. L. 115–97, §13301(b)(2), added par. (3).

Subsec. (k)(1). Pub. L. 115–97, §13301(b)(3), inserted after first sentence "Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20)."

Subsec. (l)(3)(B)(iii). Pub. L. 115–97, §11051(b)(3)(F), substituted "section 121(d)(3)(C)" for "section 71(b)(2)".

2014—Subsec. (l)(5)(F) to (H). Pub. L. 113–295 redesignated subpars. (G) and (H) as (F) and (G), respectively, and struck out former subpar. (F) which related to a special rule for certain financial institutions for certain equity structure shifts and transactions occurring before May 10, 1989.

2009—Subsec. (n). Pub. L. 111–5 added subsec. (n).

2004—Subsec. (l)(4)(B)(ii). Pub. L. 108–357 substituted "or a REMIC to which part IV of subchapter M applies," for "a REMIC to which part IV of subchapter M applies, or a FASIT to which part V of subchapter M applies,".

1996—Subsec. (l)(4)(B)(ii). Pub. L. 104–188 substituted "a REMIC to which part IV of subchapter M applies, or a FASIT to which part V of subchapter M applies" for "or a REMIC to which part IV of subchapter M applies".

1993—Subsec. (l)(5)(C). Pub. L. 103–66 amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows:

"(i) In general.—In any case to which subparagraph (A) applies, 50 percent of the amount which, but for the application of section 108(e)(10)(B), would have been applied to reduce tax attributes under section 108(b) shall be so applied.

"(ii) Clarification with subparagraph (b).—In applying clause (i), there shall not be taken into account any indebtedness for interest described in subparagraph (B)."

1989—Subsec. (h)(3)(B)(i). Pub. L. 101–239, §7205(a), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: "If the amount of the net unrealized built-in gain or net unrealized built-in loss (determined without regard to this subparagraph) of any old loss corporation is not greater than 25 percent of the amount determined for purposes of subparagraph (A)(i)(I), the net unrealized built-in gain or net unrealized built-in loss shall be zero."

Subsec. (h)(6)(B). Pub. L. 101–239, §7811(c)(5)(A)(i), inserted "(determined without regard to any carryover)" after "during the recognition period".

Subsec. (h)(6)(C). Pub. L. 101–239, §7811(c)(5)(A)(ii), substituted "which would be treated as recognized built-in gains or losses under this paragraph if such amounts were properly taken into account (or allowable as a deduction) during the recognition period" for "treated as recognized built-in gains or losses under this paragraph".

Subsec. (l)(3)(B)(i)(III). Pub. L. 101–239, §7841(d)(11), substituted "incident to divorce)," for "incident to divorce,".

Subsec. (l)(3)(C). Pub. L. 101–239, §7304(d)(1), redesignated subpar. (D) as (C) and struck out former subpar. (C) which related to special rule for employee stock ownership plans.

Subsec. (l)(3)(C)(ii). Pub. L. 101–239, §7815(h), substituted "For purposes of subclause (III)," for "for purposes of subclause (III)," in concluding provisions.

Subsec. (l)(3)(D). Pub. L. 101–239, §7304(d)(1), redesignated subpar. (D) as (C).

Subsec. (l)(5)(F). Pub. L. 101–73 substituted "on or after May 10, 1989" for "after December 31, 1989" in last sentence.

1988—Subsec. (e)(2). Pub. L. 100–647, §1006(d)(1)(A), inserted "or other corporate contraction" after "redemption" in heading and in two places in text.

Subsec. (e)(3). Pub. L. 100–647, §1006(d)(17)(A), added par. (3).

Subsec. (g)(1)(A). Pub. L. 100–647, §1006(d)(21)(A), struck out "new" after "stock of the".

Subsec. (g)(1)(B). Pub. L. 100–647, §1006(d)(21)(B), struck out "old" after "stock of the".

Subsec. (g)(4)(C). Pub. L. 100–647, §1006(d)(2), inserted "rules similar to" after "provided in regulations,".

Subsec. (h)(1)(C). Pub. L. 100–647, §1006(d)(3)(A), substituted "Special rules for certain section 338 gains" for "Section 338 gain" in heading and amended text generally. Prior to amendment, text read as follows: "The section 382 limitation for any taxable year in which gain is recognized by reason of an election under section 338 shall be increased by the excess of—

"(i) the amount of such gain, over

"(ii) the portion of such gain taken into account in computing recognized built-in gains for such taxable year."

Subsec. (h)(3)(A)(ii). Pub. L. 100–647, §1006(d)(28)(A), inserted "to the extent provided in regulations," after "an ownership change,".

Pub. L. 100–647, §1006(d)(1)(B), inserted "or other corporate contractions" after "redemptions" in heading and "or other corporate contraction" after "redemption" in two places in text.

Subsec. (h)(3)(B)(ii). Pub. L. 100–647, §1006(d)(26), inserted "except as provided in regulations," after "under clause (i),".

Subsec. (h)(4). Pub. L. 100–647, §1006(d)(20), substituted "allowed as a carryforward" for "treated as a net operating loss" in heading and inserted "(or to the extent the amount so disallowed is attributable to capital losses, under rules similar to the rules for the carrying forward of net capital losses)" after "net operating losses" in subpar. (A).

Subsec. (h)(5)(A). Pub. L. 100–647, §1006(d)(3)(B), substituted "recognized built-in gains to the extent such gains increased the section 382 limitation for the year (or recognized built-in losses to the extent such losses are treated as pre-change losses)" for "recognized built-in gains and losses".

Subsec. (h)(6). Pub. L. 100–647, §1006(d)(22), substituted "Treatment of certain built-in items" for "Secretary may treat certain deductions as built-in losses" in heading and amended text generally. Prior to amendment, text read as follows: "The Secretary may by regulation treat amounts which accrue on or before the change date but which are allowable as a deduction after such date as recognized built-in losses."

Subsec. (h)(9). Pub. L. 100–647, §1006(d)(23), substituted "was acquired (or is subsequently transferred)" for "is transferred".

Subsec. (i)(3). Pub. L. 100–647, §1006(d)(4), inserted "the earlier of" after "not begin before" and "or the taxable year in which the transaction being tested occurs" after "1st post-change year".

Subsec. (k)(1). Pub. L. 100–647, §1006(d)(5)(A), inserted "or having a net operating loss for the taxable year in which the ownership change occurs" after "operating loss carryover".

Subsec. (k)(2). Pub. L. 100–647, §1006(d)(5)(B), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "The term 'old loss corporation' means any corporation with respect to which there is an ownership change—

"(A) which (before the ownership change) was a loss corporation, or

"(B) with respect to which there is a pre-change loss described in subsection (d)(1)(B)."

Subsec. (l)(3)(A)(iv), (v). Pub. L. 100–647, §1006(d)(6), added cls. (iv) and (v) and struck out former cl. (iv) which read as follows: "except to the extent provided in regulations, paragraph (4) of section 318(a) shall apply to an option if such application results in an ownership change."

Subsec. (l)(3)(C)(ii). Pub. L. 100–647, §5077(a), added subcl. (III) and concluding provisions.

Subsec. (l)(4)(B)(ii). Pub. L. 100–647, §1006(t)(22)(A), substituted "REMIC" for "real estate mortgage pool".

Subsec. (l)(5)(A)(ii). Pub. L. 100–647, §1006(d)(25), substituted "stock of a controlling corporation" for "stock of controlling corporation".

Pub. L. 100–647, §1006(d)(7), substituted "after such ownership change and as a result of being shareholders or creditors immediately before such change" for "immediately after such ownership change".

Subsec. (l)(5)(B). Pub. L. 100–647, §1006(d)(27), substituted "the pre-change losses and excess credits (within the meaning of section 383(a)(2)) which may be carried to a post-change year shall be computed" for "the net operating loss deduction under section 172(a) for any post-change year shall be determined".

Subsec. (l)(5)(C). Pub. L. 100–647, §1006(d)(18), substituted "tax attributes" for "carryforwards" in heading and amended text generally. Prior to amendment, text read as follows: "In any case to which subparagraph (A) applies, the pre-change losses and excess credits (within the meaning of section 383(a)(2)) which may be carried to a post-change year shall be computed as if 50 percent of the amount which, but for the application of section 108(e)(10)(B), would have been includible in gross income for any taxable year had been so included."

Subsec. (l)(5)(E). Pub. L. 100–647, §1006(d)(19), substituted "taken into account" for "of creditors taken into account" in heading and amended introductory provisions generally. Prior to amendment, introductory provisions read as follows: "For purposes of subparagraph (A)(ii), stock transferred to a creditor in satisfaction of indebtedness shall be taken into account only if such indebtedness—".

Subsec. (l)(5)(F). Pub. L. 100–647, §4012(a)(3), substituted "1989" for "1988" in last sentence.

Subsec. (l)(5)(F)(i)(I). Pub. L. 100–647, §1006(d)(8)(A), inserted " '1504(a)(2)(B)' for '1504(a)(2)' and" after "by substituting".

Subsec. (l)(5)(F)(ii)(III). Pub. L. 100–647, §1006(d)(8)(B), substituted "the amount of deposits in the new loss corporation immediately after the change" for "deposits described in subclause (II)".

Subsec. (l)(5)(F)(iii)(I). Pub. L. 100–647, §4012(b)(1)(B), inserted "(as modified by section 368(a)(3)(D)(iv))" after "section 368(a)(3)(D)(ii)".

Pub. L. 100–647, §1006(d)(29), which directed amendment of subcl. (I) by substituting "section 368(a)(3)(D)(ii)" for "section 368(a)(D)(ii)", could not be executed because "section 368(a)(3)(D)(ii)" appeared and "section 368(a)(D)(ii)" did not appear.

Subsec. (l)(6). Pub. L. 100–647, §1006(d)(9), substituted "shall reflect the increase (if any) in value of the old loss corporation resulting from any surrender or cancellation of creditors' claims in the transaction" for "shall be the value of the new loss corporation immediately after the ownership change".

Subsec. (l)(8). Pub. L. 100–647, §1006(d)(10), added par. (8).

Subsec. (m)(4). Pub. L. 100–647, §1006(d)(1)(C), redesignated par. (5) as (4) and struck out former par. (4) which read as follows: "providing for the treatment of corporate contractions as redemptions for purposes of subsections (e)(2) and (h)(3)(A), and".

Subsec. (m)(5). Pub. L. 100–647, §1006(d)(24), added par. (5).

Pub. L. 100–647, §1006(d)(1)(C), redesignated former par. (5) as (4).

1987—Subsec. (g)(4)(D). Pub. L. 100–203, §10225(a), added subpar. (D).

Subsec. (h)(2)(B). Pub. L. 100–203, §10225(b), inserted at end "Such term includes any amount allowable as depreciation, amortization, or depletion for any period within the recognition period except to the extent the new loss corporation establishes that the amount so allowable is not attributable to the excess described in clause (ii)."

1986—Pub. L. 99–514, §621(a), in amending section generally, in subsec. (a), substituted provisions setting forth general rule that amount of taxable income of any new loss corporation for any post-change year which may be offset by pre-change losses shall not exceed section 382 limitation for such year for provisions relating to change in ownership of corporation and change in its business, description of persons owning corporation, attribution of ownership, and definition of "purchase", in subsec. (b), substituted provisions relating to section 382 limitation for provisions relating to change in ownership as result of reorganization, in subsec. (c), substituted provisions relating to disallowance of carryforwards if continuity of business requirements are not met for provisions defining stock as all shares except nonvoting stock which is limited and preferred as to dividends, and added subsecs. (d) to (m).

Pub. L. 99–514, §621(e)(1), repealed amendment by Pub. L. 94–455, §806(e). See 1976 Amendment note below.

1984—Subsec. (b)(1). Pub. L. 98–369, in section as amended by Pub. L. 94–455, substituted "subparagraph (A), (B), (C), or (F) of section 368(a)(1) or subparagraph (D) or (G) of section 368(a)(1) (but only if the requirements of section 354(b)(1) are met)" for "section 368(a)(1)(A), (B), (C), (D) (but only if the requirements of section 354(b)(1) are met, or (F)".

1981—Subsec. (b)(7). Pub. L. 97–34 designated existing provisions as subpar. (A) and added subpar. (B).

1980—Subsec. (b)(7). Pub. L. 96–589 added par. (7).

1976—Pub. L. 94–455, §806(e), which amended section generally, substituting provisions relating to special limitations on net operating loss carryovers based on continuity of trade or business conducted, for provisions relating to special limitations on net operating loss carryovers based on continuity of ownership, was repealed by Pub. L. 99–514, §621(e)(1). See Effective Date of 1986 and 1976 Amendment notes below.

1964—Subsec. (a)(3). Pub. L. 88–554 inserted reference to section 318(a)(3)(C) of this title.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by section 11051(b)(3)(F) of Pub. L. 115–97 applicable to any divorce or separation instrument (as defined in former section 71(b)(2) of this title as in effect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modification expressly provides that the amendment made by section 11051 of Pub. L. 115–97 applies to such modification, see section 11051(c) of Pub. L. 115–97, set out as a note under section 61 of this title.

Amendment by section 13301(b)(2), (3) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13301(c) of Pub. L. 115–97, set out as a note under section 163 of this title.

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 2009 Amendment

Pub. L. 111–5, div. B, title I, §1262(b), Feb. 17, 2009, 123 Stat. 344, provided that: "The amendment made by this section [amending this section] shall apply to ownership changes after the date of the enactment of this Act [Feb. 17, 2009]."

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–357 effective Jan. 1, 2005, with exception for any FASIT in existence on Oct. 22, 2004, to the extent that regular interests issued by the FASIT before such date continue to remain outstanding in accordance with the original terms of issuance, see section 835(c) of Pub. L. 108–357, set out as a note under section 56 of this title.

Effective Date of 1996 Amendment

Amendment by 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.

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable to stock transferred after Dec. 31, 1994, in satisfaction of any indebtedness, except that such amendment inapplicable to stock transferred in satisfaction of any indebtedness if such transfer is in a title 11 or similar case filed on or before Dec. 31, 1993, see section 13226(a)(3) of Pub. L. 103–66, set out as a note under section 108 of this title.

Effective Date of 1989 Amendment

Amendment by section 7205(a) of Pub. L. 101–239 applicable, except as otherwise provided, to ownership changes and acquisitions after Oct. 2, 1989, in taxable years ending after such date, see section 7205(c) of Pub. L. 101–239, set out as a note under section 56 of this title.

Pub. L. 101–239, title VII, §7304(d)(2), Dec. 19, 1989, 103 Stat. 2354, provided that: "The amendments made by this subsection [amending this section] shall apply to acquisitions of employer securities after July 12, 1989, except that such amendments shall not apply to acquisitions after July 12, 1989, pursuant to a written binding contract in effect on July 12, 1989, and at all times thereafter before such acquisition."

Amendment by sections 7811(c)(5)(A) and 7815(h) 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.

Pub. L. 101–73, title XIV, §1401(c)(2), Aug. 9, 1989, 103 Stat. 550, provided that: "The amendment made by subsection (a)(2) [amending this section] shall apply to transactions on or after May 10, 1989."

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, §1006(d)(1)(D), Nov. 10, 1988, 102 Stat. 3395, provided that: "The amendments made by this paragraph [amending this section] shall apply with respect to ownership changes after June 10, 1987."

Pub. L. 100–647, title I, §1006(d)(17)(B), Nov. 10, 1988, 102 Stat. 3398, provided that: "The amendment made by subparagraph (A) [amending this section] shall apply to any ownership change after June 10, 1987. For purposes of the preceding sentence, any equity structure shift pursuant to a plan of reorganization adopted on or before June 10, 1987, shall be treated as occurring when such plan was adopted."

Pub. L. 100–647, title I, §1006(d)(28)(B), Nov. 10, 1988, 102 Stat. 3400, provided that: "The amendment made by subparagraph (A) [amending this section] shall apply in the case of ownership changes on or after June 21, 1988."

Amendment by section 1006(d)(2)–(10), (18)–(27), (29), (t)(22)(A) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title IV, §4012(b)(1)(C)(ii), Nov. 10, 1988, 102 Stat. 3657, provided that: "The amendment made by subparagraph (B) [amending this section] shall apply to any ownership change occurring after the date of the enactment of this Act [Nov. 10, 1988] and before January 1, 1990."

Pub. L. 100–647, title V, §5077(b), Nov. 10, 1988, 102 Stat. 3683, provided that:

"(1) In General.—The amendment made by subsection (a) [amending this section] shall apply to acquisition after December 31, 1988.

"(2) Exception.—The amendment made by subsection (a) shall not apply to acquisitions after December 31, 1988, pursuant to a binding written contract entered into on or before October 21, 1988."

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, §10225(c), Dec. 22, 1987, 101 Stat. 1330–413, provided that:

"(1) Subsection (a).—The amendment made by subsection (a) [amending this section] shall apply in the case of stock treated as becoming worthless in taxable years beginning after December 31, 1987.

"(2) Subsection (b).—The amendment made by subsection (b) [amending this section] shall apply in the case of ownership changes (as defined in section 382 of the Internal Revenue Code of 1986 as amended by subsection (a)) after December 15, 1987; except that such amendment shall not apply in the case of any ownership change pursuant to a binding written contract which was in effect on December 15, 1987, and at all times thereafter before such ownership change."

Effective Date of 1986 Amendment; Savings Provisions

Pub. L. 99–514, title VI, §621(f), Oct. 22, 1986, 100 Stat. 2266, as amended by Pub. L. 100–647, title I, §1006(d)(11)–(16), title VI, §6277(a), (b), Nov. 10, 1988, 102 Stat. 3397, 3398, 3753, 3754, provided that:

"(1) Amendments made by subsections (a), (b), and (c).—

"(A) In general.—

"(i) Changes after 1986.—The amendments made by subsections (a), (b), and (c) [amending this section and sections 318 and 383 of this title] shall apply to any ownership change after December 31, 1986.

"(ii) Plans of reorganization adopted before 1987.—For purposes of clause (i), any equity structure shift pursuant to a plan of reorganization adopted before January 1, 1987, shall be treated as occurring when such plan was adopted.

"(B) Termination of old section 382.—Except in a case described in any of the following paragraphs—

"(i) section 382(a) of the Internal Revenue Code of 1954 (as in effect before the amendment made by subsection (a) and the amendments made by section 806 of the Tax Reform Act of 1976 [section 806 of Pub. L. 94–455]) shall not apply to any increase in percentage points occurring after December 31, 1988, and

"(ii) section 382(b) of such Code (as so in effect) shall not apply to any reorganization occurring pursuant to a plan of reorganization adopted after December 31, 1986.

In no event shall sections 382(a) and (b) of such Code (as so in effect) apply to any ownership change described in subparagraph (A).

"(C) Coordination with section 382(i).—For purposes of section 382(i) of the Internal Revenue Code of 1986 (as added by this section), any equity structure shift pursuant to a plan of reorganization adopted before January 1, 1987, shall be treated as occurring when such plan was adopted.

"(2) For amendments to tax reform act of 1976.—

"(A) In general.—The repeals made by subsection (e)(1) [repealing amendments by Pub. L. 94–455, §806(e), (f), amending this section and sections 108, 368, and 383 of this title] and the amendment made by subsection (e)(2) [repealing section 806(g)(2), (3) of Pub. L. 94–455, formerly set out as an Effective Date of 1976 Amendment note below] shall take effect on January 1, 1986.

"(B) Election to have amendments apply.—

"(i) If a taxpayer described in clause (ii) elects to have the provisions of this subparagraph apply, the amendments made by subsections (e) and (f) of section 806 of the Tax Reform Act of 1976 [amending this section and sections 108, 368, and 383 of this title] shall apply to the reorganization described in clause (ii).

"(ii) A taxpayer is described in this clause if the taxpayer filed a title 11 or similar case on December 8, 1981, filed a plan of reorganization on February 5, 1986, filed an amended plan on March 14, 1986, and received court approval for the amended plan and disclosure statement on April 16, 1986.

"(C) Application of old rules to certain debt.—In the case of debt of a corporation incorporated in Colorado on November 8, 1924, and reincorporated in Delaware in 1987, with headquarters in Denver, Colorado—

"(i) the amendments made by subsections (a), (b), and (c) shall not apply to any debt restructuring of such debt which was approved by the debtor's Board of Directors and the lenders in 1986, and

"(ii) the amendments made by subsections (e) and (f) of section 806 of the Tax Reform Act of 1976 shall not apply to such debt restructuring, except that the amendment treated as part of such subsections under section 59(b) of the Tax Reform Act of 1984 (relating to qualified workouts) shall apply to such debt restructuring.

"(D) Special rule for oil and gas well drilling business.—In the case of a Texas corporation incorporated on July 23, 1935, in applying section 382 of the Internal Revenue Code of 1986 (as in effect before and after the amendments made by subsections (a), (b), and (c)) to a loan restructuring agreement during 1985, section 382(a)(5)(C) of the Internal Revenue Code of 1954 (as added by the amendments made by subsections (e) and (f) of section 806 of the Tax Reform Act of 1976) shall be applied as if it were in effect with respect to such restructuring. For purposes of the preceding sentence, in applying section 382 (as so in effect), if a person has a warrant to acquire stock, such stock shall be considered as owned by such person.

"(3) Testing period.—For purposes of determining whether there is an ownership change, the testing period shall not begin before the later of—

"(A) May 6, 1986, or

"(B) in the case of an ownership change which occurs after May 5, 1986, and to which the amendments made by subsections (a), (b), and (c) do not apply, the first day following the date on which such ownership change occurs.

"(4) Special transition rules.—The amendments made by subsections (a), (b), and (c) shall not apply to any—

"(A) stock-for-debt exchanges and stock sales made pursuant to a plan of reorganization with respect to a petition for reorganization filed by a corporation under chapter 11 of title 11, United States Code, on August 26, 1982, and which filed with a United States district court a first amended and related plan of reorganization before March 1, 1986, or

"(B) ownership change of a Delaware corporation incorporated in August 1983, which may result from the exercise of put or call option under an agreement entered into on September 14, 1983, but only with respect to taxable years beginning after 1991 regardless of when such ownership change takes place.

Any regulations prescribed under section 382 of the Internal Revenue Code of 1986 (as added by subsection (a)) which have the effect of treating a group of shareholders as a separate 5-percent shareholder by reason of a public offering shall not apply to any public offering before January 1, 1989, for the benefit of institutions described in section 591 of such Code. Unless the corporation otherwise elects, an underwriter of any offering of stock in a corporation before September 19, 1986 (January 1, 1989, in the case of an offering for the benefit of an institution described in the preceding sentence), shall not be treated as acquiring any stock of such corporation by reason of a firm commitment underwriting to the extent the stock is disposed of pursuant to the offering (but in no event later than 60 days after the initial offering).

"(5) Bankruptcy proceedings.—Unless the taxpayer elects not to have the provisions of this paragraph apply, in the case of a reorganization described in subparagraph (G) of section 368(a)(1) 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 subsections (a), (b), and (c) 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 August 14, 1986. The determination as to whether an ownership change has occurred during the period beginning January 1, 1987, and ending on the final settlement of any reorganization or proceeding described in the preceding sentence shall be redetermined as of the time of such final settlement.

"(6) Certain plans.—The amendments made by subsections (a), (b), and (c) shall not apply to any ownership change with respect to—

"(A) the acquisition of a corporation the stock of which is acquired pursuant to a plan of divestiture which identified such corporation and its assets, and was agreed to by the board of directors of such corporation's parent corporation on May 17, 1985,

"(B) a merger which occurs pursuant to a merger agreement (entered into before September 24, 1985) and an application for approval by the Federal Home Loan Bank Board was filed on October 4, 1985,

"(C) a reorganization involving a party to a reorganization of a group of corporations engaged in enhanced oil recovery operations in California, merged in furtherance of a plan of reorganization adopted by a board of directors vote on September 24, 1985, and a Delaware corporation whose principal oil and gas producing fields are located in California, or

"(D) the conversion of a mutual savings and loan association holding a Federal charter dated March 22, 1985, to a stock savings and loan association pursuant to the rules and regulations of the Federal Home Loan Bank Board.

"(7) Ownership change of regulated air carrier.—The amendments made by subsections (a), (b), and (c) shall not apply to an ownership change of a regulated air carrier if—

"(A) on July 16, 1986, at least 40 percent of the outstanding common stock (excluding all preferred stock, whether or not convertible) of such carrier had been acquired by a parent corporation incorporated in March 1980 under the laws of Delaware, and

"(B) the acquisition (by or for such parent corporation) or retirement of the remaining common stock of such carrier is completed before the later of March 31, 1987, or 90 days after the requisite governmental approvals are finally granted,

but only if the ownership change occurs on or before the later of March 31, 1987, or such 90th day. The aggregate reduction in tax for any taxable year by reason of this paragraph shall not exceed $10,000,000. The testing period for determining whether a subsequent ownership change has occurred shall not begin before the 1st day following an ownership change to which this paragraph applies.

"(8) The amendments made by subsections (a), (b), and (c) shall not apply to any ownership change resulting from the conversion of a Minnesota mutual savings bank holding a Federal charter dated December 31, 1985, to a stock savings bank pursuant to the rules and regulations of the Federal Home Loan Bank Board, and from the issuance of stock pursuant to that conversion to a holding company incorporated in Delaware on February 21, 1984. For purposes of determining whether any ownership change occurs with respect to the holding company or any subsidiary thereof (whether resulting from the transaction described in the preceding sentence or otherwise), any issuance of stock made by such holding company in connection with the transaction described in the preceding sentence shall not be taken into account.

"(9) Definitions.—Except as otherwise provided, terms used in this subsection shall have the same meaning as when used in section 382 of the Internal Revenue Code of 1986 (as amended by this section)."

[Pub. L. 100–647, title VI, §6277(c), Nov. 10, 1988, 102 Stat. 3754, provided that: "The amendments made by this section [amending section 621(f) of Pub. L. 99–514, set out above] shall take effect as if included in section 621(f)(5) of the Tax Reform Act of 1986 [Pub. L. 99–514]."]

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, §62(b)(2), July 18, 1984, 98 Stat. 583, provided that: "The amendment made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 4 of the Bankruptcy Tax Act of 1980 [Pub. L. 96–589]."

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to any transfer made on or after Jan. 1, 1981, see section 246(a) of Pub. L. 97–34, set out as a note under section 368 of this title.

Effective Date of 1980 Amendment

Pub. L. 96–589, §2(d), Dec. 24, 1980, 94 Stat. 3396, provided that the amendment made by section 2(b) of Pub. L. 96–589 is to subsec. (b) as in effect before its amendment by section 806 of the Tax Reform Act of 1976, Pub. L. 94–455.

Amendment by Pub. L. 96–589 applicable to transactions which occur after Dec. 31, 1980, other than transactions which occur in a proceeding in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11 commencing on or before Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to transactions occurring after Sept. 30, 1979, in a specified manner, see section 7(a)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.

Effective Date of 1976 Amendment

Pub. L. 94–455, title VIII, §806(g)(2), (3), Oct. 4, 1976, 90 Stat. 1605, 1606, as amended by Pub. L. 95–600, title III, §368(a), Nov. 6, 1978, 92 Stat. 2857; Pub. L. 95–615, §8, Nov. 8, 1978, 92 Stat. 3098; Pub. L. 96–167, §9(e), Dec. 29, 1979, 93 Stat. 1279; Pub. L. 97–119, title I, §111, Dec. 29, 1981, 95 Stat. 1640; Pub. L. 98–369, div. A, title I, §62(a), July 18, 1984, 98 Stat. 583, which provided an effective date for the amendments made by section 806(e), (f) of Pub. L. 94–455 for purposes of applying sections 382(a) and 383 (as it relates to section 382(a)) of this title, was repealed by Pub. L. 99–514, title VI, §621(e)(2), (f)(2), Oct. 22, 1986, 100 Stat. 2266, eff. Jan. 1, 1986.

Effective Date of 1964 Amendment

Amendment by Pub. L. 88–554 effective Aug. 31, 1964, except that for purposes of sections 302 and 304 of this title, such amendment shall not apply to distributions in payment for stock acquisitions or redemptions, if such acquisitions or redemptions occurred before Aug. 31, 1964, see section 4(c) of Pub. L. 88–554, set out as a note under section 318 of this title.

Delay in Effective Date of 1976 Amendment

Pub. L. 95–600, title III, §368, Nov. 6, 1978, 92 Stat. 2857, provided for delaying the effective date established by section 806(g)(2), (3) of Pub. L. 94–455, formerly set out above, by substituting "1980" for "1978", with certain elections.

Clarification of Regulations Related to Limitations on Certain Built-In Losses Following an Ownership Change

Pub. L. 111–5, div. B, title I, §1261, Feb. 17, 2009, 123 Stat. 342, provided that:

"(a) Findings.—Congress finds as follows:

"(1) The delegation of authority to the Secretary of the Treasury under section 382(m) of the Internal Revenue Code of 1986 does not authorize the Secretary to provide exemptions or special rules that are restricted to particular industries or classes of taxpayers.

"(2) Internal Revenue Service Notice 2008–83 is inconsistent with the congressional intent in enacting such section 382(m).

"(3) The legal authority to prescribe Internal Revenue Service Notice 2008–83 is doubtful.

"(4) However, as taxpayers should generally be able to rely on guidance issued by the Secretary of the Treasury legislation is necessary to clarify the force and effect of Internal Revenue Service Notice 2008–83 and restore the proper application under the Internal Revenue Code of 1986 of the limitation on built-in losses following an ownership change of a bank.

"(b) Determination of Force and Effect of Internal Revenue Service Notice 2008–83 Exempting Banks From Limitation on Certain Built–in Losses Following Ownership Change.—

"(1) In general.—Internal Revenue Service Notice 2008–83—

"(A) shall be deemed to have the force and effect of law with respect to any ownership change (as defined in section 382(g) of the Internal Revenue Code of 1986) occurring on or before January 16, 2009, and

"(B) shall have no force or effect with respect to any ownership change after such date.

"(2) Binding contracts.—Notwithstanding paragraph (1), Internal Revenue Service Notice 2008–83 shall have the force and effect of law with respect to any ownership change (as so defined) which occurs after January 16, 2009, if such change—

"(A) is pursuant to a written binding contract entered into on or before such date, or

"(B) is pursuant to a written agreement entered into on or before such date and such agreement was described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission required by reason of such ownership change."

Report on Depreciation and Built-In Deductions; Report on Bankruptcy Workouts

Pub. L. 99–514, title VI, §621(d), Oct. 22, 1986, 100 Stat. 2266, directed Secretary of the Treasury or his delegate to, not later than Jan. 1, 1989, conduct a study and report to Committee on Ways and Means of House of Representatives and Committee on Finance of Senate with respect to treatment of depreciation, amortization, depletion, and other built-in deductions for purposes of sections 382 and 383 of this title, and, not later than Jan. 1, 1988, conduct a study and report to committees referred to above with respect to treatment of informal bankruptcy workouts for purposes of sections 108 and 382 of this title, prior to repeal by Pub. L. 101–508, title XI, §11832(3), Nov. 5, 1990, 104 Stat. 1388–559.