26 U.S.C. § 243 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 243: Dividends received by corporations
Dividends received by corporations
Status: in_force

(a) General rule

In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:

(1) 50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);

(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (15 U.S.C. 661 and following); and

(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).

(b) Qualifying dividends

(1) In general

For purposes of this section, the term "qualifying dividend" means any dividend received by a corporation—

(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and

(B) if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.

(2) Affiliated group

For purposes of this subsection:

(A) In general

The term "affiliated group" has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2) and 1504(c) shall not apply.

(B) Group must be consistent in foreign tax treatment

The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—

(i) 1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and

(ii) 1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.

(3) Special rule for groups which include life insurance companies

(A) In general

In the case of an affiliated group which includes 1 or more insurance companies under section 801, no dividend by any member of such group shall be treated as a qualifying dividend unless an election under this paragraph is in effect for the taxable year in which the dividend is received. The preceding sentence shall not apply in the case of a dividend described in paragraph (1)(B)(ii).

(B) Effect of election

If an election under this paragraph is in effect with respect to any affiliated group—

(i) part II of subchapter B of chapter 6 (relating to certain controlled corporations) shall be applied with respect to the members of such group without regard to sections 1563(a)(4) and 1563(b)(2)(D), and

(ii) for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563(b)(2)(D).

(C) Election

An election under this paragraph shall be made by the common parent of the affiliated group and at such time and in such manner as the Secretary shall by regulations prescribe. Any such election shall be binding on all members of such group and may be revoked only with the consent of the Secretary.

(c) Increased percentage for dividends from 20-percent owned corporations

(1) In general

In the case of any dividend received from a 20-percent owned corporation, subsection (a)(1) shall be applied by substituting "65 percent" for "50 percent".

(2) 20-percent owned corporation

For purposes of this section, the term "20-percent owned corporation" means any corporation if 20 percent or more of the stock of such corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in section 1504(a)(4) shall not be taken into account.

(d) Special rules for certain distributions

For purposes of subsection (a)—

(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.

(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.

(3) Any dividend received from a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following) shall not be treated as a dividend.

(e) Certain dividends from foreign corporations

For purposes of subsection (a) and for purposes of section 245, any dividend from a foreign corporation from earnings and profits accumulated by a domestic corporation during a period with respect to which such domestic corporation was subject to taxation under this chapter (or corresponding provisions of prior law) shall be treated as a dividend from a domestic corporation which is subject to taxation under this chapter.

(Aug. 16, 1954, ch. 736, 68A Stat. 73; Pub. L. 85–866, title I, §57(b), Sept. 2, 1958, 72 Stat. 1645; Pub. L. 86–779, §§3(a), 10(g), Sept. 14, 1960, 74 Stat. 998, 1009; Pub. L. 88–272, title II, §214(a), Feb. 26, 1964, 78 Stat. 52; Pub. L. 90–364, title I, §103(e)(2), June 28, 1968, 82 Stat. 264; Pub. L. 91–172, title V, §504(c)(1), Dec. 30, 1969, 83 Stat. 633; Pub. L. 94–12, title III, §304(b), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94–455, title X, §§1031(b)(2), 1051(f)(1), (2), title XIX, §§1901(a)(34), (b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), (13)(A), Oct. 4, 1976, 90 Stat. 1622, 1646, 1769, 1791, 1797, 1833, 1834; Pub. L. 97–34, title II, §232(b)(2), Aug. 13, 1981, 95 Stat. 250; Pub. L. 98–369, div. A, title II, §211(b)(3), July 18, 1984, 98 Stat. 754; Pub. L. 99–514, title IV, §411(b)(2)(C)(iv), title VI, §611(a)(1), Oct. 22, 1986, 100 Stat. 2227, 2249; Pub. L. 100–203, title X, §10221(a)(1), (b), Dec. 22, 1987, 101 Stat. 1330–408; Pub. L. 100–647, title I, §1010(f)(4), Nov. 10, 1988, 102 Stat. 3454; Pub. L. 101–508, title XI, §11814(a), Nov. 5, 1990, 104 Stat. 1388–556; Pub. L. 104–188, title I, §1702(h)(4), (8), Aug. 20, 1996, 110 Stat. 1873, 1874; Pub. L. 113–295, div. A, title II, §221(a)(41)(C), (D), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, §13002(a), Dec. 22, 2017, 131 Stat. 2100; Pub. L. 115–141, div. U, title IV, §401(d)(1)(D)(v), (xvii)(II), Mar. 23, 2018, 132 Stat. 1207, 1208.)

Editorial Notes

References in Text

The Small Business Investment Act of 1958, referred to in subsec. (a)(2), is Pub. L. 85–699, Aug. 21, 1958, 72 Stat. 689, which is classified principally to chapter 14B (§661 et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under section 661 of Title 15 and Tables.

Amendments

2018—Subsec. (b)(1)(B). Pub. L. 115–141, §401(d)(1)(D)(v), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "if—

"(i) such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, for which an election under section 1562 was not in effect, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group, or

"(ii) such dividend is paid by a corporation with respect to which an election under section 936 is in effect for the taxable year in which such dividend is paid."

Subsec. (b)(2)(A). Pub. L. 115–141, §401(d)(1)(D)(xvii)(II), struck out ", 1504(b)(4)," after "1504(b)(2)".

2017—Subsec. (a)(1). Pub. L. 115–97, §13002(a)(1), substituted "50 percent" for "70 percent".

Subsec. (c). Pub. L. 115–97, §13002(a)(3), which directed amendment of subsec. (c) heading by substituting "Increased percentage" for "Retention of 80-percent dividend received deduction", was executed by making the substitution for "Retention of 80-percent dividends received deduction", to reflect the probable intent of Congress.

Subsec. (c)(1). Pub. L. 115–97, §13002(a)(2), substituted "65 percent" for "80 percent" and "50 percent" for "70 percent".

2014—Subsec. (c)(1). Pub. L. 113–295, §221(a)(41)(C), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "In the case of any dividend received from a 20-percent owned corporation—

"(A) subsection (a)(1) of this section, and

"(B) subsections (a)(3) and (b)(2) of section 244,

shall be applied by substituting '80 percent' for '70 percent'."

Subsec. (d)(4). Pub. L. 113–295, §221(a)(41)(D), struck out par. (4) which read as follows: "Any dividend received which is described in section 244 (relating to dividends received on preferred stock of a public utility) shall not be treated as a dividend."

1996—Subsec. (b)(2). Pub. L. 104–188, §1702(h)(8), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "For purposes of this subsection, the term 'affiliated group' has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2), 1504(b)(4), and 1504(c) shall not apply."

Subsec. (b)(3)(A). Pub. L. 104–188, §1702(h)(4), inserted "of" after "In the case".

1990—Subsec. (b). Pub. L. 101–508 amended subsec. (b) generally, substituting present provisions for provisions defining "qualifying dividends", providing for an election by or for an affiliated group, the effect of an election, and the termination of an election, defining an "affiliated group", and providing special rules for insurance companies.

1988—Subsec. (b)(6). Pub. L. 100–647 substituted "section 801" for "section 801 or 821".

1987—Subsec. (a)(1). Pub. L. 100–203, §10221(a)(1), substituted "70 percent" for "80 percent".

Subsecs. (c) to (e). Pub. L. 100–203, §10221(b), added subsec. (c) and redesignated former subsecs. (c) and (d) as (d) and (e), respectively.

1986—Subsec. (a)(1). Pub. L. 99–514, §611(a)(1), substituted "80 percent" for "85 percent".

Subsec. (b)(3)(C). Pub. L. 99–514, §411(b)(2)(C)(iv), inserted "and" at end of cl. (i), redesignated cl. (iii) as (ii), and struck out former cl. (ii) which read as follows: "$400,000 limitation for certain exploration expenditures under section 617(h)(1), and".

1984—Subsec. (b)(3)(C). Pub. L. 98–369, §211(b)(3)(A), inserted "and" at end of cl. (ii), struck out cl. (iii) which provided for a $25,000 limitation on small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and redesignated cl. (iv) as (iii).

Subsec. (b)(6). Pub. L. 98–369, §211(b)(3)(B), substituted "section 801" for "section 802".

1981—Subsec. (b)(3)(C)(i). Pub. L. 97–34 struck out "$150,000" before "minimum accumulated earnings credit".

1976—Subsec. (a)(2). Pub. L. 94–455, §1901(a)(34)(A), inserted "(15 U.S.C. 661 and following)" after "Small Business Investment Act of 1958".

Subsec. (b)(1). Pub. L. 94–455, §1051(f)(1), inserted "either" at end of subpar. (A), substituted a comma for a period and inserted "or" at end of subpar. (B), and added subpar. (C).

Subsec. (b)(2), (3), (4). Pub. L. 94–455, title XIX, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (b)(2)(A). Pub. L. 94–455, §1901(a)(34)(B), struck out "(except that in the case of a taxable year of a member beginning in 1963 and ending in 1964, if the election is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, such election shall be effective for such taxable year of such member, if such member consents to such election with respect to such taxable year)" after "with respect to which the election is made".

Subsec. (b)(3)(B). Pub. L. 94–455, §1031(b)(2), substituted "election under section 901(a) (relating to allowance of foreign tax credit)" for "elections under section 901(a) (relating to allowance of foreign tax credit) and section 904(b)(1) (relating to election of overall limitation)".

Subsec. (b)(3)(C). Pub. L. 94–455, §§1901(b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), struck out cl. (ii) which set a $100,000 limitation for exploration expenditures under section 615 (a) and (b), redesignated former cls. (iii), (iv), and (v) as cls. (ii), (iii), and (iv), respectively, and substituted "certain exploration expenditures under section 617(h)(1)" for "exploration expenditures under sections 615(c)(1) and 617(h)(1)" in cl. (ii) as so redesignated, "804(a)(3)" for "804(a)(4)" in cl. (iii) as so redesignated, and "section 6154(c)(2) and section 6655(e)(2)" for "sections 6154(c)(2) and (3) and sections 6655(e)(2) and (3)" in cl. (iv) as so redesignated.

Subsec. (b)(5). Pub. L. 94–455, §1051(f)(2), inserted ", 1504(b)(4)," after "sections 1504(b)(2)".

1975—Subsec. (b)(3)(C)(i). Pub. L. 94–12 substituted "$150,000" for "$100,000".

1969—Subsec. (b)(3)(C)(iii). Pub. L. 91–172 substituted "sections 615(c)(1) and 617(h)(1)" for "section 615(c)(1)".

1968—Subsec. (b)(3)(C)(v). Pub. L. 90–364 substituted "surtax exemption, and one amount under section 6154(c)(2) and (3) and sections 6655(e)(2) and (3), for purposes of estimated tax payment requirements under section 6154" for "$100,000 exemption for purposes of estimated tax filing requirements under section 6016".

1964—Subsec. (a). Pub. L. 88–272 substituted provisions permitting a deduction for 85 percent of dividends received except that it shall be 100 percent when received by a small business investment company operating under the Small Business Investment Act of 1958, and 100 percent in case of qualifying dividends, for provisions permitting an 85 percent deduction for corporations other than one operating under the Small Business Investment Act of 1958, and for other than dividends described in section 244(1) of this title.

Subsec. (b). Pub. L. 88–272 added subsec. (b) and omitted a prior subsec. (b) which allowed a 100 percent deduction of dividends received by a small business investment company operating under the Small Business Investment Act of 1958, other than dividends described in section 244(1) of this title.

Subsec. (c). Pub. L. 88–272 substituted "subsection (a)" for "subsections (a) and (b)" and added par. (4).

Subsec. (d). Pub. L. 88–272 substituted "subsection (a)" for "subsections (a) and (b)".

1960—Subsec. (c)(3). Pub. L. 86–779, §10(g), added par. (3).

Subsec. (d). Pub. L. 86–779, §3(a), added subsec. (d).

1958—Subsec. (a). Pub. L. 85–866, §57(b)(1), inserted "(other than a small business investment company operating under the Small Business Investment Act of 1958)".

Subsecs. (b), (c). Pub. L. 85–866, §57(b)(2), (3), added subsec. (b), redesignated former subsec. (b) as (c), and substituted "subsections (a) and (b)" for "subsection (a)".

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §13002(f), Dec. 22, 2017, 131 Stat. 2101, provided that: "The amendments made by this section [amending this section and sections 245, 246, 246A, and 861 of this title] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Pub. L. 113–295), see section 221(a)(41)(K) of Pub. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Pub. L. 113–295, 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 1996 Amendment

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

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11814(c), Nov. 5, 1990, 104 Stat. 1388–557, provided that:

"(1) In general.—The amendments made by this section [amending this section and section 1504 of this title] shall apply to taxable years beginning after December 31, 1990.

"(2) Treatment of old elections.—For purposes of section 243(b)(3) of the Internal Revenue Code of 1986 (as amended by subsection (a)), any reference to an election under such section shall be treated as including a reference to an election under section 243(b) of such Code (as in effect on the day before the date of the enactment of this Act [Nov. 5, 1990])."

Effective Date of 1988 Amendment

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

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, §10221(e), Dec. 22, 1987, 101 Stat. 1330–409, as amended by Pub. L. 100–647, title II, §2004(i)(1), Nov. 10, 1988, 102 Stat. 3603, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 244 to 246A, 805, 854, and 861 of this title] shall apply to dividends received or accrued after December 31, 1987, in taxable years ending after such date.

"(2) Amendments relating to limitations.—The amendments made by subsection (c) [amending sections 246 and 805 of this title] shall apply to taxable years beginning after December 31, 1987."

Effective Date of 1986 Amendment

Amendment by section 411(b)(2)(C)(iv) of Pub. L. 99–514 applicable, except as otherwise provided, to costs paid or incurred after Dec. 31, 1986, in taxable years ending after such date, see section 411(c) of Pub. L. 99–514 set out as a note under section 263 of this title.

Amendment by section 611(a)(1) of Pub. L. 99–514 applicable to dividends received or accrued after Dec. 31, 1986, in taxable years ending after such date, see section 611(b) of Pub. L. 99–514, set out as a note under section 246 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as an Effective Date note under section 801 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see section 232(c) of Pub. L. 97–34, set out as a note under section 535 of this title.

Effective Date of 1976 Amendment

For effective date of amendment by section 1031(b)(2) of Pub. L. 94–455, see section 1031(c) of Pub. L. 94–455, set out as a note set out under section 904 of this title.

For effective date of amendment by section 1051(f)(1), (2) of Pub. L. 94–455, see section 1051(i) of Pub. L. 94–455, set out as a note under section 27 of this title.

Amendment by section 1901(a)(34), (b)(1), (21) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

For effective date of amendment by section 1906(b)(3)(C)(ii) of Pub. L. 94–455, see section 1906(d) of Pub. L. 94–455, set out as a note under section 6013 of this title.

Effective Date of 1975 Amendment

Amendment by Pub. L. 94–12 applicable to taxable years beginning after Dec. 31, 1974, see section 305(c) of Pub. L. 94–12, set out as a note under section 535 of this title.

Effective Date of 1969 Amendment

Pub. L. 91–172, title V, §504(d), Dec. 30, 1969, 83 Stat. 633, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—The amendments made by this section [amending this section and sections 381, 615, 617, 703, and 1016 of this title] shall apply with respect to exploration expenditures paid or incurred after December 31, 1969.

"(2) Presumption of election under section 617.—For purposes of section 617 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], an election under section 615(e) of such Code, which is effective with respect to exploration expenditures paid or incurred before January 1, 1970, shall be treated as an election under section 617(a) of such Code with respect to exploration expenditures paid or incurred after December 31, 1969. The preceding sentence shall not apply to any taxpayer who notifies the Secretary of the Treasury or his delegate (at such time and in such manner as the Secretary or his delegate prescribes by regulations) that he does not desire his election under section 615(e) to be so treated."

Effective Date of 1968 Amendment

Pub. L. 90–364, title I, §103(f), June 28, 1968, 82 Stat. 264, provided that: "Except as provided by section 104 [formerly set out as notes under sections 51 and 6154 of this title], the amendments made by this section [enacting section 6425, amending this section and sections 6020, 6154, 6651, 6655, 7203, and 7701, and repealing sections 6016 and 6074 of this title] shall apply with respect to taxable years beginning after December 31, 1967."

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §214(c), Feb. 26, 1964, 78 Stat. 55, provided that: "The amendments made by subsections (a) [amending this section] and (b) [amending sections 244, 246, 804, and 809 of this title] shall apply with respect to dividends received in taxable years ending after December 31, 1963."

Effective Date of 1960 Amendment

Pub. L. 86–779, §3(c), Sept. 14, 1960, 74 Stat. 998, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 861 of this title] shall apply to dividends received after December 31, 1959, in taxable years ending after such date."

Amendment by section 10(g) of Pub. L. 86–779 applicable with respect to taxable years of real estate investment trusts beginning after Dec. 31, 1960, see section 10(k) of Pub. L. 86–779, set out as an Effective Date note under section 856 of this title.

Effective Date of 1958 Amendment

Pub. L. 85–866, §57(d), Sept. 2, 1958, 72 Stat. 1646, provided that: "The amendments made by this section [enacting sections 1242 and 1243 and amending this section and sections 165 and 246 of this title] shall apply with respect to taxable years beginning after the date of the enactment of this Act [Sept. 2, 1958]."

Savings Provision

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

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
26 U.S.C. § 2040 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 11 / Section 2040: Joint interests
Joint interests
Status: in_force

(a) General rule

The value of the gross estate shall include the value of all property to the extent of the interest therein held as joint tenants with right of survivorship by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants with right of survivorship and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants with right of survivorship.

(b) Certain joint interests of husband and wife

(1) Interests of spouse excluded from gross estate

Notwithstanding subsection (a), in the case of any qualified joint interest, the value included in the gross estate with respect to such interest by reason of this section is one-half of the value of such qualified joint interest.

(2) Qualified joint interest defined

For purposes of paragraph (1), the term "qualified joint interest" means any interest in property held by the decedent and the decedent's spouse as—

(A) tenants by the entirety, or

(B) joint tenants with right of survivorship, but only if the decedent and the spouse of the decedent are the only joint tenants.

(Aug. 16, 1954, ch. 736, 68A Stat. 385; Pub. L. 87–834, §18(a)(2)(G), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94–455, title XX, §2002(c)(1), (3), Oct. 4, 1976, 90 Stat. 1855, 1856; Pub. L. 95–600, title V, §511(a), title VII, §702(k)(2), Nov. 6, 1978, 92 Stat. 2881, 2932; Pub. L. 96–222, title I, §105(a)(3), Apr. 1, 1980, 94 Stat. 218; Pub. L. 97–34, title IV, §403(c)(1)–(3)(A), Aug. 13, 1981, 95 Stat. 301, 302.)

Editorial Notes

Amendments

1981—Subsec. (a). Pub. L. 97–34, §403(c)(2), substituted "joint tenants with right of survivorship" for "joint tenants" in three places.

Subsec. (b)(2). Pub. L. 97–34, §403(c)(1), in redefining "qualified joint interest" substituted provision defining term as meaning any interest in property held by the decedent and the decedent's spouse as tenants by the entirety, or joint tenants with right of survivorship, but only if the decedent and the spouse of the decedent are the only joint tenants for provision defining the term as meaning any interest in property held by the decedent and the decedent's spouse as joint tenants or as tenants by the entirety, but only if such joint interest was created by the decedent, the decedent's spouse, or both, in the case of personal property, the creation of such joint interest constituted in whole or in part a gift for purposes of chapter 12, or in the case of real property, an election under section 2515 applies with respect to the creation of such joint interest, and in the case of a joint tenancy, only the decedent and the decedent's spouse are joint tenants.

Subsecs. (c) to (e). Pub. L. 97–34, §403(c)(3)(A), repealed subsec. (c) respecting value where spouse of decedent materially participated in farm or other business, subsec. (d) relating to joint interests of husband and wife created before 1977, and subsec. (e) covering treatment of certain post-1976 terminations.

1980—Subsec. (c)(1). Pub. L. 96–222, §105(a)(3)(B), substituted "subsection (a)" for "subsections (a)".

Subsec. (c)(2)(C). Pub. L. 96–222, §105(a)(3)(A), added subpar. (C).

1978—Subsec. (c). Pub. L. 95–600, §511(a), added subsec. (c).

Subsecs. (d), (e). Pub. L. 95–600, §702(k)(2), added subsecs. (d) and (e).

1976—Pub. L. 94–455 designated existing provisions as subsec. (a), added heading for subsec. (a), and added subsec. (b).

1962—Pub. L. 87–834 struck out provisions which excepted real property outside of the United States.

Statutory Notes and Related Subsidiaries

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to estates of decedents dying after Dec. 31, 1981, see section 403(e) of Pub. L. 97–34, set out as a note under section 2056 of this title.

Effective Date of 1980 Amendment

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 V, §511(b), Nov. 6, 1978, 92 Stat. 2882, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to estates of decedents dying after December 31, 1978."

Effective Date of 1976 Amendment

Pub. L. 94–455, title XX, §2002(d)(3), Oct. 4, 1976, 90 Stat. 1856, provided that: "The amendment made by subsection (c) [amending this section and section 2515 of this title] shall apply to joint interests created after December 31, 1976."

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–834 applicable to estates of decedents dying after Oct. 16, 1962, except as otherwise provided, see section 18(b) of Pub. L. 87–834, set out as a note under section 2031 of this title.

Consideration Given Before July 14, 1988 by Decedent to Noncitizen Spouse Treated as Originally Belonging to Spouse

Pub. L. 101–239, title VII, §7815(d)(16), Dec. 19, 1989, 103 Stat. 2419, as amended by Pub. L. 101–508, title XI, §11701(l)(3), Nov. 5, 1990, 104 Stat. 1388–513, provided that: "For purposes of applying section 2040(a) of the Internal Revenue Code of 1986 with respect to any joint interest to which section 2040(b) of such Code does not apply solely by reason of section 2056(d)(1)(B) of such Code, any consideration furnished before July 14, 1988, by the decedent for such interest to the extent treated as a gift to the spouse of the decedent for purposes of chapter 12 of such Code (or would have been so treated if the donor were a citizen of the United States) shall be treated as consideration originally belonging to such spouse and never acquired by such spouse from the decedent."
26 U.S.C. § 6163 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 62 / Section 6163: Extension of time for payment of estate tax on value of reversionary or remainder interest in property
Extension of time for payment of estate tax on value of reversionary or remainder interest in property
Status: in_force

(a) Extension permitted

If the value of a reversionary or remainder interest in property is included under chapter 11 in the value of the gross estate, the payment of the part of the tax under chapter 11 attributable to such interest may, at the election of the executor, be postponed until 6 months after the termination of the precedent interest or interests in the property, under such regulations as the Secretary may prescribe.

(b) Extension for reasonable cause

At the expiration of the period of postponement provided for in subsection (a), the Secretary may, for reasonable cause, extend the time for payment for a reasonable period or periods not in excess of 3 years from the expiration of the period of postponement provided in subsection (a).

(c) Cross reference

For authority of the Secretary to require security in the case of an extension under this section, see section 6165.

(Aug. 16, 1954, ch. 736, 68A Stat. 763; Pub. L. 85–866, title I, §66(b)(1), Sept. 2, 1958, 72 Stat. 1658; Pub. L. 88–272, title II, §240(a), Feb. 26, 1964, 78 Stat. 129; Pub. L. 93–625, §7(d)(1), Jan. 3, 1975, 88 Stat. 2115; Pub. L. 94–455, title XIX, §1906(b)(13)(A), title XX, §2004(c)(3), Oct. 4, 1976, 90 Stat. 1834, 1868.)

Editorial Notes

Amendments

1976—Subsec. (a). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (b). Pub. L. 94–455, §2004(c)(3), substituted provisions relating to extension of time for payment for a reasonable cause for provisions relating to extension of time for payment for undue hardship to the estate.

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

1975—Subsec. (c). Pub. L. 93–625 struck out par. (1) cross reference to interest provisions of section 6601(b) of this title and struck out par. (2) designation of cross reference to security, now incorporated in present subsec. (c) provision.

1964—Subsec. (b). Pub. L. 88–272 substituted "or periods not in excess of 3" for "not in excess of 2".

1958—Subsecs. (b), (c). Pub. L. 85–866 added subsec. (b) and redesignated former subsec. (b) as (c).

Statutory Notes and Related Subsidiaries

Effective Date of 1976 Amendment

Amendment by section 2004(c)(3) of Pub. L. 94–455 applicable to estates of decedents dying after Dec. 31, 1976, see section 2004(g) of Pub. L. 94–455, set out as an Effective Date note under section 6166 of this title.

Effective Date of 1975 Amendment

Amendment by Pub. L. 93–625 effective on July 1, 1975, and applicable to amounts outstanding on such date or arising thereafter, see section 7(e) of Pub. L. 93–625, set out as an Effective Date note under section 6621 of this title.

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §240(c), Feb. 26, 1964, 78 Stat. 129, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) The amendment made by subsection (a) [amending this section] shall apply in the case of any reversionary or remainder interest only if the time for payment of the tax under chapter 11 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] attributable to such interest, including any extensions thereof, has not expired on the date of the enactment of this Act [Feb. 26, 1964].

"(2) The amendment made by subsection (b) [amending section 925 of I.R.C. 1939] shall apply in the case of any reversionary or remainder interest only if the time for payment of the tax under chapter 3 of the Internal Revenue Code of 1939 attributable to such interest, including any extensions thereof, has not expired on the date of the enactment of this Act [Feb. 26, 1964]."

Effective Date of 1958 Amendment

Pub. L. 85–866, title I, §66(b)(3), Sept. 2, 1958, 72 Stat. 1658, provided that: "The amendments made by paragraphs (1) and (2) [amending this section and sections 925 and 926 of I.R.C. 1939] shall apply in the case of any reversionary or remainder interest only if the precedent interest or interests in the property did not terminate before the beginning of the 6-month period which ends on the date of the enactment of this Act [Sept. 2, 1958]."
26 U.S.C. § 180 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 180: Expenditures by farmers for fertilizer, etc.
Expenditures by farmers for fertilizer, etc.
Status: in_force

(a) In general

A taxpayer engaged in the business of farming may elect to treat as expenses which are not chargeable to capital account expenditures (otherwise chargeable to capital account) which are paid or incurred by him during the taxable year for the purchase or acquisition of fertilizer, lime, ground limestone, marl, or other materials to enrich, neutralize, or condition land used in farming, or for the application of such materials to such land. The expenditures so treated shall be allowed as a deduction.

(b) Land used in farming

For purposes of subsection (a), the term "land used in farming" means land used (before or simultaneously with the expenditures described in subsection (a)) by the taxpayer or his tenant for the production of crops, fruits, or other agricultural products or for the sustenance of livestock.

(c) Election

The election under subsection (a) for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe. Such election may not be revoked except with the consent of the Secretary.

(Added Pub. L. 86–779, §6(a), Sept. 14, 1960, 74 Stat. 1001; amended Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

Editorial Notes

Amendments

1976—Subsec. (c). Pub. L. 94–455 struck out "or his delegate" after "Secretary".

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 86–779, §6(d), Sept. 14, 1960, 74 Stat. 1001, provided that: "The amendments made by subsections (a), (b), and (c) [enacting this section and amending section 263 of this title] shall apply to taxable years beginning after December 31, 1959."
26 U.S.C. § 4481 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 36 / Subchapter D / Section 4481: Imposition of tax
Imposition of tax
Status: in_force

(a) Imposition of tax

A tax is hereby imposed on the use of any highway motor vehicle which (together with the semitrailers and trailers customarily used in connection with highway motor vehicles of the same type as such highway motor vehicle) has a taxable gross weight of at least 55,000 pounds at the rate specified in the following table:

 

Taxable gross weight:Rate of tax:

 At least 55,000 pounds, but not over 75,000 pounds
$100 per year plus $22 for each 1,000 pounds (or fraction thereof) in excess of 55,000 pounds.

Over 75,000 pounds
$550.

(b) By whom paid

The tax imposed by this section shall be paid by the person in whose name the highway motor vehicle is, or is required to be, registered under the law of the State or contiguous foreign country in which such vehicle is, or is required to be, registered, or, in case the highway motor vehicle is owned by the United States, by the agency or instrumentality of the United States operating such vehicle.

(c) Proration of tax

(1) Where first use occurs after first month

If in any taxable period the first use of the highway motor vehicle is after the first month in such period, the tax shall be reckoned proportionately from the first day of the month in which such use occurs to and including the last day in such taxable period.

(2) Where vehicle sold, destroyed, or stolen

(A) In general

If in any taxable period a highway motor vehicle is sold, destroyed, or stolen before the first day of the last month in such period and not subsequently used during such taxable period, the tax shall be reckoned proportionately from the first day of the month in such period in which the first use of such highway motor vehicle occurs to and including the last day of the month in which such highway motor vehicle was sold, destroyed, or stolen.

(B) Destroyed

For purposes of subparagraph (A), a highway motor vehicle is destroyed if such vehicle is damaged by reason of an accident or other casualty to such an extent that it is not economic to rebuild.

(d) One tax liability per period

To the extent that the tax imposed by this section is paid with respect to any highway motor vehicle for any taxable period, no further tax shall be imposed by this section for such taxable period with respect to such vehicle.

(e) Electronic filing

Any taxpayer who files a return under this section with respect to 25 or more vehicles for any taxable period shall file such return electronically.

(f) Period tax in effect

The tax imposed by this section shall apply only to use before October 1, 2029.

(Added June 29, 1956, ch. 462, title II, §206(a), 70 Stat. 390; amended Pub. L. 87–61, title II, §203(a), (b)(1), (2)(A), (B), June 29, 1961, 75 Stat. 124; Pub. L. 91–605, title III, §303(a)(7), (8), Dec. 31, 1970, 84 Stat. 1744; Pub. L. 94–280, title III, §303(a)(7), (8), May 5, 1976, 90 Stat. 456; Pub. L. 95–599, title V, §502(a)(6), (7), Nov. 6, 1978, 92 Stat. 2756; Pub. L. 97–424, title V, §§513(a), (d), 516(a)(4), Jan. 6, 1983, 96 Stat. 2177, 2179, 2182; Pub. L. 98–369, div. A, title VII, §734(f), title IX, §901(a), July 18, 1984, 98 Stat. 980, 1003; Pub. L. 100–17, title V, §§502(a)(5), 507(a), Apr. 2, 1987, 101 Stat. 256, 260; Pub. L. 101–508, title XI, §11211(c)(5), Nov. 5, 1990, 104 Stat. 1388–426; Pub. L. 102–240, title VIII, §8002(a)(5), Dec. 18, 1991, 105 Stat. 2203; Pub. L. 104–188, title I, §1704(t)(57), Aug. 20, 1996, 110 Stat. 1890; Pub. L. 105–178, title IX, §9002(a)(1)(G), June 9, 1998, 112 Stat. 499; Pub. L. 108–357, title VIII, §867(a), (c), Oct. 22, 2004, 118 Stat. 1622; Pub. L. 109–14, §9(c)(1), May 31, 2005, 119 Stat. 336; Pub. L. 109–59, title XI, §11101(a)(2)(A), Aug. 10, 2005, 119 Stat. 1944; Pub. L. 112–30, title I, §142(b)(1), Sept. 16, 2011, 125 Stat. 356; Pub. L. 112–102, title IV, §402(b)(1), Mar. 30, 2012, 126 Stat. 282; Pub. L. 112–141, div. D, title I, §40102(b)(1)(A), July 6, 2012, 126 Stat. 844; Pub. L. 114–94, div. C, title XXXI, §31102(b)(1), Dec. 4, 2015, 129 Stat. 1727; Pub. L. 115–141, div. U, title IV, §401(b)(43), Mar. 23, 2018, 132 Stat. 1204; Pub. L. 117–58, div. H, title I, §80102(b)(1), Nov. 15, 2021, 135 Stat. 1327.)

Editorial Notes

Amendments

2021—Subsec. (f). Pub. L. 117–58 substituted "2029" for "2023".

2018—Subsec. (d). Pub. L. 115–141 amended subsec. (d) generally. Prior to amendment, text read as follows:

"(1) In general.—To the extent that the tax imposed by this section is paid with respect to any highway motor vehicle for any taxable period, no further tax shall be imposed by this section for such taxable period with respect to such vehicle.

"(2) Cross reference.—For privilege of paying tax imposed by this section in installments, see section 6156."

2015—Subsec. (f). Pub. L. 114–94 substituted "2023" for "2017".

2012—Subsec. (f). Pub. L. 112–141 substituted "2017" for "2013".

Pub. L. 112–102 substituted "2013" for "2012".

2011—Subsec. (f). Pub. L. 112–30 substituted "2012" for "2011".

2005—Subsec. (f). Pub. L. 109–59 substituted "2011" for "2006".

Pub. L. 109–14 substituted "2006" for "2005".

2004—Subsec. (c)(2). Pub. L. 108–357, §867(a)(2), substituted "sold, destroyed, or stolen" for "destroyed or stolen" in heading.

Subsec. (c)(2)(A). Pub. L. 108–357, §867(a)(1), substituted "sold, destroyed, or stolen" for "destroyed or stolen" in two places.

Subsecs. (e), (f). Pub. L. 108–357, §867(c), added subsec. (e) and redesignated former subsec. (e) as (f).

1998—Subsec. (e). Pub. L. 105–178 substituted "2005" for "1999".

1996—Subsec. (e). Pub. L. 104–188 provided that section 8002(a)(5) of Pub. L. 102–240 shall be applied as if "4481(e)" appeared instead of "4481(c)". See 1991 Amendment note below.

1991—Subsec. (e). Pub. L. 102–240, which directed the substitution of "1999" for "1995" in subsec. (c), was executed by making the substitution in subsec. (e). See 1996 Amendment note above.

1990—Subsec. (e). Pub. L. 101–508 substituted "1995" for "1993".

1987—Subsec. (b). Pub. L. 100–17, §507(a), inserted "or contiguous foreign country" after "State".

Subsec. (e). Pub. L. 100–17, §502(a)(5), substituted "1993" for "1988".

1984—Subsec. (a). Pub. L. 98–369, §901(a), in amending subsec. (a) generally, substituted "55,000" for "33,000" in provisions preceding table, struck out heading "(1) In general", substituted table provisions for former table which provided:

 

Taxable gross weightRate of tax

At leastBut less than

33,000 pounds
55,000
$50 a year, plus $25 for each 1,000 pounds or fraction thereof in excess of 33,000 pounds.

55,000 pounds
80,000
$600 a year, plus the applicable rate for each 1,000 pounds or fraction thereof in excess of 55,000 pounds

80,000 pounds or more

The maximum tax a year.

and struck out par. (2) which provided applicable rates and maximum taxes for taxable periods beginning July 1, 1984 through 1988 or thereafter.

Pub. L. 98–369, §734(f), struck out from subsec. (a), as subsec. (a) was in effect before the amendments made by section 513(a) of Pub. L. 97–424: "In case of the taxable period beginning on July 1, 1984, and ending on September 30, 1984, the tax shall be at the rate of 75 cents for such period for each 1,000 pounds of taxable gross weight or fraction thereof." See 1983 Amendment note below.

1983—Subsec. (a). Pub. L. 97–424, §513(a), substituted "at least 33,000 pounds at the rate specified in the following table:" for "more than 26,000 pounds, at the rate of $3.00 a year for each 1,000 pounds of taxable gross weight or fraction thereof.", and added pars. (1) and (2).

Subsec. (c). Pub. L. 97–424, §513(d), designated existing provisions as par. (1) and added par. (2).

Subsec. (e). Pub. L. 97–424, §516(a)(4), substituted "1988" for "1984" after "October 1,".

1978—Subsec. (a). Pub. L. 95–599, §502(a)(6), substituted "1984" for "1979" in two places.

Subsec. (e). Pub. L. 95–599, §502(a)(7), substituted "1984" for "1979".

1976—Subsec. (a). Pub. L. 94–280, §303(a)(7), substituted "1979" for "1977" in two places.

Subsec. (e). Pub. L. 94–280, §303(a)(8), substituted "1979" for "1977".

1970—Subsec. (a). Pub. L. 91–605, §303(a)(7), substituted "1977" for "1972" in two places.

Subsec. (e). Pub. L. 91–605, §303(a)(8), substituted "1977" for "1972".

1961—Subsec. (a). Pub. L. 87–61, §203(a), (b)(2)(A), increased rate of tax from $1.50 to $3.00 a year, and provided for a tax at the rate of 75 cents for each 1,000 pounds during the period beginning on July 1, 1972, and ending on September 30, 1972.

Subsec. (c). Pub. L. 87–61, §203(b)(2)(B), substituted "any taxable period" for "any year", "after the first month in such period" for "after July 31", and "the last day in such taxable period" for "the last day of June following".

Subsec. (d). Pub. L. 87–61, §203(b)(2)(B), made conforming changes to refer to payment of tax for a taxable period instead of payment for a year, and inserted cross reference to section 6156.

Subsec. (e). Pub. L. 87–61, §203(b)(1), substituted "before October 1, 1972" for "after June 30, 1956, and before July 1, 1972".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 117–58 effective Oct. 1, 2021, see section 80102(f) of Pub. L. 117–58, set out as a note under section 4041 of this title.

Effective Date of 2015 Amendment

Amendment by Pub. L. 114–94 effective Oct. 1, 2016, see section 31102(f) of Pub. L. 114–94, set out as a note under section 4041 of this title.

Effective Date of 2012 Amendment

Amendment by Pub. L. 112–141 effective July 1, 2012, see section 40102(f) of Pub. L. 112–141, set out as a note under section 4041 of this title.

Amendment by Pub. L. 112–102 effective Apr. 1, 2012, see section 402(f) of Pub. L. 112–102, set out as an Effective and Termination Dates of 2012 Amendment note under section 4041 of this title.

Effective Date of 2011 Amendment

Amendment by Pub. L. 112–30 effective Oct. 1, 2011, see section 142(f) of Pub. L. 112–30, set out as a note under section 4041 of this title.

Effective Date of 2005 Amendment

Pub. L. 109–14, §9(d), May 31, 2005, 119 Stat. 336, provided that: "The amendments made by this section [amending this section and sections 4482, 4483, 9503, and 9504 of this title] shall take effect on the date of the enactment of this Act [May 31, 2005]."

Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, §867(e), Oct. 22, 2004, 118 Stat. 1622, provided that: "The amendments made by this section [amending this section and section 4483 of this title and repealing section 6156 of this title] shall apply to taxable periods beginning after the date of the enactment of this Act [Oct. 22, 2004]."

Effective Date of 1987 Amendment

Pub. L. 100–17, title V, §507(d), Apr. 2, 1987, 101 Stat. 260, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 4483 of this title] shall take effect on July 1, 1987."

Effective Date of 1984 Amendment

Amendment by section 734(f) of Pub. L. 98–369 effective, except as otherwise provided, as if included in the provisions of the Highway Revenue Act of 1982, title V of Pub. L. 97–424, to which such amendment relates, see section 736 of Pub. L. 98–369, set out as a note under section 4051 of this title.

Pub. L. 98–369, div. A, title IX, §901(c), July 18, 1984, 98 Stat. 1004, provided that: "The amendment made by subsection (a) [amending this section] (and the provisions of subsection (b) [set out below]) shall take effect on July 1, 1984."

Effective Date of 1983 Amendment

Pub. L. 97–424, title V, §513(f), Jan. 6, 1983, 96 Stat. 2179, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 4482 and 4483 of this title and enacting provisions set out below] shall take effect on July 1, 1984.

"(2) Special rule in the case of certain owner-operators.—

"(A) In general.—In the case of a small owner-operator, paragraph (1) of this subsection and paragraph (2) of section 4481(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this section) shall be applied by substituting for each date contained in such paragraphs a date which is 1 year after the date so contained.

"(B) Small owner-operator.—For purposes of this paragraph, the term "small owner-operator" means any person who owns and operates at any time during the taxable period no more than 5 highway motor vehicles with respect to which a tax is imposed by section 4481 of such Code for such taxable period.

"[No subpar. (C) has been enacted.]

"(D) Aggregation of vehicle ownerships.—For purposes of subparagraph (B), all highway motor vehicles with respect to which a tax is imposed by section 4481 of such Code which are owned by—

"(i) any trade or business (whether or not incorporated) which is under common control with the taxpayer (within the meaning of section 52(b)), or

"(ii) any member of any controlled groups of corporations of which the taxpayer is a member, for any taxable period shall be treated as being owned by the taxpayer during such period. The Secretary shall prescribe regulations which provide attribution rules that take into account, in addition to the persons and entities described in the preceding sentence, taxpayers who own highway motor vehicles through partnerships, joint ventures, and corporations.

"(E) Controlled groups of corporations.—For purposes of this paragraph, the term 'controlled group of corporations' has the meaning given to such term by section 1563(a), except that—

"(i) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in section 1563(a)(1), and

"(ii) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.

"(F) Highway motor vehicles.—For purposes of this paragraph, the term 'highway motor vehicle' has the meaning given to such term by section 4482(a) of such Code."

Effective Date of 1961 Amendment

Amendment by Pub. L. 87–61 effective July 1, 1961, see section 208 of Pub. L. 87–61, set out as a note under section 4041 of this title.

Effective Date

Section effective June 29, 1956, see section 211 of act June 29, 1956, set out as an Effective Date of 1956 Amendment note under section 4041 of this title.

Regulations

Pub. L. 100–17, title V, §507(c), Apr. 2, 1987, 101 Stat. 260, provided that: "The Secretary of the Treasury or the delegate of the Secretary shall within 120 days after the date of the enactment of this section [Apr. 2, 1987] prescribe regulations governing payment of the tax imposed by section 4481 of the Internal Revenue Code of 1986 on any highway motor vehicle operated by a motor carrier domiciled in any contiguous foreign country or owned or controlled by persons of any contiguous foreign country. Such regulations shall include a procedure by which the operator of such motor vehicle shall evidence that such operator has paid such tax at the time such motor vehicle enters the United States. In the event of the failure to provide evidence of payment, such regulations may provide for denial of entry of such motor vehicle into the United States."

Savings Provision

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

Special Rules in the Case of Certain Owner-Operators

Pub. L. 98–369, div. A, title IX, §901(b), July 18, 1984, 98 Stat. 1003, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) Special rule for taxable period beginning on july 1, 1984.—In the case of a small owner-operator, the amount of the tax imposed by section 4481 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] on the use of any highway motor vehicle subject to tax under section 4481(a) of such Code (as amended by subsection (a)) for the taxable period which begins on July 1, 1984, shall be the lesser of—

"(A) $3 for each 1,000 pounds of taxable gross weight (or fraction thereof), or

"(B) the amount of the tax which would be imposed under such section 4481(a) without regard to this paragraph.

"(2) Exemption for vehicles used for less than 5,000 miles (and certain other amendments) to take effect on july 1, 1984.—In the case of a small owner-operator, notwithstanding subsection (f)(2) of section 513 of the Highway Revenue Act of 1982 [section 513(f)(2) of Pub. L. 97–424, set out as an Effective Date of 1983 Amendment note above], the amendments made by subsections (b), (c), and (d) of such section [amending sections 4481 to 4483 of this title] shall take effect on July 1, 1984.

"(3) Small owner-operator defined.—For purposes of this subsection, the term 'small owner-operator' has the meaning given such term by section 513(f)(2) of the Highway Revenue Act of 1982.

"(4) Taxable gross weight.—For purposes of this subsection, the term 'taxable gross weight' has the same meaning as when used in section 4481 of the Internal Revenue Code of 1986."

Studies Relating to Heavy Vehicle Use Tax

Pub. L. 98–369, div. A, title IX, subtitle D, part I, July 18, 1984, 98 Stat. 1010, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that the Secretary of Transportation, in consultation with the Secretary of the Treasury, would conduct a study of whether highway motor vehicles with taxable gross weights of 80,000 pounds or more bear their fair share of the costs of the highway system, a study to determine the significance of the tax imposed by this section (relating to tax on use of certain vehicles) on trans-border trucking operations, and a study to evaluate the feasibility and ability of weight-distance truck taxes to provide the greatest degree of equity among highway users, to ease the costs of compliance of such taxes, and to improve the efficiency by which such taxes might be administered, and submit to Congress a report of each study, together with any recommendations, by Oct. 1, 1987.

Study of Alternatives to Tax on Use of Heavy Trucks

Pub. L. 97–424, title V, §513(g), Jan. 6, 1983, 96 Stat. 2180, provided that the Secretary of Transportation, in consultation with the Secretary of the Treasury, conduct a study of alternatives to the tax on heavy vehicles imposed by section 4481(a) of the Internal Revenue Code, and plans for improving the collecting and enforcement of such tax and alternatives to such tax, such alternatives to include taxes based either singly or in suitable combinations on vehicle size or configuration; vehicle weight, both registered and actual operating weight; and distance traveled, and such plans for improving tax collection and enforcement to provide for Federal and State co-operation in such activities. The study was to be conducted in consultation with State officials, motor carriers, and other affected parties, and the Secretary of Transportation was to submit a report and recommendations to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate not later than Jan. 1, 1985.
26 U.S.C. § 6038B (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 61 / Section 6038B: Notice of certain transfers to foreign persons
Notice of certain transfers to foreign persons
Status: in_force

(a) In general

Each United States person who—

(1) transfers property to—

(A) a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361, or

(B) a foreign partnership in a contribution described in section 721 or in any other contribution described in regulations prescribed by the Secretary, or

(2) makes a distribution described in section 336 to a person who is not a United States person,

shall furnish to the Secretary, at such time and in such manner as the Secretary shall by regulations prescribe, such information with respect to such exchange or distribution as the Secretary may require in such regulations.

(b) Exceptions for certain transfers to foreign partnerships; special rule

(1) Exceptions

Subsection (a)(1)(B) shall apply to a transfer by a United States person to a foreign partnership only if—

(A) the United States person holds (immediately after the transfer) directly or indirectly at least a 10-percent interest (as defined in section 6046A(d)) in the partnership, or

(B) the value of the property transferred (when added to the value of the property transferred by such person or any related person to such partnership or a related partnership during the 12-month period ending on the date of the transfer) exceeds $100,000.

For purposes of the preceding sentence, the value of any transferred property is its fair market value at the time of its transfer.

(2) Special rule

If by reason of an adjustment under section 482 or otherwise, a contribution described in subsection (a)(1) is deemed to have been made, such contribution shall be treated for purposes of this section as having been made not earlier than the date specified by the Secretary.

(c) Penalty for failure to furnish information

(1) In general

If any United States person fails to furnish the information described in subsection (a) at the time and in the manner required by regulations, such person shall pay a penalty equal to 10 percent of the fair market value of the property at the time of the exchange (and, in the case of a contribution described in subsection (a)(1)(B), such person shall recognize gain as if the contributed property had been sold for such value at the time of such contribution).

(2) Reasonable cause exception

Paragraph (1) shall not apply to any failure if the United States person shows such failure is due to reasonable cause and not to willful neglect.

(3) Limit on penalty

The penalty under paragraph (1) with respect to any exchange shall not exceed $100,000 unless the failure with respect to such exchange was due to intentional disregard.

(Added Pub. L. 98–369, div. A, title I, §131(d)(1), July 18, 1984, 98 Stat. 664; amended Pub. L. 105–34, title XI, §1144(a)–(c), Aug. 5, 1997, 111 Stat. 984, 985; Pub. L. 105–206, title VI, §6011(g), July 22, 1998, 112 Stat. 818; Pub. L. 109–135, title IV, §409(c), Dec. 21, 2005, 119 Stat. 2636.)

Editorial Notes

Amendments

2005—Subsec. (a)(1)(B). Pub. L. 109–135 inserted "or" at end.

1998—Subsec. (c). Pub. L. 105–206, §6011(g), made technical amendment to directory language of Pub. L. 105–206, §1144(c). See 1997 Amendment note below.

1997—Subsec. (a)(1). Pub. L. 105–34, §1144(a), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "transfers property to a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361, or".

Subsec. (b). Pub. L. 105–34, §1144(b), added subsec. (b). Former subsec. (b) redesignated (c).

Subsec. (c). Pub. L. 105–34, §1144(c), as amended by Pub. L. 105–206, §6011(g), substituted "equal to 10 percent of the fair market value of the property at the time of the exchange (and, in the case of a contribution described in subsection (a)(1)(B), such person shall recognize gain as if the contributed property had been sold for such value at the time of such contribution)" for "equal to 25 percent of the amount of the gain realized on the exchange" in par. (1) and added par. (3).

Pub. L. 105–34, §1144(b), redesignated subsec. (b) as (c).

Statutory Notes and Related Subsidiaries

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–135 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 409(d) of Pub. L. 109–135, set out as a note under section 961 of this title.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title XI, §1144(d)(1), Aug. 5, 1997, 111 Stat. 985, provided that: "The amendments made by this section [amending this section] shall apply to transfers made after the date of the enactment of this Act [Aug. 5, 1997]."

Effective Date

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

Election of Retroactive Effect

Pub. L. 105–34, title XI, §1144(d)(2), Aug. 5, 1997, 111 Stat. 985, provided that: "Section 1494(c) of the Internal Revenue Code of 1986 shall not apply to any transfer after August 20, 1996, if all applicable reporting requirements under section 6038B of such Code (as amended by this section) are satisfied. The Secretary of the Treasury or his delegate may prescribe simplified reporting requirements under the preceding sentence."
26 U.S.C. § 933 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 933: Income from sources within Puerto Rico
Income from sources within Puerto Rico
Status: in_force

The following items shall not be included in gross income and shall be exempt from taxation under this subtitle:

(1) Resident of Puerto Rico for entire taxable year

In the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof); but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction under section 151, relating to personal exemptions), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.

(2) Taxable year of change of residence from Puerto Rico

In the case of an individual citizen of the United States who has been a bona fide resident of Puerto Rico for a period of at least 2 years before the date on which he changes his residence from Puerto Rico, income derived from sources therein (except amounts received for services performed as an employee of the United States or any agency thereof) which is attributable to that part of such period of Puerto Rican residence before such date; but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction for personal exemptions under section 151), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.

(Aug. 16, 1954, ch. 736, 68A Stat. 293; Pub. L. 99–514, title XII, §1272(d)(3), Oct. 22, 1986, 100 Stat. 2594.)

Editorial Notes

Amendments

1986—Pub. L. 99–514 inserted ", or any credit," in pars. (1) and (2).

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.
26 U.S.C. § 164 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 164: Taxes
Taxes
Status: in_force

(a) General rule

Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued:

(1) State and local, and foreign, real property taxes.

(2) State and local personal property taxes.

(3) State and local, and foreign, income, war profits, and excess profits taxes.

(4) The GST tax imposed on income distributions.

In addition, there shall be allowed as a deduction State and local, and foreign, taxes not described in the preceding sentence which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for production of income). Notwithstanding the preceding sentence, any tax (not described in the first sentence of this subsection) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition.

(b) Definitions and special rules

For purposes of this section—

(1) Personal property taxes

The term "personal property tax" means an ad valorem tax which is imposed on an annual basis in respect of personal property.

(2) State or local taxes

A State or local tax includes only a tax imposed by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia.

(3) Foreign taxes

A foreign tax includes only a tax imposed by the authority of a foreign country.

(4) Special rules for GST tax

(A) In general

The GST tax imposed on income distributions is—

(i) the tax imposed by section 2601, and

(ii) any State tax described in section 2604 (as in effect before its repeal),

but only to the extent such tax is imposed on a transfer which is included in the gross income of the distributee and to which section 666 does not apply.

(B) Special rule for tax paid before due date

Any tax referred to in subparagraph (A) imposed with respect to a transfer occurring during the taxable year of the distributee (or, in the case of a taxable termination, the trust) which is paid not later than the time prescribed by law (including extensions) for filing the return with respect to such transfer shall be treated as having been paid on the last day of the taxable year in which the transfer was made.

(5) General sales taxes

For purposes of subsection (a)—

(A) Election to deduct State and local sales taxes in lieu of State and local income taxes

At the election of the taxpayer for the taxable year, subsection (a) shall be applied—

(i) without regard to the reference to State and local income taxes, and

(ii) as if State and local general sales taxes were referred to in a paragraph thereof.

(B) Definition of general sales tax

The term "general sales tax" means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of items.

(C) Special rules for food, etc.

In the case of items of food, clothing, medical supplies, and motor vehicles—

(i) the fact that the tax does not apply with respect to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and

(ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the general rate of tax shall not be taken into account in determining whether the tax is imposed at one rate.

(D) Items taxed at different rates

Except in the case of a lower rate of tax applicable with respect to an item described in subparagraph (C), no deduction shall be allowed under this paragraph for any general sales tax imposed with respect to an item at a rate other than the general rate of tax.

(E) Compensating use taxes

A compensating use tax with respect to an item shall be treated as a general sales tax. For purposes of the preceding sentence, the term "compensating use tax" means, with respect to any item, a tax which—

(i) is imposed on the use, storage, or consumption of such item, and

(ii) is complementary to a general sales tax, but only if a deduction is allowable under this paragraph with respect to items sold at retail in the taxing jurisdiction which are similar to such item.

(F) Special rule for motor vehicles

In the case of motor vehicles, if the rate of tax exceeds the general rate, such excess shall be disregarded and the general rate shall be treated as the rate of tax.

(G) Separately stated general sales taxes

If the amount of any general sales tax is separately stated, then, to the extent that the amount so stated is paid by the consumer (other than in connection with the consumer's trade or business) to the seller, such amount shall be treated as a tax imposed on, and paid by, such consumer.

(H) Amount of deduction may be determined under tables

(i) In general

At the election of the taxpayer for the taxable year, the amount of the deduction allowed under this paragraph for such year shall be—

(I) the amount determined under this paragraph (without regard to this subparagraph) with respect to motor vehicles, boats, and other items specified by the Secretary, and

(II) the amount determined under tables prescribed by the Secretary with respect to items to which subclause (I) does not apply.

(ii) Requirements for tables

The tables prescribed under clause (i)—

(I) shall reflect the provisions of this paragraph,

(II) shall be based on the average consumption by taxpayers on a State-by-State basis (as determined by the Secretary) of items to which clause (i)(I) does not apply, taking into account filing status, number of dependents, adjusted gross income, and rates of State and local general sales taxation, and

(III) need only be determined with respect to adjusted gross incomes up to the applicable amount (as determined under section 68(b)).

(6) Limitation on individual deductions for taxable years 2018 through 2025

In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026—

(A) foreign real property taxes shall not be taken into account under subsection (a)(1), and

(B) the aggregate amount of taxes taken into account under paragraphs (1), (2), and (3) of subsection (a) and paragraph (5) of this subsection for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return).

The preceding sentence shall not apply to any foreign taxes described in subsection (a)(3) or to any taxes described in paragraph (1) and (2) of subsection (a) which are paid or accrued in carrying on a trade or business or an activity described in section 212. For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.

(c) Deduction denied in case of certain taxes

No deduction shall be allowed for the following taxes:

(1) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent the deduction of so much of such taxes as is properly allocable to maintenance or interest charges.

(2) Taxes on real property, to the extent that subsection (d) requires such taxes to be treated as imposed on another taxpayer.

(d) Apportionment of taxes on real property between seller and purchaser

(1) General rule

For purposes of subsection (a), if real property is sold during any real property tax year, then—

(A) so much of the real property tax as is properly allocable to that part of such year which ends on the day before the date of the sale shall be treated as a tax imposed on the seller, and

(B) so much of such tax as is properly allocable to that part of such year which begins on the date of the sale shall be treated as a tax imposed on the purchaser.

(2) Special rules

(A) In the case of any sale of real property, if—

(i) a taxpayer may not, by reason of his method of accounting, deduct any amount for taxes unless paid, and

(ii) the other party to the sale is (under the law imposing the real property tax) liable for the real property tax for the real property tax year,

then for purposes of subsection (a) the taxpayer shall be treated as having paid, on the date of the sale, so much of such tax as, under paragraph (1) of this subsection, is treated as imposed on the taxpayer. For purposes of the preceding sentence, if neither party is liable for the tax, then the party holding the property at the time the tax becomes a lien on the property shall be considered liable for the real property tax for the real property tax year.

(B) In the case of any sale of real property, if the taxpayer's taxable income for the taxable year during which the sale occurs is computed under an accrual method of accounting, and if no election under section 461(c) (relating to the accrual of real property taxes) applies, then, for purposes of subsection (a), that portion of such tax which—

(i) is treated, under paragraph (1) of this subsection, as imposed on the taxpayer, and

(ii) may not, by reason of the taxpayer's method of accounting, be deducted by the taxpayer for any taxable year,

shall be treated as having accrued on the date of the sale.

(e) Taxes of shareholder paid by corporation

Where a corporation pays a tax imposed on a shareholder on his interest as a shareholder, and where the shareholder does not reimburse the corporation, then—

(1) the deduction allowed by subsection (a) shall be allowed to the corporation; and

(2) no deduction shall be allowed the shareholder for such tax.

(f) Deduction for one-half of self-employment taxes

(1) In general

In the case of an individual, in addition to the taxes described in subsection (a), there shall be allowed as a deduction for the taxable year an amount equal to one-half of the taxes imposed by section 1401 (other than the taxes imposed by section 1401(b)(2)) for such taxable year.

(2) Deduction treated as attributable to trade or business

For purposes of this chapter, the deduction allowed by paragraph (1) shall be treated as attributable to a trade or business carried on by the taxpayer which does not consist of the performance of services by the taxpayer as an employee.

(g) Cross references

(1) For provisions disallowing any deduction for certain taxes, see section 275.

(2) For treatment of taxes imposed by Indian tribal governments (or their subdivisions), see section 7871.

(Aug. 16, 1954, ch. 736, 68A Stat. 47; Pub. L. 85–866, title I, §6(a), Sept. 2, 1958, 72 Stat. 1608; Pub. L. 88–272, title II, §207(a), (b)(1), (2), Feb. 26, 1964, 78 Stat. 40–42; Pub. L. 92–580, §4(a), Oct. 27, 1972, 86 Stat. 1277; Pub. L. 94–455, title XIX, §§1901(a)(25), 1951(b)(3)(A), Oct. 4, 1976, 90 Stat. 1767, 1837; Pub. L. 95–600, title I, §111(a), (b), Nov. 6, 1978, 92 Stat. 2777; Pub. L. 96–223, title I, §101(b), Apr. 2, 1980, 94 Stat. 250; Pub. L. 97–473, title II, §202(b)(3), Jan. 14, 1983, 96 Stat. 2609; Pub. L. 98–21, title I, §124(c)(1), Apr. 20, 1983, 97 Stat. 90; Pub. L. 98–369, div. A, title IV, §474(r)(29)(F), July 18, 1984, 98 Stat. 844; Pub. L. 99–499, title V, §516(b)(2)(A), Oct. 17, 1986, 100 Stat. 1771; Pub. L. 99–514, title I, §134, title XIV, §1432(a)(1), (2), Oct. 22, 1986, 100 Stat. 2116, 2729; Pub. L. 100–418, title I, §1941(b)(2)(A), Aug. 23, 1988, 102 Stat. 1323; Pub. L. 100–647, title I, §1018(u)(11), Nov. 10, 1988, 102 Stat. 3590; Pub. L. 104–188, title I, §1704(t)(79), Aug. 20, 1996, 110 Stat. 1891; Pub. L. 108–357, title V, §501(a), Oct. 22, 2004, 118 Stat. 1520; Pub. L. 109–135, title IV, §403(r)(1), Dec. 21, 2005, 119 Stat. 2628; Pub. L. 109–432, div. A, title I, §103(a), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title II, §201(a), Oct. 3, 2008, 122 Stat. 3864; Pub. L. 111–5, div. B, title I, §1008(a), (b), Feb. 17, 2009, 123 Stat. 317; Pub. L. 111–148, title IX, §9015(b)(2)(A), Mar. 23, 2010, 124 Stat. 871; Pub. L. 111–312, title VII, §722(a), Dec. 17, 2010, 124 Stat. 3316; Pub. L. 112–240, title II, §205(a), Jan. 2, 2013, 126 Stat. 2323; Pub. L. 113–295, div. A, title I, §105(a), title II, §§209(c), 221(a)(12)(D), (26), (95)(B)(ii), Dec. 19, 2014, 128 Stat. 4013, 4028, 4038, 4040, 4051; Pub. L. 114–113, div. Q, title I, §106(a), Dec. 18, 2015, 129 Stat. 3046; Pub. L. 115–97, title I, §11042(a), Dec. 22, 2017, 131 Stat. 2085; Pub. L. 117–169, title I, §§13903(a)(1), 13904(b)(1), Aug. 16, 2022, 136 Stat. 2014, 2015.)

Editorial Notes

References in Text

Section 2604, referred to in subsec. (b)(4)(A)(ii), was repealed by Pub. L. 113–295, div. A, title II, §221(a)(95)(B)(i), Dec. 19, 2014, 128 Stat. 4051, effective Dec. 19, 2014.

Amendments

2022—Subsec. (b)(6). Pub. L. 117–169, §13903(a)(1), amended par. (6), "as amended by section 13904", by substituting "2025" for "2026" in heading and "2026" for "2027" in introductory provisions. See note below.

Pub. L. 117–169, §13904(b)(1), substituted "2026" for "2025" in heading and "2027" for "2026" in introductory provisions.

2017—Subsec. (b)(6). Pub. L. 115–97 added par. (6).

2015—Subsec. (b)(5)(I). Pub. L. 114–113 struck out subpar. (I). Text read as follows: "This paragraph shall apply to taxable years beginning after December 31, 2003, and before January 1, 2015."

2014—Subsec. (a)(5). Pub. L. 113–295, §221(a)(12)(D), struck out par. (5) which read as follows: "The environmental tax imposed by section 59A."

Subsec. (a)(6). Pub. L. 113–295, §221(a)(26), struck out par. (6) which read as follows: "Qualified motor vehicle taxes."

Subsec. (b)(4)(A)(ii). Pub. L. 113–295, §221(a)(95)(B)(ii), inserted "(as in effect before its repeal)" after "section 2604".

Subsec. (b)(5)(I). Pub. L. 113–295, §105(a), substituted "January 1, 2015" for "January 1, 2014".

Subsec. (b)(6). Pub. L. 113–295, §221(a)(26), struck out par. (6) which related to qualified motor vehicle taxes.

Subsec. (b)(6)(E) to (G). Pub. L. 113–295, §209(c), redesignated subpars. (F) and (G) as (E) and (F), respectively, substituted "Subsection (a)(6)" for "This paragraph" in subpars. (E) and (F), and struck out former subpar. (E). Prior to amendment, text of former subpar. (E) read as follows: "The last sentence of subsection (a) shall not apply to any qualified motor vehicle taxes."

2013—Subsec. (b)(5)(I). Pub. L. 112–240 substituted "January 1, 2014" for "January 1, 2012".

2010—Subsec. (b)(5)(I). Pub. L. 111–312 substituted "January 1, 2012" for "January 1, 2010".

Subsec. (f)(1). Pub. L. 111–148, which directed the insertion of "(other than the taxes imposed by section 1401(b)(2))" after "section 1401)" in subsec. (f), was executed by making the insertion after "section 1401" in subsec. (f)(1), to reflect the probable intent of Congress.

2009—Subsec. (a)(6). Pub. L. 111–5, §1008(a), added par. (6).

Subsec. (b)(6). Pub. L. 111–5, §1008(b), added par. (6).

2008—Subsec. (b)(5)(I). Pub. L. 110–343 substituted "January 1, 2010" for "January 1, 2008".

2006—Subsec. (b)(5)(I). Pub. L. 109–432 substituted "2008" for "2006".

2005—Subsec. (b)(5)(A). Pub. L. 109–135 reenacted heading without change and amended text generally. Prior to amendment, text read as follows:

"(i) In general.—At the election of the taxpayer for the taxable year, subsection (a) shall be applied—

"(I) without regard to the reference to State and local income taxes, and

"(II) as if State and local general sales taxes were referred to in a paragraph thereof."

2004—Subsec. (b)(5). Pub. L. 108–357 added par. (5).

1996—Subsec. (a)(4), (5). Pub. L. 104–188 added pars. (4) and (5) and struck out former pars. (4) and (5) which read as follows:

"(4) The environmental tax imposed by section 59A.

"(5) The GST tax imposed on income distributions."

1988—Subsec. (a)(4). Pub. L. 100–418 struck out par. (4) relating to windfall profit tax imposed by section 4986 and redesignated par. (5) relating to environmental tax as (4).

Subsec. (a)(5). Pub. L. 100–647 substituted "The GST" for "the GST".

Pub. L. 100–418 redesignated par. (5), relating to environmental tax, as (4).

1986—Subsec. (a). Pub. L. 99–514, §134(a)(2), inserted "Notwithstanding the preceding sentence, any tax (not described in the first sentence of this subsection) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition."

Subsec. (a)(4). Pub. L. 99–514, §134(a)(1), struck out par. (4) relating to "State and local general sales taxes" and redesignated as par. (4) former par. (5) relating to windfall profit tax.

Subsec. (a)(5). Pub. L. 99–514, §1432(a)(1), added par. (5) relating to GST tax imposed on income distributions.

Pub. L. 99–499 added par. (5) relating to environmental tax.

Subsec. (b)(2). Pub. L. 99–514, §134(b)(1), (2), redesignated par. (3) as (2) and struck out former par. (2), general sales taxes provisions, subpars. (A) to (E) of which covered in general rule, special rules for food, etc., items taxed at different rates, compensating use taxes, and special rules for motor vehicles, respectively.

Subsec. (b)(3). Pub. L. 99–514, §134(b)(2), redesignated par. (4) as (3). Former par. (3) redesignated (2).

Subsec. (b)(4). Pub. L. 99–514, §1432(a)(2), added par. (4).

Pub. L. 99–514, §134(b)(2), redesignated par. (4) as (3).

Subsec. (b)(5). Pub. L. 99–514, §134(b)(1), struck out par. (5), separately stated general sales taxes, which read as follows: "If the amount of any general sales tax is separately stated, then, to the extent that the amount so stated is paid by the consumer (otherwise than in connection with the consumer's trade or business) to his seller, such amount shall be treated as a tax imposed on, and paid by, such consumer."

1984—Subsec. (f). Pub. L. 98–369 redesignated pars. (2) and (3) as pars. (1) and (2), respectively. Former par. (1), which referred to section 1451 for provisions disallowing any deduction for the payment of the tax imposed by subchapter B of chapter 3 (relating to tax-free covenant bonds), was struck out.

1983—Subsec. (f). Pub. L. 98–21 added subsec. (f). Former subsec. (f) redesignated (g).

Subsec. (f)(3). Pub. L. 97–473 added par. (3).

Subsec. (g). Pub. L. 98–21 redesignated subsec. (f) as (g).

1980—Subsec. (a)(5). Pub. L. 96–223 added par. (5).

1978—Subsec. (a)(5). Pub. L. 95–600, §111(a), struck out par. (5) relating to a deduction for State and local taxes on the sale of gasoline, diesel fuel, and other motor fuels.

Subsec. (b)(5). Pub. L. 95–600, §111(b), struck out in heading "and gasoline taxes" after "sales taxes", and in text "or of any tax on the sale of gasoline, diesel fuel, or other motor fuel" after "sales tax".

1976—Subsec. (d)(2). Pub. L. 94–455, §1901(a)(25), redesignated subpar. (D) as (B), and struck out subpar. (B) which related to the taxable years that subsec. (d)(1) applied and subpar. (C) which related to the limitations on subsec. (d)(1) where real property tax was allowable as a deduction under the Internal Revenue Code of 1939.

Subsecs. (f), (g). Pub. L. 94–455, §1951(b)(3)(A), redesignated subsec. (g) as (f). Former subsec. (f), which related to payments for municipal services in atomic energy communities, was struck out.

1972—Subsec. (b)(2)(E). Pub. L. 92–580 added subpar. (E).

1964—Subsec. (a). Pub. L. 88–272, §207(a), limited the subsection to State, local and foreign real property, income, war profits, excess profits, and unspecified taxes, on a business or activity described in section 212, and to State and local personal property, general sales, gasoline, diesel fuel and other motor fuel taxes.

Subsec. (b). Pub. L. 88–272, §207(a), added subsec. (b). Former subsec. (b), which denied the deduction for certain Federal income taxes, for Federal war profits and excess profits taxes, import duties, excise and stamp taxes, and estate, inheritance, legacy, succession and gift taxes, local assessments against benefits increasing property values, and certain taxes imposed by any foreign country or possession of the United States if the taxpayer chose to benefit by section 901 relating to foreign tax credit, and for taxes on real property to the extent that they are treated as imposed on another taxpayer, was struck out.

Subsec. (c). Pub. L. 88–272, §207(a), substituted provisions denying the deduction for taxes assessed against local benefits which increase property value, except for so much as is properly allocable to maintenance or interest charges, and for real property taxes to the extent they are treated as imposed on another taxpayer, for provisions relating to certain retail sales taxes and gasoline taxes, the extent to which they were deductible, and to definition of "state or local sales tax".

Subsec. (f). Pub. L. 88–272, §207(b)(1), inserted "State" before "real property taxes".

Subsec. (g). Pub. L. 88–272, §207(b)(2), designated existing provisions as par. (1), substituted "1451" for "1451(f)" and added par. (2).

1958—Subsecs. (f), (g). Pub. L. 85–866, §6(a), added subsec. (f) and redesignated former subsec. (f) as (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–169, title I, §13903(a)(2), Aug. 16, 2022, 136 Stat. 2014, provided that: "The amendments made by this subsection [amending this section] shall apply to taxable years beginning after December 31, 2022."

Pub. L. 117–169, title I, §13904(b)(2), Aug. 16, 2022, 136 Stat. 2015, provided that: "The amendments made by this subsection [amending this section] shall apply to taxable years beginning after December 31, 2022."

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §11042(b), Dec. 22, 2017, 131 Stat. 2086, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2016."

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, §106(b), Dec. 18, 2015, 129 Stat. 3046, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2014."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, §105(b), Dec. 19, 2014, 128 Stat. 4013, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2013."

Amendment by section 209(c) of Pub. L. 113–295 effective as if included in the provisions of the American Recovery and Reinvestment Tax Act of 2009, Pub. L. 111–5, div. B, title I, to which such amendment relates, see section 209(k) of Pub. L. 113–295, set out as a note under section 24 of this title.

Amendment by section 221(a)(12)(D), (26), (95)(B)(ii) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2013 Amendment

Pub. L. 112–240, title II, §205(b), Jan. 2, 2013, 126 Stat. 2323, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2011."

Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, §722(b), Dec. 17, 2010, 124 Stat. 3316, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009."

Pub. L. 111–148, title IX, §9015(c), Mar. 23, 2010, 124 Stat. 872, provided that: "The amendments made by this section [amending this section and sections 1401, 1402, 3101, and 3102 of this title] shall apply with respect to remuneration received, and taxable years beginning, after December 31, 2012."

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–5 applicable to purchases on or after Feb. 17, 2009, in taxable years ending after such date, see section 1008(e) of Pub. L. 111–5, set out as a note under section 56 of this title.

Effective Date of 2008 Amendment

Pub. L. 110–343, div. C, title II, §201(b), Oct. 3, 2008, 122 Stat. 3864, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2007."

Effective Date of 2006 Amendment

Pub. L. 109–432, div. A, title I, §103(b), Dec. 20, 2006, 120 Stat. 2934, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2005."

Effective Date of 2005 Amendment

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

Effective Date of 2004 Amendment

Pub. L. 108–357, title V, §501(b), Oct. 22, 2004, 118 Stat. 1521, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2003."

Effective Date of 1988 Amendment

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

Pub. L. 100–418, title I, §1941(c), Aug. 23, 1988, 102 Stat. 1324, provided that: "The amendments made by this section [amending this section and sections 193, 291, 6161, 6211, 6212, 6213, 6214, 6302, 6344, 6501, 6511, 6512, 6611, 6654, 6655, 6724, 6862, 7422, and 7512 of this title, and repealing sections 280D, 4986 to 4998, 6050C, 6076, 6232, 6429, 6430, and 7241 of this title] shall apply to crude oil removed from the premises on or after the date of the enactment of this Act [Aug. 23, 1988]."

Effective Date of 1986 Amendment

Amendment by section 134 of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title.

Amendment by section 1432(a)(1), (2) of Pub. L. 99–514 applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as an Effective Date note under section 2601 of this title.

Amendment by Pub. L. 99–499 applicable to taxable years beginning after Dec. 31, 1986, see section 516(c) of Pub. L. 99–499, set out as a note under section 26 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 not applicable with respect to obligations issued before Jan. 1, 1984, see section 475(b) of Pub. L. 98–369, set out as a note under section 33 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 98–21 applicable to taxable years beginning after Dec. 31, 1989, see section 124(d)(2) of Pub. L. 98–21, set out as a note under section 1401 of this title.

For effective date of amendment by Pub. L. 97–473, see section 204(1) of Pub. L. 97–473, set out as an Effective Date note under section 7871 of this title.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–223 applicable to periods after Feb. 29, 1980, see section 101(i) of Pub. L. 96–223, set out as an Effective Date note under section 6161 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title I, §111(c), Nov. 6, 1978, 92 Stat. 2777, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1978."

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see sections 1901(d) and 1951(d) of Pub. L. 94–455, set out as notes under sections 2 and 72 of this title, respectively.

Effective Date of 1972 Amendment

Pub. L. 92–580, §4(b), Oct. 27, 1972, 86 Stat. 1277, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years ending on or after January 1, 1971."

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §207(c), Feb. 26, 1964, 78 Stat. 43, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) General rule.—Except as provided in paragraph (2), the amendments made by this section [enacting section 275 of this title and amending this section and sections 535, 545, 556, 901, and 903 of this title] shall apply to taxable years beginning after December 31, 1963.

"(2) Special taxing districts.—Section 164(c)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)) shall not prevent the deduction under section 164 of such Code (as so amended) of taxes levied by a special taxing district which is described in section 164(b)(5) of such Code (as in effect for a taxable year ending on December 31, 1963) and which was in existence on December 31, 1963, for the purpose of retiring indebtedness existing on such date."

Effective Date of 1958 Amendment

Pub. L. 85–866, §6(b), Sept. 2, 1958, 72 Stat. 1608, provided that: "The amendments made by subsection (a) [amending this section] shall apply with respect to taxable years beginning after December 31, 1957."

Savings Provision

Pub. L. 94–455, title XIX, §1951(b)(3)(B), Oct. 4, 1976, 90 Stat. 1837, provided that: "Notwithstanding subparagraph (A) [amending this section], any amount paid or accrued in a taxable year beginning after December 31, 1976, to the Atomic Energy Commission or its successors for municipal-type services shall be allowed as a deduction under section 164 if such amount would have been deductible by reason of section 164(f) (as in effect for a taxable year ending on December 31, 1976) and if the amount is paid or accrued with respect to real property in a community (within the meaning of section 21(b) of the Atomic Energy Community Act of 1955 (42 U.S.C. 2304(b))) in which the Commission on December 31, 1976, was rendering municipal-type services for which it received compensation from the owners of property within such community."
26 U.S.C. § 311 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 311: Taxability of corporation on distribution
Taxability of corporation on distribution
Status: in_force

(a) General rule

Except as provided in subsection (b), no gain or loss shall be recognized to a corporation on the distribution (not in complete liquidation) with respect to its stock of—

(1) its stock (or rights to acquire its stock), or

(2) property.

(b) Distributions of appreciated property

(1) In general

If—

(A) a corporation distributes property (other than an obligation of such corporation) to a shareholder in a distribution to which subpart A applies, and

(B) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation),

then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.

(2) Treatment of liabilities

Rules similar to the rules of section 336(b) shall apply for purposes of this subsection.

(3) Special rule for certain distributions of partnership or trust interests

If the property distributed consists of an interest in a partnership or trust, the Secretary may by regulations provide that the amount of the gain recognized under paragraph (1) shall be computed without regard to any loss attributable to property contributed to the partnership or trust for the principal purpose of recognizing such loss on the distribution.

(Aug. 16, 1954, ch. 736, 68A Stat. 94; Pub. L. 91–172, title IX, §905(a), (b)(1), Dec. 30, 1969, 83 Stat. 713, 714; Pub. L. 94–452, §2(b), Oct. 2, 1976, 90 Stat. 1511; Pub. L. 94–455, title XIX, §1901(a)(42)(A), (B)(i), (C), Oct. 4, 1976, 90 Stat. 1771; Pub. L. 95–600, title VII, §703(j)(2)(A), (B), Nov. 6, 1978, 92 Stat. 2941; Pub. L. 96–471, §2(b)(1), Oct. 19, 1980, 94 Stat. 2253; Pub. L. 97–248, title II, §223(a), Sept. 3, 1982, 96 Stat. 483; Pub. L. 98–369, div. A, title I, §54(a), title VII, §712(j), July 18, 1984, 98 Stat. 568, 948; Pub. L. 99–514, title VI, §631(c), Oct. 22, 1986, 100 Stat. 2272; Pub. L. 100–647, title I, §§1006(e)(8)(B), (21)(B), 1018(d)(5)(E), Nov. 10, 1988, 102 Stat. 3401, 3403, 3580.)

Editorial Notes

Amendments

1988—Subsec. (a). Pub. L. 100–647, §1018(d)(5)(E), substituted "distribution (not in complete liquidation) with respect to its stock" for "distribution, with respect to its stock,".

Subsec. (b)(2). Pub. L. 100–647, §1006(e)(21)(B), substituted "liabilities" for "liabilities in excess of basis" in heading.

Subsec. (b)(3). Pub. L. 100–647, §1006(e)(8)(B), added par. (3).

1986—Pub. L. 99–514 amended section generally, substituting provisions relating to distributions of appreciated property for provisions relating to LIFO inventory, liability in excess of basis, and appreciated property used to redeem stock.

1984—Subsec. (d). Pub. L. 98–369, §54(a)(3), substituted "Distributions of appreciated property" for "Appreciated property used to redeem stock" in heading.

Subsec. (d)(1). Pub. L. 98–369, §54(a)(1), substituted "This subsection shall be applied after the applications of subsections (b) and (c)" for "Subsections (b) and (c) shall not apply to any distribution to which this subsection applies" in provisions following subpar. (B).

Subsec. (d)(1)(A). Pub. L. 98–369, §54(a)(1), struck out "of part or all of his stock in such corporation" before "and".

Subsec. (d)(2)(A). Pub. L. 98–369, §54(a)(2)(A), substituted provisions relating to a distribution which is made with respect to qualified stock if section 302(b)(4) applies to such distribution or such distribution is a qualified distribution for provisions which had related to a distribution to a corporate shareholder if the basis of the property distributed was determined under section 301(d)(2).

Subsec. (d)(2)(B) to (F). Pub. L. 98–369, §54(a)(2)(A), (B), redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B) which related to distributions to which section 302(b)(4) applied and which were made with respect to qualified stock.

Subsec. (e)(1)(C). Pub. L. 98–369, §712(j), added subpar. (C).

Subsec. (e)(3). Pub. L. 98–369, §54(a)(2)(C), added par. (3).

1982—Subsec. (d)(2)(A). Pub. L. 97–248, §223(a)(1), substituted reference to a distribution to a corporate shareholder if the basis of the property distributed is determined under section 301(d)(2) for reference to a distribution in complete redemption of all of the stock of a shareholder who, at all times within the 12-month period ending on the date of such distribution owned at least 10 percent in value of the outstanding stock of the distributing corporation, but only if the redemption qualified under section 302(b)(3) (determined without the application of section 302(c)(2)(A)(ii)).

Subsec. (d)(2)(B). Pub. L. 97–248, §223(a)(1), substituted reference to a distribution to which section 302(b)(4) applies and which is made with respect to qualified stock for reference to a distribution of stock or an obligation of a corporation, which was engaged in at least one trade or business, which had not received property constituting a substantial part of its assets from the distributing corporation, in a transaction to which section 351 applied or as a contribution to capital, within the 5-year period ending on the date of the distribution, and at least 50 percent in value of the outstanding stock of which was owned by the distributing corporation at any time within the 9-year period ending one year before the date of the distribution.

Subsec. (d)(2)(C). Pub. L. 97–248, §223(a)(1), substituted reference to a distribution of stock or an obligation of a corporation if the requirements of subsec. (e)(2) of this section are met with respect to the distribution for reference to a distribution of stock or securities pursuant to the terms of a final judgment rendered by a court with respect to the distributing corporation in a court proceeding under the Sherman Act (15 U.S.C. 1–7) or the Clayton Act (15 U.S.C. 12–27), or both, to which the United States was a party, but only if the distribution of such stock or securities in redemption of the distributing corporation's stock was in furtherance of the purposes of the judgment.

Subsec. (d)(2)(G). Pub. L. 97–248, §223(a)(3), struck out subpar. (G) which provided that a distribution of stock to a distributee which is not an organization exempt from tax under section 501(a) of this title, if with respect to such distributee, subsec. (a)(1) or (b)(1) of section 1101 of this title applied to such distribution.

Subsec. (e). Pub. L. 97–248, §223(a)(2), added subsec. (e).

1980—Subsec. (a). Pub. L. 96–471 substituted "section 453B" for "Section 453(d)".

1978—Subsec. (d)(2)(G), (H). Pub. L. 95–600 redesignated subpar. (H) as (G).

1976—Subsec. (d)(1)(B). Pub. L. 94–455, §1901(a) (42)(A), substituted "then a gain shall be recognized" for "then again shall be recognized".

Subsec. (d)(2). Pub. L. 94–452 and Pub. L. 94–455 §1901(a)(42)(B)(i), (C), struck out subpar. (C) relating to certain distributions before Dec. 1, 1974, struck out "26 Stat. 209;" before "15 U.S.C. 1–7)" and "38 Stat. 730;" before "15 U.S.C. 12–27)" in subpar. (D), added subpar. (H), and redesignated subpars. (D) to (G), as so amended, as subpars. (C) to (F), respectively.

1969—Subsec. (a). Pub. L. 91–172, §905(b)(1), inserted reference to subsec. (d).

Subsec. (d). Pub. L. 91–172, §905(a), added subsec. (d).

Statutory Notes and Related Subsidiaries

Effective Date of 1988 Amendment

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

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, §54(d), July 18, 1984, 98 Stat. 569, as amended by Pub. L. 99–514, §2, title XVIII, §1804(b)(3), Oct. 22, 1986, 100 Stat. 2095, 2799; Pub. L. 100–647, title I, §1018(d)(1)–(3), Nov. 10, 1988, 102 Stat. 3578, provided that:

"(1) Subsection (a).—Except as otherwise provided in this subsection, the amendments made by subsection (a) [amending this section] shall apply to distributions declared on or after June 14, 1984, in taxable years ending after such date.

"(2) Subsection (b).—The amendment made by subsection (b) [amending section 301 of this title] shall apply to distributions after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date.

"(3) Exception for distributions before january 1, 1985, to 80-percent corporate shareholders.—

"(A) In general.—The amendments made by subsection (a) shall not apply to any distribution before January 1, 1985, to an 80-percent corporate shareholder if the basis of the property distributed is determined under section 301(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].

"(B) 80-percent corporate shareholder.—The term '80-percent corporate shareholder' means, with respect to any distribution, any corporation which owns—

"(i) stock in the corporation making the distribution possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote, and

"(ii) at least 80 percent of the total number of shares of all other classes of stock of the distributing corporation (except nonvoting stock which is limited and preferred as to dividends).

"(C) Special rule for affiliated group filing consolidated return.—For purposes of this paragraph and paragraph (4), all members of the same affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986) which file a consolidated return for the taxable year which includes the date of the distribution shall be treated as 1 corporation.

"(D) Special rule for certain distributions before january 1, 1988.—

"(i) In general.—In the case of a transaction to which this subparagraph applies, subparagraph (A) shall be applied by substituting '1988' for '1985' and the amendments made by subtitle D of title VI of the Tax Reform Act of 1986 [sections 631 to 634 of Pub. L. 99–514, enacting sections 336 and 337 of this title, amending this section and sections 26, 312, 332, 334, 338, 341, 346, 367, 453, 453B, 467, 852, 897, 1056, 1248, 1255, 1276, 1363, 1366, 1374, and 1375 of this title, repealing sections 333, 336, and 337 of this title, and enacting provisions set out as a note under section 301 of this title] shall not apply.

"(ii) Transaction to which subparagaph [sic] applies.—This subparagraph appies [applies] to a transaction in which a Delaware corporation which was incorporated on May 31, 1927, and which was acquired by the transferee on December 10, 1968, transfers to the transferee stock in a corporation—

"(I) with respect to which such Delaware corporation is a 100-percent corporate shareholder, and

"(II) which is a Tennessee corporation which was incorporated on March 2, 1978,, [sic] and which is a successor to an Indiana corporation which was incorporated on June 28, 1946, and acquired by the transferee on December 9 [10], 1968.

"(4) Exception for certain distributions where tender offer commenced on may 23, 1984.—

"(A) In general.—The amendments made by subsection (a) shall not apply to any distribution made before September 1, 1986, if—

"(i) such distribution consists of qualified stock held (directly or indirectly) on June 15, 1984, by the distributing corporation,

"(ii) control of the distributing corporation (as defined in section 368(c) of the Internal Revenue Code of 1986) is acquired other than in a tax-free transaction after January 1, 1984, but before January 1, 1985,

"(iii) a tender offer for the shares of the distributing corporation was commenced on May 23, 1984, and was amended on May 24, 1984, and

"(iv) the distributing corporation and the distributee corporation are members of the same affiliated group (as defined in section 1504 of such Code) which filed a consolidated return for the taxable year which includes the date of the distribution.

If the common parent of any affiliated group filing a consolidated return meets the requirements of clauses (ii) and (iii), each other member of such group shall be treated as meeting such requirements.

"(B) Qualified stock.—For purposes of subparagraph (A), the term 'qualified stock' means any stock in a corporation which on June 15, 1984, was a member of the same affiliated group as the distributing corporation and which filed a consolidated return with the distributing corporation for the taxable year which included June 15, 1984.

"(5) Exception for certain distributions.—

"(A) In general.—The amendments made by this section [amending this section and sections 301 and 1223 of this title] shall not apply to distributions before February 1, 1986, if—

"(i) the distribution consists of property held on March 7, 1984 (or property acquired thereafter in the ordinary course of a trade or business) by—

"(I) the controlled corporation, or

"(II) any subsidiary controlled corporation,

"(ii) a group of 1 or more shareholders (acting in concert)—

"(I) acquired, during the 1-year period ending on February 1, 1984, at least 10 percent of the outstanding stock of the controlled corporation,

"(II) held at least 10 percent of the outstanding stock of the common parent on February 1, 1984, and

"(III) submitted a proposal for distributions of interests in a royalty trust from the common parent or the controlled corporation, and

"(iii) the common parent acquired control of the controlled corporation during the 1-year period ending on February 1, 1984.

"(B) Definitions.—For purposes of this paragraph—

"(i) The term 'common parent' has the meaning given such term by section 1504(a) of the Internal Revenue Code of 1986.

"(ii) The term 'controlled corporation' means a corporation with respect to which 50 percent or more of the outstanding stock of its common parent is tendered for pursuant to a tender offer outstanding on March 7, 1984.

"(iii) The term 'subsidiary controlled corporation' means any corporation with respect to which the controlled corporation has control (within the meaning of section 368(c) of such Code) on March 7, 1984.

"(6) Exception for certain distribution of partnership interests.—The amendments made by this section shall not apply to any distribution before February 1, 1986, of an interest in a partnership the interests of which were being traded on a national securities exchange on March 7, 1984, if—

"(A) such interest was owned by the distributing corporation (or any member of an affiliated group within the meaning of section 1504(a) of such Code of which the distributing corporation was a member) on March 7, 1984,

"(B) the distributing corporation (or any such affiliated member) owned more than 80 percent of the interests in such partnership on March 7, 1984, and

"(C) more than 10 percent of the interests in such partnership was offered for sale to the public during the 1-year period ending on March 7, 1984."

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

Effective Date of 1982 Amendment; Exceptions

Pub. L. 97–248, title II, §223(b), Sept. 3, 1982, 96 Stat. 484, as amended by Pub. L. 97–448, title III, §306(a)(7), Jan. 12, 1983, 96 Stat. 2402; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to distributions after August 31, 1982.

"(2) Distributions pursuant to ruling requests before july 23, 1982.—In the case of a ruling request under section 311(d)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect before the amendments made by this section) made before July 23, 1982, the amendments made by this section [amending this section] shall not apply to distributions made—

"(A) pursuant to a ruling granted pursuant to such request, and

"(B) either before October 21, 1982, or within 90 days after the date of such ruling.

"(3) Distributions pursuant to final judgments of court.—In the case of a final judgment described in section 311(d)(2)(C) of such Code (as in effect before the amendments made by this section) rendered before July 23, 1982, the amendments made by this section [amending this section] shall not apply to distributions made before January 1, 1986, pursuant to such judgment.

"(4) Certain distributions with respect to stock acquired before may 1982.—The amendments made by this section [amending this section] shall not apply to distributions—

"(A) which meet the requirements of section 311(d)(2)(A) of such Code (as in effect on the day before the date of the enactment of this Act [Sept. 3, 1982]),

"(B) which are made on or before August 31, 1983, and

"(C) which are made with respect to stock acquired after 1980 and before May 1982.

"(5) Distributions of timberland with respect to stock of forest products company.—If—

"(A) a forest products company distributes timberland to a shareholder in redemption of the common and preferred stock in such corporation held by such shareholder,

"(B) section 311(d)(2)(A) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) would have applied to such distributions, and

"(C) such distributions are made pursuant to 1 of 2 options contained in a contract between such company and such shareholder which is binding on August 31, 1982, and at all times thereafter,

then such distributions of timberland having an aggregate fair market value on August 31, 1982, not in excess of $10,000,000 shall be treated as distributions to which section 311(d)(2)(A) of such Code (as in effect before the date of the enactment of this Act [Sept. 3, 1982] applies."

Effective Date of 1980 Amendment

For effective date of amendment by Pub. L. 96–471, see section 6(a)(1) of Pub. L. 96–471, set out as an Effective Date note under section 453 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title VII, §703(j)(2)(C), Nov. 6, 1978, 92 Stat. 2941, provided that: "The amendments made by this paragraph [amending this section] shall take effect as if included in section 2(b) of the Bank Holding Company Tax Act of 1976 [amending this section]."

Effective Date of 1976 Amendment

Amendment by section 1901(a)(42)(A), (C) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Pub. L. 94–455, title XIX, §1901(a)(42)(B)(ii), Oct. 4, 1976, 90 Stat. 1771, provided that: "The amendments made by clause (i) [amending this section] shall apply only with respect to distributions after November 30, 1974."

Pub. L. 94–452, §2(d)(4), Oct. 2, 1976, 90 Stat. 1512, provided that: "The amendment made by subsection (b) [amending this section] shall take effect on October 1, 1977, with respect to distributions after December 31, 1975, in taxable years ending after December 31, 1975."

Effective Date of 1969 Amendment

Pub. L. 91–172, title IX, §905(c), Dec. 30, 1969, 83 Stat. 714, as amended by Pub. L. 91–675, Jan. 12, 1971, 84 Stat. 2059, provided that:

"(1) Except as provided in paragraphs (2), (3), (4), and (5), the amendments made by subsections (a) and (b) [amending this section and sections 301 and 312 of this title] shall apply with respect to distributions after November 30, 1969.

"(2) The amendments made by subsections (a) and (b) shall not apply to a distribution before April 1, 1970, pursuant to the terms of—

"(A) a written contract which was binding on the distributing corporation on November 30, 1969, and at all times thereafter before the distribution,

"(B) an offer made by the distributing corporation before December 1, 1969,

"(C) an offer made in accordance with a request for a ruling filed by the distributing corporation with the Internal Revenue Service before December 1, 1969, or

"(D) an offer made in accordance with a registration statement filed with the Securities and Exchange Commission before December 1, 1969.

For purposes of subparagraphs (B), (C), and (D), an offer shall be treated as an offer only if it was in writing and not revocable by its express terms.

"(3) The amendments made by subsections (a) and (b) shall not apply to a distribution by a corporation of specific property in redemption of stock outstanding on November 30, 1969, if—

"(A) every holder of such stock on such date had the right to demand redemption of his stock in such specific property, and

"(B) the corporation had such specific property on hand on such date in a quantity sufficient to redeem all of such stock.

For purposes of the preceding sentence, stock shall be considered to have been outstanding on November 30, 1969, if it could have been acquired on such date through the exercise of an existing right of conversion contained in other stock held on such date.

"(4) The amendments made by subsections (a) and (b) shall not apply to a distribution by a corporation of property (held on December 1, 1969, by the distributing corporation or a corporation which was a wholly owned subsidiary of the distributing corporation on such date) in redemption of stock outstanding on November 30, 1969, which is redeemed and canceled before July 31, 1971, if—

"(A) such redemption is pursuant to a resolution adopted before November 1, 1969, by the Board of Directors authorizing the redemption of a specific amount of stock constituting more than 10 percent of the outstanding stock of the corporation at the time of the adoption of such resolution; and

"(B) more than 40 percent of the stock authorized to be redeemed pursuant to such resolution was redeemed before December 30, 1969, and more than one-half of the stock so redeemed was redeemed with property other than money.

"(5) The amendments made by subsections (a) and (b) shall not apply to a distribution of stock, by a corporation organized prior to December 1, 1969, for the principal purpose of providing an equity participation plan for employees of the corporation whose stock is being distributed (hereinafter referred to as the 'employer corporation') if—

"(A) the stock being distributed was owned by the distributing corporation on November 30, 1969,

"(B) the stock being redeemed was acquired before January 1, 1973, pursuant to such equity participation plan by the shareholder presenting such stock for redemption (or by a predecessor of such shareholder),

"(C) the employment of the shareholder presenting the stock for redemption (or the predecessor of such shareholder) by the employer corporation commenced before January 1, 1971,

"(D) at least 90 percent in value of the assets of the distributing corporation on November 30, 1969, consisted of common stock of the employer corporation, and

"(E) at least 50 percent of the outstanding voting stock of the employer corporation is owned by the distributing corporation at any time within the nine-year period ending one year before the date of such distribution."
26 U.S.C. § 651 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 651: Deduction for trusts distributing current income only
Deduction for trusts distributing current income only
Status: in_force

(a) Deduction

In the case of any trust the terms of which—

(1) provide that all of its income is required to be distributed currently, and

(2) do not provide that any amounts are to be paid, permanently set aside, or used for the purposes specified in section 642(c) (relating to deduction for charitable, etc., purposes),

there shall be allowed as a deduction in computing the taxable income of the trust the amount of the income for the taxable year which is required to be distributed currently. This section shall not apply in any taxable year in which the trust distributes amounts other than amounts of income described in paragraph (1).

(b) Limitation on deduction

If the amount of income required to be distributed currently exceeds the distributable net income of the trust for the taxable year, the deduction shall be limited to the amount of the distributable net income. For this purpose, the computation of distributable net income shall not include items of income which are not included in the gross income of the trust and the deductions allocable thereto.

(Aug. 16, 1954, ch. 736, 68A Stat. 219.)
26 U.S.C. § 2602 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 13 / Section 2602: Amount of tax
Amount of tax
Status: in_force

The amount of the tax imposed by section 2601 is—

(1) the taxable amount (determined under subchapter C), multiplied by

(2) the applicable rate (determined under subchapter E).

(Added Pub. L. 94–455, title XX, §2006(a), Oct. 4, 1976, 90 Stat. 1879; amended Pub. L. 95–600, title VII, §702(h)(2), (n)(4), Nov. 6, 1978, 92 Stat. 2931, 2936; Pub. L. 97–34, title IV, §403(a)(2)(B), Aug. 13, 1981, 95 Stat. 301; Pub. L. 99–514, title XIV, §1431(a), Oct. 22, 1986, 100 Stat. 2718.)

Editorial Notes

Amendments

1986—Pub. L. 99–514 amended section generally, substituting provisions that amount of tax imposed by section 2601 is the taxable amount (determined under subchapter C), multiplied by the applicable rate (determined under subchapter E) for former provisions which set out in detail the calculations and formulae for determining amount of tax imposed by section 2601.

1981—Subsec. (c)(5). Pub. L. 97–34 redesignated subpars. (B) and (C) as (A) and (B), respectively, and struck out former subpar. (A) relating to adjustments to marital deduction and providing that if the generation-skipping transfer occurs at the same time as, or within 9 months after, the death of the deemed transferor, for purposes of section 2056, relating to bequests, etc., to surviving spouse, the value of the gross estate of the deemed transferor shall be deemed to be increased by the amount of such transfer.

1978—Subsec. (a)(1)(C). Pub. L. 95–600, §702(h)(2), inserted ", as modified by section 2001(e)" after "within the meaning of section 2001(b)".

Subsec. (d)(1)(A). Pub. L. 95–600, §702(n)(4)(A), inserted "(or at the same time as the death of a beneficiary of the trust assigned to a higher generation than such deemed transferor)" after "such deemed transferor".

Subsec. (d)(2)(A). Pub. L. 95–600, §702(n)(4)(B), inserted "(or beneficiary)" after "the deemed transferor".

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Section applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as a note under section 2601 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to estates of decedents dying after Dec. 31, 1981, but inapplicable under certain conditions under will executed before date which is 30 days after Aug. 13, 1981, or under trust created by such date, see section 403(e) of Pub. L. 97–34, set out as a note under section 2056 of this title.

Effective Date of 1978 Amendment

Amendment by section 702(h)(2) of Pub. L. 95–600 applicable to estates of decedents dying after Dec. 31, 1976, except that such amendment shall not apply to transfers made before Jan. 1, 1977, see section 702(h)(3) of Pub. L. 95–600, set out as a note under section 2001 of this title.

Amendment by section 702(n)(4) of Pub. L. 95–600 effective as if included in this chapter as added by section 2006 of Pub. L. 94–455, see section 702(n)(5) of Pub. L. 95–600, set out as a note under section 2613 of this title.
26 U.S.C. § 3503 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 25 / Section 3503: Erroneous payments
Erroneous payments
Status: in_force

Any tax paid under chapter 21 or 22 by a taxpayer with respect to any period with respect to which he is not liable to tax under such chapter shall be credited against the tax, if any, imposed by such other chapter upon the taxpayer, and the balance, if any, shall be refunded.

(Aug. 16, 1954, ch. 736, 68A Stat. 471.)
26 U.S.C. § 1244 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1244: Losses on small business stock
Losses on small business stock
Status: in_force

(a) General rule

In the case of an individual, a loss on section 1244 stock issued to such individual or to a partnership which would (but for this section) be treated as a loss from the sale or exchange of a capital asset shall, to the extent provided in this section, be treated as an ordinary loss.

(b) Maximum amount for any taxable year

For any taxable year the aggregate amount treated by the taxpayer by reason of this section as an ordinary loss shall not exceed—

(1) $50,000, or

(2) $100,000, in the case of a husband and wife filing a joint return for such year under section 6013.

(c) Section 1244 stock defined

(1) In general

For purposes of this section, the term "section 1244 stock" means stock in a domestic corporation if—

(A) at the time such stock is issued, such corporation was a small business corporation,

(B) such stock was issued by such corporation for money or other property (other than stock and securities), and

(C) such corporation, during the period of its 5 most recent taxable years ending before the date the loss on such stock was sustained, derived more than 50 percent of its aggregate gross receipts from sources other than royalties, rents, dividends, interests, annuities, and sales or exchanges of stocks or securities.

(2) Rules for application of paragraph (1)(C)

(A) Period taken into account with respect to new corporations

For purposes of paragraph (1)(C), if the corporation has not been in existence for 5 taxable years ending before the date the loss on the stock was sustained, there shall be substituted for such 5-year period—

(i) the period of the corporation's taxable years ending before such date, or

(ii) if the corporation has not been in existence for 1 taxable year ending before such date, the period such corporation has been in existence before such date.

(B) Gross receipts from sales of securities

For purposes of paragraph (1)(C), gross receipts from the sales or exchanges of stock or securities shall be taken into account only to the extent of gains therefrom.

(C) Nonapplication where deductions exceed gross income

Paragraph (1)(C) shall not apply with respect to any corporation if, for the period taken into account for purposes of paragraph (1)(C), the amount of the deductions allowed by this chapter (other than by sections 172, 243, and 245) exceeds the amount of gross income.

(3) Small business corporation defined

(A) In general

For purposes of this section, a corporation shall be treated as a small business corporation if the aggregate amount of money and other property received by the corporation for stock, as a contribution to capital, and as paid-in surplus, does not exceed $1,000,000. The determination under the preceding sentence shall be made as of the time of the issuance of the stock in question but shall include amounts received for such stock and for all stock theretofore issued.

(B) Amount taken into account with respect to property

For purposes of subparagraph (A), the amount taken into account with respect to any property other than money shall be the amount equal to the adjusted basis to the corporation of such property for determining gain, reduced by any liability to which the property was subject or which was assumed by the corporation. The determination under the preceding sentence shall be made as of the time the property was received by the corporation.

(d) Special rules

(1) Limitations on amount of ordinary loss

(A) Contributions of property having basis in excess of value

If—

(i) section 1244 stock was issued in exchange for property,

(ii) the basis of such stock in the hands of the taxpayer is determined by reference to the basis in his hands of such property, and

(iii) the adjusted basis (for determining loss) of such property immediately before the exchange exceeded its fair market value at such time,

then in computing the amount of the loss on such stock for purposes of this section the basis of such stock shall be reduced by an amount equal to the excess described in clause (iii).

(B) Increases in basis

In computing the amount of the loss on stock for purposes of this section, any increase in the basis of such stock (through contributions to the capital of the corporation, or otherwise) shall be treated as allocable to stock which is not section 1244 stock.

(2) Recapitalizations, changes in name, etc.

To the extent provided in regulations prescribed by the Secretary, stock in a corporation, the basis of which (in the hands of a taxpayer) is determined in whole or in part by reference to the basis in his hands of stock in such corporation which meets the requirements of subsection (c)(1) (other than subparagraph (C) thereof), or which is received in a reorganization described in section 368(a)(1)(F) in exchange for stock which meets such requirements, shall be treated as meeting such requirements. For purposes of paragraphs (1)(C) and (3)(A) of subsection (c), a successor corporation in a reorganization described in section 368(a)(1)(F) shall be treated as the same corporation as its predecessor.

(3) Relationship to net operating loss deduction

For purposes of section 172 (relating to the net operating loss deduction), any amount of loss treated by reason of this section as an ordinary loss shall be treated as attributable to a trade or business of the taxpayer.

(4) Individual defined

For purposes of this section, the term "individual" does not include a trust or estate.

(e) Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.

(Added Pub. L. 85–866, title II, §202(b), Sept. 2, 1958, 72 Stat. 1676; amended Pub. L. 94–455, title XIX, §§1901(b)(1)(W), (3)(G), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1792, 1793, 1834; Pub. L. 95–600, title III, §345(a)–(d), Nov. 6, 1978, 92 Stat. 2844, 2845; Pub. L. 98–369, div. A, title IV, §481(a), July 18, 1984, 98 Stat. 847; Pub. L. 113–295, div. A, title II, §221(a)(41)(H), Dec. 19, 2014, 128 Stat. 4044.)

Editorial Notes

Amendments

2014—Subsec. (c)(2)(C). Pub. L. 113–295 struck out "244," after "243,".

1984—Subsecs. (c)(1), (d)(2). Pub. L. 98–369 substituted "stock in a" for "common stock in a".

1978—Subsec. (b). Pub. L. 95–600, §345(b), substituted in par. (1) "$50,000" for "$25,000" and in par. (2) "$100,000" for "$50,000".

Subsec. (c). Pub. L. 95–600, §345(a), (c), among other changes, substituted provisions permitting a corporation to issue common stock under the provisions of this section without a written plan for provisions requiring that a written plan to issue section 1244 stock must be adopted by the issuing corporation and increased the amount of section 1244 stock that a qualified small business corporation may issue from $500,000 to $1,000,000.

Subsec. (d)(2). Pub. L. 95–600, §345(d), substituted "subparagraph (C)" for "subparagraph (E)" and "paragraphs (1)(C) and (3)(A)" for "paragraphs (1)(E) and (2)(A)".

1976—Subsecs. (a), (b). Pub. L. 94–455, §1901(b)(3)(G), substituted "an ordinary loss" for "a loss from the sale or exchange of an asset which is not a capital asset".

Subsec. (c)(1)(E). Pub. L. 94–455, §1901(b)(1)(W), struck out reference to section 242 of this title.

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

Subsec. (d)(3). Pub. L. 94–455, §1901(b)(3)(G), substituted "an ordinary loss" for "a loss from the sale or exchange of an asset which is not a capital asset".

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Pub. L. 113–295), see section 221(a)(41)(K) of Pub. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Pub. L. 113–295, 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 1984 Amendment

Pub. L. 98–369, div. A, title IV, §481(b), July 18, 1984, 98 Stat. 847, provided that: "The amendment made by subsection (a) [amending this section] shall apply to stock issued after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date."

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §345(e), Nov. 6, 1978, 92 Stat. 2845, as amended by Pub. L. 96–222, title I, §103(a)(9), Apr. 1, 1980, 94 Stat. 212, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to stock issued after November 6, 1978.

"(2) Subsection (b).—The amendments made by subsection (b) [amending this section] shall apply to taxable years beginning after December 31, 1978.

"(3) Transitional rule for subsection (b).—In the case of a taxable year which includes November 6, 1978, the amendments made by subsection (b) [amending this section] shall apply with respect to stock issued after such date."

Effective Date of 1976 Amendment

Amendment by section 1901(b)(1)(W), (3)(G) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
26 U.S.C. § 5235 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 51 / Subchapter C / Section 5235: Bottling of alcohol for industrial purposes
Bottling of alcohol for industrial purposes
Status: in_force

Alcohol for industrial purposes may be bottled, labeled, and cased on bonded premises of a distilled spirits plant prior to payment or determination of tax, under such regulations as the Secretary may prescribe.

(Added Pub. L. 85–859, title II, §201, Sept. 2, 1958, 72 Stat. 1369; amended Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–39, title VIII, §807(a)(36), July 26, 1979, 93 Stat. 286; Pub. L. 98–369, div. A, title IV, §454(c)(8), July 18, 1984, 98 Stat. 821.)

Editorial Notes

Prior Provisions

Provisions similar to those comprising this section were contained in prior section 5305, act Aug. 16, 1954, ch. 736, 68A Stat. 657, prior to the general revision of this chapter by Pub. L. 85–859.

Amendments

1984—Pub. L. 98–369 struck out "stamped," before "labeled," and struck out provision that section 5205(a)(1) shall not apply to alcohol bottled, stamped, and labeled as such under this section.

1979—Pub. L. 96–39 substituted "section 5205(a)(1) shall not apply" for "sections 5178(a)(4)(A), 5205(a)(1), and 5233 (relating to the bottling of distilled spirits in bond) shall not be applicable".

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

Statutory Notes and Related Subsidiaries

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 effective July 1, 1985, see section 456(b) of Pub. L. 98–369, set out as an Effective Date note under section 5101 of this title.

Effective Date of 1979 Amendment

Amendment by Pub. L. 96–39 effective Jan. 1, 1980, see section 810 of Pub. L. 96–39, set out as a note under section 5001 of this title.
26 U.S.C. § 1367 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1367: Adjustments to basis of stock of shareholders, etc.
Adjustments to basis of stock of shareholders, etc.
Status: in_force

(a) General rule

(1) Increases in basis

The basis of each shareholder's stock in an S corporation shall be increased for any period by the sum of the following items determined with respect to that shareholder for such period:

(A) the items of income described in subparagraph (A) of section 1366(a)(1),

(B) any nonseparately computed income determined under subparagraph (B) of section 1366(a)(1), and

(C) the excess of the deductions for depletion over the basis of the property subject to depletion.

(2) Decreases in basis

The basis of each shareholder's stock in an S corporation shall be decreased for any period (but not below zero) by the sum of the following items determined with respect to the shareholder for such period:

(A) distributions by the corporation which were not includible in the income of the shareholder by reason of section 1368,

(B) the items of loss and deduction described in subparagraph (A) of section 1366(a)(1),

(C) any nonseparately computed loss determined under subparagraph (B) of section 1366(a)(1),

(D) any expense of the corporation not deductible in computing its taxable income and not properly chargeable to capital account, and

(E) the amount of the shareholder's deduction for depletion for any oil and gas property held by the S corporation to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such shareholder under section 613A(c)(11)(B).

The decrease under subparagraph (B) by reason of a charitable contribution (as defined in section 170(c)) of property shall be the amount equal to the shareholder's pro rata share of the adjusted basis of such property.

(b) Special rules

(1) Income items

An amount which is required to be included in the gross income of a shareholder and shown on his return shall be taken into account under subparagraph (A) or (B) of subsection (a)(1) only to the extent such amount is included in the shareholder's gross income on his return, increased or decreased by any adjustment of such amount in a redetermination of the shareholder's tax liability.

(2) Adjustments in basis of indebtedness

(A) Reduction of basis

If for any taxable year the amounts specified in subparagraphs (B), (C), (D), and (E) of subsection (a)(2) exceed the amount which reduces the shareholder's basis to zero, such excess shall be applied to reduce (but not below zero) the shareholder's basis in any indebtedness of the S corporation to the shareholder.

(B) Restoration of basis

If for any taxable year beginning after December 31, 1982, there is a reduction under subparagraph (A) in the shareholder's basis in the indebtedness of an S corporation to a shareholder, any net increase (after the application of paragraphs (1) and (2) of subsection (a)) for any subsequent taxable year shall be applied to restore such reduction in basis before any of it may be used to increase the shareholder's basis in the stock of the S corporation.

(3) Coordination with sections 165(g) and 166(d)

This section and section 1366 shall be applied before the application of sections 165(g) and 166(d) to any taxable year of the shareholder or the corporation in which the security or debt becomes worthless.

(4) Adjustments in case of inherited stock

(A) In general

If any person acquires stock in an S corporation by reason of the death of a decedent or by bequest, devise, or inheritance, section 691 shall be applied with respect to any item of income of the S corporation in the same manner as if the decedent had held directly his pro rata share of such item.

(B) Adjustments to basis

The basis determined under section 1014 of any stock in an S corporation shall be reduced by the portion of the value of the stock which is attributable to items constituting income in respect of the decedent.

(Added Pub. L. 97–354, §2, Oct. 19, 1982, 96 Stat. 1679; amended Pub. L. 98–369, div. A, title VII, §§721(d), (w), 722(e)(2), July 18, 1984, 98 Stat. 967, 971, 974; Pub. L. 104–188, title I, §§1313(a), 1702(h)(14), Aug. 20, 1996, 110 Stat. 1785, 1874; Pub. L. 109–280, title XII, §1203(a), Aug. 17, 2006, 120 Stat. 1066; Pub. L. 110–343, div. C, title III, §307(a), Oct. 3, 2008, 122 Stat. 3869; Pub. L. 111–312, title VII, §752(a), Dec. 17, 2010, 124 Stat. 3321; Pub. L. 112–240, title III, §325(a), Jan. 2, 2013, 126 Stat. 2333; Pub. L. 113–295, div. A, title I, §137(a), Dec. 19, 2014, 128 Stat. 4019; Pub. L. 114–113, div. Q, title I, §115(a), Dec. 18, 2015, 129 Stat. 3049.)

Editorial Notes

Amendments

2015—Subsec. (a)(2). Pub. L. 114–113 struck out "The preceding sentence shall not apply to contributions made in taxable years beginning after December 31, 2014." at end of concluding provisions.

2014—Subsec. (a)(2). Pub. L. 113–295 substituted "December 31, 2014" for "December 31, 2013" in concluding provisions.

2013—Subsec. (a)(2). Pub. L. 112–240 substituted "December 31, 2013" for "December 31, 2011" in concluding provisions.

2010—Subsec. (a)(2). Pub. L. 111–312 substituted "December 31, 2011" for "December 31, 2009" in concluding provisions.

2008—Subsec. (a)(2). Pub. L. 110–343 substituted "December 31, 2009" for "December 31, 2007" in concluding provisions.

2006—Subsec. (a)(2). Pub. L. 109–280, which directed the addition of concluding provisions to section 1367(a)(2), without specifying the act to be amended, was executed to subsec. (a)(2) of this section, which is section 1367 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.

1996—Subsec. (a)(2)(E). Pub. L. 104–188, §1702(h)(14), substituted "section 613A(c)(11)(B)" for "section 613A(c)(13)(B)".

Subsec. (b)(4). Pub. L. 104–188, §1313(a), added par. (4).

1984—Subsec. (a)(2)(E). Pub. L. 98–369, §722(e)(2), substituted "for any oil and gas property held by the S corporation to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such shareholder under section 613A(c)(13)(B)" for "under section 611 with respect to oil and gas wells".

Subsec. (b)(2)(B). Pub. L. 98–369, §721(w), substituted "for any taxable year beginning after December 31, 1982, there is" for "for any taxable year there is".

Subsec. (b)(3). Pub. L. 98–369, §721(d), inserted "and 166(d)" in heading and text.

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, §115(b), Dec. 18, 2015, 129 Stat. 3049, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2014."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, §137(b), Dec. 19, 2014, 128 Stat. 4020, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2013."

Effective Date of 2013 Amendment

Pub. L. 112–240, title III, §325(b), Jan. 2, 2013, 126 Stat. 2333, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2011."

Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, §752(b), Dec. 17, 2010, 124 Stat. 3321, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2009."

Effective Date of 2008 Amendment

Pub. L. 110–343, div. C, title III, §307(b), Oct. 3, 2008, 122 Stat. 3869, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2007."

Effective Date of 2006 Amendment

Pub. L. 109–280, title XII, §1203(b), Aug. 17, 2006, 120 Stat. 1066, provided that: "The amendment made by this section [amending this section] shall apply to contributions made in taxable years beginning after December 31, 2005."

Effective Date of 1996 Amendment

Pub. L. 104–188, title I, §1313(b), Aug. 20, 1996, 110 Stat. 1785, provided that: "The amendment made by subsection (a) [amending this section] shall apply in the case of decedents dying after the date of the enactment of this Act [Aug. 20, 1996]."

Amendment by section 1702(h)(14) of Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

Effective Date of 1984 Amendment

Amendment by section 721(d), (w) of Pub. L. 98–369 effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) of Pub. L. 98–369, set out as a note under section 1361 of this title.

Pub. L. 98–369, div. A, title VII, §722(e)(3)(B), July 18, 1984, 98 Stat. 974, provided that: "The amendment made by paragraph (2) [amending this section] shall apply to taxable years beginning after December 31, 1982."

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as a note under section 1361 of this title.
26 U.S.C. § 6405 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 65 / Section 6405: Reports of refunds and credits
Reports of refunds and credits
Status: in_force

(a) By Treasury to Joint Committee

No refund or credit of any income, war profits, excess profits, estate, or gift tax, or any tax imposed with respect to public charities, private foundations, operators' trust funds, pension plans, or real estate investment trusts under chapter 41, 42, 43, or 44, in excess of $2,000,000 ($5,000,000 in the case of a C corporation) shall be made until after the expiration of 30 days from the date upon which a report giving the name of the person to whom the refund or credit is to be made, the amount of such refund or credit, and a summary of the facts and the decision of the Secretary, is submitted to the Joint Committee on Taxation.

(b) Tentative adjustments

Any credit or refund allowed or made under section 6411 shall be made without regard to the provisions of subsection (a) of this section. In any such case, if the credit or refund, reduced by any deficiency in such tax thereafter assessed and by deficiencies in any other tax resulting from adjustments reflected in the determination of the credit or refund, is in excess of $2,000,000 ($5,000,000 in the case of a C corporation), there shall be submitted to such committee a report containing the matter specified in subsection (a) at such time after the making of the credit or refund as the Secretary shall determine the correct amount of the tax.

(c) Refunds attributable to certain disaster losses

If any refund or credit of income taxes is attributable to the taxpayer's election under section 165(i) to deduct a disaster loss for the taxable year immediately preceding the taxable year in which the disaster occurred, the Secretary is authorized in his discretion to make the refund or credit, to the extent attributable to such election, without regard to the provisions of subsection (a) of this section. If such refund or credit is made without regard to subsection (a), there shall thereafter be submitted to such Joint Committee a report containing the matter specified in subsection (a) as soon as the Secretary shall determine the correct amount of the tax for the taxable year for which the refund or credit is made.

(Aug. 16, 1954, ch. 736, 68A Stat. 792; Pub. L. 92–418, §2(b), Aug. 29, 1972, 86 Stat. 657; Pub. L. 92–512, title II, §203(a), Oct. 20, 1972, 86 Stat. 944; Pub. L. 94–455, title XII, §1210(a), (b), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1711, 1834; Pub. L. 95–227, §4(d)(3), Feb. 10, 1978, 92 Stat. 23; Pub. L. 98–369, div. A, title VII, §711(c)(3), July 18, 1984, 98 Stat. 946; Pub. L. 99–514, title XVIII, §1879(e), Oct. 22, 1986, 100 Stat. 2906; Pub. L. 101–508, title XI, §§11801(c)(21)(A), 11834(a), Nov. 5, 1990, 104 Stat. 1388–528, 1388–560; Pub. L. 106–554, §1(a)(7) [title III, §305(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–634; Pub. L. 113–295, div. A, title III, §301(a), Dec. 19, 2014, 128 Stat. 4055.)

Editorial Notes

Amendments

2014—Subsecs. (a), (b). Pub. L. 113–295 inserted "($5,000,000 in the case of a C corporation)" after "$2,000,000".

2000—Subsecs. (a), (b). Pub. L. 106–554 substituted "$2,000,000" for "$1,000,000".

1990—Subsecs. (a), (b). Pub. L. 101–508, §11834(a) substituted "$1,000,000" for "$200,000".

Subsec. (d). Pub. L. 101–508, §11801(c)(21)(A), struck out subsec. (d) which read as follows: "For purposes of this section, a refund or credit made under subchapter E of chapter 64 (relating to Federal collection of qualified State individual income taxes) for a taxable year shall be treated as a portion of a refund or credit of the income tax for that taxable year."

1986—Subsecs. (b) to (e). Pub. L. 99–514 redesignated subsecs. (c) to (e) as (b) to (d), respectively, and struck out former subsec. (b) which read as follows: "A report to Congress shall be made annually by such committee of such refunds and credits, including the names of all persons and corporations to whom amounts are credited or payments are made, together with the amounts credited or paid to each."

1984—Subsec. (d). Pub. L. 98–369 substituted "section 165(i)" for "section 165(h)".

1978—Subsec. (a). Pub. L. 95–227 inserted provisions relating to applicability to public charities, operators' trust funds, or real estate investment trusts, and references to chapters 41 and 44.

1976—Subsec. (a). Pub. L. 94–455, §1210(a), inserted reference to any tax imposed with respect to private foundations and pensions under chapters 42 and 43, substituted $200,000 for $100,000 and struck out "or his delegate" after "Secretary".

Subsec. (c). Pub. L. 94–455, §§1210(b), 1906(b)(13)(A), substituted "$200,000" for "$100,000" and struck out "or his delegate" after "Secretary".

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

1972—Subsec. (d). Pub. L. 92–418 added subsec. (d).

Subsec. (e). Pub. L. 92–512 added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title III, §301(b), Dec. 19, 2014, 128 Stat. 4055, provided that: "The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Dec. 19, 2014], except that such amendment shall not apply with respect to any refund or credit with respect to a report that has been made before such date under section 6405 of the Internal Revenue Code of 1986."

Effective Date of 2000 Amendment

Pub. L. 106–554, §1(a)(7) [title III, §305(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–634, provided that: "The amendment made by subsection (a) [amending this section] shall take effect on the date of the enactment of this Act [Dec. 21, 2000], except that such amendment shall not apply with respect to any refund or credit with respect to a report that has been made before such date of the enactment under section 6405 of the Internal Revenue Code of 1986."

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11834(b), Nov. 5, 1990, 104 Stat. 1388–560, provided that: "The amendment made by subsection (a) [amending this section] shall take effect on the date of the enactment of this Act [Nov. 5, 1990], except that such amendment shall not apply with respect to any refund or credit with respect to a report has been made before such date of enactment under section 6405 of the Internal Revenue Code of 1986."

Effective Date of 1986 Amendment

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

Effective Date of 1984 Amendment

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

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–227 applicable with respect to contributions, acts, and expenditures made after Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of Pub. L. 95–227, set out as an Effective Date note under section 192 of this title.

Effective Date of 1976 Amendment

Pub. L. 94–455, title XII, §1210(d)(1), Oct. 4, 1976, 90 Stat. 1711, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall take effect on the date of enactment of this Act [Oct. 4, 1976], except that such amendments shall not apply with respect to any refund or credit with respect to which a report has been made before the date of enactment of this Act [Oct. 4, 1976] under subsection (a) or (c) of section 6405 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]."

Effective Date of 1972 Amendment

Pub. L. 92–418, §2(c), Aug. 29, 1972, 86 Stat. 657, provided in part that: "The amendment made by subsection (b) [amending this section] shall apply with respect to refunds or credits made after July 1, 1972."

Savings Provision

For provisions that nothing in amendment by section 11801(c)(21)(A) of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

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.
26 U.S.C. § 562 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 562: Rules applicable in determining dividends eligible for dividends paid deduction
Rules applicable in determining dividends eligible for dividends paid deduction
Status: in_force

(a) General rule

For purposes of this part, the term "dividend" shall, except as otherwise provided in this section, include only dividends described in section 316 (relating to definition of dividends for purposes of corporate distributions).

(b) Distributions in liquidation

(1) Except in the case of a personal holding company described in section 542—

(A) in the case of amounts distributed in liquidation, the part of such distribution which is properly chargeable to earnings and profits accumulated after February 28, 1913, shall be treated as a dividend for purposes of computing the dividends paid deduction, and

(B) in the case of a complete liquidation occurring within 24 months after the adoption of a plan of liquidation, any distribution within such period pursuant to such plan shall, to the extent of the earnings and profits (computed without regard to capital losses) of the corporation for the taxable year in which such distribution is made, be treated as a dividend for purposes of computing the dividends paid deduction.

For purposes of subparagraph (A), a liquidation includes a redemption of stock to which section 302 applies. Except to the extent provided in regulations, the preceding sentence shall not apply in the case of any mere holding or investment company which is not a regulated investment company.

(2) In the case of a complete liquidation of a personal holding company, occurring within 24 months after the adoption of a plan of liquidation, the amount of any distribution within such period pursuant to such plan shall be treated as a dividend for purposes of computing the dividends paid deduction, to the extent that such amount is distributed to corporate distributees and represents such corporate distributees' allocable share of the undistributed personal holding company income for the taxable year of such distribution computed without regard to this paragraph and without regard to subparagraph (B) of section 316(b)(2).

(c) Preferential dividends

(1) In general

Except in the case of a publicly offered regulated investment company (as defined in section 67(c)(2)(B)) or a publicly offered REIT, the amount of any distribution shall not be considered as a dividend for purposes of computing the dividends paid deduction, unless such distribution is pro rata, with no preference to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders) to such preference. In the case of a distribution by a regulated investment company (other than a publicly offered regulated investment company (as so defined)) to a shareholder who made an initial investment of at least $10,000,000 in such company, such distribution shall not be treated as not being pro rata or as being preferential solely by reason of an increase in the distribution by reason of reductions in administrative expenses of the company.

(2) Publicly offered REIT

For purposes of this subsection, the term "publicly offered REIT" means a real estate investment trust which is required to file annual and periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

(d) Distributions by a member of an affiliated group

In the case where a corporation which is a member of an affiliated group of corporations filing or required to file a consolidated return for a taxable year is required to file a separate personal holding company schedule for such taxable year, a distribution by such corporation to another member of the affiliated group shall be considered as a dividend for purposes of computing the dividends paid deduction if such distribution would constitute a dividend under the other provisions of this section to a recipient which is not a member of an affiliated group.

(e) Special rules for real estate investment trusts

(1) Determination of earnings and profits for purposes of dividends paid deduction

In the case of a real estate investment trust, in determining the amount of dividends under section 316 for purposes of computing the dividends paid deduction—

(A) the earnings and profits of such trust for any taxable year (but not its accumulated earnings) shall be increased by the amount of gain (if any) on the sale or exchange of real property which is taken into account in determining the taxable income of such trust for such taxable year (and not otherwise taken into account in determining such earnings and profits), and

(B) section 857(d)(1) shall be applied without regard to subparagraph (B) thereof.

(2) Authority to provide alternative remedies for certain failures

In the case of a failure of a distribution by a real estate investment trust to comply with the requirements of subsection (c), the Secretary may provide an appropriate remedy to cure such failure in lieu of not considering the distribution to be a dividend for purposes of computing the dividends paid deduction if—

(A) the Secretary determines that such failure is inadvertent or is due to reasonable cause and not due to willful neglect, or

(B) such failure is of a type of failure which the Secretary has identified for purposes of this paragraph as being described in subparagraph (A).

(Aug. 16, 1954, ch. 736, 68A Stat. 198; Pub. L. 88–272, title II, §225(f)(3), Feb. 26, 1964, 78 Stat. 88; Pub. L. 97–248, title II, §222(e)(7), Sept. 3, 1982, 96 Stat. 480; Pub. L. 97–448, title I, §102(c)(2), Jan. 12, 1983, 96 Stat. 2370; Pub. L. 99–514, title VI, §657(a), title XVIII, §1804(d)(1), Oct. 22, 1986, 100 Stat. 2299, 2800; Pub. L. 108–357, title IV, §413(c)(9), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 111–325, title III, §307(a), (b), Dec. 22, 2010, 124 Stat. 3550; Pub. L. 114–113, div. Q, title III, §§314(a), (b), 315(a), 320(b), Dec. 18, 2015, 129 Stat. 3093, 3097.)

Editorial Notes

References in Text

The Securities Exchange Act of 1934, referred to in subsec. (c)(2), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.

Amendments

2015—Subsec. (c). Pub. L. 114–113, §314(a), (b), designated existing provisions as par. (1), inserted heading and "or a publicly offered REIT" after "a publicly offered regulated investment company (as defined in section 67(c)(2)(B))" in text, and added par. (2).

Subsec. (e). Pub. L. 114–113, §315(a), designated existing provisions as par. (1), inserted heading, and added par. (2).

Subsec. (e)(1). Pub. L. 114–113, §320(b), substituted "deduction—" for "deduction, the earnings and profits of such trust for any taxable year beginning after December 31, 1980, shall be increased by the total amount of gain (if any) on the sale or exchange of real property by such trust during such taxable year." and added subpars. (A) and (B).

2010—Subsec. (c). Pub. L. 111–325 substituted "Except in the case of a publicly offered regulated investment company (as defined in section 67(c)(2)(B)), the amount" for "The amount" in first sentence and inserted "(other than a publicly offered regulated investment company (as so defined))" after "regulated investment company" in second sentence.

2004—Subsec. (b)(1). Pub. L. 108–357 struck out "or a foreign personal holding company described in section 552" after "section 542" in introductory provisions.

1986—Subsec. (b)(1). Pub. L. 99–514, §1804(d)(1), inserted at end "Except to the extent provided in regulations, the preceding sentence shall not apply in the case of any mere holding or investment company which is not a regulated investment company."

Subsec. (c). Pub. L. 99–514, §657(a), inserted at end "In the case of a distribution by a regulated investment company to a shareholder who made an initial investment of at least $10,000,000 in such company, such distribution shall not be treated as not being pro rata or as being preferential solely by reason of an increase in the distribution by reason of reductions in administrative expenses of the company."

1983—Subsec. (e). Pub. L. 97–448 added subsec. (e).

1982—Subsec. (b)(1). Pub. L. 97–248 inserted sentence at end providing that, for purposes of subpar. (A), a liquidation includes a redemption of stock to which section 302 applies.

1964—Subsec. (b). Pub. L. 88–272 designated existing provisions as subpars. (A) and (B) of par. (1), excepted personal holding companies in section 542, and foreign personal holding companies in section 552 therefrom, and added par. (2).

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, §314(c), Dec. 18, 2015, 129 Stat. 3093, provided that: "The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after December 31, 2014."

Pub. L. 114–113, div. Q, title III, §315(b), Dec. 18, 2015, 129 Stat. 3093, provided that: "The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after December 31, 2015."

Pub. L. 114–113, div. Q, title III, §320(c), Dec. 18, 2015, 129 Stat. 3097, provided that: "The amendments made by this section [amending this section and section 857 of this title] shall apply to taxable years beginning after December 31, 2015."

Effective Date of 2010 Amendment

Pub. L. 111–325, title III, §307(c), Dec. 22, 2010, 124 Stat. 3550, provided that: "The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after the date of the enactment of this Act [Dec. 22, 2010]."

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, §657(b), Oct. 22, 1986, 100 Stat. 2299, provided that: "The amendment made by subsection (a) [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 1986]."

Pub. L. 99–514, title XVIII, §1804(d)(2), Oct. 22, 1986, 100 Stat. 2800, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to distributions after September 27, 1985."

Effective Date of 1983 Amendment

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

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to distributions after Aug. 31, 1982, with exceptions for certain partial liquidations, see section 222(f) of Pub. L. 97–248, set out as a note under section 302 of this title.

Effective Date of 1964 Amendment

Amendment Pub. L. 88–272 applicable to distributions made in any taxable year of the distributing corporation beginning after Dec. 31, 1963, see section 225(l) of Pub. L. 88–272, set out as a note under section 316 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§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.
26 U.S.C. § 139A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 139A: Federal subsidies for prescription drug plans
Federal subsidies for prescription drug plans
Status: in_force

Gross income shall not include any special subsidy payment received under section 1860D–22 of the Social Security Act.

(Added Pub. L. 108–173, title XII, §1202(a), Dec. 8, 2003, 117 Stat. 2480; amended Pub. L. 111–148, title IX, §9012(a), Mar. 23, 2010, 124 Stat. 868.)

Editorial Notes

References in Text

Section 1860D–22 of the Social Security Act, referred to in text, is classified to section 1395w–132 of Title 42, The Public Health and Welfare.

Amendments

2010—Pub. L. 111–148 struck out second sentence which read as follows: "This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost taken into account in determining such payment."

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Pub. L. 111–148, title IX, §9012(b), Mar. 23, 2010, 124 Stat. 868, as amended by Pub. L. 111–152, title I, §1407, Mar. 30, 2010, 124 Stat. 1067, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2012."

Effective Date

Section applicable to taxable years ending after Dec. 8, 2003, see section 1202(d) of Pub. L. 108–173, set out as an Effective Date of 2003 Amendment note under section 56 of this title.
26 U.S.C. § 7519 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 77 / Section 7519: Required payments for entities electing not to have required taxable year
Required payments for entities electing not to have required taxable year
Status: in_force

(a) General rule

This section applies to a partnership or S corporation for any taxable year, if—

(1) an election under section 444 is in effect for the taxable year, and

(2) the required payment determined under subsection (b) for such taxable year (or any preceding taxable year) exceeds $500.

(b) Required payment

For purposes of this section, the term "required payment" means, with respect to any applicable election year of a partnership or S corporation, an amount equal to—

(1) the excess of the product of—

(A) the applicable percentage of the adjusted highest section 1 rate, multiplied by

(B) the net base year income of the entity, over

(2) the net required payment balance.

For purposes of paragraph (1)(A), the term "adjusted highest section 1 rate" means the highest rate of tax in effect under section 1 as of the end of the base year plus 1 percentage point (or, in the case of applicable election years beginning in 1987, 36 percent).

(c) Refund of payments

(1) In general

If, for any applicable election year, the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), the entity shall be entitled to a refund of such excess for such year.

(2) Termination of elections, etc.

If—

(A) an election under section 444 is terminated effective with respect to any year, or

(B) the entity is liquidated during any year, the entity shall be entitled to a refund of the net required payment balance.

(3) Date on which refund payable

Any refund under this subsection shall be payable on the later of—

(A) April 15 of the calendar year following—

(i) in the case of the year referred to in paragraph (1), the calendar year in which it begins,

(ii) in the case of the year referred to in paragraph (2), the calendar year in which it ends, or

(B) the day 90 days after the day on which claim therefor is filed with the Secretary.

(d) Net base year income

For purposes of this section—

(1) In general

An entity's net base year income shall be equal to the sum of—

(A) the deferral ratio multiplied by the entity's net income for the base year, plus

(B) the excess (if any) of—

(i) the deferral ratio multiplied by the aggregate amount of applicable payments made by the entity during the base year, over

(ii) the aggregate amount of such applicable payments made during the deferral period of the base year.

For purposes of this paragraph, the term "deferral ratio" means the ratio which the number of months in the deferral period of the base year bears to the number of months in the partnership's or S corporation's taxable year.

(2) Net income

Net income is determined by taking into account the aggregate amount of the following items—

(A) Partnerships

In the case of a partnership, net income shall be the amount (not below zero) determined by taking into account the aggregate amount of the partnership's items described in section 702(a) (other than credits and tax-exempt income).

(B) S corporations

In the case of an S corporation, net income shall be the amount (not below zero) determined by taking into account the aggregate amount of the S corporation's items described in section 1366(a) (other than credits and tax-exempt income). If the S corporation was a C corporation for the base year, its taxable income for such year shall be treated as its net income for such year (and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3)).

(C) Certain limitations disregarded

For purposes of subparagraph (A) or (B), any limitation on the amount of any item described in either such paragraph which may be taken into account for purposes of computing the taxable income of a partner or shareholder shall be disregarded.

(3) Applicable payments

(A) In general

The term "applicable payment" means amounts paid by a partnership or S corporation which are includible in gross income of a partner or shareholder.

(B) Exceptions

The term "applicable payment" shall not include any—

(i) gain from the sale or exchange of property between the partner or shareholder and the partnership or S corporation, and

(ii) dividend paid by the S corporation.

(4) Applicable percentage

The applicable percentage is the percentage determined in accordance with the following table:

 

If the applicable election year of
 the partnership or S corporation

 begins during:
The applicable percentage is:

1987
25  

1988
50  

1989
75  

1990 or thereafter
100.

Notwithstanding the preceding provisions of this paragraph, the applicable percentage for any partnership or S corporation shall be 100 percent unless more than 50 percent of such entity's net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.

(5) Treatment of guaranteed payments

(A) In general

Any guaranteed payment by a partnership shall not be treated as an applicable payment, and the amount of the net income of the partnership shall be determined by not taking such guaranteed payment into account.

(B) Guaranteed payment

For purposes of subparagraph (A), the term "guaranteed payment" means any payment referred to in section 707(c).

(e) Other definitions and special rules

For purposes of this section—

(1) Deferral period

The term "deferral period" has the meaning given to such term by section 444(b)(4).

(2) Years

(A) Base year

The term "base year" means, with respect to any applicable election year, the taxable year of the partnership or S corporation preceding such applicable election year.

(B) Applicable election year

The term "applicable election year" means any taxable year of a partnership or S corporation with respect to which an election is in effect under section 444.

(3) Requirement of reporting

Each partnership or S corporation which makes an election under section 444 shall include on any required return or statement such information as the Secretary shall prescribe as is necessary to carry out the provisions of this section.

(4) Net required payment balance

The term "net required payment balance" means the excess (if any) of—

(A) the aggregate of the required payments under this section for all preceding applicable election years, over

(B) the aggregate amount allowable as a refund to the entity under subsection (c) for all preceding applicable election years.

(f) Administrative provisions

(1) In general

Except as otherwise provided in this subsection or in regulations prescribed by the Secretary, any payment required by this section shall be assessed and collected in the same manner as if it were a tax imposed by subtitle C.

(2) Due date

The amount of any payment required by this section shall be paid on or before April 15 of the calendar year following the calendar year in which the applicable election year begins (or such later date as may be prescribed by the Secretary).

(3) Interest

For purposes of determining interest, any payment required by this section shall be treated as a tax; except that no interest shall be allowed with respect to any refund of a payment made under this section.

(4) Penalties

(A) In general

In the case of any failure by any person to pay on the date prescribed therefor any amount required by this section, there shall be imposed on such person a penalty of 10 percent of the underpayment. For purposes of the preceding sentence, the term "underpayment" means the excess of the amount of the payment required under this section over the amount (if any) of such payment paid on or before the date prescribed therefor. No penalty shall be imposed under this subparagraph on any failure which is shown to be due to reasonable cause and not willful neglect.

(B) Negligence and fraud penalties made applicable

For purposes of part II of subchapter A of chapter 68, any payment required by this section shall be treated as a tax.

(C) Willful failure

If any partnership or S corporation willfully fails to comply with the requirements of this section, section 444 shall cease to apply with respect to such partnership or S corporation.

(g) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the provisions of this section and section 280H, including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where—

(1) 2 or more applicable election years begin in the same calendar year, or

(2) the base year is a taxable year of less than 12 months.

(Added Pub. L. 100–203, title X, §10206(b)(1), Dec. 22, 1987, 101 Stat. 1330–398; amended Pub. L. 100–647, title II, §2004(e)(4)–(10), (14)(B), Nov. 10, 1988, 102 Stat. 3601, 3602; Pub. L. 101–239, title VII, §§7721(c)(12), 7821(b), Dec. 19, 1989, 103 Stat. 2400, 2424; Pub. L. 101–508, title XI, §11704(a)(29), Nov. 5, 1990, 104 Stat. 1388–519; Pub. L. 105–34, title XII, §1281(d), Aug. 5, 1997, 111 Stat. 1037.)

Editorial Notes

References in Text

Section 806(e)(2)(C) of the Tax Reform Act of 1986, referred to in subsec. (d)(4), is section 806(e)(2)(C) of Pub. L. 99–514, which is set out as a note under section 1378 of this title.

Amendments

1997—Subsec. (f)(4)(A). Pub. L. 105–34 inserted at end "No penalty shall be imposed under this subparagraph on any failure which is shown to be due to reasonable cause and not willful neglect."

1990—Subsec. (c)(3). Pub. L. 101–508 substituted "payable on the later of" for "payable on later of".

1989—Subsec. (d)(4). Pub. L. 101–239, §7821(b), struck out "for taxable years beginning after 1987," before "the applicable percentage" and substituted "unless more than 50 percent" for "if more than 50 percent" and "who would have been entitled" for "who would not have been entitled".

Subsec. (f)(4)(B). Pub. L. 101–239, §7721(c)(12), substituted "part II of subchapter A of chapter 68" for "section 6653".

1988—Subsec. (b)(2). Pub. L. 100–647, §2004(e)(4)(A), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "the amount of the required payment for the preceding applicable election year."

Subsec. (c). Pub. L. 100–647, §2004(e)(5), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: "If the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), then the entity shall be entitled to a refund of such excess."

Subsec. (d)(2)(A). Pub. L. 100–647, §2004(e)(10), substituted "(other than credits and tax-exempt income)" for "(other than credits)".

Subsec. (d)(2)(B). Pub. L. 100–647, §2004(e)(7), (10), substituted "(other than credits and tax-exempt income)" for "(other than credits)" and inserted before period at end "(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))".

Subsec. (d)(3)(A). Pub. L. 100–647, §2004(e)(14)(B), struck out "or incurred" after "amounts paid".

Subsec. (d)(4). Pub. L. 100–647, §2004(e)(9), inserted at end "Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity's net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income."

Subsec. (d)(5). Pub. L. 100–647, §2004(e)(8), added par. (5).

Subsec. (e)(4). Pub. L. 100–647, §2004(e)(4)(B), added par. (4).

Subsec. (g). Pub. L. 100–647, §2004(e)(6), substituted "including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where—

"(1) 2 or more applicable election years begin in the same calendar year, or

"(2) the base year is a taxable year of less than 12 months" for "including regulations for annualizing the income and applicable payments of an entity if the base year is a taxable year of less than 12 months".

Statutory Notes and Related Subsidiaries

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to taxable years beginning after Aug. 5, 1997, see section 1281(e) of Pub. L. 105–34, set out as a note under section 6652 of this title.

Effective Date of 1989 Amendment

Amendment by section 7721(c)(12) of Pub. L. 101–239 applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989, see section 7721(d) of Pub. L. 101–239, set out as a note under section 461 of this title.

Pub. L. 101–239, title VII, §7821(b), Dec. 19, 1989, 103 Stat. 2424, provided that the amendment made by that section is effective with respect to taxable years beginning after 1988.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.

Effective Date

Section applicable to applicable election years beginning after Dec. 31, 1986, see section 10206(d)(2) of Pub. L. 100–203, set out as a note under section 444 of this title.
26 U.S.C. § 174 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 174: Amortization of research and experimental expenditures
Amortization of research and experimental expenditures
Status: in_force

(a) In general

In the case of a taxpayer's specified research or experimental expenditures for any taxable year—

(1) except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

(2) the taxpayer shall—

(A) charge such expenditures to capital account, and

(B) be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F))) beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.

(b) Specified research or experimental expenditures

For purposes of this section, the term "specified research or experimental expenditures" means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer's trade or business.

(c) Special rules

(1) Land and other property

This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

(2) Exploration expenditures

This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).

(3) Software development

For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.

(d) Treatment upon disposition, retirement, or abandonment

If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.

(Aug. 16, 1954, ch. 736, 68A Stat. 66; Pub. L. 94–455, title XIX, §§1901(a)(30), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1769, 1834; Pub. L. 97–248, title II, §201(d)(9)(B) formerly §201(c)(9)(B), Sept. 3, 1982, 96 Stat. 420, renumbered §201(d)(9)(B), Pub. L. 97–448, title III, §306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; amended Pub. L. 99–514, title VII, §701(e)(4)(D), Oct. 22, 1986, 100 Stat. 2343; Pub. L. 100–647, title I, §1007(g)(5), Nov. 10, 1988, 102 Stat. 3435; Pub. L. 101–239, title VII, §7110(d), Dec. 19, 1989, 103 Stat. 2325; Pub. L. 113–295, div. A, title II, §221(a)(31), (32), Dec. 19, 2014, 128 Stat. 4042; Pub. L. 115–97, title I, §13206(a), Dec. 22, 2017, 131 Stat. 2111.)

Editorial Notes

Amendments

2017—Pub. L. 115–97 amended section generally. Prior to amendment, section consisted of subsecs. (a) to (f) relating to treatment of research and experimental expenditures as expenses, amortization of certain research and experimental expenditures, expenditure for the acquisition or improvement of land or property, ore and mineral deposit exploration expenditures, limitation to reasonable research expenditures eligible, and cross references, respectively.

2014—Subsec. (a)(2)(A). Pub. L. 113–295, §221(a)(31), amended subpar. (A) generally. Prior to amendment, text read as follows: "A taxpayer may, without the consent of the Secretary, adopt the method provided in this subsection for his first taxable year—

"(i) which begins after December 31, 1953, and ends after August 16, 1954, and

"(ii) for which expenditures described in paragraph (1) are paid or incurred."

Subsec. (b)(2). Pub. L. 113–295, §221(a)(32), struck out "beginning after December 31, 1953" after "for any taxable year".

1989—Subsecs. (e), (f). Pub. L. 101–239 added subsec. (e) and redesignated former subsec. (e) as (f).

1988—Subsec. (e)(2). Pub. L. 100–647 substituted "section 59(e)" for "section 59(d)".

1986—Subsec. (e)(2). Pub. L. 99–514 substituted "section 59(d)" for "section 58(i)".

1982—Subsec. (e). Pub. L. 97–248, §201(d)(9)(B), substituted "Cross references" for "Cross reference" in heading, designated existing provisions as par. (1), and added par. (2).

1976—Subsec. (a)(2)(A). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (a)(2)(A)(i). Pub. L. 94–455, §1901(a)(30), substituted "August 16, 1954" for "the date on which this title is enacted" after "ends after".

Subsecs. (a)(3), (b)(1), (2). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment; Applicability of Change in Method of Accounting

Pub. L. 115–97, title I, §13206(b), Dec. 22, 2017, 131 Stat. 2112, provided that: "The amendments made by subsection (a) [amending this section] shall be treated as a change in method of accounting for purposes of section 481 of the Internal Revenue Code of 1986 and—

"(1) such change shall be treated as initiated by the taxpayer,

"(2) such change shall be treated as made with the consent of the Secretary, and

"(3) such change shall be applied only on a cut-off basis for any research or experimental expenditures paid or incurred in taxable years beginning after December 31, 2021, and no adjustments under section 481(a) shall be made."

Amendment by Pub. L. 115–97 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2021, see section 13206(e) of Pub. L. 115–97, set out as a note under section 41 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 1989 Amendment

Amendment by Pub. L. 101–239 applicable to taxable years beginning after Dec. 31, 1989, see section 7110(e) of Pub. L. 101–239, set out as a note under section 41 of this title.

Effective Date of 1988 Amendment

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

Effective Date of 1986 Amendment

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

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to taxable years beginning after Dec. 31, 1982, see section 201(e)(1) of Pub. L. 97–248, set out as a note under section 5 of this title.

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

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

Allocation or Apportionment to Sources Within United States of Research and Experimental Expenditures Paid or Incurred for Research Activities Conducted in United States; 2-Year Program

Pub. L. 97–34, title II, §223(a), Aug. 13, 1981, 95 Stat. 249, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the case of the taxpayer's first 2 taxable years beginning within 2 years after the date of the enactment of this Act [Aug. 13, 1981], all research and experimental expenditures (within the meaning of section 174 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) which are paid or incurred in such year for research activities conducted in the United States shall be allocated or apportioned to sources within the United States."
26 U.S.C. § 5000D (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 50A / Section 5000D: Designated drugs during noncompliance periods
Designated drugs during noncompliance periods
Status: in_force

(a) In general

There is hereby imposed on the sale by the manufacturer, producer, or importer of any designated drug during a day described in subsection (b) a tax in an amount such that the applicable percentage is equal to the ratio of—

(1) such tax, divided by

(2) the sum of such tax and the price for which so sold.

(b) Noncompliance periods

A day is described in this subsection with respect to a designated drug if it is a day during one of the following periods:

(1) The period beginning on the March 1st (or, in the case of initial price applicability year 2026, the October 2nd) immediately following the date on which such drug is included on the list published under section 1192(a) of the Social Security Act and ending on the earlier of—

(A) the first date on which the manufacturer of such designated drug has in place an agreement described in section 1193(a) of such Act with respect to such drug, or

(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.

(2) The period beginning on the November 2nd immediately following the March 1st described in paragraph (1) (or, in the case of initial price applicability year 2026, the August 2nd immediately following the October 2nd described in such paragraph) and ending on the earlier of—

(A) the first date on which the manufacturer of such designated drug and the Secretary of Health and Human Services have agreed to a maximum fair price under an agreement described in section 1193(a) of the Social Security Act, or

(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.

(3) In the case of any designated drug which is a selected drug (as defined in section 1192(c) of the Social Security Act) that the Secretary of Health and Human Services has selected for renegotiation under section 1194(f) of such Act, the period beginning on the November 2nd of the year that begins 2 years prior to the first initial price applicability year of the price applicability period for which the maximum fair price established pursuant to such renegotiation applies and ending on the earlier of—

(A) the first date on which the manufacturer of such designated drug has agreed to a renegotiated maximum fair price under such agreement, or

(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.

(4) With respect to information that is required to be submitted to the Secretary of Health and Human Services under an agreement described in section 1193(a) of the Social Security Act, the period beginning on the date on which such Secretary certifies that such information is overdue and ending on the date that such information is so submitted.

(c) Suspension of tax

(1) In general

A day shall not be taken into account as a day during a period described in subsection (b) if such day is also a day during the period—

(A) beginning on the first date on which—

(i) the notice of terminations of all applicable agreements of the manufacturer have been received by the Secretary of Health and Human Services, and

(ii) none of the drugs of the manufacturer of the designated drug are covered by an agreement under section 1860D–14A or 1860D–14C of the Social Security Act, and

(B) ending on the last day of February following the earlier of—

(i) the first day after the date described in subparagraph (A) on which the manufacturer enters into any subsequent applicable agreement, or

(ii) the first date any drug of the manufacturer of the designated drug is covered by an agreement under section 1860D–14A or 1860D–14C of the Social Security Act.

(2) Applicable agreement

For purposes of this subsection, the term "applicable agreement" means the following:

(A) An agreement under—

(i) the Medicare coverage gap discount program under section 1860D–14A of the Social Security Act, or

(ii) the manufacturer discount program under section 1860D–14C of such Act.

(B) A rebate agreement described in section 1927(b) of such Act.

(d) Applicable percentage

For purposes of this section, the term "applicable percentage" means—

(1) in the case of sales of a designated drug during the first 90 days described in subsection (b) with respect to such drug, 65 percent,

(2) in the case of sales of such drug during the 91st day through the 180th day described in subsection (b) with respect to such drug, 75 percent,

(3) in the case of sales of such drug during the 181st day through the 270th day described in subsection (b) with respect to such drug, 85 percent, and

(4) in the case of sales of such drug during any subsequent day, 95 percent.

(e) Definitions

For purposes of this section—

(1) Designated drug

The term "designated drug" means any negotiation-eligible drug (as defined in section 1192(d) of the Social Security Act) included on the list published under section 1192(a) of such Act which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.

(2) United States

The term "United States" has the meaning given such term by section 4612(a)(4).

(3) Other terms

The terms "initial price applicability year", "price applicability period", and "maximum fair price" have the meaning given such terms in section 1191 of the Social Security Act.

(f) Special rules

(1) Coordination with rules for possessions of the United States

Rules similar to the rules of paragraphs (2) and (4) of section 4132(c) shall apply for purposes of this section.

(2) Anti-abuse rule

In the case of a sale which was timed for the purpose of avoiding the tax imposed by this section, the Secretary may treat such sale as occurring during a day described in subsection (b).

(g) Exports

Rules similar to the rules of section 4662(e) (other than section 4662(e)(2)(A)(ii)(II)) shall apply for purposes of this chapter.

(h) Regulations

The Secretary shall prescribe such regulations and other guidance as may be necessary to carry out this section.

(Added Pub. L. 117–169, title I, §11003(a), Aug. 16, 2022, 136 Stat. 1862.)

Editorial Notes

References in Text

The Social Security Act, referred to in text, is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Sections 1191 to 1194 of the Act are classified to sections 1320f to 1320f–3, respectively, of Title 42, The Public Health and Welfare. Sections 1860D–14A and 1860D–14C of the Act are classified to sections 1395w–114a and 1395w–114c, respectively, of Title 42. Section 1927 of the Act is classified to section 1396r–8 of Title 42.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 117–169, title I, §11003(d), Aug. 16, 2022, 136 Stat. 1864, provided that: "The amendments made by this section [enacting this chapter and amending section 275 of this title] shall apply to sales after the date of the enactment of this Act [Aug. 16, 2022]."