26 U.S.C. § 368 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 368: Definitions relating to corporate reorganizations
Definitions relating to corporate reorganizations
Status: in_force

(a) Reorganization

(1) In general

For purposes of parts I and II and this part, the term "reorganization" means—

(A) a statutory merger or consolidation;

(B) the acquisition by one corporation, in exchange solely for all or a part of its voting stock (or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation), of stock of another corporation if, immediately after the acquisition, the acquiring corporation has control of such other corporation (whether or not such acquiring corporation had control immediately before the acquisition);

(C) the acquisition by one corporation, in exchange solely for all or a part of its voting stock (or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation), of substantially all of the properties of another corporation, but in determining whether the exchange is solely for stock the assumption by the acquiring corporation of a liability of the other shall be disregarded;

(D) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor, or one or more of its shareholders (including persons who were shareholders immediately before the transfer), or any combination thereof, is in control of the corporation to which the assets are transferred; but only if, in pursuance of the plan, stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 354, 355, or 356;

(E) a recapitalization;

(F) a mere change in identity, form, or place of organization of one corporation, however effected; or

(G) a transfer by a corporation of all or part of its assets to another corporation in a title 11 or similar case; but only if, in pursuance of the plan, stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 354, 355, or 356.

(2) Special rules relating to paragraph (1)

(A) Reorganizations described in both paragraph (1)(C) and paragraph (1)(D)

If a transaction is described in both paragraph (1)(C) and paragraph (1)(D), then, for purposes of this subchapter (other than for purposes of subparagraph (C)), such transaction shall be treated as described only in paragraph (1)(D).

(B) Additional consideration in certain paragraph (1)(C) cases

If—

(i) one corporation acquires substantially all of the properties of another corporation,

(ii) the acquisition would qualify under paragraph (1)(C) but for the fact that the acquiring corporation exchanges money or other property in addition to voting stock, and

(iii) the acquiring corporation acquires, solely for voting stock described in paragraph (1)(C), property of the other corporation having a fair market value which is at least 80 percent of the fair market value of all of the property of the other corporation,

then such acquisition shall (subject to subparagraph (A) of this paragraph) be treated as qualifying under paragraph (1)(C). Solely for the purpose of determining whether clause (iii) of the preceding sentence applies, the amount of any liability assumed by the acquiring corporation shall be treated as money paid for the property.

(C) Transfers of assets or stock to subsidiaries in certain paragraph (1)(A), (1)(B), (1)(C), and (1)(G) cases

A transaction otherwise qualifying under paragraph (1)(A), (1)(B), or (1)(C) shall not be disqualified by reason of the fact that part or all of the assets or stock which were acquired in the transaction are transferred to a corporation controlled by the corporation acquiring such assets or stock. A similar rule shall apply to a transaction otherwise qualifying under paragraph (1)(G) where the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met with respect to the acquisition of the assets.

(D) Use of stock of controlling corporation in paragraph (1)(A) and (1)(G) cases

The acquisition by one corporation, in exchange for stock of a corporation (referred to in this subparagraph as "controlling corporation") which is in control of the acquiring corporation, of substantially all of the properties of another corporation shall not disqualify a transaction under paragraph (1)(A) or (1)(G) if—

(i) no stock of the acquiring corporation is used in the transaction, and

(ii) in the case of a transaction under paragraph (1)(A), such transaction would have qualified under paragraph (1)(A) had the merger been into the controlling corporation.

(E) Statutory merger using voting stock of corporation controlling merged corporation

A transaction otherwise qualifying under paragraph (1)(A) shall not be disqualified by reason of the fact that stock of a corporation (referred to in this subparagraph as the "controlling corporation") which before the merger was in control of the merged corporation is used in the transaction, if—

(i) after the transaction, the corporation surviving the merger holds substantially all of its properties and of the properties of the merged corporation (other than stock of the controlling corporation distributed in the transaction); and

(ii) in the transaction, former shareholders of the surviving corporation exchanged, for an amount of voting stock of the controlling corporation, an amount of stock in the surviving corporation which constitutes control of such corporation.

(F) Certain transactions involving 2 or more investment companies

(i) If immediately before a transaction described in paragraph (1) (other than subparagraph (E) thereof), 2 or more parties to the transaction were investment companies, then the transaction shall not be considered to be a reorganization with respect to any such investment company (and its shareholders and security holders) unless it was a regulated investment company, a real estate investment trust, or a corporation which meets the requirements of clause (ii).

(ii) A corporation meets the requirements of this clause if not more than 25 percent of the value of its total assets is invested in the stock and securities of any one issuer, and not more than 50 percent of the value of its total assets is invested in the stock and securities of 5 or fewer issuers. For purposes of this clause, all members of a controlled group of corporations (within the meaning of section 1563(a)) shall be treated as one issuer. For purposes of this clause, a person holding stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause shall, except as provided in regulations, be treated as holding its proportionate share of the assets held by such company or trust.

(iii) For purposes of this subparagraph the term "investment company" means a regulated investment company, a real estate investment trust, or a corporation 50 percent or more of the value of whose total assets are stock and securities and 80 percent or more of the value of whose total assets are assets held for investment. In making the 50-percent and 80-percent determinations under the preceding sentence, stock and securities in any subsidiary corporation shall be disregarded and the parent corporation shall be deemed to own its ratable share of the subsidiary's assets, and a corporation shall be considered a subsidiary if the parent owns 50 percent or more of the combined voting power of all classes of stock entitled to vote, or 50 percent or more of the total value of shares of all classes of stock outstanding.

(iv) For purposes of this subparagraph, in determining total assets there shall be excluded cash and cash items (including receivables). Government securities, and, under regulations prescribed by the Secretary, assets acquired (through incurring indebtedness or otherwise) for purposes of meeting the requirements of clause (ii) or ceasing to be an investment company.

(v) This subparagraph shall not apply if the stock of each investment company is owned substantially by the same persons in the same proportions.

(vi) If an investment company which does not meet the requirements of clause (ii) acquires assets of another corporation, clause (i) shall be applied to such investment company and its shareholders and security holders as though its assets had been acquired by such other corporation. If such investment company acquires stock of another corporation in a reorganization described in section 368(a)(1)(B), clause (i) shall be applied to the shareholders of such investment company as though they had exchanged with such other corporation all of their stock in such company for stock having a fair market value equal to the fair market value of their stock of such investment company immediately after the exchange. For purposes of section 1001, the deemed acquisition or exchange referred to in the two preceding sentences shall be treated as a sale or exchange of property by the corporation and by the shareholders and security holders to which clause (i) is applied.

(vii) For purposes of clauses (ii) and (iii), the term "securities" includes obligations of State and local governments, commodity futures contracts, shares of regulated investment companies and real estate investment trusts, and other investments constituting a security within the meaning of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(36)).

[(viii) Repealed. Pub. L. 98–369, div. A, title I, §174(b)(5)(D), July 18, 1984, 98 Stat. 707]

(G) Distribution requirement for paragraph (1)(C)

(i) In general

A transaction shall fail to meet the requirements of paragraph (1)(C) unless the acquired corporation distributes the stock, securities, and other properties it receives, as well as its other properties, in pursuance of the plan of reorganization. For purposes of the preceding sentence, if the acquired corporation is liquidated pursuant to the plan of reorganization, any distribution to its creditors in connection with such liquidation shall be treated as pursuant to the plan of reorganization.

(ii) Exception

The Secretary may waive the application of clause (i) to any transaction subject to any conditions the Secretary may prescribe.

(H) Special rules for determining whether certain transactions are qualified under paragraph (1)(D)

For purposes of determining whether a transaction qualifies under paragraph (1)(D)—

(i) in the case of a transaction with respect to which the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met, the term "control" has the meaning given such term by section 304(c), and

(ii) in the case of a transaction with respect to which the requirements of section 355 (or so much of section 356 as relates to section 355) are met, the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock, or the fact that the corporation whose stock was distributed issues additional stock, shall not be taken into account.

(3) Additional rules relating to title 11 and similar cases

(A) Title 11 or similar case defined

For purposes of this part, the term "title 11 or similar case" means—

(i) a case under title 11 of the United States Code, or

(ii) a receivership, foreclosure, or similar proceeding in a Federal or State court.

(B) Transfer of assets in a title 11 or similar case

In applying paragraph (1)(G), a transfer of the assets of a corporation shall be treated as made in a title 11 or similar case if and only if—

(i) any party to the reorganization is under the jurisdiction of the court in such case, and

(ii) the transfer is pursuant to a plan of reorganization approved by the court.

(C) Reorganizations qualifying under paragraph (1)(G) and another provision

If a transaction would (but for this subparagraph) qualify both—

(i) under subparagraph (G) of paragraph (1), and

(ii) under any other subparagraph of paragraph (1) or under section 332 or 351,

then, for purposes of this subchapter (other than section 357(c)(1)), such transaction shall be treated as qualifying only under subparagraph (G) of paragraph (1).

(D) Agency receivership proceedings which involve financial institutions

For purposes of subparagraphs (A) and (B), in the case of a receivership, foreclosure, or similar proceeding before a Federal or State agency involving a financial institution referred to in section 581 or 591, the agency shall be treated as a court.

(E) Application of paragraph (2)(E)(ii)

In the case of a title 11 or similar case, the requirement of clause (ii) of paragraph (2)(E) shall be treated as met if—

(i) no former shareholder of the surviving corporation received any consideration for his stock, and

(ii) the former creditors of the surviving corporation exchanged, for an amount of voting stock of the controlling corporation, debt of the surviving corporation which had a fair market value equal to 80 percent or more of the total fair market value of the debt of the surviving corporation.

(b) Party to a reorganization

For purposes of this part, the term "a party to a reorganization" includes—

(1) a corporation resulting from a reorganization, and

(2) both corporations, in the case of a reorganization resulting from the acquisition by one corporation of stock or properties of another.

In the case of a reorganization qualifying under paragraph (1)(B) or (1)(C) of subsection (a), if the stock exchanged for the stock or properties is stock of a corporation which is in control of the acquiring corporation, the term "a party to a reorganization" includes the corporation so controlling the acquiring corporation. In the case of a reorganization qualifying under paragraph (1)(A), (1)(B), (1)(C), or (1)(G) of subsection (a) by reason of paragraph (2)(C) of subsection (a), the term "a party to a reorganization" includes the corporation controlling the corporation to which the acquired assets or stock are transferred. In the case of a reorganization qualifying under paragraph (1)(A) or (1)(G) of subsection (a) by reason of paragraph (2)(D) of that subsection, the term "a party to a reorganization" includes the controlling corporation referred to in such paragraph (2)(D). In the case of a reorganization qualifying under subsection (a)(1)(A) by reason of subsection (a)(2)(E), the term "party to a reorganization" includes the controlling corporation referred to in subsection (a)(2)(E).

(c) Control defined

For purposes of part I (other than section 304), part II, this part, and part V, the term "control" means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation.

(Aug. 16, 1954, ch. 736, 68A Stat. 120; Pub. L. 88–272, title II, §218(a), (b), Feb. 26, 1964, 78 Stat. 57; Pub. L. 90–621, §1(a), (b), Oct. 22, 1968, 82 Stat. 1310, 1311; Pub. L. 91–693, §1(a), (b), Jan. 12, 1971, 84 Stat. 2077; Pub. L. 94–455, title VIII, §806(f)(1), title XXI, §2131(a), Oct. 4, 1976, 90 Stat. 1605, 1922; Pub. L. 95–600, title VII, §701(j)(1), Nov. 6, 1978, 92 Stat. 2905; Pub. L. 96–589, §4(a)–(d), (h)(3), (4), Dec. 24, 1980, 94 Stat. 3401–3403, 3405; Pub. L. 97–34, title II, §241, Aug. 13, 1981, 95 Stat. 254; Pub. L. 97–248, title II, §225(a), Sept. 3, 1982, 96 Stat. 490; Pub. L. 97–448, title III, §304(b), (c), Jan. 12, 1983, 96 Stat. 2398; Pub. L. 98–369, div. A, title I, §§63(a), 64(a), 174(b)(5)(D), July 18, 1984, 98 Stat. 583, 584, 707; Pub. L. 99–514, title VI, §621(e)(1), title IX, §904(a), title XVIII, §§1804(g)(2), (h), 1879(l)(1), Oct. 22, 1986, 100 Stat. 2266, 2385, 2806, 2909; Pub. L. 100–647, title I, §1018(q)(5), title IV, §4012(b)(1)(A), Nov. 10, 1988, 102 Stat. 3586, 3656; Pub. L. 101–73, title XIV, §1401(a)(1), (b)(1), Aug. 9, 1989, 103 Stat. 548, 549; Pub. L. 105–34, title X, §1012(c)(2), Aug. 5, 1997, 111 Stat. 917; Pub. L. 105–206, title VI, §6010(c)(3)(B), July 22, 1998, 112 Stat. 813; Pub. L. 105–277, div. J, title IV, §4003(f)(2), Oct. 21, 1998, 112 Stat. 2681–910; Pub. L. 106–36, title III, §3001(a)(3), June 25, 1999, 113 Stat. 182; Pub. L. 115–141, div. U, title IV, §401(a)(68), Mar. 23, 2018, 132 Stat. 1187.)

Editorial Notes

References in Text

The Investment Company Act of 1940, referred to in subsec. (a)(2)(F)(vii), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§80a–1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80a–51 of Title 15 and Tables.

Amendments

2018—Subsec. (a)(2)(F)(vii). Pub. L. 115–141 substituted "(15 U.S.C. 80a–2(a)(36))" for "(15 U.S.C. 80a–2(36))".

1999—Subsec. (a)(1)(C). Pub. L. 106–36, §3001(a)(3)(A), struck out ", or the fact that property acquired is subject to a liability," before "shall be disregarded".

Subsec. (a)(2)(B). Pub. L. 106–36, §3001(a)(3)(B), which directed amendment of concluding provisions by striking out ", and the amount of any liability to which any property acquired from the acquiring corporation is subject,", was executed by striking out ", and the amount of any liability to which any property acquired by the acquiring corporation is subject," after "acquiring corporation", to reflect the probable intent of Congress.

1998—Subsec. (a)(2)(H)(ii). Pub. L. 105–277 inserted ", or the fact that the corporation whose stock was distributed issues additional stock," after "dispose of part or all of the distributed stock".

Pub. L. 105–206 amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "in the case of a transaction with respect to which the requirements of section 355 are met, the shareholders described in paragraph (1)(D) shall be treated as having control of the corporation to which the assets are transferred if such shareholders own (immediately after the distribution) stock possessing—

"(I) more than 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and

"(II) more than 50 percent of the total value of shares of all classes of stock of such corporation."

1997—Subsec. (a)(2)(H). Pub. L. 105–34 amended heading and text of subpar. (H) generally. Prior to amendment, text read as follows: "In the case of any transaction with respect to which the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met, for purposes of determining whether such transaction qualifies under subparagraph (D) of paragraph (1), the term 'control' has the meaning given to such term by section 304(c)."

1989—Subsec. (a)(3)(D). Pub. L. 101–73, §1401(b)(1), repealed amendment made by Pub. L. 99–514, §904(a), see 1986 Amendment note below.

Pub. L. 101–73, §1401(a)(1), inserted "receivership" in heading and amended text generally, changing the structure of the subparagraph from one consisting of five clauses designated (i) to (v) to one consisting of a single undesignated subparagraph.

1988—Subsec. (a)(2)(F)(ii). Pub. L. 100–647, §1018(q)(5), struck out "(other than stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause (ii))" after "any one issuer" and after "or fewer issuers" and inserted at end "For purposes of this clause, a person holding stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause shall, except as provided in regulations, be treated as holding its proportionate share of the assets held by such company or trust."

Subsec. (a)(3)(D)(iv), (v). Pub. L. 100–647, §4012(b)(1)(A), amended subpar. (D), as in effect before the amendment made by section 904(a) of Pub. L. 99–514, by adding cls. (iv) and (v).

1986—Subsec. (a)(2)(A). Pub. L. 99–514, §1804(h)(3), inserted "(other than for purposes of subparagraph (C))" after "subchapter".

Subsec. (a)(2)(F)(ii). Pub. L. 99–514, §1879(l)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "A corporation meets the requirements of this clause if not more than 25 percent of the value of its total assets is invested in the stock and securities of any one issuer, and not more than 50 percent of the value of its total assets is invested in the stock and securities of 5 or fewer issuers. For purposes of this clause, all members of a controlled group of corporations (within the meaning of section 1563(a)) shall be treated as one issuer."

Subsec. (a)(2)(G)(i). Pub. L. 99–514, §1804(g)(2), inserted "For purposes of the preceding sentence, if the acquired corporation is liquidated pursuant to the plan of reorganization, any distribution to its creditors in connection with such liquidation shall be treated as pursuant to the plan of reorganization."

Subsec. (a)(2)(H). Pub. L. 99–514, §1804(h)(2), added subpar. (H).

Subsec. (a)(3)(D). Pub. L. 99–514, §904(a), (c)(1), as amended by Pub. L. 100–647, §4012(a)(1), which (applicable to acquisitions after Dec. 31, 1989, in taxable years ending after such date) directed amendment of subpar. (D) to read "(D) Agency receivership proceedings which involve financial institutions.—For purposes of subparagraphs (A) and (B), in the case of a receivership, foreclosure, or similar proceeding before a Federal or State agency involving a financial institution referred to in section 581 or 591, the agency shall be treated as a court.", was repealed by Pub. L. 101–73, §1401(b)(1), (c)(4), eff. Oct. 22, 1986, and I.R.C. of 1986 applicable as if the amendments made by such section had not been enacted.

Subsec. (c). Pub. L. 99–514, §1804(h)(1), in amending subsec. (c) generally, struck out par. (1) designation and struck out par. (2) defining term "control" as having meaning given to such term by section 304(c) in case of any transaction with respect to which requirements of subpars. (A) and (B) of section 354(b)(1) are met, for purposes of determining whether such transaction is described in subpar. (D) of subsec. (a)(1).

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

1984—Subsec. (a)(2)(F)(viii). Pub. L. 98–369, §174(b)(5)(D), struck out cl. (viii) which provided that in applying paragraph (3) of section 267(b) in respect of any transaction to which this subparagraph applies, the reference to a personal holding company in such paragraph (3) be treated as including a reference to an investment company and the determination of whether a corporation is an investment company be made as of the time immediately before the transaction instead of with respect to the taxable year referred to in such paragraph (3).

Subsec. (a)(2)(G). Pub. L. 98–369, §63(a), added subpar. (G).

Subsec. (c). Pub. L. 98–369, §64(a), designated existing provisions as par. (1) and added par. (2).

1983—Subsec. (a)(2)(C). Pub. L. 97–448, §304(b), struck out "or stock" after "acquisition of the assets".

Subsec. (a)(3)(B)(i). Pub. L. 97–448, §304(c), substituted "any party to the reorganization" for "such corporation".

1982—Subsec. (a)(1)(F). Pub. L. 97–248 inserted "of one corporation" after "place of organization".

1981—Subsec. (a)(3)(D). Pub. L. 97–34 substituted "Agency proceedings" for "Agency receivership proceedings" in heading, incorporated existing provisions in text designated cl. (i), inserted in cl. (i)(II) definition for term "title 11 or similar case", and added cls. (ii) and (iii).

1980—Subsec. (a)(1)(G). Pub. L. 96–589, §4(a), (h)(3), added subpar. (G).

Subsec. (a)(2)(C). Pub. L. 96–589, §4(c), inserted provision that a similar rule would apply to a transaction otherwise qualifying under par. (1)(G), where the requirements of subpars. (A) and (B) of section 354(b)(1) are met with respect to the acquisition of the assets or stock.

Subsec. (a)(2)(D). Pub. L. 96–589, §4(d), among other changes, inserted reference to par. (1)(G).

Subsec. (a)(3). Pub. L. 96–589, §4(b), added par. (3).

Subsec. (b). Pub. L. 96–589, §4(h)(4), substituted "paragraph (1)(A), (1)(B), (1)(C), or (1)(G) of subsection (a) by reason of paragraph (2)(C)" and "paragraph (1)(A) or (1)(G) of subsection (a) by reason of paragraph (2)(D)" for "paragraph (1)(A), (1)(B), or (1)(C) of subsection (a) by reason of paragraph (2)(C)" and "paragraph (1)(A) of subsection (a) by reason of paragraph (2)(D)", respectively.

1978—Subsec. (a)(2)(F). Pub. L. 95–600 substituted in cl. (iii), first sentence, "50 percent or more" and "80 percent or more" for "more than 50 percent" and "more than 80 percent"; substituted in cl. (vi), first sentence, "does not meet the requirements" for "is not diversified within the meaning"; struck from cl. (vi), second sentence, "(hereafter referred to as the ('actual acquisition')" after "section 368(a)(1)(B)" and "and security holders" after "the shareholders" and substituted "stock in such company for stock having a fair market value equal to the fair market value of their stock of such investment company immediately after the exchange" for "stock in such investment company for a percentage of the value of the total outstanding stock of the other corporation equal to the percentage of the value of the total outstanding stock of such investment company which such shareholders own immediately after the actual acquisition"; and added cls. (vii) and (viii).

1976—Subsec. (a)(2)(F). Pub. L. 94–455, §2131(a), added subpar. (F).

Subsec. (c). Pub. L. 94–455, §806(f)(1), which substituted "this part, and Part V," for "and this part," was repealed by Pub. L. 99–514, §621(e)(1). See Effective Date of 1986 and 1976 Amendment notes below.

1971—Subsec. (a)(2)(E). Pub. L. 91–693, §1(a), added subpar. (E).

Subsec. (b). Pub. L. 91–693, §1(b), defined "party to a reorganization" in the case of a reorganization qualifying under subsection (a)(1)(A) by reason of subsection (a)(2)(E).

1968—Subsec. (a)(2)(D). Pub. L. 90–621, §1(a), added subpar. (D).

Subsec. (b). Pub. L. 90–621, §1(b), inserted reference to the inclusion of the controlling corporation in term "a party to a reorganization" in reorganizations qualifying under paragraph (1)(A) of subsection (a) by reason of paragraph (2)(D) of subsection (a).

1964—Subsec. (a). Pub. L. 88–272, §218(a), (b)(1), inserted "(or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation)" in par. (1)(B), and in par. (2)(C), inserted references to par. (1)(B), and substituted "assets or stock" for "assets" wherever appearing.

Subsec. (b). Pub. L. 88–272, §218(b)(2), inserted references to par. (1)(B) wherever appearing.

Statutory Notes and Related Subsidiaries

Effective Date of 1999 Amendment

Amendment by Pub. L. 106–36 applicable to transfers after Oct. 18, 1998, see section 3001(e) of Pub. L. 106–36, set out as a note under section 351 of this title.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–277 effective as if included in the provision of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 4003(l) of Pub. L. 105–277, set out as a note under section 86 of this title.

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

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transfers after Aug. 5, 1997, see section 1012(d) of Pub. L. 105–34, set out as a note under section 351 of this title.

Effective Date of 1989 Amendment

Repeal of amendment by section 904(a) of Pub. L. 99–514 effective Oct. 22, 1986, and I.R.C. of 1986 applicable as if the amendment had not been enacted, see section 1401(b)(1) of Pub. L. 101–73, set out as a Repeal of Provisions Relating to Repeal of Special Reorganization Rules for Financial Institutions note set out under section 597 of this title, and section 1401(c)(4) of Pub. L. 101–73, set out as Effective Date of 1989 Amendment note under section 597 of this title.

Pub. L. 101–73, title XIV, §1401(c)(1), Aug. 9, 1989, 103 Stat. 550, provided that: "The amendment made by subsection (a)(1) [amending this section] shall apply to acquisitions on or after May 10, 1989."

Effective Date of 1988 Amendment

Amendment by section 1018(q)(5) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

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

Effective Date of 1986 Amendment

Repeal of amendment by section 806(f)(1) of Pub. L. 94–455 effective Jan. 1, 1986, with certain exceptions, see section 621(f)(2) of Pub. L. 99–514, set out as a note under section 382 of this title.

Pub. L. 99–514, title IX, §904(c)(1), Oct. 22, 1986, 100 Stat. 2385, as amended by Pub. L. 100–647, title IV, §4012(a)(1), Nov. 10, 1988, 102 Stat. 3656, which provided that the amendments made by subsection (a), amending this section, were to apply to acquisitions after Dec. 31, 1989, in taxable years ending after such date, was repealed by Pub. L. 101–73, title XIV, §1401(b)(1), Aug. 9, 1989, 103 Stat. 549.

Amendment by section 1804(g)(2) of Pub. L. 99–514 applicable to plans of reorganizations adopted after Oct. 22, 1986, see section 1804(g)(4) of Pub. L. 99–514, set out as a note under section 361 of this title.

Amendment by section 1804(h) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Pub. L. 99–514, title XVIII, §1879(l)(2), Oct. 22, 1986, 100 Stat. 2910, provided that: "The amendment made by this subsection [amending this section] shall apply as if included in section 2131 of the Tax Reform Act of 1976 [Pub. L. 94–455]."

Effective Date of 1984 Amendment

Amendment by section 63(a) of Pub. L. 98–369 applicable to transactions pursuant to plans adopted after July 18, 1984, see section 63(c) of Pub. L. 98–369, set out as a note under section 312 of this title.

Pub. L. 98–369, div. A, title I, §64(b), July 18, 1984, 98 Stat. 584, provided that: "The amendments made by this section [amending this section] shall apply to transactions pursuant to plans adopted after the date of the enactment of this Act [July 18, 1984]."

Amendment by section 174(b)(5)(D) of Pub. L. 98–369 applicable to transactions after Dec. 31, 1983, in taxable years ending after that date, see section 174(c)(2)(A) of Pub. L. 98–369, set out as a note under section 267 of this title.

Effective Date of 1983 Amendment

Pub. L. 97–448, title III, §311(b)(2), Jan. 12, 1983, 96 Stat. 2411, provided that: "The amendment made by subsection (b) of section 304 [amending this section] shall take effect as if included in the amendments made by section 4 of such Act [Pub. L. 96–589, the Bankruptcy Tax Act of 1980, see 1980 Amendment notes above]."

Effective Date of 1982 Amendment

Pub. L. 97–248, title II, §225(b), Sept. 3, 1982, 96 Stat. 490, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply with respect to transactions occurring after August 31, 1982.

"(2) Plans adopted on or before august 31, 1982.—The amendment made by subsection (a) shall not apply with respect to plans of reorganization adopted on or before August 31, 1982, but only if the transaction occurs before January 1, 1983."

Effective Date of 1981 Amendment

Pub. L. 97–34, title II, §246(a), Aug. 13, 1981, 95 Stat. 256, provided that: "The amendment made by sections 241 and 242 [amending this section and section 382 of this title] shall apply to any transfer made on or after January 1, 1981."

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after Dec. 31, 1980, with exception permitting the debtor to make the amendment applicable to such cases or proceedings commencing after Sept. 30, 1979, see section 7(c)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title VII, §701(j)(2), Nov. 6, 1978, 92 Stat. 2906, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(A) Except as provided in subparagraphs (B) and (C), the amendments made by paragraph (1) [amending this section] shall apply as if included in section 368(a)(2)(F) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] as added by section 2131(a) of the Tax Reform Act of 1976 [Pub. L. 94–455, title XX, §2131(a), Oct. 4, 1976, 90 Stat. 1922].

"(B) Clause (viii) of section 368(a)(2)(F) of the Internal Revenue Code of 1986 (as added by paragraph (1)) shall apply only with respect to losses sustained after September 26, 1977.

"(C) Clause (vii) of section 368(a)(2)(F) of the Internal Revenue Code of 1986 (as added by paragraph (1)) shall apply only with respect to transfers made after September 26, 1977."

Effective Date of 1976 Amendment

Pub. L. 94–455, title XXI, §2131(f)(1), (2), Oct. 4, 1976, 90 Stat. 1924, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply to transfers made after February 17, 1976, in taxable years ending after such date.

"(2) The amendment made by subsection (a) shall not apply to transfers made in accordance with a ruling issued by the Internal Revenue Service before February 18, 1976, holding that a proposed transaction would be a reorganization described in paragraph (1) of section 368(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]."

For effective date of amendment by section 806(f)(1) of Pub. L. 94–455, see section 806(g)(2), (3) of Pub. L. 94–455, formerly set out as a note under section 382 of this title.

Effective Date of 1971 Amendment

Pub. L. 91–693, §1(c), Jan. 12, 1971, 84 Stat. 2077, provided that: "The amendments made by this section [amending this section] shall apply to statutory mergers occurring after December 31, 1970."

Effective Date of 1968 Amendment

Pub. L. 90–621, §1(c), Oct. 22, 1968, 82 Stat. 1311, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall apply to statutory mergers occurring after the date of the enactment of this Act [Oct. 22, 1968]."

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §218(c), Feb. 26, 1964, 78 Stat. 57, provided that: "The amendments made by this section [amending this section] shall apply with respect to transactions after December 31, 1963, in taxable years ending after such date."

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. § 6716 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 68 / Section 6716: Repealed. Pub. L. 111-312, title III, §301(a), Dec. 17, 2010, 124 Stat. 3300
Repealed. Pub. L. 111-312, title III, §301(a), Dec. 17, 2010, 124 Stat. 3300
Status: repealed

[§6716. Repealed. Pub. L. 111–312, title III, §301(a), Dec. 17, 2010, 124 Stat. 3300]

Section, added Pub. L. 107–16, title V, §542(b)(4), June 7, 2001, 115 Stat. 83, related to failure to file information with respect to certain transfers at death and gifts.

Statutory Notes and Related Subsidiaries

Effective Date of Repeal

Repeal of section applicable to estates of decedents dying, and transfers made after Dec. 31, 2009, except as otherwise provided, see section 301(e) of Pub. L. 111–312, set out as an Effective and Termination Dates of 2010 Amendment note under section 121 of this title.
26 U.S.C. § 336 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter C / Section 336: Gain or loss recognized on property distributed in complete liquidation
Gain or loss recognized on property distributed in complete liquidation
Status: in_force

(a) General rule

Except as otherwise provided in this section or section 337, gain or loss shall be recognized to a liquidating corporation on the distribution of property in complete liquidation as if such property were sold to the distributee at its fair market value.

(b) Treatment of liabilities

If any property distributed in the liquidation is subject to a liability or the shareholder assumes a liability of the liquidating corporation in connection with the distribution, for purposes of subsection (a) and section 337, the fair market value of such property shall be treated as not less than the amount of such liability.

(c) Exception for liquidations which are part of a reorganization

For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4).

(d) Limitations on recognition of loss

(1) No loss recognized in certain distributions to related persons

(A) In general

No loss shall be recognized to a liquidating corporation on the distribution of any property to a related person (within the meaning of section 267) if—

(i) such distribution is not pro rata, or

(ii) such property is disqualified property.

(B) Disqualified property

For purposes of subparagraph (A), the term "disqualified property" means any property which is acquired by the liquidating corporation in a transaction to which section 351 applied, or as a contribution to capital, during the 5-year period ending on the date of the distribution. Such term includes any property if the adjusted basis of such property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.

(2) Special rule for certain property acquired in certain carryover basis transactions

(A) In general

For purposes of determining the amount of loss recognized by any liquidating corporation on any sale, exchange, or distribution of property described in subparagraph (B), the adjusted basis of such property shall be reduced (but not below zero) by the excess (if any) of—

(i) the adjusted basis of such property immediately after its acquisition by such corporation, over

(ii) the fair market value of such property as of such time.

(B) Description of property

(i) In general

For purposes of subparagraph (A), property is described in this subparagraph if—

(I) such property is acquired by the liquidating corporation in a transaction to which section 351 applied or as a contribution to capital, and

(II) the acquisition of such property by the liquidating corporation was part of a plan a principal purpose of which was to recognize loss by the liquidating corporation with respect to such property in connection with the liquidation.

 Other property shall be treated as so described if the adjusted basis of such other property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.

(ii) Certain acquisitions treated as part of plan

For purposes of clause (i), any property described in clause (i)(I) acquired by the liquidated corporation after the date 2 years before the date of the adoption of the plan of complete liquidation shall, except as provided in regulations, be treated as acquired as part of a plan described in clause (i)(II).

(C) Recapture in lieu of disallowance

The Secretary may prescribe regulations under which, in lieu of disallowing a loss under subparagraph (A) for a prior taxable year, the gross income of the liquidating corporation for the taxable year in which the plan of complete liquidation is adopted shall be increased by the amount of the disallowed loss.

(3) Special rule in case of liquidation to which section 332 applies

In the case of any liquidation to which section 332 applies, no loss shall be recognized to the liquidating corporation on any distribution in such liquidation. The preceding sentence shall apply to any distribution to the 80-percent distributee only if subsection (a) or (b)(1) of section 337 applies to such distribution.

(e) Certain stock sales and distributions may be treated as asset transfers

Under regulations prescribed by the Secretary, if—

(1) a corporation owns stock in another corporation meeting the requirements of section 1504(a)(2), and

(2) such corporation sells, exchanges, or distributes all of such stock,

an election may be made to treat such sale, exchange, or distribution as a disposition of all of the assets of such other corporation, and no gain or loss shall be recognized on the sale, exchange, or distribution of such stock.

(Added Pub. L. 99–514, title VI, §631(a), Oct. 22, 1986, 100 Stat. 2269; amended Pub. L. 100–647, title I, §§1006(e)(1)–(3), (21)(A), 1018(d)(5)(D), Nov. 10, 1988, 102 Stat. 3400, 3403, 3580.)

Editorial Notes

Prior Provisions

A prior section 336, acts Aug. 16, 1954, ch. 736, 68A Stat. 106; Apr. 2, 1980, Pub. L. 96–223, title IV, §403(b)(1), 94 Stat. 304; Oct. 19, 1980, Pub. L. 96–471, §2(b)(1), (c)(1), 94 Stat. 2253, 2254; Sept. 3, 1982, Pub. L. 97–248, title II, §222(b), (e)(1)(D), 224(c)(4), 96 Stat. 478, 480, 489, related to distributions of property in liquidation, prior to repeal by Pub. L. 99–514, §631(a).

Amendments

1988—Subsec. (b). Pub. L. 100–647, §1006(e)(21)(A), substituted "liabilities" for "liabilities in excess of basis" in heading.

Subsec. (c). Pub. L. 100–647, §1018(d)(5)(D), substituted "liquidations which are part of a reorganization" for "certain liquidations to which part III applies" in heading and amended text generally. Prior to amendment, text read as follows: "This section shall not apply with respect to any distribution of property to the extent there is nonrecognition of gain or loss with respect to such property to the recipient under part III."

Subsec. (d)(2)(B)(ii). Pub. L. 100–647, §1006(e)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "For purposes of clause (i), any property described in clause (i)(I) acquired by the liquidating corporation during the 2-year period ending on the date of the adoption of the plan of complete liquidation shall, except as provided in regulations, be treated as part of a plan described in clause (i)(II)."

Subsec. (d)(3). Pub. L. 100–647, §1006(e)(2), inserted at end "The preceding sentence shall apply to any distribution to the 80-percent distributee only if subsection (a) or (b)(1) of section 337 applies to such distribution."

Subsec. (e). Pub. L. 100–647, §1006(e)(3), substituted "an election may be made" for "such corporation may elect" in concluding provisions.

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

Pub. L. 99–514, title VI, §633, Oct. 22, 1986, 100 Stat. 2277, as amended by Pub. L. 100–647, title I, §1006(g), Nov. 10, 1988, 102 Stat. 3407, provided that:

"(a) General Rule.—Except as otherwise provided in this section, the amendments made by this subtitle [subtitle D (§§631–634) of title VI of Pub. L. 99–514, enacting this section and section 337 of this title, amending sections 26, 311, 312, 332, 334, 338, 341, 346, 367, 453, 453B, 467, 852, 897, 1056, 1248, 1255, 1276, 1363, 1366, 1374, and 1375 of this title, and repealing former sections 333, 336, and 337 of this title] shall apply to—

"(1) 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 January 1, 1987,

"(2) any transaction described in section 338 of the Internal Revenue Code of 1986 for which the acquisition date occurs after December 31, 1986, and

"(3) any distribution (not in complete liquidation) made after December 31, 1986.

"(b) Built-In Gains of S Corporations.—

"(1) In general.—The amendments made by section 632 (other than subsection (b) thereof) [amending sections 26, 1366, 1374, and 1375 of this title] shall apply to taxable years beginning after December 31, 1986, but only in cases where the return for the taxable year is filed pursuant to an S election made after December 31, 1986.

"(2) Application of prior law.—In the case of any taxable year of an S corporation which begins after December 31, 1986, and to which the amendments made by section 632 (other than subsection (b) thereof) do not apply, paragraph (1) of section 1374(b) of the Internal Revenue Code of 1954 (as in effect on the date before the date of the enactment of this Act [Oct. 22, 1986]) shall be applied as if it read as follows:

" '(1) an amount equal to 34 percent of the amount by which the net capital gain of the corporation for the taxable year exceeds $25,000, or'[.]

"(c) Exception for Certain Plans of Liquidation and Binding Contracts.—

"(1) In general.—The amendments made by this subtitle shall not apply to—

"(A) any distribution or sale or exchange made pursuant to a plan of liquidation adopted before August 1, 1986, if the liquidating corporation is completely liquidated before January 1, 1988,

"(B) any distribution or sale or exchange made by any corporation if more than 50 percent of the voting stock (by value) of such corporation is acquired on or after August 1, 1986, pursuant to a written binding contract in effect before such date and if such corporation is completely liquidated before January 1, 1988,

"(C) any distribution or sale or exchange made by any corporation if substantially all of the assets of such corporation are sold on or after August 1, 1986, pursuant to 1 or more written binding contracts in effect before such date and if such corporation is completely liquidated before January 1, 1988, or

"(D) any transaction described in section 338 of the Internal Revenue Code of 1986 with respect to any target corporation if a qualified stock purchase of such target corporation is made on or after August 1, 1986, pursuant to a written binding contract in effect before such date and the acquisition date (within the meaning of such section 338) is before January 1, 1988.

"(2) Special rule for certain actions taken before november 20, 1985.—For purposes of paragraph (1), transactions shall be treated as pursuant to a plan of liquidation adopted before August 1, 1986, if—

"(A) before November 20, 1985—

"(i) the board of directors of the liquidating corporation adopted a resolution to solicit shareholder approval for a transaction of a kind described in section 336 or 337, or

"(ii) the shareholders or board of directors have approved such a transaction,

"(B) before November 20, 1985—

"(i) there has been an offer to purchase a majority of the voting stock of the liquidating corporation, or

"(ii) the board of directors of the liquidating corporation has adopted a resolution approving an acquisition or recommending the approval of an acquisition to the shareholders, or

"(C) before November 20, 1985, a ruling request was submitted to the Secretary of the Treasury or his delegate with respect to a transaction of a kind described in section 336 or 337 of the Internal Revenue Code of 1954 (as in effect before the amendments made by this subtitle).

For purposes of the preceding sentence, any action taken by the board of directors or shareholders of a corporation with respect to any subsidiary of such corporation shall be treated as taken by the board of directors or shareholders of such subsidiary.

"(d) Transitional Rule for Certain Small Corporations.—

"(1) In general.—In the case of the complete liquidation before January 1, 1989, of a qualified corporation, the amendments made by this subtitle shall not apply to the applicable percentage of each gain or loss which (but for this paragraph) would be recognized by the liquidating corporation by reason of the amendments made by this subtitle. Section 333 of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act [Oct. 22, 1986]) shall continue to apply to any complete liquidation described in the preceding sentence.

"(2) Paragraph (1) not to apply to certain items.—Paragraph (1) shall not apply to—

"(A) any gain or loss which is an ordinary gain or loss (determined without regard to section 1239 of the Internal Revenue Code of 1986),

"(B) any gain or loss on a capital asset held for not more than 6 months, and

"(C) any gain on an asset acquired by the qualified corporation if—

"(i) the basis of such asset in the hands of the qualified corporation is determined (in whole or in part) by reference to the basis of such asset in the hands of the person from whom acquired, and

"(ii) a principal purpose for the transfer of such asset to the qualified corporation was to secure the benefits of this subsection.

"(3) Applicable percentage.—For purposes of this subsection, the term 'applicable percentage' means—

"(A) 100 percent if the applicable value of the qualified corporation is less than $5,000,000, or

"(B) 100 percent reduced by an amount which bears the same ratio to 100 percent as—

"(i) the excess of the applicable value of the corporation over $5,000,000, bears to

"(ii) $5,000,000.

"(4) Applicable value.—For purposes of this subsection, the applicable value is the fair market value of all of the stock of the corporation on the date of the adoption of the plan of complete liquidation (or if greater, on August 1, 1986).

"(5) Qualified corporation.—For purposes of this subsection, the term 'qualified corporation' means any corporation if—

"(A) on August 1, 1986, and at all times thereafter before the corporation is completely liquidated, more than 50 percent (by value) of the stock in such corporation is held by a qualified group, and

"(B) the applicable value of such corporation does not exceed $10,000,000.

"(6) Definitions and special rules.—For purposes of this subsection—

"(A) Qualified group.—

"(i) In general.—Except as provided in clause (ii), the term 'qualified group' means any group of 10 or fewer qualified persons who at all times during the 5-year period ending on the date of the adoption of the plan of complete liquidation (or, if shorter, the period during which the corporation or any predecessor was in existence) owned (or was treated as owning under the rules of subparagraph (C)) more than 50 percent (by value) of the stock in such corporation.

"(ii) 5-year ownership requirement not to apply in certain cases.—In the case of—

     "(I) any complete liquidation pursuant to a plan of liquidation adopted before March 31, 1988,

     "(II) any distribution not in liquidation made before March 31, 1988,

     "(III) an election to be an S corporation filed before March 31, 1988, or

     "(IV) a transaction described in section 338 of the Internal Revenue Code of 1986 where the acquisition date (within the meaning of such section 338) is before March 31, 1988,

 the term 'qualified group' means any group of 10 or fewer qualified persons.

"(B) Qualified person.—The term 'qualified person' means—

"(i) an individual,

"(ii) an estate, or

"(iii) any trust described in clause (ii) or clause (iii) of section 1361(c)(2)(A) of the Internal Revenue Code of 1986.

"(C) Attribution rules.—

"(i) In general.—Any stock owned by a corporation, trust (other than a trust referred to in subparagraph (B)(iii)[)], or partnership shall be treated as owned proportionately by its shareholders, beneficiaries, or partners, and shall not be treated as owned by such corporation, trust, or partnership. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person.

"(ii) Family members.—Stock owned (or treated as owned) by members of the same family (within the meaning of section 318(a)(1) of the Internal Revenue Code of 1986) shall be treated as owned by 1 person, and shall be treated as owned by such 1 person for any period during which it was owned (or treated as owned) by any such member.

"(iii) Treatment of certain trusts.—Stock owned (or treated as owned) by the estate of any decedent or by any trust referred to in subparagraph (B)(iii) with respect to such decedent shall be treated as owned by 1 person and shall be treated as owned by such 1 person for the period during which it was owned (or treated as owned) by such estate or any such trust or by the decedent.

"(D) Special holding period rules.—Any property acquired by reason of the death of an individual shall be treated as owned at all times during which such property was owned (or treated as owned) by the decedent.

"(E) Controlled group of corporations.—All members of the same controlled group (as defined in section 267(f)(1) of such Code) shall be treated as 1 corporation for purposes of determining whether any of such corporations met the requirement of paragraph (5)(B) and for purposes of determining the applicable percentage with respect to any of such corporations. For purposes of the preceding sentence, an S corporation shall not be treated as a member of a controlled group unless such corporation was a C corporation for its taxable year which includes August 1, 1986, or it was not described for such taxable year in paragraph (1) or (2) of section 1374(c) of such Code (as in effect on the day before the date of the enactment of this Act [Oct. 22, 1986]).

"(7) Section 338 transactions.—The provisions of this subsection shall also apply in the case of a transaction described in section 338 of the Internal Revenue Code of 1986 where the acquisition date (within the meaning of such section 338) is before January 1, 1989.

"(8) Application of section 1374.—Rules similar to the rules of this subsection shall apply for purposes of applying section 1374 of the Internal Revenue Code of 1986 (as amended by section 632) in the case of a qualified corporation which makes an election to be an S corporation under section 1362 of such Code before January 1, 1989, without regard to whether such corporation is completely liquidated.

"(9) Application to nonliquidating distributions.—The provisions of this subsection shall also apply in the case of any distribution (not in complete liquidation) made by a qualified corporation before January 1, 1989, without regard to whether such corporation is completely liquidated.

"(e) Complete Liquidation Defined.—For purposes of this section, a corporation shall be treated as completely liquidated if all of the assets of such corporation are distributed in complete liquidation, less assets retained to meet claims.

"(f) Other Transitional Rules.—

"(1) The amendments made by this subtitle shall not apply to any liquidation of a corporation incorporated under the laws of Pennsylvania on August 3, 1970, if—

"(A) the board of directors of such corporation approved a plan of liquidation before January 1, 1986,

"(B) an agreement for the sale of a material portion of the assets of such corporation was signed on May 9, 1986 (whether or not the assets are sold in accordance with such agreement), and

"(C) the corporation is completely liquidated on or before December 31, 1988.

"(2) The amendments made by this subtitle shall not apply to any liquidation (or deemed liquidation under section 338 of the Internal Revenue Code of 1986) of a diversified financial services corporation incorporated under the laws of Delaware on May 9, 1929 (or any direct or indirect subsidiary of such corporation), pursuant to a binding written contract entered into on or before December 31, 1986; but only if the liquidation is completed (or in the case of a section 338 election, the acquisition date occurs) before January 1, 1988.

"(3) The amendments made by this subtitle shall not apply to any distribution, or sale, or exchange—

"(A) of the assets owned (directly or indirectly) by a testamentary trust established under the will of a decedent dying on June 15, 1956, or its beneficiaries,

"(B) made pursuant to a court order in an action filed on January 18, 1984, if such order—

"(i) is issued after July 31, 1986, and

"(ii) directs the disposition of the assets of such trust and the division of the trust corpus into 3 separate sub-trusts.

  For purposes of the preceding sentence, an election under section 338(g) of the Internal Revenue Code of 1986 (or an election under section 338(h)(10) of such Code qualifying as a section 337 liquidation pursuant to regulations prescribed by the Secretary under section 1.338(h)(10)–1T(j)) made in connection with a sale or exchange pursuant to a court order described in subparagraph (B) shall be treated as a sale of [or] exchange.

"(4)(A) The amendments made by this subtitle shall not apply to any distribution, or sale, or exchange—

"(i) if—

"(I) an option agreement to sell substantially all of the assets of a selling corporation organized under the laws of Massachusetts on October 20, 1976, is executed before August 1, 1986, the corporation adopts (by approval of its shareholders) a conditional plan of liquidation before August 1, 1986 to become effective upon the exercise of such option agreement (or modification thereto), and the assets are sold pursuant to the exercise of the option (as originally executed or subsequently modified provided that the purchase price is not thereby increased), or

"(II) in the event that the optionee does not acquire substantially all the assets of the corporation, the optionor corporation sells substantially all its assets to another purchaser at a purchase price not greater than that contemplated by such option agreement pursuant to an effective plan of liquidation, and

"(ii) the complete liquidation of the corporation occurs within 12 months of the time the plan of liquidation becomes effective, but in no event later than December 31, 1989.

"(B) For purposes of subparagraph (A), a distribution, or sale, or exchange, of a distributee corporation (within the meaning of section 337(c)(3) of the Internal Revenue Code of 1986) shall be treated as satisfying the requirements of subparagraph (A) if its subsidiary satisfies the requirements of subparagraph (A).

"(C) For purposes of section 56 of the Internal Revenue Code of 1986 (as amended by this Act), any gain or loss not recognized by reason of this paragraph shall not be taken into account in determining the adjusted net book income of the corporation.

"(5) In the case of a corporation incorporated under the laws of Wisconsin on April 3, 1948—

"(A) a voting trust established not later than December 31, 1987, shall qualify as a trust permitted as a shareholder of an S corporation and shall be treated as only 1 shareholder if the holders of beneficial interests in such voting trust are—

"(i) employees or retirees of such corporation, or

"(ii) in the case of stock or voting trust certificates acquired from an employee or retiree of such corporation, the spouse, child, or estate of such employee or retiree or a trust created by such employee or retiree which is described in section 1361(c)(2) of the Internal Revenue Code of 1986 (or treated as described in such section by reason of section 1361(d) of such Code), and

"(B) the amendment made by section 632 (other than subsection (b) thereof) shall not apply to such corporation if it elects to be an S corporation before January 1, 1989.

"(6) The amendments made by this subtitle shall not apply to the liquidation of a corporation incorporated on January 26, 1982, under the laws of the State of Alabama with a principal place of business in Colbert County, Alabama, but only if such corporation is completely liquidated on or before December 31, 1987.

"(7) The amendments made by this subtitle shall not apply to the acquisition by a Delaware bank holding company of all of the assets of an Iowa bank holding company pursuant to a written contract dated December 9, 1981.

"(8) The amendments made by this subtitle shall not apply to the liquidation of a corporation incorporated under the laws of Delaware on January 20, 1984, if more than 40 percent of the stock of such corporation was acquired by purchase on June 11, 1986, and there was a tender offer with respect to all additional outstanding shares of such corporation on July 29, 1986, but only if the corporation is completely liquidated on or before December 31, 1987.

"(g) Treatment of Certain Distributions in Response To Hostile Tender Offer.—

"(1) In general.—No gain or loss shall be recognized under the Internal Revenue Code of 1986 to a corporation (hereinafter in this subsection referred to as 'parent') on a qualified distribution.

"(2) Qualified Distribution Defined.—For purposes of paragraph (1)—

"(A) In general.—The term 'qualified distribution' means a distribution—

"(i) by parent of all of the stock of a qualified subsidiary in exchange for stock of parent which was acquired for purposes of such exchange pursuant to a tender offer dated February 16, 1982, and

"(ii) pursuant to a contract dated February 13, 1982, and

"(iii) which was made not more than 60 days after the board of directors of parent recommended rejection of an unsolicited tender offer to obtain control of parent.

"(B) Qualified subsidiary.—The term 'qualified subsidiary' means a corporation created or organized under the laws of Delaware on September 7, 1976, all of the stock of which was owned by parent immediately before the qualified distribution."
26 U.S.C. § 6212 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 63 / Section 6212: Notice of deficiency
Notice of deficiency
Status: in_force

(a) In general

If the Secretary determines that there is a deficiency in respect of any tax imposed by subtitles A or B or chapter 41, 42, 43, or 44 he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail. Such notice shall include a notice to the taxpayer of the taxpayer's right to contact a local office of the taxpayer advocate and the location and phone number of the appropriate office.

(b) Address for notice of deficiency

(1) Income and gift taxes and certain excise taxes

In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, or chapter 44 if mailed to the taxpayer at his last known address, shall be sufficient for purposes of subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, chapter 44, and this chapter even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

(2) Joint income tax return

In the case of a joint income tax return filed by husband and wife, such notice of deficiency may be a single joint notice, except that if the Secretary has been notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be sent by certified mail or registered mail to each spouse at his last known address.

(3) Estate tax

In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by chapter 11, if addressed in the name of the decedent or other person subject to liability and mailed to his last known address, shall be sufficient for purposes of chapter 11 and of this chapter.

(c) Further deficiency letters restricted

(1) General rule

If the Secretary has mailed to the taxpayer a notice of deficiency as provided in subsection (a), and the taxpayer files a petition with the Tax Court within the time prescribed in section 6213(a), the Secretary shall have no right to determine any additional deficiency of income tax for the same taxable year, of gift tax for the same calendar year, of estate tax in respect of the taxable estate of the same decedent, of chapter 41 tax for the same taxable year, of chapter 43 tax for the same taxable year, of chapter 44 tax for the same taxable year, of section 4940 tax for the same taxable year, or of chapter 42 tax, (other than under section 4940) with respect to any act (or failure to act) to which such petition relates, except in the case of fraud, and except as provided in section 6214(a) (relating to assertion of greater deficiencies before the Tax Court), in section 6213(b)(1) (relating to mathematical or clerical errors), in section 6851 or 6852 (relating to termination assessments), or in section 6861(c) (relating to the making of jeopardy assessments).

(2) Cross references

For assessment as a deficiency notwithstanding the prohibition of further deficiency letters, in the case of—

(A) Deficiency attributable to change of treatment with respect to itemized deductions, see section 63(e)(3).

(B) Deficiency attributable to gain on involuntary conversion, see section 1033(a)(2)(C) and (D).

(C) Deficiency attributable to activities not engaged in for profit, see section 183(e)(4).

For provisions allowing determination of tax in title 11 cases, see section 505(a) of title 11 of the United States Code.

(d) Authority to rescind notice of deficiency with taxpayer's consent

The Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Any notice so rescinded shall not be treated as a notice of deficiency for purposes of subsection (c)(1) (relating to further deficiency letters restricted), section 6213(a) (relating to restrictions applicable to deficiencies; petition to Tax Court), and section 6512(a) (relating to limitations in case of petition to Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice. Nothing in this subsection shall affect any suspension of the running of any period of limitations during any period during which the rescinded notice was outstanding.

(Aug. 16, 1954, ch. 736, 68A Stat. 770; Pub. L. 85–866, title I, §§76, 89(b), Sept. 2, 1958, 72 Stat. 1661, 1665; Pub. L. 88–272, title I, §112(d)(1), Feb. 26, 1964, 78 Stat. 24; Pub. L. 91–172, title I, §101(f)(2), (j)(40), (41), Dec. 30, 1969, 83 Stat. 524, 530; Pub. L. 91–614, title I, §102(d)(5), Dec. 31, 1970, 84 Stat. 1842; Pub. L. 93–406, title II, §1016(a)(10), Sept. 2, 1974, 88 Stat. 930; Pub. L. 94–455, title II, §214(b), title XII, §§1204(c)(5), 1206(c)(3), title XIII, §1307(d)(2)(F)(ii), (G), title XVI, §1605(b)(5), title XIX, §§1901(b)(31)(C), (37)(C), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1549, 1698, 1704, 1728, 1754, 1800, 1803, 1834; Pub. L. 95–30, title I, §101(d)(15), May 23, 1977, 91 Stat. 134; Pub. L. 95–600, title IV, §405(c)(5), title VII, §701(t)(3)(C), Nov. 6, 1978, 92 Stat. 2871, 2912; Pub. L. 96–223, title I, §101(f)(1)(C), (4), (5), Apr. 2, 1980, 94 Stat. 252, 253; Pub. L. 96–589, §6(d)(2), Dec. 24, 1980, 94 Stat. 3408; Pub. L. 97–34, title IV, §442(d)(4), Aug. 13, 1981, 95 Stat. 323; Pub. L. 99–514, title I, §104(b)(17), title XV, §1562(a), Oct. 22, 1986, 100 Stat. 2106, 2761; Pub. L. 100–203, title X, §10713(b)(2)(C), Dec. 22, 1987, 101 Stat. 1330–470; Pub. L. 100–418, title I, §1941(b)(2)(B)(iii), (E), (F), Aug. 23, 1988, 102 Stat. 1323; Pub. L. 100–647, title I, §1015(m), Nov. 10, 1988, 102 Stat. 3572; Pub. L. 105–34, title III, §312(d)(12), Aug. 5, 1997, 111 Stat. 840; Pub. L. 105–206, title I, §1102(b), July 22, 1998, 112 Stat. 703.)

Editorial Notes

Amendments

1998—Subsec. (a). Pub. L. 105–206 inserted at end "Such notice shall include a notice to the taxpayer of the taxpayer's right to contact a local office of the taxpayer advocate and the location and phone number of the appropriate office."

1997—Subsec. (c)(2)(C) to (E). Pub. L. 105–34, which directed the amendment of par. (2) by striking out subpar. (C) and redesignating succeeding subpars. accordingly, was executed by redesignating subpar. (E) as (C) and striking out former subpar. (C). Prior to amendment, subpar. (C) read as follows: "Deficiency attributable to gain on sale or exchange of principal residence, see section 1034(j)." Former subpar. (D) was repealed previously.

1988—Subsec. (a). Pub. L. 100–418, §1941(b)(2)(B)(iii), substituted "or 44" for "44, or 45".

Subsec. (b)(1). Pub. L. 100–418, §1941(b)(2)(E), substituted "or chapter 44" for "chapter 44, or chapter 45" and "chapter 44, and this chapter" for "chapter 44, chapter 45, and this chapter".

Subsec. (c)(1). Pub. L. 100–418, §1941(b)(2)(F), substituted "or of chapter 42 tax" for "of chapter 42 tax" and struck out ", or of chapter 45 tax for the same taxable period" after "such petition relates".

Subsec. (d). Pub. L. 100–647 inserted sentence at end that nothing in this subsection shall affect suspension of running of period of limitations during period during which rescinded notice was outstanding.

1987—Subsec. (c)(1). Pub. L. 100–203 inserted reference to section 6852.

1986—Subsec. (c)(2)(A). Pub. L. 99–514, §104(b)(17), amended subpar. (A) generally, substituting ", see section 63(e)(3)" for "and zero bracket amount, see section 63(g)(5)".

Subsec. (d). Pub. L. 99–514, §1562(a), added subsec. (d).

1981—Subsec. (c)(1). Pub. L. 97–34 substituted "calendar year" for "calendar quarter".

1980—Subsec. (a). Pub. L. 96–223, §101(f)(1)(C), inserted reference to chapter 45.

Subsec. (b)(1). Pub. L. 96–223, §101(f)(4), substituted "and certain excise taxes" for "taxes imposed by chapter 42" in section catchline and inserted references to chapter 45 in two places in text.

Subsec. (c)(1). Pub. L. 96–223, §101(f)(5), substituted "of chapter 42 tax" for "or of chapter 42 tax" and inserted ", or of chapter 45 tax for the same taxable period" after "to which such petition relates".

Subsec. (c)(2). Pub. L. 96–589 inserted cross reference to section 505(a) of title 11 for provisions allowing determination of tax in title 11 cases.

1978—Subsec. (c)(1). Pub. L. 95–600, §701(t)(3)(C), substituted "same taxable year" for "same taxable years" in two places.

Subsec. (c)(2)(C). Pub. L. 95–600, §405(c)(5), substituted "principal residence" for "personal residence".

1977—Subsec. (c)(2)(A). Pub. L. 95–30 substituted "change of treatment with respect to itemized deductions and zero bracket amount, see section 63(g)(5)" for "change of election with respect to the standard deduction where taxpayer and his spouse made separate returns, see section 144(b)".

1976—Subsec. (a). Pub. L. 94–455, §§1307(d)(2)(F)(ii), 1605(b)(5)(A), 1906(b)(13)(A), struck out "or his delegate" after "Secretary", and substituted "chapter 41, 42, 43, or 44" for "chapter 42 or 43".

Subsec. (b)(1). Pub. L. 94–455, §§1307(d)(2)(G)(i), 1605(b)(5)(B), (C), 1906(b)(13)(A), struck out "or his delegate" after "Secretary", and substituted "chapter 41, chapter 42, chapter 43, or chapter 44" for "chapter 42, or chapter 43", and "chapter 41, chapter 42, chapter 43, chapter 44, and this chapter" for "chapter 42, chapter 43, and this chapter".

Subsec. (c)(1). Pub. L. 94–455, §§1204(c)(5), 1206(c)(3), 1307(d)(2)(G)(ii), 1605(b)(5)(D), 1906(b)(13)(A), struck out "or his delegate" after "Secretary" wherever appearing, substituted "of chapter 41 tax for the same taxable year, of chapter 43 tax for the same taxable years, of chapter 44 tax for the same taxable years" for "of chapter 43 tax for the same taxable years", and "(relating to mathematical or clerical errors), in section 6851 (relating to termination assessments)" for "(relating to mathematical errors)".

Subsec. (c)(2)(B). Pub. L. 94–455, §1901(b)(31)(C), substituted "1033(a)(2)(C) and (D)" for "1033(a)(3)(C) and (D)".

Subsec. (c)(2)(D). Pub. L. 94–455, §1901(b)(37)(C), struck out subsec. (c)(2)(D) which set forth a cross reference to section 1335 of this title relating to a deficiency attributable to war loss recoveries where prior benefit rule is elected.

Subsec. (c)(2)(E). Pub. L. 94–455, §214(b), added subpar. (E).

1974—Subsec. (a). Pub. L. 93–406, §1016(a)(10)(A), inserted reference to taxes imposed by chapter 43.

Subsec. (b)(1). Pub. L. 93–406, §1016(a)(10)(B), (C), inserted reference to chapter 43 in two places.

Subsec. (c)(1). Pub. L. 93–406, §1016(a)(10)(D), substituted "of the same decedent, of chapter 43 tax for the same taxable years," for "of the same decedent,".

1970—Subsec. (c)(1). Pub. L. 91–614 substituted "calendar quarter" for "calendar year".

1969—Subsec. (a). Pub. L. 91–172, §101(j)(40), inserted reference to chapter 42.

Subsec. (b)(1). Pub. L. 91–172, §101(j)(41), inserted reference to chapter 42 taxes in heading and text.

Subsec. (c)(1). Pub. L. 91–172, §101(f)(2), included section 4940 tax and chapter 42 tax (other than under section 4940), among the classes of taxes with respect to which the Secretary cannot determine additional deficiencies after the taxpayer has filed a petition for redetermination of any deficiency about which he has been notified.

1964—Subsec. (c)(2)(A). Pub. L. 88–272 substituted "with respect to the" for "to take".

1958—Subsec. (a). Pub. L. 85–866, §89(b), inserted "certified mail or" before "registered mail".

Subsec. (b)(1). Pub. L. 85–866, §76, substituted "subtitle A or chapter 12" for "chapter 1 or 12" and "subtitle A, chapter 12," for "such chapter".

Subsec. (b)(2). Pub. L. 85–866, §89(b), inserted "certified mail or" before "registered mail".

Statutory Notes and Related Subsidiaries

Effective Date of 1997 Amendment

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

Effective Date of 1988 Amendments

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

Amendment by Pub. L. 100–418 applicable to crude oil removed from the premises on or after Aug. 23, 1988, see section 1941(c) of Pub. L. 100–418, set out as a note under section 164 of this title.

Effective Date of 1986 Amendment

Amendment by section 104(b)(17) 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.

Pub. L. 99–514, title XV, §1562(b), Oct. 22, 1986, 100 Stat. 2762, provided that: "The amendment made by this section [amending this section] shall apply to notices of deficiency issued on or after January 1, 1986."

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable with respect to gifts made after Dec. 31, 1981, see section 442(e) of Pub. L. 97–34, set out as a note under section 2501 of this title.

Effective Date of 1980 Amendments

Amendment by Pub. L. 96–589 effective Oct. 1, 1979, but not applicable to proceedings under title 11, Bankruptcy, commenced before Oct. 1, 1979, see section 7(e) of Pub. L. 96–589, set out as a note under section 108 of this title.

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 a note under section 6161 of this title.

Effective Date of 1978 Amendment

Amendment by section 405(c)(5) of Pub. L. 95–600 applicable to sales and exchanges of residences after July 26, 1978, in taxable years ending after such date, see section 405(d) of Pub. L. 95–600, set out as a note under section 1038 of this title.

Amendment by section 701(t)(3)(C) of Pub. L. 95–600 effective Oct. 4, 1976, see section 701(t)(5) of Pub. L. 95–600, set out as a note under section 859 of this title.

Effective Date of 1977 Amendment

Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.

Effective Date of 1976 Amendment

Amendment by section 214(b) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1969, except that such amendments shall not apply to any taxable year ending before Oct. 4, 1976 with respect to which the period for assessing a deficiency has expired before Oct. 4, 1976, see section 214(c) of Pub. L. 94–455, set out as a note under section 183 of this title.

Amendment by section 1204(c)(5) of Pub. L. 94–455 applicable with respect to action taken under section 6851, 6861, or 6862 of this title where the notice and demand takes place after Feb. 28, 1977, see section 1204(d) of Pub. L. 94–455, as amended, set out as a note under section 6851 of this title.

Amendment by section 1206(c)(3) of Pub. L. 94–455 applicable to returns filed after Dec. 31, 1976, see section 1206(d) of Pub. L. 94–455, set out as a note under section 6213 of this title.

Amendment by section 1307(d)(2)(F)(ii), (G) of Pub. L. 94–455 effective on and after Oct. 4, 1976, see section 1307(e)(6) of Pub. L. 94–455, set out as a note under section 501 of this title.

For effective date of amendment by section 1605(b)(5) of Pub. L. 94–455, see section 1608(d) of Pub. L. 94–455, set out as a note under section 856 of this title.

Amendment by section 1901(b)(31)(C), (37)(C) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1974 Amendment

Amendment by Pub. L. 93–406 applicable, except as otherwise provided in section 1017(c) through (i) of Pub. L. 93–406, for plan years beginning after Sept. 2, 1974, but, in the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93–406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93–406, set out as an Effective Date; Transitional Rules note under section 410 of this title.

Effective Date of 1970 Amendment

Amendment by Pub. L. 91–614 applicable with respect to gifts made after Dec. 31, 1970, see section 102(e) of Pub. L. 91–614, set out as a note under section 2501 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an Effective Date note under section 4940 of this title.

Effective Date of 1964 Amendment

Amendment by Pub. L. 88–272, except for purposes of section 21 of this title, effective with respect to taxable years beginning after Dec. 31, 1963, see section 131 of Pub. L. 88–272, set out as a note under section 1 of this title.

Effective Date of 1958 Amendment

Amendment by section 76 of Pub. L. 85–866 effective Aug. 17, 1954, see section 1(c)(2) of Pub. L. 85–866, set out as a note under section 165 of this title.

Amendment by section 89(b) of Pub. L. 85–866 applicable only if mailing occurs after Sept. 2, 1958, see section 89(d) of Pub. L. 85–866, set out as a note under section 7502 of this title.

Notice of Deficiency To Specify Deadlines for Filing Tax Court Petition

Pub. L. 105–206, title III, §3463(a), July 22, 1998, 112 Stat. 767, provided that: "The Secretary of the Treasury or the Secretary's delegate shall include on each notice of deficiency under section 6212 of the Internal Revenue Code of 1986 the date determined by such Secretary (or delegate) as the last day on which the taxpayer may file a petition with the Tax Court."

[Section 3463(a) of Pub. L. 105–206, set out above, applicable to notices mailed after Dec. 31, 1998, see section 3463(c) of Pub. L. 105–206, set out as an Effective Date of 1998 Amendment note under section 6213 of this title.]

Explanations of Appeals and Collection Process

Pub. L. 105–206, title III, §3504, July 22, 1998, 112 Stat. 771, provided that: "The Secretary of the Treasury or the Secretary's delegate shall, as soon as practicable, but not later than 180 days after the date of the enactment of this Act [July 22, 1998], include with any first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals [now Internal Revenue Service Independent Office of Appeals] an explanation of the entire process from examination through collection with respect to such proposed deficiency, including the assistance available to the taxpayer from the National Taxpayer Advocate at various points in the process."
26 U.S.C. § 6334 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 64 / Subchapter D / Section 6334: Property exempt from levy
Property exempt from levy
Status: in_force

(a) Enumeration

There shall be exempt from levy—

(1) Wearing apparel and school books

Such items of wearing apparel and such school books as are necessary for the taxpayer or for members of his family;

(2) Fuel, provisions, furniture, and personal effects

So much of the fuel, provisions, furniture, and personal effects in the taxpayer's household, and of the arms for personal use, livestock, and poultry of the taxpayer, as does not exceed $6,250 in value;

(3) Books and tools of a trade, business, or profession

So many of the books and tools necessary for the trade, business, or profession of the taxpayer as do not exceed in the aggregate $3,125 in value.

(4) Unemployment benefits

Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, of any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.

(5) Undelivered mail

Mail, addressed to any person, which has not been delivered to the addressee.

(6) Certain annuity and pension payments

Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Honor roll (38 U.S.C. 1562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code.

(7) Workmen's compensation

Any amount payable to an individual as workmen's compensation (including any portion thereof payable with respect to dependents) under a workmen's compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico.

(8) Judgments for support of minor children

If the taxpayer is required by judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages, or other income as is necessary to comply with such judgment.

(9) Minimum exemption for wages, salary, and other income

Any amount payable to or received by an individual as wages or salary for personal services, or as income derived from other sources, during any period, to the extent that the total of such amounts payable to or received by him during such period does not exceed the applicable exempt amount determined under subsection (d).

(10) Certain service-connected disability payments

Any amount payable to an individual as a service-connected (within the meaning of section 101(16) of title 38, United States Code) disability benefit under—

(A) subchapter II, III, IV, V, or VI of chapter 11 of such title 38, or

(B) chapter 13, 21, 23, 31, 32, 34, 35, 37, or 39 of such title 38.

(11) Certain public assistance payments

Any amount payable to an individual as a recipient of public assistance under—

(A) title IV or title XVI (relating to supplemental security income for the aged, blind, and disabled) of the Social Security Act, or

(B) State or local government public assistance or public welfare programs for which eligibility is determined by a needs or income test.

(12) Assistance under Job Training Partnership Act

Any amount payable to a participant under the Job Training Partnership Act (29 U.S.C. 1501 et seq.) from funds appropriated pursuant to such Act.

(13) Residences exempt in small deficiency cases and principal residences and certain business assets exempt in absence of certain approval or jeopardy

(A) Residences in small deficiency cases

If the amount of the levy does not exceed $5,000—

(i) any real property used as a residence by the taxpayer; or

(ii) any real property of the taxpayer (other than real property which is rented) used by any other individual as a residence.

(B) Principal residences and certain business assets

Except to the extent provided in subsection (e)—

(i) the principal residence of the taxpayer (within the meaning of section 121); and

(ii) tangible personal property or real property (other than real property which is rented) used in the trade or business of an individual taxpayer.

(b) Appraisal

The officer seizing property of the type described in subsection (a) shall appraise and set aside to the owner the amount of such property declared to be exempt. If the taxpayer objects at the time of the seizure to the valuation fixed by the officer making the seizure, the Secretary shall summon three disinterested individuals who shall make the valuation.

(c) No other property exempt

Notwithstanding any other law of the United States (including section 207 of the Social Security Act), no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a).

(d) Exempt amount of wages, salary, or other income

(1) Individuals on weekly basis

In the case of an individual who is paid or receives all of his wages, salary, and other income on a weekly basis, the amount of the wages, salary, and other income payable to or received by him during any week which is exempt from levy under subsection (a)(9) shall be the exempt amount.

(2) Exempt amount

For purposes of paragraph (1), the term "exempt amount" means an amount equal to—

(A) the sum of—

(i) the standard deduction, and

(ii) the aggregate amount of the deductions for personal exemptions allowed the taxpayer under section 151 in the taxable year in which such levy occurs, divided by

(B) 52.

Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with only 1 personal exemption.

(3) Individuals on basis other than weekly

In the case of any individual not described in paragraph (1), the amount of the wages, salary, and other income payable to or received by him during any applicable pay period or other fiscal period (as determined under regulations prescribed by the Secretary) which is exempt from levy under subsection (a)(9) shall be an amount (determined under such regulations) which as nearly as possible will result in the same total exemption from levy for such individual over a period of time as he would have under paragraph (1) if (during such period of time) he were paid or received such wages, salary, and other income on a regular weekly basis.

(4) Years when personal exemption amount is zero

(A) In general

In the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall not apply and for purposes of paragraph (1) the term "exempt amount" means an amount equal to—

(i) the sum of the amount determined under subparagraph (B) and the standard deduction, divided by

(ii) 52.

(B) Amount determined

For purposes of subparagraph (A), the amount determined under this subparagraph is $4,150 multiplied by the number of the taxpayer's dependents for the taxable year in which the levy occurs.

(C) Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2018, the $4,150 amount in subparagraph (B) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "2017" for "2016" in subparagraph (A)(ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.

(D) Verified statement

Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with no dependents.

(e) Levy allowed on principal residences and certain business assets in certain circumstances

(1) Principal residences

(A) Approval required

A principal residence shall not be exempt from levy if a judge or magistrate of a district court of the United States approves (in writing) the levy of such residence.

(B) Jurisdiction

The district courts of the United States shall have exclusive jurisdiction to approve a levy under subparagraph (A).

(2) Certain business assets

Property (other than a principal residence) described in subsection (a)(13)(B) shall not be exempt from levy if—

(A) a district director or assistant district director of the Internal Revenue Service personally approves (in writing) the levy of such property; or

(B) the Secretary finds that the collection of tax is in jeopardy.

An official may not approve a levy under subparagraph (A) unless the official determines that the taxpayer's other assets subject to collection are insufficient to pay the amount due, together with expenses of the proceedings.

(f) Levy allowed on certain specified payments

Any payment described in subparagraph (B) or (C) of section 6331(h)(2) shall not be exempt from levy if the Secretary approves the levy thereon under section 6331(h).

(g) Inflation adjustment

(1) In general

In the case of any calendar year beginning after 1999, each dollar amount referred to in paragraphs (2) and (3) of subsection (a) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, by substituting "calendar year 1998" for "calendar year 2016" in subparagraph (A)(ii) thereof.

(2) Rounding

If any dollar amount after being increased under paragraph (1) is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.

(Aug. 16, 1954, ch. 736, 68A Stat. 784; Pub. L. 85–840, title IV, §406, Aug. 28, 1958, 72 Stat. 1047; Pub. L. 89–44, title VIII, §812(a), June 21, 1965, 79 Stat. 170; Pub. L. 89–719, title I, §104(c), Nov. 2, 1966, 80 Stat. 1137; Pub. L. 91–172, title IX, §945(a), Dec. 30, 1969, 83 Stat. 729; Pub. L. 94–455, title XII, §1209(a)–(c), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1709, 1710, 1834; Pub. L. 97–248, title III, §347(a), Sept. 3, 1982, 96 Stat. 638; Pub. L. 98–369, div. B, title VI, §2661(o)(5), July 18, 1984, 98 Stat. 1159; Pub. L. 99–514, title XV, §1565(a), Oct. 22, 1986, 100 Stat. 2763; Pub. L. 100–647, title I, §1015(o), title VI, §6236(c), Nov. 10, 1988, 102 Stat. 3572, 3738; Pub. L. 102–83, §5(c)(2), Aug. 6, 1991, 105 Stat. 406; Pub. L. 104–168, title V, §502(a)–(c), July 30, 1996, 110 Stat. 1461; Pub. L. 104–193, title I, §110(l)(3), formerly §110(l)(6), Aug. 22, 1996, 110 Stat. 2173, renumbered and amended Pub. L. 105–33, title V, §5514(a)(2), (3), Aug. 5, 1997, 111 Stat. 620; Pub. L. 105–34, title III, §312(d)(1), title X, §1025(a), Aug. 5, 1997, 111 Stat. 839, 924; Pub. L. 105–206, title III, §§3431(a)–(c), 3445(a), (b), July 22, 1998, 112 Stat. 758, 762, 763; Pub. L. 115–97, title I, §§11002(d)(1)(II), 11041(d), Dec. 22, 2017, 131 Stat. 2060, 2084; Pub. L. 115–141, div. U, title IV, §401(a)(283), Mar. 23, 2018, 132 Stat. 1198.)

Inflation Adjusted Items for Certain Years

For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.

Editorial Notes

References in Text

The Railroad Retirement Act, referred to in subsec. (a)(6), is act Aug. 29, 1935, ch. 812, as amended generally by Pub. L. 93–445, title I, §101, Oct. 16, 1974, 88 Stat. 1305, known as the Railroad Retirement Act of 1974, which is classified generally to subchapter IV (§231 et seq.) of chapter 9 of Title 45, Railroads. For further details and complete classification of this Act to the Code, see Codification note set out preceding section 231 of Title 45, section 231t of Title 45, and Tables.

The Railroad Unemployment Insurance Act, referred to in subsec. (a)(6), is act June 25, 1938, ch. 680, 52 Stat. 1094, which is classified principally to chapter 11 (§351 et seq.) of Title 45. For complete classification of this Act to the Code, see section 367 of Title 45 and Tables.

The Social Security Act, referred to in subsecs. (a)(11)(A) and (c), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Titles IV and XVI of the Social Security Act are classified generally to subchapters IV (§601 et seq.) and XVI (§1381 et seq.), respectively, of chapter 7 of Title 42, The Public Health and Welfare. Section 207 of the Social Security Act is classified to section 407 of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.

The Job Training Partnership Act, referred to in subsec. (a)(12), is Pub. L. 97–300, Oct. 13, 1982, 96 Stat. 1322, which was classified generally to chapter 19 (§1501 et seq.) of Title 29, Labor, and was repealed by Pub. L. 105–220, title I, §199(b)(2), (c)(2)(B), Aug. 7, 1998, 112 Stat. 1059, effective July 1, 2000. Pursuant to former section 2940(b) of Title 29, references to a provision of the Job Training Partnership Act, effective Aug. 7, 1998, were deemed to refer to that provision or the corresponding provision of the Workforce Investment Act of 1998, Pub. L. 105–220, Aug. 7, 1998, 112 Stat. 936, and, effective July 1, 2000, were deemed to refer to the corresponding provision of the Workforce Investment Act of 1998. The Workforce Investment Act of 1998 was repealed by Pub. L. 113–128, title V, §511(a), July 22, 2014, 128 Stat. 1705, effective July 1, 2015. Pursuant to section 3361(a) of Title 29, references to a provision of the Workforce Investment Act of 1998 are deemed to refer to the corresponding provision of the Workforce Innovation and Opportunity Act, Pub. L. 113–128, July 22, 2014, 128 Stat. 1425, effective July 1, 2015. For complete classification of the Job Training Partnership Act and the Workforce Investment Act of 1998 to the Code, see Tables. For complete classification of the Workforce Innovation and Opportunity Act to the Code, see Short Title note set out under section 3101 of Title 29 and Tables.

Amendments

2018—Subsec. (a)(10)(A). Pub. L. 115–141 substituted "V, or VI" for "V,, or VI".

2017—Subsec. (d)(4). Pub. L. 115–97, §11041(d), added par. (4).

Subsec. (g)(1)(B). Pub. L. 115–97, §11002(d)(1)(II), substituted "for 'calendar year 2016' in subparagraph (A)(ii)" for "for 'calendar year 1992' in subparagraph (B)".

1998—Subsec. (a)(2). Pub. L. 105–206, §3431(a), substituted "$6,250" for "$2,500".

Subsec. (a)(3). Pub. L. 105–206, §3431(b), substituted "$3,125" for "$1,250".

Subsec. (a)(13). Pub. L. 105–206, §3445(a), amended heading and text of par. (13) generally. Prior to amendment, text read as follows: "Except to the extent provided in subsection (e), the principal residence of the taxpayer (within the meaning of section 121)."

Subsec. (e). Pub. L. 105–206, §3445(b), amended heading and text of subsec. (e) generally. Prior to amendment, text read as follows: "Property described in subsection (a)(13) shall not be exempt from levy if—

"(1) a district director or assistant district director of the Internal Revenue Service personally approves (in writing) the levy of such property, or

"(2) the Secretary finds that the collection of tax is in jeopardy."

Subsec. (g)(1). Pub. L. 105–206, §3431(c)(1), substituted "1999" for "1997" in introductory provisions.

Subsec. (g)(1)(B). Pub. L. 105–206, §3431(c)(2), substituted "1998" for "1996".

1997—Subsec. (a)(11)(A). Pub. L. 105–33, §5514(a)(3), made technical amendment to directory language of Pub. L. 104–193, §110(l)(3). See 1996 Amendment note below.

Subsec. (a)(13). Pub. L. 105–34, §312(d)(1), substituted "section 121" for "section 1034".

Subsecs. (f), (g). Pub. L. 105–34 added subsec. (f) and redesignated former subsec. (f) as (g).

1996—Subsec. (a)(2). Pub. L. 104–168, §502(a), substituted "So" for "If the taxpayer is the head of a family, so", "the taxpayer's household" for "his household", and "$2,500" for "$1,650 ($1,550 in the case of levies issued during 1989)".

Subsec. (a)(3). Pub. L. 104–168, §502(b), substituted "$1,250" for "$1,100 ($1,050 in the case of levies issued during 1989)".

Subsec. (a)(11)(A). Pub. L. 104–193, §110(l)(3), formerly §110(l)(6), as renumbered and amended by Pub. L. 105–33, struck out "(relating to aid to families with dependent children)" after "title IV".

Subsec. (f). Pub. L. 104–168, §502(c), added subsec. (f).

1991—Subsec. (a)(6). Pub. L. 102–83 substituted "1562" for "562".

1988—Subsec. (a)(2). Pub. L. 100–647, §6236(c)(1), substituted "$1,650 ($1,550 in the case of levies issued during 1989)" for "$1,500".

Subsec. (a)(3). Pub. L. 100–647, §6236(c)(2), substituted "$1,100 ($1,050 in the case of levies issued during 1989)" for "$1,000".

Subsec. (a)(10)(A). Pub. L. 100–647, §1015(o)(1), substituted "III, IV, V," for "IV" and added "or" at end.

Subsec. (a)(10)(B), (C). Pub. L. 100–647, §1015(o)(2), (3), redesignated subpar. (C) as (B) and substituted "13, 21, 23" for "21", and struck out former subpar. (B), which read as follows: "subchapter I, II, or III of chapter 19 of such title 38, or".

Subsec. (a)(11) to (13). Pub. L. 100–647, §6236(c)(4)(A), added pars. (11) to (13).

Subsec. (d)(1). Pub. L. 100–647, §6236(c)(3)(A), amended par. (1) generally, striking out after introductory provisions the following definition of exempt amount:

"(A) $75, plus

"(B) $25 for each individual who is specified in a written statement which is submitted to the person on whom notice of levy is served and which is verified in such manner as the Secretary shall prescribe by regulations and—

"(i) over half of whose support for the payroll period was received from the taxpayer,

"(ii) who is the spouse of the taxpayer, or who bears a relationship to the taxpayer specified in paragraphs (1) through (9) of section 152(a) (relating to definition of dependents), and

"(iii) who is not a minor child of the taxpayer with respect to whom amounts are exempt from levy under subsection (a)(8) for the payroll period.

For purposes of subparagraph (B)(ii) of the preceding sentence, 'payroll period' shall be substituted for 'taxable year' each place it appears in paragraph (9) of section 152(a)."

Subsec. (d)(2), (3). Pub. L. 100–647, §6236(c)(3)(B), added par. (2) and redesignated former par. (2) as (3).

Subsec. (e). Pub. L. 100–647, §6236(c)(4)(B), added subsec. (e).

1986—Subsec. (a)(10). Pub. L. 99–514 added par. (10).

1984—Subsec. (c). Pub. L. 98–369 inserted "(including section 207 of the Social Security Act)".

1982—Subsec. (a)(2). Pub. L. 97–248, §347(a)(1), substituted "$1,500" for "$500".

Subsec. (a)(3). Pub. L. 97–248, §347(a)(2), substituted "$1,000" for "$250".

Subsec. (d)(1)(A). Pub. L. 97–248, §347(a)(3)(A), substituted "$75" for "$50".

Subsec. (d)(1)(B). Pub. L. 97–248, §347(a)(3)(B), substituted "$25" for "$15".

1976—Subsec. (a)(8). Pub. L. 94–455, §1209(c), substituted "Judgments for support of minor children" for "Salary, wages, or other income" in heading.

Subsec. (a)(9). Pub. L. 94–455, §1209(a), added par. (9).

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

Subsec. (d). Pub. L. 94–455, §1209(b), added subsec. (d).

1969—Subsec. (a)(8). Pub. L. 91–172 added par. (8).

1966—Subsec. (a)(4). Pub. L. 89–719, §104(c)(1), struck out "or Territory" after "of any State".

Subsec. (a)(6), (7). Pub. L. 89–719, §104(c)(2), added pars. (6) and (7).

1965—Subsec. (a)(5). Pub. L. 89–44 added par. (5).

1958—Subsec. (a)(4). Pub. L. 85–840 added par. (4).

Statutory Notes and Related Subsidiaries

Change of Name

Reference to United States magistrate or to magistrate deemed to refer to United States magistrate judge pursuant to section 321 of Pub. L. 101–650, set out as a note under section 631 of Title 28, Judiciary and Judicial Procedure.

Effective Date of 2017 Amendment

Amendment by section 11002(d)(1)(II) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title.

Amendment by section 11041(d) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11041(f)(1) of Pub. L. 115–97, set out as a note under section 151 of this title.

Effective Date of 1998 Amendment

Pub. L. 105–206, title III, §3431(d), July 22, 1998, 112 Stat. 758, provided that: "The amendments made by this section [amending this section] shall take effect with respect to levies issued after the date of the enactment of this Act [July 22, 1998]."

Pub. L. 105–206, title III, §3445(d), July 22, 1998, 112 Stat. 763, provided that: "The amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [July 22, 1998]."

Effective Date of 1997 Amendments

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

Pub. L. 105–34, title X, §1025(b), Aug. 5, 1997, 111 Stat. 924, provided that: "The amendment made by subsection (a) [amending this section] shall apply to levies issued after the date of the enactment of this Act [Aug. 5, 1997]."

Amendment by Pub. L. 105–33 effective as if included in section 110 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L. 104–193, at the time such section 110 became law, see section 5518(c) of Pub. L. 105–33, set out as a note under section 51 of this title.

Effective Date of 1996 Amendments

Amendment by section 110(l)(3) of Pub. L. 104–193 effective July 1, 1997, with transition rules relating to State options to accelerate such date, rules relating to claims, actions, and proceedings commenced before such date, rules relating to closing out of accounts for terminated or substantially modified programs and continuance in office of Assistant Secretary for Family Support, and provisions relating to termination of entitlement under AFDC program, see section 116 of Pub. L. 104–193, as amended, set out as an Effective Date note under section 601 of Title 42, The Public Health and Welfare.

Pub. L. 104–168, title V, §502(d), July 30, 1996, 110 Stat. 1461, provided that: "The amendments made by this section [amending this section] shall take effect with respect to levies issued after December 31, 1996."

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, §1015(o), Nov. 10, 1988, 102 Stat. 3572, provided that the amendment made by that section is effective with respect to levies made after Dec. 31, 1988.

Amendment by section 6236(c) of Pub. L. 100–647 applicable to levies issued on or after July 1, 1989, see section 6236(h)(1) of Pub. L. 100–647, set out as a note under section 6331 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XV, §1565(b), Oct. 22, 1986, 100 Stat. 2763, provided that: "The amendment made by this section [amending this section] shall apply to amounts payable after December 31, 1986."

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 effective as though included in the enactment of the Social Security Amendments of 1983, Pub. L. 98–21, see section 2664(a) of Pub. L. 98–369, set out as a note under section 401 of Title 42, The Public Health and Welfare.

Effective Date of 1982 Amendment

Pub. L. 97–248, title III, §347(b), Sept. 3, 1982, 96 Stat. 638, provided that: "The amendments made by subsection (a) [amending this section] shall apply to levies made after December 31, 1982."

Effective Date of 1976 Amendment

Pub. L. 94–455, title XII, §1209(e), Oct. 4, 1976, 90 Stat. 1711, as amended by Pub. L. 94–528, §2(c), Oct. 17, 1976, 90 Stat. 2483, provided that: "The amendments made by this section [amending this section and sections 6331 and 6332 of this title] shall apply only with respect to levies made after February 28, 1977."

Effective Date of 1969 Amendment

Pub. L. 91–172, title IX, §945(b), Dec. 30, 1969, 83 Stat. 729, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to levies made 30 days or more after the date of the enactment of this Act [Dec. 30, 1969]."

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–719 applicable after Nov. 2, 1966, regardless of when title or lien of United States arose or when lien or interest of another person was acquired, with certain exceptions, see section 114(a)–(c) of Pub. L. 89–719, set out as a note under section 6323 of this title.

Effective Date of 1965 Amendment

Pub. L. 89–44, title VIII, §812(b), June 21, 1965, 79 Stat. 170, provided that: "The amendment made by subsection (a) [amending this section] shall take effect on the date of the enactment of this Act [June 21, 1965]."

Transfer of Functions

For transfer of authorities, functions, personnel, and assets of the Coast Guard, including the authorities and functions of the Secretary of Transportation relating thereto, to the Department of Homeland Security, and for treatment of related references, see sections 468(b), 551(d), 552(d), and 557 of Title 6, Domestic Security, and the Department of Homeland Security Reorganization Plan of November 25, 2002, as modified, set out as a note under section 542 of Title 6.

State Fish and Wildlife Permits

Pub. L. 105–206, title III, §3445(c), July 22, 1998, 112 Stat. 763, provided that:

"(1) In general.—With respect to permits issued by a State and required under State law for the harvest of fish or wildlife in the trade or business of an individual taxpayer, the term 'other assets' as used in section 6334(e)(2) of the Internal Revenue Code of 1986 shall include future income which may be derived by such taxpayer from the commercial sale of fish or wildlife under such permit.

"(2) Construction.—Paragraph (1) shall not be construed to invalidate or in any way prejudice any assertion that the privilege embodied in permits described in paragraph (1) is not property or a right to property under the Internal Revenue Code of 1986."
26 U.S.C. § 743 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 743: Special rules where section 754 election or substantial built-in loss
Special rules where section 754 election or substantial built-in loss
Status: in_force

(a) General rule

The basis of partnership property shall not be adjusted as the result of a transfer of an interest in a partnership by sale or exchange or on the death of a partner unless the election provided by section 754 (relating to optional adjustment to basis of partnership property) is in effect with respect to such partnership or unless the partnership has a substantial built-in loss immediately after such transfer.

(b) Adjustment to basis of partnership property

In the case of a transfer of an interest in a partnership by sale or exchange or upon the death of a partner, a partnership with respect to which the election provided in section 754 is in effect or which has a substantial built-in loss immediately after such transfer shall—

(1) increase the adjusted basis of the partnership property by the excess of the basis to the transferee partner of his interest in the partnership over his proportionate share of the adjusted basis of the partnership property, or

(2) decrease the adjusted basis of the partnership property by the excess of the transferee partner's proportionate share of the adjusted basis of the partnership property over the basis of his interest in the partnership.

Under regulations prescribed by the Secretary, such increase or decrease shall constitute an adjustment to the basis of partnership property with respect to the transferee partner only. A partner's proportionate share of the adjusted basis of partnership property shall be determined in accordance with his interest in partnership capital and, in the case of property contributed to the partnership by a partner, section 704(c) (relating to contributed property) shall apply in determining such share. In the case of an adjustment under this subsection to the basis of partnership property subject to depletion, any depletion allowable shall be determined separately for the transferee partner with respect to his interest in such property.

(c) Allocation of basis

The allocation of basis among partnership properties where subsection (b) is applicable shall be made in accordance with the rules provided in section 755.

(d) Substantial built-in loss

(1) In general

For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer of an interest in the partnership if—

(A) the partnership's adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such property, or

(B) the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their fair market value immediately after such transfer.

(2) Regulations

The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of paragraph (1) and section 734(d), including regulations aggregating related partnerships and disregarding property acquired by the partnership in an attempt to avoid such purposes.

(e) Alternative rules for electing investment partnerships

(1) No adjustment of partnership basis

For purposes of this section, an electing investment partnership shall not be treated as having a substantial built-in loss with respect to any transfer occurring while the election under paragraph (6)(A) is in effect.

(2) Loss deferral for transferee partner

In the case of a transfer of an interest in an electing investment partnership, the transferee partner's distributive share of losses (without regard to gains) from the sale or exchange of partnership property shall not be allowed except to the extent that it is established that such losses exceed the loss (if any) recognized by the transferor (or any prior transferor to the extent not fully offset by a prior disallowance under this paragraph) on the transfer of the partnership interest.

(3) No reduction in partnership basis

Losses disallowed under paragraph (2) shall not decrease the transferee partner's basis in the partnership interest.

(4) Certain basis reductions treated as losses

In the case of a transferee partner whose basis in property distributed by the partnership is reduced under section 732(a)(2), the amount of the loss recognized by the transferor on the transfer of the partnership interest which is taken into account under paragraph (2) shall be reduced by the amount of such basis reduction.

(5) Electing investment partnership

For purposes of this subsection, the term "electing investment partnership" means any partnership if—

(A) the partnership makes an election to have this subsection apply,

(B) the partnership would be an investment company under section 3(a)(1)(A) of the Investment Company Act of 1940 but for an exemption under paragraph (1) or (7) of section 3(c) of such Act,

(C) such partnership has never been engaged in a trade or business,

(D) substantially all of the assets of such partnership are held for investment,

(E) at least 95 percent of the assets contributed to such partnership consist of money,

(F) no assets contributed to such partnership had an adjusted basis in excess of fair market value at the time of contribution,

(G) all partnership interests of such partnership are issued by such partnership pursuant to a private offering before the date which is 24 months after the date of the first capital contribution to such partnership,

(H) the partnership agreement of such partnership has substantive restrictions on each partner's ability to cause a redemption of the partner's interest, and

(I) the partnership agreement of such partnership provides for a term that is not in excess of 15 years.

The election described in subparagraph (A), once made, shall be irrevocable except with the consent of the Secretary.

(6) Regulations

The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this subsection, including regulations for applying this subsection to tiered partnerships.

(f) Exception for securitization partnerships

(1) No adjustment of partnership basis

For purposes of this section, a securitization partnership shall not be treated as having a substantial built-in loss with respect to any transfer.

(2) Securitization partnership

For purposes of paragraph (1), the term "securitization partnership" means any partnership the sole business activity of which is to issue securities which provide for a fixed principal (or similar) amount and which are primarily serviced by the cash flows of a discrete pool (either fixed or revolving) of receivables or other financial assets that by their terms convert into cash in a finite period, but only if the sponsor of the pool reasonably believes that the receivables and other financial assets comprising the pool are not acquired so as to be disposed of.

(Aug. 16, 1954, ch. 736, 68A Stat. 249; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, §71(b), July 18, 1984, 98 Stat. 589; Pub. L. 108–357, title VIII, §833(b)(1)–(4)(A), (5), (6)(A), Oct. 22, 2004, 118 Stat. 1589, 1591; Pub. L. 115–97, title I, §§13502(a), 13504(b)(2), Dec. 22, 2017, 131 Stat. 2141, 2142.)

Editorial Notes

References in Text

Section 3(a)(1)(A), (c)(1), (7) of the Investment Company Act of 1940, referred to in subsec. (e)(5)(B), is classified to section 80a–3(a)(1)(A), (c)(1), (7) of Title 15, Commerce and Trade.

Amendments

2017—Subsec. (d)(1). Pub. L. 115–97, §13502(a), amended par. (1) generally. Prior to amendment, text read as follows: "For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer of an interest in a partnership if the partnership's adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such property."

Subsec. (e)(4) to (7). Pub. L. 115–97, §13504(b)(2), redesignated pars. (5) to (7) as (4) to (6), respectively, and struck out former par. (4). Prior to amendment, text of par. (4) read as follows: "This subsection shall be applied without regard to any termination of a partnership under section 708(b)(1)(B)."

2004—Pub. L. 108–357, §833(b)(6)(A), substituted "Special rules where section 754 election or substantial built-in loss" for "Optional adjustment to basis of partnership property" in section catchline.

Subsec. (a). Pub. L. 108–357, §833(b)(1), inserted "or unless the partnership has a substantial built-in loss immediately after such transfer" before period at end.

Subsec. (b). Pub. L. 108–357, §833(b)(2), inserted "or which has a substantial built-in loss immediately after such transfer" after "section 754 is in effect" in introductory provisions.

Subsec. (d). Pub. L. 108–357, §833(b)(3), added subsec. (d).

Subsec. (e). Pub. L. 108–357, §833(b)(4)(A), added subsec. (e).

Subsec. (f). Pub. L. 108–357, §833(b)(5), added subsec. (f).

1984—Subsec. (b). Pub. L. 98–369 substituted "property contributed to the partnership by a partner, section 704(c) (relating to contributed property) shall apply in determining such share" for "an agreement described in section 704(c)(2) (relating to effect of partnership agreement on contributed property), such share shall be determined by taking such agreement into account" in penultimate sentence.

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

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §13502(b), Dec. 22, 2017, 131 Stat. 2141, provided that: "The amendments made by this section [amending this section] shall apply to transfers of partnership interests after December 31, 2017."

Amendment by section 13504(b)(2) of Pub. L. 115–97 applicable to partnership taxable years beginning after Dec. 31, 2017, see section 13504(c) of Pub. L. 115–97, set out as a note under section 168 of this title.

Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, §833(d)(2), Oct. 22, 2004, 118 Stat. 1592, provided that:

"(A) In general.—Except as provided in subparagraph (B), the amendments made by subsection (b) [amending this section and section 6031 of this title] shall apply to transfers after the date of the enactment of this Act [Oct. 22, 2004].

"(B) Transition rule.—In the case of an electing investment partnership which is in existence on June 4, 2004, section 743(e)(6)(H) [now 743(e)(5)(H)] of the Internal Revenue Code of 1986, as added by this section, shall not apply to such partnership and section 743(e)(6)(I) [now 743(e)(5)(I)] of such Code, as so added, shall be applied by substituting '20 years' for '15 years'."

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable with respect to property contributed to the partnership after Mar. 31, 1984, in taxable years ending after such date, see section 71(c) of Pub. L. 98–369, set out as a note under section 704 of this title.
26 U.S.C. § 15 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 15: Effect of changes
Effect of changes
Status: in_force

(a) General rule

If any rate of tax imposed by this chapter changes, and if the taxable year includes the effective date of the change (unless that date is the first day of the taxable year), then—

(1) tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year; and

(2) the tax for such taxable year shall be the sum of that proportion of each tentative tax which the number of days in each period bears to the number of days in the entire taxable year.

(b) Repeal of tax

For purposes of subsection (a)—

(1) if a tax is repealed, the repeal shall be considered a change of rate; and

(2) the rate for the period after the repeal shall be zero.

(c) Effective date of change

For purposes of subsections (a) and (b)—

(1) if the rate changes for taxable years "beginning after" or "ending after" a certain date, the following day shall be considered the effective date of the change; and

(2) if a rate changes for taxable years "beginning on or after" a certain date, that date shall be considered the effective date of the change.

(d) Section not to apply to inflation adjustments

This section shall not apply to any change in rates under subsection (f) of section 1 (relating to adjustments in tax tables so that inflation will not result in tax increases).

(e) References to highest rate

If the change referred to in subsection (a) involves a change in the highest rate of tax imposed by section 1 or 11(b), any reference in this chapter to such highest rate (other than in a provision imposing a tax by reference to such rate) shall be treated as a reference to the weighted average of the highest rates before and after the change determined on the basis of the respective portions of the taxable year before the date of the change and on or after the date of the change.

(f) Rate reductions enacted by Economic Growth and Tax Relief Reconciliation Act of 2001

This section shall not apply to any change in rates under subsection (i) of section 1 (relating to rate reductions after 2000).

(Aug. 16, 1954, ch. 736, 68A Stat. 12, §21; Pub. L. 88–272, title I, §132, Feb. 26, 1964, 78 Stat. 30; Pub. L. 91–172, title VIII, §803(e), Dec. 30, 1969, 83 Stat. 685; Pub. L. 92–178, title II, §205, Dec. 10, 1971, 85 Stat. 511; Pub. L. 94–12, title III, §305(b)(2), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94–164, §4(d)(2), Dec. 23, 1975, 89 Stat. 975; Pub. L. 94–455, title IX, §901(c)(2), Oct. 4, 1976, 90 Stat. 1607; Pub. L. 95–30, title I, §101(d)(2), May 23, 1977, 91 Stat. 133; Pub. L. 95–600, title I, §106, Nov. 6, 1978, 92 Stat. 2776; Pub. L. 97–34, title I, §101(d)(3), Aug. 13, 1981, 95 Stat. 184; renumbered §15, Pub. L. 98–369, div. A, title IV, §474(b)(1), July 18, 1984, 98 Stat. 830; Pub. L. 99–514, title I, §101(b), Oct. 22, 1986, 100 Stat. 2099; Pub. L. 100–647, title I, §1006(a), Nov. 10, 1988, 102 Stat. 3393; Pub. L. 107–16, title I, §101(c)(3), June 7, 2001, 115 Stat. 43.)

Editorial Notes

Amendments

2001—Subsec. (f). Pub. L. 107–16, §101(c)(3), added subsec. (f).

1988—Subsec. (e). Pub. L. 100–647 added subsec. (e).

1986—Subsec. (d). Pub. L. 99–514 amended subsec. (d) generally, substituting "apply to inflation adjustments" for "apply to section 1 rate changes made by Economic Recovery Tax Act of 1981" in heading and struck out "section 1 attributable to the amendments made by section 101 of the Economic Tax Act of 1981 or" before "subsection (f)" in text.

1984—Pub. L. 98–369 renumbered section 21 of this title as this section.

1981—Subsec. (d). Pub. L. 97–34 substituted provisions that this section shall not apply to any change in rates under section 1 attributable to the amendments made by section 101 of the Economic Recovery Tax Act of 1981 or subsec. (f) of section 1 for provisions that had related to the changes made by section 303(b) of the Tax Reduction Act of 1975 in the surtax exemption.

Subsecs. (e), (f). Pub. L. 97–34 struck out subsecs. (e) and (f) which had related, respectively, to changes made by the Tax Reduction and Simplification Act of 1977 and to changes made by Revenue Act of 1978.

1978—Subsec. (f). Pub. L. 95–600 added subsec. (f).

1977—Subsec. (d). Pub. L. 95–30, §101(d)(2)(A), (B), redesignated subsec. (f) as (d). Former subsec. (d), which directed that, in applying subsec. (a) to a taxable year of an individual which was not a calendar year, each change made by the Tax Reform Act of 1969 in part I or in the application of part IV or V of subchapter B for purposes of the determination of taxable income should be treated as a change in a rate of tax, was struck out.

Subsec. (e). Pub. L. 95–30, §101(d)(2)(A), (C), added subsec. (e). Former subsec. (e), which directed that, in applying subsec. (a) to a taxable year of an individual which was not a calendar year, each change made by the Revenue Act of 1971 in section 141 (relating to the standard deduction) and section 151 (relating to personal exemptions) should be treated as a change in a rate of tax, was struck out.

Subsec. (f). Pub. L. 95–30, §101(d)(2)(B), redesignated subsec. (f) as (d).

1976—Subsec. (f). Pub. L. 94–455 substituted "in the surtax exemption and any change under section 11(d) in the surtax exemption" for "and the change made by section 3(c) of the Revenue Adjustment Act of 1975 in section 11(d) (relating to corporate surtax exemption)".

1975—Subsec. (f). Pub. L. 94–164 inserted reference to change made by section 3(c) of the Revenue Adjustment Act of 1975.

Pub. L. 94–12 added subsec. (f).

1971—Subsec. (e). Pub. L. 92–178 added subsec. (e).

1969—Subsec. (d). Pub. L. 91–172 substituted provisions covering changes made by the Tax Reform Act of 1969 in case of individuals for provisions covering changes made by Revenue Act of 1964.

1964—Subsec. (d). Pub. L. 88–272 amended subsection generally by substituting provisions relating to changes made by the Revenue Act of 1964, for provisions relating to taxable years beginning before Jan. 1, 1954, and ending after Dec. 31, 1953.

Statutory Notes and Related Subsidiaries

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2000, see section 101(d)(1) of Pub. L. 107–16, set out as an Effective and Termination Dates of 2001 Amendment note under section 1 of this title.

Effective Date of 1988 Amendment

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

Effective Date of 1986 Amendment

Amendment by 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.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see section 101(f)(1) of Pub. L. 97–34, set out as a note under section 1 of this title.

Effective Date of 1977 Amendment

Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–455 applicable with respect to taxable years ending after Dec. 31, 1975, see section 901(d) of Pub. L. 94–455, set out as a note under section 11 of this title.

Effective Date of 1975 Amendment

Amendment by Pub. L. 94–164 applicable to taxable years beginning after Dec. 31, 1975, see section 4(e) of Pub. L. 94–164, set out as an Effective and Termination Dates of 1975 Amendments note under section 11 of this title.

Effective Date of 1964 Amendment

Pub. L. 88–272, title I, §132, Feb. 26, 1964, 78 Stat. 30, provided that the amendment made by that section is effective with respect to taxable years ending after Dec. 31, 1963.

Coordination of 2017 Amendment With Section 15

This section not to apply to any change in a rate of tax by reason of section 1(j) of this title, as added by Pub. L. 115–97, see section 1(j)(6) of this title.

Coordination of 1997 Amendment With Section 15

Pub. L. 105–34, title I, §1(c), Aug. 5, 1997, 111 Stat. 788, provided that: "No amendment made by this Act [see Tables for classification] shall be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986."

Coordination of 1993 Amendment With Section 15

Pub. L. 103–66, title XIII, §13001(c), Aug. 10, 1993, 107 Stat. 416, provided that: "Except in the case of the amendments made by section 13221 [amending sections 11, 852, 1201, and 1445 of this title] (relating to corporate rate increase), no amendment made by this chapter [chapter 1 (§§13001–13444) of title XIII of Pub. L. 103–66, see Tables for classification] shall be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986."

Coordination of 1990 Amendment With Section 15

Pub. L. 101–508, title XI, §11001(c), Nov. 5, 1990, 104 Stat. 1388–400, provided that: "Except as otherwise expressly provided in this title, no amendment made by this title [see Tables for classification] shall be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986."

Coordination of 1987 Amendment With Section 15

Pub. L. 100–203, title X, §10000(c), Dec. 22, 1987, 101 Stat. 1330–382, provided that: "No amendment made by this title [see Tables for classification] shall be treated as a change in a rate of tax for purposes [of] section 15 of the Internal Revenue Code of 1986."

Coordination of 1986 Amendment With Section 15

Pub. L. 99–514, §3(b), Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as provided in paragraph (2), for purposes of section 15 of the Internal Revenue Code of 1986, no amendment or repeal made by this Act [see Tables for classification] shall be treated as a change in the rate of a tax imposed by chapter 1 of such Code.

"(2) Exception.—Paragraph (1) shall not apply to the amendment made by section 601 [amending section 11 of this title] (relating to corporate rate reductions)."
26 U.S.C. § 9505 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 98 / Section 9505: Harbor Maintenance Trust Fund
Harbor Maintenance Trust Fund
Status: in_force

(a) Creation of Trust Fund

There is hereby established in the Treasury of the United States a trust fund to be known as the "Harbor Maintenance Trust Fund", consisting of such amounts as may be—

(1) appropriated to the Harbor Maintenance Trust Fund as provided in this section,

(2) transferred to the Harbor Maintenance Trust Fund by the Great Lakes St. Lawrence Seaway Development Corporation pursuant to section 13(a) of the Act of May 13, 1954, or

(3) credited to the Harbor Maintenance Trust Fund as provided in section 9602(b).

(b) Transfer to Harbor Maintenance Trust Fund of amounts equivalent to certain taxes

There are hereby appropriated to the Harbor Maintenance Trust Fund amounts equivalent to the taxes received in the Treasury under section 4461 (relating to harbor maintenance tax).

(c) Expenditures from Harbor Maintenance Trust Fund

Amounts in the Harbor Maintenance Trust Fund shall be available, as provided by appropriation Acts, for making expenditures—

(1) to carry out section 210 of the Water Resources Development Act of 1986,

(2) for payments of rebates of tolls or charges pursuant to section 13(b) of the Act of May 13, 1954 (as in effect on April 1, 1987), and

(3) for the payment of all expenses of administration incurred by the Department of the Treasury, the Army Corps of Engineers, and the Department of Commerce related to the administration of subchapter A of chapter 36 (relating to harbor maintenance tax), but not in excess of $5,000,000 for any fiscal year.

(Added Pub. L. 99–662, title XIV, §1403(a), Nov. 17, 1986, 100 Stat. 4269; amended Pub. L. 103–182, title VI, §683(a), Dec. 8, 1993, 107 Stat. 2218; Pub. L. 104–303, title VI, §601, Oct. 12, 1996, 110 Stat. 3792; Pub. L. 113–121, title II, §2102(c), June 10, 2014, 128 Stat. 1278; Pub. L. 116–260, div. AA, title V, §512(c)(3), Dec. 27, 2020, 134 Stat. 2756.)

Editorial Notes

References in Text

Section 13 of the Act of May 13, 1954, referred to in subsecs. (a)(2) and (c)(2), is classified to section 988a of Title 33, Navigation and Navigable Waters.

Section 210 of the Water Resources Development Act of 1986, referred to in subsec. (c)(1), is classified to section 2238 of Title 33, Navigation and Navigable Waters.

Amendments

2020—Subsec. (a)(2). Pub. L. 116–260 substituted "Great Lakes St. Lawrence Seaway Development Corporation" for "Saint Lawrence Seaway Development Corporation".

2014—Subsec. (c)(1). Pub. L. 113–121 struck out "(as in effect on the date of the enactment of the Water Resources Development Act of 1996)" after "1986".

1996—Subsec. (c)(1). Pub. L. 104–303 amended par. (1) generally. Prior to amendment, par. (1) read as follows: "to carry out section 210(a) of the Water Resources Development Act of 1986 (as in effect on the date of enactment of this section),".

1993—Subsec. (c)(3). Pub. L. 103–182 amended par. (3) generally. Prior to amendment, par. (3) read as follows: "for the payment of all expenses of administration incurred—

"(A) by the Department of the Treasury in administering subchapter A of chapter 36 (relating to harbor maintenance tax), but not in excess of $5,000,000 for any fiscal year, and

"(B) for periods during which no fee applies under paragraph (9) or (10) of section 13031(a) of the Consolidated Omnibus Budget Reconciliation Act of 1985."

Statutory Notes and Related Subsidiaries

Effective Date of 1993 Amendment

Pub. L. 103–182, title VI, §683(b), Dec. 8, 1993, 107 Stat. 2218, which provided that the amendment made by section 683(a) of Pub. L. 103–182 was applicable to fiscal years beginning after Dec. 8, 1993, was repealed by Pub. L. 116–113, title VI, §601, Jan. 29, 2020, 134 Stat. 78, effective on the date the USMCA entered into force (July 1, 2020).

Effective Date

Pub. L. 99–662, title XIV, §1403(d), Nov. 17, 1986, 100 Stat. 4270, provided that: "The amendments made by this section [enacting this section] shall take effect on April 1, 1987."

Harbor Maintenance Trust Fund Deposits and Expenditures

Pub. L. 102–580, title III, §330, Oct. 31, 1992, 106 Stat. 4851, as amended by Pub. L. 116–260, div. AA, title I, §103, Dec. 27, 2020, 134 Stat. 2621, which authorized the President to transmit to the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Environment and Public Works of the Senate an annual report on expenditures from and deposits into the Harbor Maintenance Trust Fund, was repealed by Pub. L. 118–272, div. A, title II, §1206(d)(2), Jan. 4, 2025, 138 Stat. 3077.
26 U.S.C. § 4071 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 32 / Section 4071: Imposition of tax
Imposition of tax
Status: in_force

(a) Imposition and rate of tax

There is hereby imposed on taxable tires sold by the manufacturer, producer, or importer thereof a tax at the rate of 9.45 cents (4.725 cents in the case of a biasply tire or super single tire) for each 10 pounds so much of the maximum rated load capacity thereof as exceeds 3,500 pounds.

(b) Special rule for manufacturers who sell at retail

Under regulations prescribed by the Secretary, if the manufacturer, producer, or importer of any tire delivers such tire to a retail store or retail outlet of such manufacturer, producer, or importer, he shall be liable for tax under subsection (a) in respect of such tire in the same manner as if it had been sold at the time it was delivered to such retail store or outlet. This subsection shall not apply to an article in respect to which tax has been imposed by subsection (a). Subsection (a) shall not apply to an article in respect of which tax has been imposed by this subsection.

(c) Tires on imported articles

For the purposes of subsection (a), if an article imported into the United States is equipped with tires—

(1) the importer of the article shall be treated as the importer of the tires with which such article is equipped, and

(2) the sale of the article by the importer thereof shall be treated as the sale of the tires with which such article is equipped.

This subsection shall not apply with respect to the sale of an automobile bus chassis or an automobile bus body.

(d) Termination

On and after October 1, 2028, the taxes imposed by subsection (a) shall not apply.

(Aug. 16, 1954, ch. 736, 68A Stat. 482; June 29, 1956, ch. 462, title II, §204(a), 70 Stat. 388; Pub. L. 86–440, §1(a), Apr. 22, 1960, 74 Stat. 80; Pub. L. 87–61, title II, §202, June 29, 1961, 75 Stat. 124; Pub. L. 89–523, §1(a), Aug. 1, 1966, 80 Stat. 331; Pub. L. 91–605, title III, §303(a)(5), Dec. 31, 1970, 84 Stat. 1744; Pub. L. 92–178, title IV, §401(f), Dec. 10, 1971, 85 Stat. 533; Pub. L. 94–280, title III, §303(a)(5), May 5, 1976, 90 Stat. 456; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–599, title V, §502(a)(4), Nov. 6, 1978, 92 Stat. 2756; Pub. L. 96–222, title I, §108(c)(2)(C), Apr. 1, 1980, 94 Stat. 227; Pub. L. 96–596, §4(a)(1), Dec. 24, 1980, 94 Stat. 3475; Pub. L. 96–598, §1(d), Dec. 24, 1980, 94 Stat. 3486; Pub. L. 97–424, title V, §§514(a), 516(a)(2), Jan. 6, 1983, 96 Stat. 2181, 2182; Pub. L. 98–369, div. A, title VII, §735(c)(2), July 18, 1984, 98 Stat. 982; Pub. L. 100–17, title V, §502(a)(3), Apr. 2, 1987, 101 Stat. 256; Pub. L. 101–508, title XI, §11211(c)(2), Nov. 5, 1990, 104 Stat. 1388–426; Pub. L. 102–240, title VIII, §8002(a)(2), Dec. 18, 1991, 105 Stat. 2203; Pub. L. 105–178, title IX, §9002(a)(1)(E), June 9, 1998, 112 Stat. 499; Pub. L. 108–357, title VIII, §869(a), (d)(1), Oct. 22, 2004, 118 Stat. 1623; Pub. L. 109–59, title XI, §11101(a)(1)(E), Aug. 10, 2005, 119 Stat. 1943; Pub. L. 112–30, title I, §142(a)(2)(C), Sept. 16, 2011, 125 Stat. 356; Pub. L. 112–102, title IV, §402(a)(2)(C), Mar. 30, 2012, 126 Stat. 282; Pub. L. 112–140, title IV, §402(a)(2)(C), June 29, 2012, 126 Stat. 402; Pub. L. 112–141, div. D, title I, §40102(a)(2)(C), July 6, 2012, 126 Stat. 844; Pub. L. 114–94, div. C, title XXXI, §31102(a)(2)(C), Dec. 4, 2015, 129 Stat. 1727; Pub. L. 117–58, div. H, title I, §80102(a)(2)(C), Nov. 15, 2021, 135 Stat. 1327.)

Editorial Notes

Amendments

2021—Subsec. (d). Pub. L. 117–58 substituted "October 1, 2028" for "October 1, 2022".

2015—Subsec. (d). Pub. L. 114–94 substituted "October 1, 2022" for "October 1, 2016".

2012—Subsec. (d). Pub. L. 112–141 substituted "October 1, 2016" for "July 1, 2012".

Pub. L. 112–140, §§1(c), 402(a)(2)(C), temporarily substituted "July 7, 2012" for "July 1, 2012". See Effective and Termination Dates of 2012 Amendment note below.

Pub. L. 112–102 substituted "July 1, 2012" for "April 1, 2012".

2011—Subsec. (d). Pub. L. 112–30 substituted "April 1, 2012" for "October 1, 2011".

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

2004—Subsec. (a). Pub. L. 108–357, §869(a), reenacted heading without change and amended text of subsec. (a) generally. Prior to amendment, subsec. (a) imposed tax and set forth table of rates providing for no tax if the tire weighed not more than 40 lbs., tax of 15 cents per lb. in excess of 40 lbs. if the tire weighed more than 40 lbs. but not more than 70 lbs., tax of $4.50 plus 30 cents per lb. in excess of 70 lbs. if the tire weighed more than 70 lbs. but not more than 90 lbs., and tax of $10.50 plus 50 cents per lb. in excess of 90 lbs. if the tire weighed more than 90 lbs.

Subsec. (c). Pub. L. 108–357, §869(d)(1), redesignated subsec. (e) as (c) and struck out heading and text of former subsec. (c). Text read as follows: "For purposes of this section, weight shall be based on total weight exclusive of metal rims or rim bases. Total weight of the articles shall be determined under regulations prescribed by the Secretary."

Subsec. (e). Pub. L. 108–357, §869(d)(1), redesignated subsec. (e) as (c).

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

1991—Subsec. (d). Pub. L. 102–240 substituted "1999" for "1995".

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

1987—Subsec. (d). Pub. L. 100–17 substituted "1993" for "1988".

1984—Subsec. (b). Pub. L. 98–369, §735(c)(2)(A), struck out "or inner tube" after "any tire", and struck out "or tube" after "such tire" in two places in first sentence.

Subsec. (c). Pub. L. 98–369, §735(c)(2)(B), substituted "on total weight exclusive" for "on total weight, except that in the case of tires such total weight shall be exclusive".

Subsec. (e). Pub. L. 98–369, §735(c)(2)(C), struck out "or inner tubes (other than bicycle tires and inner tubes)" after "equipped with tires" in provisions preceding par. (1), struck out "and inner tubes" before "with which such article is equipped" in pars. (1) and (2), and substituted "sale of an automobile bus chassis or an automobile bus body" for "sale of an article if a tax on such sale is imposed under section 4061 or if such article is an automobile bus chassis or an automobile bus body" in provisions following par. (2).

Subsec. (f). Pub. L. 98–369, §735(c)(2)(D), struck out subsec. (f) which related to imported recapped or retreaded United States tires.

1983—Subsec. (a). Pub. L. 97–424, §514(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: "There is hereby imposed upon the following articles, if wholly or in part of rubber, sold by the manufacturer, producer, or importer, a tax at the following rates:

"(1) Tires of the type used on highway vehicles, 9.75 cents a pound.

"(2) Other tires (other than laminated tires to which paragraph (5) applies), 4.875 cents a pound.

"(3) Inner tubes, for tires, 10 cents a pound.

"(4) Tread rubber, 5 cents a pound.

"(5) Laminated tires (not of the type used on highway vehicles) which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent, 1 cent a pound."

Subsec. (d). Pub. L. 97–424, §516(a)(2), substituted provision that, on and after Oct. 1, 1988, the taxes imposed by subsec. (a) shall not apply, for provision that, on and after Oct. 1, 1984, the tax imposed by subsec. (a)(1) would be 4.875 cents a pound, that by subsec. (a)(3) would be 9 cents a pound, and that subsec. (a)(4) would not apply.

1980—Subsec. (a)(1). Pub. L. 96–596, §4(a)(1)(A), substituted "9.75 cents" for "10 cents".

Subsec. (a)(2). Pub. L. 96–596, §4(a)(1)(B), substituted "4.875 cents" for "5 cents".

Subsec. (d)(1). Pub. L. 96–596, §4(a)(1)(C), substituted "4.875 cents" for "5 cents".

Subsec. (e). Pub. L. 96–222 inserted references to an automobile bus chassis or body.

Subsec. (f). Pub. L. 96–598 added subsec. (f).

1978—Subsec. (d). Pub. L. 95–599 substituted "1984" for "1979".

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

Subsec. (d). Pub. L. 94–280 substituted "1979" for "1977".

1971—Subsec. (e). Pub. L. 92–178 added subsec. (e).

1970—Subsec. (d). Pub. L. 91–605 substituted "1977" for "1972".

1966—Subsecs. (b) to (d). Pub. L. 89–523 added subsec. (b) and redesignated former subsec. (b) and (c) as (c) and (d), respectively.

1961—Subsec. (a)(1). Pub. L. 87–61, §202(a), increased tax from 8 to 10 cents a pound.

Subsec. (a)(3). Pub. L. 87–61, §202(c), increased tax from 9 to 10 cents a pound.

Subsec. (a)(4). Pub. L. 87–61, §202(c), increased tax from 3 to 5 cents a pound.

Subsec. (c). Pub. L. 87–61, §202(d), substituted "October 1, 1972" for "July 1, 1972", added par. (2), and redesignated former par. (2) as (3).

1960—Subsec. (a)(2). Pub. L. 86–440, §1(a)(1), inserted "(other than laminated tires to which paragraph (5) applies)" after "other tires".

Subsec. (a)(5). Pub. L. 86–440, §1(a)(2), added par. (5).

1956—Act June 29, 1956, increased tax on tires of type used on highway vehicles from 5 cents a pound to 8 cents a pound, provided for a tax of 3 cents a pound on tread rubber, and required on and after July 1, 1972, a reduction in tax on tires of type used on highway vehicles from 8 cents a pound to 5 cents a pound, and elimination of tax on tread rubber.

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 and Termination Dates 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. 112–140 to cease to be effective on July 6, 2012, with text as amended by Pub. L. 112–140 to revert back to read as it did on the day before June 29, 2012, and amendments by Pub. L. 112–141 to be executed as if Pub. L. 112–140 had not been enacted, see section 1(c) of Pub. L. 112–140, set out as a note under section 101 of Title 23, Highways.

Amendment by Pub. L. 112–140 effective July 1, 2012, see section 402(f)(1) of Pub. L. 112–140, 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 a 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 2004 Amendment

Pub. L. 108–357, title VIII, §869(e), Oct. 22, 2004, 118 Stat. 1623, provided that: "The amendments made by this section [amending this section and sections 4072 and 4073 of this title] shall apply to sales in calendar years beginning more than 30 days after the date of the enactment of this Act [Oct. 22, 2004]."

Effective Date of 1984 Amendment

Amendment by 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.

Effective Date of 1983 Amendment

Pub. L. 97–424, title V, §514(b), Jan. 6, 1983, 96 Stat. 2181, provided that: "The amendment made by this section [amending this section] shall apply to articles sold on or after January 1, 1984".

Effective Date of 1980 Amendments

Pub. L. 96–598, §1(e), Dec. 24, 1980, 94 Stat. 3486, provided that: "The amendments made by this section [amending this section and sections 6416 and 6511 of this title] shall take effect on the first day of the first calendar month which begins more than 10 days after the date of the enactment of this Act [Dec. 24, 1980]."

Pub. L. 96–596, §4(a)(2), Dec. 24, 1980, 94 Stat. 3475, provided that: "The amendments made by this subsection [amending this section] shall apply on and after January 1, 1981."

Amendment by Pub. L. 96–222 effective as if included in the provision of the Energy Tax Act of 1978, Pub. L. 95–618, Nov. 9, 1978, 92 Stat. 3174, to which such amendment relates, see section 108(c)(7) of Pub. L. 96–222, set out as a note under section 48 of this title.

Effective Date of 1971 Amendment

Pub. L. 92–178, title IV, §401(h), Dec. 10, 1971, 85 Stat. 534, provided that:

"(1) Except as otherwise provided in this section, the amendments made by subsections (a), (f), and (g) [amending this section and sections 4061, 4062, 4063, 4216, 4221, 4222, 6412, and 6416 of this title] of this section shall apply with respect to articles sold on or after the day after the date of the enactment of this Act [Dec. 10, 1971].

"(2) For purposes of paragraph (1), an article shall not be considered sold before the day after the date of the enactment of this Act [Dec. 10, 1971] unless possession or right to possession passes to the purchaser before such day.

"(3) In the case of—

"(A) a lease,

"(B) a contract for the sale of an article where it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,

"(C) a conditional sale, or

"(D) a chattel mortgage arrangement wherein it is provided that the sale price shall be paid in installments,

entered into on or before the date of the enactment of this Act [Dec. 10, 1971], payments made after such date, with respect to the article leased or sold shall, for purposes of this subsection, be considered as payments made with respect to an article sold after such date, if the lessor or vendor establishes that the amount of payments payable after such date with respect to such article has been reduced by an amount equal to that portion of the tax applicable with respect to the lease or sale of such article which is due and payable after such date. If the lessor or vendor does not establish that the payments have been so reduced, they shall be treated as payments made in respect of an article sold before the day after the date of the enactment of this Act."

Effective Date of 1966 Amendment

Pub. L. 89–523, §1(b), Aug. 1, 1966, 80 Stat. 331, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the first day of the first calendar quarter which begins more than 20 days after the date on which this Act is enacted [Aug. 1, 1966]."

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 of 1960 Amendment

Pub. L. 86–440, §1(b), Apr. 22, 1960, 74 Stat. 81, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to articles sold on or after the first day of the first month which begins more than 10 days after the date of the enactment of this Act [April 22, 1960]."

Effective Date of 1956 Amendment

Amendment by act June 29, 1956, effective July 1, 1956, see section 211 of act June 29, 1956, set out as a note under section 4041 of this title.

Allowance of Credit or Refund of Overpayment of Tax Imposed

Pub. L. 96–596, §4(b), Dec. 24, 1980, 94 Stat. 3475, provided that, applicable to any tire adjustment between Mar. 31, 1978, and Jan. 1, 1983, the determination of any overpayment of tax imposed by former subsec. (a)(1) and (2) or subsec. (b) of this section arising by reason of an adjustment of a tire after the original sale pursuant to a warranty or guarantee, and the allowance of a credit or refund of any such overpayment, would be determined with the principles set forth in regulations and rulings in effect on Mar. 31, 1978.
26 U.S.C. § 454 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 454: Obligations issued at discount
Obligations issued at discount
Status: in_force

(a) Non-interest-bearing obligations issued at a discount

If, in the case of a taxpayer owning any non-interest-bearing obligation issued at a discount and redeemable for fixed amounts increasing at stated intervals or owning an obligation described in paragraph (2) of subsection (c), the increase in the redemption price of such obligation occurring in the taxable year does not (under the method of accounting used in computing his taxable income) constitute income to him in such year, such taxpayer may, at his election made in his return for any taxable year, treat such increase as income received in such taxable year. If any such election is made with respect to any such obligation, it shall apply also to all such obligations owned by the taxpayer at the beginning of the first taxable year to which it applies and to all such obligations thereafter acquired by him and shall be binding for all subsequent taxable years, unless on application by the taxpayer the Secretary permits him, subject to such conditions as the Secretary deems necessary, to change to a different method. In the case of any such obligations owned by the taxpayer at the beginning of the first taxable year to which his election applies, the increase in the redemption price of such obligations occurring between the date of acquisition (or, in the case of an obligation described in paragraph (2) of subsection (c), the date of acquisition of the series E bond involved) and the first day of such taxable year shall also be treated as income received in such taxable year.

(b) Short-term obligations issued on discount basis

In the case of any obligation—

(1) of the United States; or

(2) of a State or a possession of the United States, or any political subdivision of any of the foregoing, or of the District of Columbia,

which is issued on a discount basis and payable without interest at a fixed maturity date not exceeding 1 year from the date of issue, the amount of discount at which such obligation is originally sold shall not be considered to accrue until the date on which such obligation is paid at maturity, sold, or otherwise disposed of.

(c) Matured United States savings bonds

In the case of a taxpayer who—

(1) holds a series E United States savings bond at the date of maturity, and

(2) pursuant to regulations prescribed under chapter 31 of title 31 (A) retains his investment in such series E bond in an obligation of the United States, other than a current income obligation, or (B) exchanges such series E bond for another nontransferable obligation of the United States in an exchange upon which gain or loss is not recognized because of section 1037 (or so much of section 1031 as relates to section 1037),

the increase in redemption value (to the extent not previously includible in gross income) in excess of the amount paid for such series E bond shall be includible in gross income in the taxable year in which the obligation is finally redeemed or in the taxable year of final maturity, whichever is earlier. This subsection shall not apply to a corporation, and shall not apply in the case of any taxable year for which the taxpayer's taxable income is computed under an accrual method of accounting or for which an election made by the taxpayer under subsection (a) applies.

(Aug. 16, 1954, ch. 736, 68A Stat. 156; Pub. L. 86–346, title I, §102, Sept. 22, 1959, 73 Stat. 621; Pub. L. 94–455, title XIX, §§1901(c)(2), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1803, 1834; Pub. L. 97–452, §2(c)(2), Jan. 12, 1983, 96 Stat. 2478.)

Editorial Notes

Amendments

1983—Subsec. (c)(2). Pub. L. 97–452 substituted "chapter 31 of title 31" for "the Second Liberty Bond Act".

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

Subsec. (b)(2). Pub. L. 94–455, §1901(c)(2), struck out ", a Territory," after "a State".

1959—Subsec. (c)(2). Pub. L. 86–346 designated existing provisions as cl. (A), inserted "of the United States" after "an obligation" and struck out "the maturity value of" before "such series E bond" and "which matures not more than 10 years from the date of maturity of such series E bond" after "income obligation" in such cl. (A), and added cl. (B).
26 U.S.C. § 7608 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 78 / Section 7608: Authority of internal revenue enforcement officers
Authority of internal revenue enforcement officers
Status: in_force

(a) Enforcement of subtitle E and other laws pertaining to liquor, tobacco, and firearms

Any investigator, agent, or other internal revenue officer by whatever term designated, whom the Secretary charges with the duty of enforcing any of the criminal, seizure, or forfeiture provisions of subtitle E or of any other law of the United States pertaining to the commodities subject to tax under such subtitle for the enforcement of which the Secretary is responsible, may—

(1) carry firearms;

(2) execute and serve search warrants and arrest warrants, and serve subpoenas and summonses issued under authority of the United States;

(3) in respect to the performance of such duty, make arrests without warrant for any offense against the United States committed in his presence, or for any felony cognizable under the laws of the United States if he has reasonable grounds to believe that the person to be arrested has committed, or is committing, such felony; and

(4) in respect to the performance of such duty, make seizures of property subject to forfeiture to the United States.

(b) Enforcement of laws relating to internal revenue other than subtitle E

(1) Any criminal investigator of the Intelligence Division of the Internal Revenue Service whom the Secretary charges with the duty of enforcing any of the criminal provisions of the internal revenue laws, any other criminal provisions of law relating to internal revenue for the enforcement of which the Secretary is responsible, or any other law for which the Secretary has delegated investigatory authority to the Internal Revenue Service, is, in the performance of his duties, authorized to perform the functions described in paragraph (2).

(2) The functions authorized under this subsection to be performed by an officer referred to in paragraph (1) are—

(A) to execute and serve search warrants and arrest warrants, and serve subpoenas and summonses issued under authority of the United States;

(B) to make arrests without warrant for any offense against the United States relating to the internal revenue laws committed in his presence, or for any felony cognizable under such laws if he has reasonable grounds to believe that the person to be arrested has committed or is committing any such felony; and

(C) to make seizures of property subject to forfeiture under the internal revenue laws.

(c) Rules relating to undercover operations

(1) Certification required for exemption of undercover operations from certain laws

With respect to any undercover investigative operation of the Internal Revenue Service (hereinafter in this subsection referred to as the "Service") which is necessary for the detection and prosecution of offenses under the internal revenue laws, any other criminal provisions of law relating to internal revenue, or any other law for which the Secretary has delegated investigatory authority to the Internal Revenue Service—

(A) sums authorized to be appropriated for the Service may be used—

(i) to purchase property, buildings, and other facilities, and to lease space, within the United States, the District of Columbia, and the territories and possessions of the United States without regard to—

(I) sections 1341 and 3324 of title 31, United States Code,

(II) sections 6301(a) and (b)(1)–(3) and 6306 of title 41, United States Code,

(III) chapter 45 of title 41, United States Code,

(IV) section 8141 of title 40, United States Code, and

(V) section 3901 of title 41, United States Code, and

(ii) to establish or to acquire proprietary corporations or business entities as part of the undercover operation, and to operate such corporations or business entities on a commercial basis, without regard to sections 9102 and 9103 of title 31, United States Code;

(B) sums authorized to be appropriated for the Service and the proceeds from the undercover operations may be deposited in banks or other financial institutions without regard to the provisions of section 648 of title 18, United States Code, and section 3302 of title 31, United States Code, and

(C) the proceeds from the undercover operation may be used to offset necessary and reasonable expenses incurred in such operation without regard to the provisions of section 3302 of title 31, United States Code.

This paragraph shall apply only upon the written certification of the Commissioner of Internal Revenue (or, if designated by the Commissioner, the Deputy Commissioner or an Assistant Commissioner of Internal Revenue) that any action authorized by subparagraph (A), (B), or (C) is necessary for the conduct of such undercover operation.

(2) Liquidation of corporations and business entities

If a corporation or business entity established or acquired as part of an undercover operation under subparagraph (B) of paragraph (1) with a net value over $50,000 is to be liquidated, sold, or otherwise disposed of, the Service, as much in advance as the Commissioner or his delegate determines is practicable, shall report the circumstances to the Secretary. The proceeds of the liquidation, sale, or other disposition, after obligations are met, shall be deposited in the Treasury of the United States as miscellaneous receipts.

(3) Deposit of proceeds

As soon as the proceeds from an undercover investigative operation with respect to which an action is authorized and carried out under subparagraphs (B) and (C) of paragraph (1) are no longer necessary for the conduct of such operation, such proceeds or the balance of such proceeds remaining at the time shall be deposited into the Treasury of the United States as miscellaneous receipts.

(4) Audits

(A) The Service shall conduct a detailed financial audit of each undercover investigative operation which is closed in each fiscal year; and

(i) submit the results of the audit in writing to the Secretary; and

(ii) not later than 180 days after such undercover operation is closed, submit a report to the Congress concerning such audit.

(B) The Service shall also submit a report annually to the Congress specifying as to its undercover investigative operations—

(i) the number, by programs, of undercover investigative operations pending as of the end of the 1-year period for which such report is submitted;

(ii) the number, by programs, of undercover investigative operations commenced in the 1-year period for which such report is submitted;

(iii) the number, by programs, of undercover investigative operations closed in the 1-year period for which such report is submitted, and

(iv) the following information with respect to each undercover investigative operation pending as of the end of the 1-year period for which such report is submitted or closed during such 1-year period—

(I) the date the operation began and the date of the certification referred to in the last sentence of paragraph (1),

(II) the total expenditures under the operation and the amount and use of the proceeds from the operation,

(III) a detailed description of the operation including the potential violation being investigated and whether the operation is being conducted under grand jury auspices, and

(IV) the results of the operation including the results of criminal proceedings.

(5) Definitions

For purposes of paragraph (4)—

(A) Closed

The term "closed" means the date on which the later of the following occurs;

(i) all criminal proceedings (other than appeals) are concluded, or

(ii) covert activities are concluded, whichever occurs later.

(B) Employees

The term "employees" has the meaning given such term by section 2105 of title 5, United States Code.

(C) Undercover investigative operation

The term "undercover investigative operation" means any undercover investigative operation of the Service; except that, for purposes of subparagraphs (A) and (C) of paragraph (4), such term only includes an operation which is exempt from section 3302 or 9102 of title 31, United States Code.

(Added Pub. L. 85–859, title II, §204(14), Sept. 2, 1958, 72 Stat. 1429; amended Pub. L. 87–863, §6(a), Oct. 23, 1962, 76 Stat. 1143; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 100–690, title VII, §7601(c)(1), (2), Nov. 18, 1988, 102 Stat. 4504; Pub. L. 101–508, title XI, §11704(a)(32), (33), Nov. 5, 1990, 104 Stat. 1388–519; Pub. L. 104–168, title XII, §1205(b)–(c)(2), July 30, 1996, 110 Stat. 1471, 1472; Pub. L. 104–316, title I, §113, Oct. 19, 1996, 110 Stat. 3833; Pub. L. 105–206, title I, §1103(e)(4), July 22, 1998, 112 Stat. 710; Pub. L. 106–554, §1(a)(7) [title III, §303], Dec. 21, 2000, 114 Stat. 2763, 2763A–632; Pub. L. 107–217, §3(f), Aug. 21, 2002, 116 Stat. 1299; Pub. L. 108–178, §4(e), Dec. 15, 2003, 117 Stat. 2641; Pub. L. 109–135, title III, §304, Dec. 21, 2005, 119 Stat. 2609; Pub. L. 109–432, div. A, title I, §121, Dec. 20, 2006, 120 Stat. 2944; Pub. L. 110–343, div. C, title IV, §401(a), Oct. 3, 2008, 122 Stat. 3875; Pub. L. 111–350, §5(f), Jan. 4, 2011, 124 Stat. 3848.)

Editorial Notes

Prior Provisions

A prior section 7608 was renumbered section 7613 of this title.

Amendments

2011—Subsec. (c)(1)(A)(i)(II). Pub. L. 111–350, §5(f)(1), substituted "sections 6301(a) and (b)(1)–(3) and 6306" for "sections 11(a) and 22".

Subsec. (c)(1)(A)(i)(III). Pub. L. 111–350, §5(f)(2), substituted "chapter 45" for "section 255".

Subsec. (c)(1)(A)(i)(V). Pub. L. 111–350, §5(f)(3), substituted "section 3901" for "section 254(a) and (c)".

2008—Subsec. (c)(6). Pub. L. 110–343 struck out par. (6). Text read as follows: "The provisions of this subsection—

"(A) shall apply after November 17, 1988, and before January 1, 1990, and

"(B) shall apply after the date of the enactment of this paragraph and before January 1, 2008.

All amounts expended pursuant to this subsection during the period described in subparagraph (B) shall be recovered to the extent possible, and deposited in the Treasury of the United States as miscellaneous receipts, before January 1, 2008."

2006—Subsec. (c)(6). Pub. L. 109–432 substituted "2008" for "2007" in subpar. (B) and concluding provisions.

2005—Subsec. (c)(6). Pub. L. 109–135 substituted "January 1, 2007" for "January 1, 2006" in subpar. (B) and concluding provisions.

2003—Subsec. (c)(1)(A)(i)(IV). Pub. L. 108–178 substituted "title 40, United States Code" for "title 40".

2002—Subsec. (c)(1)(A)(i)(IV). Pub. L. 107–217 substituted "section 8141 of title 40" for "section 34 of title 40, United States Code".

2000—Subsec. (c)(6). Pub. L. 106–554 substituted "January 1, 2006" for "January 1, 2001" in subpar. (B) and concluding provisions.

1998—Subsec. (b)(1). Pub. L. 105–206 struck out "or of the Internal Security Division" after "Intelligence Division".

1996—Subsec. (c)(2). Pub. L. 104–316 struck out "and the Comptroller General of the United States" after "Secretary".

Subsec. (c)(4)(B)(ii). Pub. L. 104–168, §1205(c)(1)(A), (B), struck out "preceding the period" after "in the 1-year period" and "and" at end.

Subsec. (c)(4)(B)(iii), (iv). Pub. L. 104–168, §1205(c)(1)(C), added cls. (iii) and (iv) and struck out former cl. (iii) which read as follows: "the number, by programs, of undercover investigative operations closed in the 1-year period preceding the period for which such report is submitted and, with respect to each such closed undercover operation, the results obtained and any civil claims made with respect thereto."

Subsec. (c)(5)(C). Pub. L. 104–168, §1205(c)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "The terms 'undercover investigative operation' and 'undercover operation' mean any undercover investigative operation of the Service—

"(i) in which—

"(I) the gross receipts (excluding interest earned) exceed $50,000; or

"(II) expenditures, both recoverable and nonrecoverable (other than expenditures for salaries of employees), exceed $150,000; and

"(ii) which is exempt from section 3302 or 9102 of title 31, United States Code.

Clauses (i) and (ii) shall not apply with respect to the report required under subparagraph (B) of paragraph (4)."

Subsec. (c)(6). Pub. L. 104–168, §1205(b), added par. (6).

1990—Subsec. (c)(1)(B). Pub. L. 101–508, §11704(a)(32), struck out comma after "operations".

Subsec. (c)(5)(C). Pub. L. 101–508, §11704(a)(33), substituted "interest" for "interested" in cl. (i)(I) and "title 31" for "title 3" in cl. (ii).

1988—Subsec. (b)(1). Pub. L. 100–690, §7601(c)(1), substituted comma for "or" before "any other" and inserted ", or any other law for which the Secretary has delegated investigatory authority to the Internal Revenue Service," after "responsible".

Subsec. (c). Pub. L. 100–690, §7601(c)(2), added subsec. (c).

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

1962—Pub. L. 87–863 redesignated existing provisions as subsec. (a), added subsec. (a) heading, and added subsec. (b).

Statutory Notes and Related Subsidiaries

Effective Date of 2008 Amendment

Pub. L. 110–343, div. C, title IV, §401(b), Oct. 3, 2008, 122 Stat. 3875, provided that: "The amendment made by this section [amending this section] shall apply to operations conducted after the date of the enactment of this Act [Oct. 3, 2008]."

Effective Date of 2003 Amendment

Amendment by Pub. L. 108–178 effective Aug. 21, 2002, see section 5 of Pub. L. 108–178, set out as a note under section 5334 of Title 5, Government Organization and Employees.

Effective Date of 1996 Amendment

Pub. L. 104–168, title XII, §1205(c)(3), July 30, 1996, 110 Stat. 1472, provided that: "The amendments made by this subsection [amending this section] shall take effect on the date of the enactment of this Act [July 30, 1996]."

Effective Date of 1988 Amendment

Pub. L. 100–690, title VII, §7601(c)(3), Nov. 18, 1988, 102 Stat. 4507, as amended by Pub. L. 101–647, title XXXIII, §3301(a), Nov. 29, 1990, 104 Stat. 4917; Pub. L. 104–168, title XII, §1205(a), July 30, 1996, 110 Stat. 1471, provided that: "The amendments made by this subsection [amending this section] shall take effect on the date of the enactment of this Act [Nov. 18, 1988]."

Effective Date of 1962 Amendment

Pub. L. 87–863, §6(b), Oct. 23, 1962, 76 Stat. 1143, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the day after the date of enactment of this Act [Oct. 23, 1962]."

Effective Date

Section effective Sept. 3, 1958, see section 210(a)(1) of Pub. L. 85–859, set out as a note under section 5001 of this title.
26 U.S.C. § 6424 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 65 / Section 6424: Repealed. Pub. L. 97-424, title V, §515(b)(5), Jan. 6, 1983, 96 Stat. 2181
Repealed. Pub. L. 97-424, title V, §515(b)(5), Jan. 6, 1983, 96 Stat. 2181
Status: repealed

[§6424. Repealed. Pub. L. 97–424, title V, §515(b)(5), Jan. 6, 1983, 96 Stat. 2181]

Section, added Pub. L. 89–44, title II, §202(b), June 21, 1965, 79 Stat. 137; amended Pub. L. 91–258, title II, §207(b), May 21, 1970, 84 Stat. 248; Pub. L. 94–455, title XIX, §1906(a)(30), (b)(13)(A), Oct. 4, 1976, 90 Stat. 1828, 1834; Pub. L. 95–618, title II, §§222(a)(3), 233(b)(1), (2)(A), Nov. 9, 1978, 92 Stat. 3187, 3191; Pub. L. 97–473, title II, §202(b)(13), Jan. 14, 1983, 96 Stat. 2610, had provided for payments by the Secretary of an amount equal to 6 cents for each gallon of lubricating oil used in a qualified business use or in a qualified bus to certain ultimate purchasers of the lubricating oil.

Statutory Notes and Related Subsidiaries

Effective Date of Repeal

Repeal applicable with respect to articles sold after Jan. 6, 1983, see section 515(c) of Pub. L. 97–424, set out as an Effective Date of 1983 Amendment note under section 34 of this title.