26 U.S.C. § 47 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 47: Rehabilitation credit
Rehabilitation credit
Status: in_force

(a) General rule

(1) In general

For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable year in which a qualified rehabilitated building is placed in service, the rehabilitation credit for such year is an amount equal to the ratable share for such year.

(2) Ratable share

For purposes of paragraph (1), the ratable share for any taxable year during the period described in such paragraph is the amount equal to 20 percent of the qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year during such period.

(b) When expenditures taken into account

(1) In general

Qualified rehabilitation expenditures with respect to any qualified rehabilitated building shall be taken into account for the taxable year in which such qualified rehabilitated building is placed in service.

(2) Coordination with subsection (d)

The amount which would (but for this paragraph) be taken into account under paragraph (1) with respect to any qualified rehabilitated building shall be reduced (but not below zero) by any amount of qualified rehabilitation expenditures taken into account under subsection (d) by the taxpayer or a predecessor of the taxpayer (or, in the case of a sale and leaseback described in section 50(a)(2)(C), by the lessee), to the extent any amount so taken into account has not been required to be recaptured under section 50(a).

(c) Definitions

For purposes of this section—

(1) Qualified rehabilitated building

(A) In general

The term "qualified rehabilitated building" means any building (and its structural components) if—

(i) such building has been substantially rehabilitated,

(ii) such building was placed in service before the beginning of the rehabilitation,

(iii) such building is a certified historic structure, and

(iv) depreciation (or amortization in lieu of depreciation) is allowable with respect to such building.

(B) Substantially rehabilitated defined

(i) In general

For purposes of subparagraph (A)(i), a building shall be treated as having been substantially rehabilitated only if the qualified rehabilitation expenditures during the 24-month period selected by the taxpayer (at the time and in the manner prescribed by regulation) and ending with or within the taxable year exceed the greater of—

(I) the adjusted basis of such building (and its structural components), or

(II) $5,000.

 The adjusted basis of the building (and its structural components) shall be determined as of the beginning of the 1st day of such 24-month period, or of the holding period of the building, whichever is later. For purposes of the preceding sentence, the determination of the beginning of the holding period shall be made without regard to any reconstruction by the taxpayer in connection with the rehabilitation.

(ii) Special rule for phased rehabilitation

In the case of any rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the rehabilitation begins, clause (i) shall be applied by substituting "60-month period" for "24-month period".

(iii) Lessees

The Secretary shall prescribe by regulation rules for applying this subparagraph to lessees.

(C) Reconstruction

Rehabilitation includes reconstruction.

(2) Qualified rehabilitation expenditure defined

(A) In general

The term "qualified rehabilitation expenditure" means any amount properly chargeable to capital account—

(i) for property for which depreciation is allowable under section 168 and which is—

(I) nonresidential real property,

(II) residential rental property,

(III) real property which has a class life of more than 12.5 years, or

(IV) an addition or improvement to property described in subclause (I), (II), or (III), and

(ii) in connection with the rehabilitation of a qualified rehabilitated building.

(B) Certain expenditures not included

The term "qualified rehabilitation expenditure" does not include—

(i) Straight line depreciation must be used

Any expenditure with respect to which the taxpayer does not use the straight line method over a recovery period determined under subsection (c) or (g) of section 168. The preceding sentence shall not apply to any expenditure to the extent the alternative depreciation system of section 168(g) applies to such expenditure by reason of subparagraph (B) or (C) of section 168(g)(1).

(ii) Cost of acquisition

The cost of acquiring any building or interest therein.

(iii) Enlargements

Any expenditure attributable to the enlargement of an existing building.

(iv) Certified historic structure

Any expenditure attributable to the rehabilitation of a qualified rehabilitated building unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (C)).

(v) Tax-exempt use property

(I) In general

Any expenditure in connection with the rehabilitation of a building which is allocable to the portion of such property which is (or may reasonably be expected to be) tax-exempt use property (within the meaning of section 168(h), except that "50 percent" shall be substituted for "35 percent" in paragraph (1)(B)(iii) thereof).

(II) Clause not to apply for purposes of paragraph (1)(C)

This clause shall not apply for purposes of determining under paragraph (1)(C) whether a building has been substantially rehabilitated.

(vi) Expenditures of lessee

Any expenditure of a lessee of a building if, on the date the rehabilitation is completed, the remaining term of the lease (determined without regard to any renewal periods) is less than the recovery period determined under section 168(c).

(C) Certified rehabilitation

For purposes of subparagraph (B), the term "certified rehabilitation" means any rehabilitation of a certified historic structure which the Secretary of the Interior has certified to the Secretary as being consistent with the historic character of such property or the district in which such property is located.

(D) Nonresidential real property; residential rental property; class life

For purposes of subparagraph (A), the terms "nonresidential real property," "residential rental property," and "class life" have the respective meanings given such terms by section 168.

(3) Certified historic structure defined

(A) In general

The term "certified historic structure" means any building (and its structural components) which—

(i) is listed in the National Register, or

(ii) is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary as being of historic significance to the district.

(B) Registered historic district

The term "registered historic district" means—

(i) any district listed in the National Register, and

(ii) any district—

(I) which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and

(II) which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.

(d) Progress expenditures

(1) In general

In the case of any building to which this subsection applies, except as provided in paragraph (3)—

(A) if such building is self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year for which such expenditure is properly chargeable to capital account with respect to such building, and

(B) if such building is not self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year in which paid.

(2) Property to which subsection applies

(A) In general

This subsection shall apply to any building which is being rehabilitated by or for the taxpayer if—

(i) the normal rehabilitation period for such building is 2 years or more, and

(ii) it is reasonable to expect that such building will be a qualified rehabilitated building in the hands of the taxpayer when it is placed in service.

Clauses (i) and (ii) shall be applied on the basis of facts known as of the close of the taxable year of the taxpayer in which the rehabilitation begins (or, if later, at the close of the first taxable year to which an election under this subsection applies).

(B) Normal rehabilitation period

For purposes of subparagraph (A), the term "normal rehabilitation period" means the period reasonably expected to be required for the rehabilitation of the building—

(i) beginning with the date on which physical work on the rehabilitation begins (or, if later, the first day of the first taxable year to which an election under this subsection applies), and

(ii) ending on the date on which it is expected that the property will be available for placing in service.

(3) Special rules for applying paragraph (1)

For purposes of paragraph (1)—

(A) Component parts, etc.

Property which is to be a component part of, or is otherwise to be included in, any building to which this subsection applies shall be taken into account—

(i) at a time not earlier than the time at which it becomes irrevocably devoted to use in the building, and

(ii) as if (at the time referred to in clause (i)) the taxpayer had expended an amount equal to that portion of the cost to the taxpayer of such component or other property which, for purposes of this subpart, is properly chargeable (during such taxable year) to capital account with respect to such building.

(B) Certain borrowing disregarded

Any amount borrowed directly or indirectly by the taxpayer from the person rehabilitating the property for him shall not be treated as an amount expended for such rehabilitation.

(C) Limitation for buildings which are not self-rehabilitated

(i) In general

In the case of a building which is not self-rehabilitated, the amount taken into account under paragraph (1)(B) for any taxable year shall not exceed the amount which represents the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to the portion of the rehabilitation which is completed during such taxable year.

(ii) Carryover of certain amounts

In the case of a building which is not a self-rehabilitated building, if for the taxable year—

(I) the amount which (but for clause (i)) would have been taken into account under paragraph (1)(B) exceeds the limitation of clause (i), then the amount of such excess shall be taken into account under paragraph (1)(B) for the succeeding taxable year, or

(II) the limitation of clause (i) exceeds the amount taken into account under paragraph (1)(B), then the amount of such excess shall increase the limitation of clause (i) for the succeeding taxable year.

(D) Determination of percentage of completion

The determination under subparagraph (C)(i) of the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to rehabilitation completed during any taxable year shall be made, under regulations prescribed by the Secretary, on the basis of engineering or architectural estimates or on the basis of cost accounting records. Unless the taxpayer establishes otherwise by clear and convincing evidence, the rehabilitation shall be deemed to be completed not more rapidly than ratably over the normal rehabilitation period.

(E) No progress expenditures for certain prior periods

No qualified rehabilitation expenditures shall be taken into account under this subsection for any period before the first day of the first taxable year to which an election under this subsection applies.

(F) No progress expenditures for property for year it is placed in service, etc.

In the case of any building, no qualified rehabilitation expenditures shall be taken into account under this subsection for the earlier of—

(i) the taxable year in which the building is placed in service, or

(ii) the first taxable year for which recapture is required under section 50(a)(2) with respect to such property,

or for any taxable year thereafter.

(4) Self-rehabilitated building

For purposes of this subsection, the term "self-rehabilitated building" means any building if it is reasonable to believe that more than half of the qualified rehabilitation expenditures for such building will be made directly by the taxpayer.

(5) Election

This subsection shall apply to any taxpayer only if such taxpayer has made an election under this paragraph. Such an election shall apply to the taxable year for which made and all subsequent taxable years. Such an election, once made, may be revoked only with the consent of the Secretary.

(Added Pub. L. 87–834, §2(b), Oct. 16, 1962, 76 Stat. 966; amended Pub. L. 91–172, title VII, §703(c), Dec. 30, 1969, 83 Stat. 666; Pub. L. 91–676, §1, Jan. 12, 1971, 84 Stat. 2060; Pub. L. 92–178, title I, §§102(c), 107(a)(1), (b)(1), Dec. 10, 1971, 85 Stat. 500, 507; Mar. 29, 1975, Pub. L. 94–12, title III, §302(b)(2)(A), (c)(1), (2), 89 Stat. 43, 44; Pub. L. 94–455, title VIII, §804(b), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1594, 1834; Pub. L. 95–600, title III, §317(a), Nov. 6, 1978, 92 Stat. 2830; Pub. L. 95–618, title II, §241(b), Nov. 9, 1978, 92 Stat. 3193; Pub. L. 97–34, title II, §211(f)(2), (g), Aug. 13, 1981, 95 Stat. 231, 233; Pub. L. 97–248, title II, §208(a)(2)(B), Sept. 3, 1982, 96 Stat. 435; Pub. L. 97–448, title I, §102(e)(3), Jan. 12, 1983, 96 Stat. 2371; Pub. L. 98–369, div. A, title IV, §§421(b)(7), 431(b)(2), (d)(4), (5), 474(o)(8), (9), July 18, 1984, 98 Stat. 794, 807, 810, 836; Pub. L. 98–443, §9(p), Oct. 4, 1984, 98 Stat. 1708; Pub. L. 99–121, title I, §103(b)(6), Oct. 11, 1985, 99 Stat. 510; Pub. L. 99–514, title XV, §1511(c)(2), title XVIII, §§1802(a)(5)(A), 1844(b)(1), (2), (4), Oct. 22, 1986, 100 Stat. 2744, 2788, 2855; Pub. L. 100–647, title I, §§1002(a)(18), (26)–(28), 1007(g)(3)(A), Nov. 10, 1988, 102 Stat. 3356, 3357, 3435; Pub. L. 101–508, title XI, §11801(c)(8)(A), 11813(a), Nov. 5, 1990, 104 Stat. 1388–524, 1388–536; Pub. L. 110–289, div. C, title I, §3025(a), July 30, 2008, 122 Stat. 2897; Pub. L. 115–97, title I, §13402(a), (b)(1), Dec. 22, 2017, 131 Stat. 2134.)

Editorial Notes

Prior Provisions

Provisions similar to this section were contained in section 48(g) of this title, prior to the general amendment of this subpart by Pub. L. 101–508.

Amendments

2017—Subsec. (a). Pub. L. 115–97, §13402(a), amended subsec. (a) generally. Prior to amendment, text read as follows: "For purposes of section 46, the rehabilitation credit for any taxable year is the sum of—

"(1) 10 percent of the qualified rehabilitation expenditures with respect to any qualified rehabilitated building other than a certified historic structure, and

"(2) 20 percent of the qualified rehabilitation expenditures with respect to any certified historic structure."

Subsec. (c)(1)(A)(iii). Pub. L. 115–97, §13402(b)(1)(A)(i), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: "in the case of any building other than a certified historic structure, in the rehabilitation process—

"(I) 50 percent or more of the existing external walls of such building are retained in place as external walls,

"(II) 75 percent or more of the existing external walls of such building are retained in place as internal or external walls, and

"(III) 75 percent or more of the existing internal structural framework of such building is retained in place, and".

Subsec. (c)(1)(B) to (D). Pub. L. 115–97, §13402(b)(1)(A)(ii), (iii), redesignated subpars. (C) and (D) as (B) and (C), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: "In the case of a building other than a certified historic structure, a building shall not be a qualified rehabilitated building unless the building was first placed in service before 1936."

Subsec. (c)(2)(B)(iv). Pub. L. 115–97, §13402(b)(1)(B), amended cl. (iv) generally. Prior to amendment, text read as follows: "Any expenditure attributable to the rehabilitation of a certified historic structure or a building in a registered historic district, unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (C)). The preceding sentence shall not apply to a building in a registered historic district if—

"(I) such building was not a certified historic structure,

"(II) the Secretary of the Interior certified to the Secretary that such building is not of historic significance to the district, and

"(III) if the certification referred to in subclause (II) occurs after the beginning of the rehabilitation of such building, the taxpayer certifies to the Secretary that, at the beginning of such rehabilitation, he in good faith was not aware of the requirements of subclause (II)."

2008—Subsec. (c)(2)(B)(v)(I). Pub. L. 110–289 substituted "section 168(h), except that '50 percent' shall be substituted for '35 percent' in paragraph (1)(B)(iii) thereof" for "section 168(h)".

1990—Pub. L. 101–508, §11813(a), amended section generally, substituting section catchline for one which read: "Certain dispositions, etc., of section 38 property" and in text substituting present provisions for provisions relating to general rules regarding disposition of section 38 property, nonapplicability of section in certain cases, the treatment of any increase in tax under the section, increases in nonqualified nonrecourse financing, and transfers between spouses or incident to divorce.

Subsec. (b)(1) to (3). Pub. L. 101–508, §11801(c)(8)(A), inserted "or" at end of par. (1), substituted a period for ", or" at end of par. (2), and struck out par. (3) which related to nonapplicability of subsec. (a) in the case of a transfer of section 38 property related to exchanges under final system plan for ConRail.

1988—Subsec. (a)(5)(D). Pub. L. 100–647, §1002(a)(26)(B), struck out at end "If, prior to a disposition to which this subsection applies, any portion of any credit is not allowable with respect to any property by reason of section 168(i)(3), such portion shall be treated (for purposes of this subparagraph) as not having been used to reduce tax liability."

Subsec. (a)(5)(E)(iii). Pub. L. 100–647, §1002(a)(26)(C), substituted "168(e)" for "168(c)".

Subsec. (a)(5)(E)(v). Pub. L. 100–647, §1002(a)(26)(A), added cl. (v).

Subsec. (a)(9)(A). Pub. L. 100–647, §1002(a)(27), substituted "section 168(h)(2)" for "section 168(j)(4)(C)".

Subsec. (c). Pub. L. 100–647, §1007(g)(3)(A), substituted "D, or G" for "or D".

Subsec. (d)(1). Pub. L. 100–647, §1002(a)(18), substituted "section 46(c)(8)(C)" for "section 48(c)(8)(C)".

Subsec. (d)(3)(C)(i). Pub. L. 100–647, §1002(a)(28), substituted "class life (as defined in section 168(i)(1))" for "present class life (as defined in section 168(g)(2))" and "no class life" for "no present class life".

1986—Subsec. (a)(9). Pub. L. 99–514, §1802(a)(5)(A), added par. (9).

Subsec. (d)(1). Pub. L. 99–514, §1844(b)(1), substituted "reducing the credit base (as defined in section 48(c)(8)(C))" for "reducing the qualified investment" and inserted "For purposes of determining the amount of credit subject to the early disposition or cessation rules of subsection (a), the net increase in the amount of the nonqualified nonrecourse financing with respect to the property shall be treated as reducing the property's credit base (and correspondingly reducing the qualified investment in the property) in the year in which the property was first placed in service."

Subsec. (d)(3)(E)(i). Pub. L. 99–514, §1844(b)(4), inserted "reduced by the sum of the credit recapture amounts with respect to such property for all preceding years".

Subsec. (d)(3)(F). Pub. L. 99–514, §1844(b)(2), struck out subpar. (F) which read as follows: "The amount of any increase in tax under subsection (a) with respect to any property to which this paragraph applies shall be determined by reducing the qualified investment with respect to such property by the aggregate credit recapture amounts for all taxable years under this paragraph."

Subsec. (d)(3)(G). Pub. L. 99–514, §1511(c)(2), substituted "determined at the underpayment rate established under section 6621" for "determined under section 6621".

1985—Subsec. (a)(5)(B). Pub. L. 99–121 substituted "For property other than 3-year property" for "For 15-year, 10-year, and 5-year property" in table heading.

1984—Subsec. (a)(5)(D), (6). Pub. L. 98–369, §474(o)(8), substituted "under section 39" for "under section 46(b)".

Subsec. (a)(7)(C). Pub. L. 98–443 substituted "Secretary of Transportation" for "Civil Aeronautics Board".

Subsec. (c). Pub. L. 98–369, §474(o)(9), substituted "subpart A, B, or D" for "subpart A".

Subsec. (d). Pub. L. 98–369, §431(b)(2), substituted "Increases in nonqualified nonrecourse financing" for "Property ceasing to be at risk" in heading.

Subsec. (d)(1). Pub. L. 98–369, §431(b)(2), substituted provisions relating to increases in tax liability resulting from increases in nonqualified nonrecourse financing for provisions relating to increases in tax liability resulting from the taxpayer ceasing to be at risk with respect to certain property.

Subsec. (d)(2). Pub. L. 98–369, §431(b)(2), substituted provisions that for purposes of par. (1), transfers of debt, or agreements to transfer, occurring more than one year after the initial borrowing shall not be treated as increasing nonqualified nonrecourse financing with respect to the taxpayer for provisions that for purposes of par. (1), such transfers (or agreements to transfer) by a qualified person to a nonqualified person would not cause the taxpayer to be treated as ceasing to be at risk.

Subsec. (d)(3)(A). Pub. L. 98–369, §431(d)(4), substituted "increasing the amount of nonqualified nonrecourse financing (within the meaning of section 46(c)(8))" for "ceasing to be at risk".

Subsec. (d)(3)(B)(i). Pub. L. 98–369, §431(d)(5), struck out "other than a loan described in section 46(c)(8)(B)(ii)" after "section 46(c)(8)(F)(iv)".

Subsec. (e). Pub. L. 98–369, §421(b)(7), added subsec. (e).

1983—Subsec. (d)(2). Pub. L. 97–448, §102(e)(3)(A), substituted "section 46(c)(8)(D)" and "section 46(c)(8)(B)" for "section 48(c)(8)(D)" and "section 48(c)(8)(B)", respectively.

Subsec. (d)(3)(A). Pub. L. 97–448, §102(e)(3)(B), substituted "section 46(c)(8)(F)" for "section 46(c)(8)(E)".

1982—Subsec. (a)(5)(D). Pub. L. 97–248, §208(a)(2)(B), inserted provision that if, prior to a disposition to which this subsection applies, any portion of any credit is not allowable with respect to any property by reason of section 168(i)(3), such portion shall be treated, for purposes of this subparagraph, as not having been used to reduce tax liability.

1981—Subsec. (a)(3)(D). Pub. L. 97–34, §211(g)(2)(A), inserted provisions relating to disposition, cessation, or change in expected use described in paragraph (5).

Subsec. (a)(5), (6). Pub. L. 97–34, §211(g)(1), (2)(B), added par. (5), redesignated former par. (5) as (6) and substituted "paragraph (1), (3), or (5)" for "paragraph (1) or (3)". Former par. (6) redesignated (7).

Subsec. (a)(7), (8). Pub. L. 97–34, §211(g)(1), (2)(C), redesignated former par. (6) as (7), substituted "paragraph (6)" for "paragraph (5)", and redesignated former par. (7) as (8).

Subsec. (d). Pub. L. 97–34, §211(f)(2), added subsec. (d).

1978—Subsec. (a)(4), (5). Pub. L. 95–618, §241(b)(1), added par. (4), redesignated former par. (4) as (5) and substituted "paragraph (2) or (4)" for "paragraph (2)".

Subsec. (a)(6)(B). Pub. L. 95–618, §241(b)(3), substituted "paragraph (5)" for "paragraph (4)".

Subsec. (b)(3). Pub. L. 95–600, §317(a), added par. (3).

1976—Subsec. (a). Pub. L. 94–455, §1906(b)(13)(A), struck out in introductory provision and in par. (3)(C) "or his delegate" after "Secretary".

Subsec. (a)(7). Pub. L. 94–455, §804(b), added par. (7).

1975—Subsec. (a)(3), (4). Pub. L. 94–12, §302(b)(2)(A), (c)(1), added par. (3), redesignated former par. (3) as (4) and substituted "paragraph (1) or (3)" for "paragraph (1)". A former par. (4), relating to increase or adjustment of tax where property is destroyed by casualty, etc., was repealed by Pub. L. 92–178.

Subsec. (a)(5), (6)(B). Pub. L. 94–12, §302(c)(2), substituted "paragraph (4)" for "paragraph (3)".

1971—Subsec. (a)(4). Pub. L. 92–178, §107(a)(1), struck out par. (4) relating to property destroyed by casualty, etc.

Subsec. (a)(5). Pub. L. 92–178, §107(b)(1), provided for the repeal of par. (5) with the repeal not to apply, however, in the case of certain replacement property. See section 107(b)(2) of Pub. L. 92–178, set out in the Effective Date of 1971 Amendment note below.

Subsec. (a)(6)(A). Pub. L. 92–178, §102(c), substituted "3½ years" for "4 years".

Subsec. (a)(6). Pub. L. 91–676 added par. (6).

1969—Subsec. (a)(5). Pub. L. 91–172, §703(c)(2), added par. (5).

Subsec. (a)(4). Pub. L. 91–172, §703(c)(1), inserted provision making subpars. (B) and (C) inapplicable to any casualty or theft occurring after April 18, 1969.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §13402(c), Dec. 22, 2017, 131 Stat. 2134, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and section 145 of this title] shall apply to amounts paid or incurred after December 31, 2017.

"(2) Transition rule.—In the case of qualified rehabilitation expenditures with respect to any building—

"(A) owned or leased by the taxpayer during the entirety of the period after December 31, 2017, and

"(B) with respect to which the 24-month period selected by the taxpayer under clause (i) of section 47(c)(1)(B) of the Internal Revenue Code (as amended by subsection (b)), or the 60-month period applicable under clause (ii) of such section, begins not later than 180 days after the date of the enactment of this Act [Dec. 22, 2017],

the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the 24-month period, or the 60-month period, referred to in subparagraph (B) ends."

Effective Date of 2008 Amendment

Pub. L. 110–289, div. C, title I, §3025(b), July 30, 2008, 122 Stat. 2897, provided that: "The amendments made by this section [amending this section] shall apply to expenditures properly taken into account for periods after December 31, 2007."

Effective Date of 1990 Amendment

Amendment by section 11813(a) of Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K 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

Pub. L. 99–514, title XV, §1511(d), Oct. 22, 1986, 100 Stat. 2746, provided that: "The amendments made by this section [amending this section and sections 48, 167, 644, 852, 4497, 6214, 6332, 6343, 6601, 6602, 6611, 6621, 6654, 6655, and 7426 of this title and sections 1961 and 2411 of Title 28, Judiciary and Judicial Procedure, and enacting provisions set out as a note under section 6621 of this title] shall apply for purposes of determining interest for periods after December 31, 1986."

Amendment by sections 1802(a)(5)(A) and 1844(b)(1), (2), (4) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1985 Amendment

Amendment by Pub. L. 99–121 applicable as if included in the amendments made by section 111 of the Tax Reform Act of 1984, Pub. L. 98–369, see section 105(b)(4) of Pub. L. 99–121, set out as a note under section 168 of this title, and section 111(g) of Pub. L. 98–369, set out as an Effective Date of 1984 Amendment note under section 168 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–443 effective Jan. 1, 1985, see section 9(v) of Pub. L. 98–443, set out as a note under section 5314 of Title 5, Government Organization and Employees.

Amendment by section 421(b)(7) of Pub. L. 98–369 applicable to transfers after July 18, 1984, in taxable years ending after such date, subject to election to have amendment apply to transfers after 1983 or to transfers pursuant to existing decrees, see section 421(d) of Pub. L. 98–369, set out as an Effective Date note under section 1041 of this title.

Amendment by section 431(b)(2), (d)(4), (5) of Pub. L. 98–369 applicable to property placed in service after July 18, 1984, in taxable years ending after such date, but not applicable to property to which subsec. (d) of this section and section 46(c)(8), (9) of this title, as enacted by section 211(f) of Pub. L. 97–34, do not apply, with the taxpayer having an option to elect retroactive application of amendment by Pub. L. 98–369, see section 431(e) of Pub. L. 98–369, set out as a note under section 46 of this title.

Amendment by section 474(o)(8), (9) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.

Effective Date of 1983 Amendment

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

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to agreements entered into after July 1, 1982, or to property placed in service after that date, but not to transitional safe harbor lease property, nor to qualified leased property described in section 168(f)(8)(D)(v) of this title which is placed in service before Jan. 1, 1988, or is placed in service after such date pursuant to a binding contract or commitment entered into before April 1, 1983, and solely because of conditions which, as determined by the Secretary of the Treasury or his delegate, are not within the control of the lessor or lessee, see section 208(d)(1), (2)(A), (5) of Pub. L. 97–248, set out as a note under section 168 of this title.

Effective Date of 1981 Amendment

Amendment by section 211(g) of Pub. L. 97–34 applicable to property placed in service after Dec. 31, 1980, see section 211(i)(1) of Pub. L. 97–34, set out in a note under section 46 of this title.

Amendment by section 211(f)(2) of Pub. L. 97–34 not to apply to property placed in service by the taxpayer on or before Feb. 18, 1981, and property placed in service by the taxpayer after Feb. 18, 1981, where such property was acquired by the taxpayer pursuant to a binding contract entered into on or before that date, see section 211(i)(5) of Pub. L. 97–34, set out as a note under section 46 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §317(b), Nov. 6, 1978, 92 Stat. 2830, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years ending after March 31, 1976."

Effective Date of 1976 Amendment

Amendment by section 804(b) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1974, see section 804(e) of Pub. L. 94–455, set out as a note under section 48 of this title.

Effective Date of 1975 Amendment

Amendment by Pub. L. 94–12 applicable to taxable years ending after Dec. 31, 1974, see section 305(a) of Pub. L. 94–12, set out as a note under section 46 of this title.

Effective Date of 1971 Amendment

In redetermining qualified investment for purposes of subsec. (a) of this section in the case of any property which ceases to be section 38 property with respect to the taxpayer after Aug. 15, 1971, or which becomes public utility property after such date, section 46(c)(2) of this title as amended by section 102(a) of Pub. L. 92–178 as applicable, see section 102(d)(2) of Pub. L. 92–178, set out as a note under section 46 of this title.

Amendment by section 107(a)(1) of Pub. L. 92–178 applicable to casualties and thefts occurring after Aug. 15, 1971, see section 107(a)(2) of Pub. L. 92–178, set out as a note under section 46 of this title.

Pub. L. 92–178, title I, §107(b)(2), Dec. 10, 1971, 85 Stat. 507, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The repeal made by paragraph (1) [repealing subsec. (a)(5) of this section] shall not apply if replacement property described in subparagraph (B) of such section 47(a)(5) is not property described in section 50 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]."

Pub. L. 92–178, title I, §102(d)(3), Dec. 10, 1971, 85 Stat. 500, provided that: "The amendment made by subsection (c) [amending this section] shall apply to leases executed after April 18, 1969."

Pub. L. 91–676, §2, Jan. 12, 1971, 84 Stat. 2060, provided that: "The amendment made by the first section of this Act [amending this section] shall apply to taxable years ending after April 18, 1969."

Effective Date

Section applicable with respect to taxable years ending after Dec. 31, 1961, see section 2(h) of Pub. L. 87–834, set out as a note under section 46 of this title.

Savings Provision

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

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.

Clarification of Effect of 1984 Amendment on Investment Tax Credit

For provision that nothing in the amendments made by section 474(o) of Pub. L. 98–369, which amended this section, be construed as reducing the investment tax credit in taxable years beginning before Jan. 1, 1984, see section 475(c) of Pub. L. 98–369, set out as a note under section 46 of this title.

Transfer of Functions

Functions, powers, and duties of Federal Aviation Agency and of Administrator and other offices and officers thereof transferred by Pub. L. 89–670, Oct. 15, 1966, 80 Stat. 931, to Secretary of Transportation, with functions, powers, and duties of Secretary of Transportation pertaining to aviation safety to be exercised by Federal Aviation Administrator in Department of Transportation, see section 106 of Title 49, Transportation.
26 U.S.C. § 7433A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 76 / Section 7433A: Civil damages for certain unauthorized collection actions by persons performing services under qualified tax collection contracts
Civil damages for certain unauthorized collection actions by persons performing services under qualified tax collection contracts
Status: in_force

(a) In general

Subject to the modifications provided by subsection (b), section 7433 shall apply to the acts and omissions of any person performing services under a qualified tax collection contract (as defined in section 6306(b)) to the same extent and in the same manner as if such person were an employee of the Internal Revenue Service.

(b) Modifications

For purposes of subsection (a):

(1) Any civil action brought under section 7433 by reason of this section shall be brought against the person who entered into the qualified tax collection contract with the Secretary and shall not be brought against the United States.

(2) Such person and not the United States shall be liable for any damages and costs determined in such civil action.

(3) Such civil action shall not be an exclusive remedy with respect to such person.

(4) Subsections (c), (d)(1), and (e) of section 7433 shall not apply.

(Added Pub. L. 108–357, title VIII, §881(b)(1), Oct. 22, 2004, 118 Stat. 1626.)
26 U.S.C. § 59 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 59: Other definitions and special rules
Other definitions and special rules
Status: in_force

(a) Alternative minimum tax foreign tax credit

For purposes of this part—

(1) In general

The alternative minimum tax foreign tax credit for any taxable year shall be the credit which would be determined under section 27 for such taxable year if—

(A) the pre-credit tentative minimum tax were the tax against which such credit was taken for purposes of section 904 for the taxable year and all prior taxable years beginning after December 31, 1986,

(B) section 904 were applied on the basis of alternative minimum taxable income instead of taxable income, and

(C) the determination of whether any income is high-taxed income for purposes of section 904(d)(2) were made on the basis of the applicable rate specified in section 55(b)(1) in lieu of the highest rate of tax specified in section 1.

(2) Pre-credit tentative minimum tax

For purposes of this subsection, the term "pre-credit tentative minimum tax" means the amount determined under the first sentence of section 55(b)(1)(A).

(3) Election to use simplified section 904 limitation

(A) In general

In determining the alternative minimum tax foreign tax credit for any taxable year to which an election under this paragraph applies—

(i) subparagraph (B) of paragraph (1) shall not apply, and

(ii) the limitation of section 904 shall be based on the proportion which—

(I) the taxpayer's taxable income (as determined for purposes of the regular tax) from sources without the United States (but not in excess of the taxpayer's entire alternative minimum taxable income), bears to

(II) the taxpayer's entire alternative minimum taxable income for the taxable year.

(B) Election

(i) In general

An election under this paragraph may be made only for the taxpayer's first taxable year which begins after December 31, 1997, and for which the taxpayer claims an alternative minimum tax foreign tax credit.

(ii) Election revocable only with consent

An election under this paragraph, once made, shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.

[(b) Repealed. Pub. L. 115–97, title I, §12001(b)(10), Dec. 22, 2017, 131 Stat. 2093]

(c) Treatment of estates and trusts

In the case of any estate or trust, the alternative minimum taxable income of such estate or trust and any beneficiary thereof shall be determined by applying part I of subchapter J with the adjustments provided in this part.

(d) Apportionment of differently treated items in case of certain entities

(1) In general

The differently treated items for the taxable year shall be apportioned (in accordance with regulations prescribed by the Secretary)—

(A) Regulated investment companies and real estate investment trusts

In the case of a regulated investment company to which part I of subchapter M applies or a real estate investment company to which part II of subchapter M applies, between such company or trust and shareholders and holders of beneficial interest in such company or trust.

(B) Common trust funds

In the case of a common trust fund (as defined in section 584(a)), pro rata among the participants of such fund.

(2) Differently treated items

For purposes of this section, the term "differently treated item" means any item of tax preference or any other item which is treated differently for purposes of this part than for purposes of computing the regular tax.

(e) Optional 10-year writeoff of certain tax preferences

(1) In general

For purposes of this title, any qualified expenditure to which an election under this paragraph applies shall be allowed as a deduction ratably over the 10-year period (3-year period in the case of circulation expenditures described in section 173) beginning with the taxable year in which such expenditure was made (or, in the case of a qualified expenditure described in paragraph (2)(C), over the 60-month period beginning with the month in which such expenditure was paid or incurred).

(2) Qualified expenditure

For purposes of this subsection, the term "qualified expenditure" means any amount which, but for an election under this subsection, would have been allowable as a deduction (determined without regard to section 291) for the taxable year in which paid or incurred under—

(A) section 173 (relating to circulation expenditures),

(B) section 174(a) (relating to research and experimental expenditures),

(C) section 263(c) (relating to intangible drilling and development expenditures),

(D) section 616(a) (relating to development expenditures), or

(E) section 617(a) (relating to mining exploration expenditures).

(3) Other sections not applicable

Except as provided in this subsection, no deduction shall be allowed under any other section for any qualified expenditure to which an election under this subsection applies.

(4) Election

(A) In general

An election may be made under paragraph (1) with respect to any portion of any qualified expenditure.

(B) Revocable only with consent

Any election under this subsection may be revoked only with the consent of the Secretary.

(C) Partners and shareholders of S corporations

In the case of a partnership, any election under paragraph (1) shall be made separately by each partner with respect to the partner's allocable share of any qualified expenditure. A similar rule shall apply in the case of an S corporation and its shareholders.

(5) Dispositions

(A) Application of section 1254

In the case of any disposition of property to which section 1254 applies (determined without regard to this section), any deduction under paragraph (1) with respect to amounts which are allocable to such property shall, for purposes of section 1254, be treated as a deduction allowable under section 263(c), 616(a), or 617(a), whichever is appropriate.

(B) Application of section 617(d)

In the case of any disposition of mining property to which section 617(d) applies (determined without regard to this subsection), any deduction under paragraph (1) with respect to amounts which are allocable to such property shall, for purposes of section 617(d), be treated as a deduction allowable under section 617(a).

(6) Amounts to which election apply not treated as tax preference

Any portion of any qualified expenditure to which an election under paragraph (1) applies shall not be treated as an item of tax preference under section 57(a) and section 56 shall not apply to such expenditure.

[(f) Repealed. Pub. L. 115–97, title I, §12001(b)(10), Dec. 22, 2017, 131 Stat. 2093]

(g) Tax benefit rule

The Secretary may prescribe regulations under which differently treated items shall be properly adjusted where the tax treatment giving rise to such items will not result in the reduction of the taxpayer's regular tax for the taxable year for which the item is taken into account or for any other taxable year.

(h) Coordination with certain limitations

The limitations of sections 704(d), 465, and 1366(d) (and such other provisions as may be specified in regulations) shall be applied for purposes of computing the alternative minimum taxable income of the taxpayer for the taxable year with the adjustments of sections 56, 57, and 58.

(i) Special rule for amounts treated as tax preference

For purposes of this subtitle (other than this part), any amount shall not fail to be treated as wholly exempt from tax imposed by this subtitle solely by reason of being included in alternative minimum taxable income.

(j) Treatment of unearned income of minor children

(1) In general

In the case of a child to whom section 1(g) applies, the exemption amount for purposes of section 55 shall not exceed the sum of—

(A) such child's earned income (as defined in section 911(d)(2)) for the taxable year, plus

(B) $5,000.

(2) Inflation adjustment

In the case of any taxable year beginning in a calendar year after 1998, the dollar amount in paragraph (1)(B) shall be increased by an amount equal to the product of—

(A) such dollar amount, and

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "1997" for "2016" in subparagraph (A)(ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

(k) Applicable corporation

For purposes of this part—

(1) Applicable corporation defined

(A) In general

The term "applicable corporation" means, with respect to any taxable year, any corporation (other than an S corporation, a regulated investment company, or a real estate investment trust) which meets the average annual adjusted financial statement income test of subparagraph (B) for one or more taxable years which—

(i) are prior to such taxable year, and

(ii) end after December 31, 2021.

(B) Average annual adjusted financial statement income test

For purposes of this subsection—

(i) a corporation meets the average annual adjusted financial statement income test for a taxable year if the average annual adjusted financial statement income of such corporation (determined without regard to section 56A(d)) for the 3-taxable-year period ending with such taxable year exceeds $1,000,000,000, and

(ii) in the case of a corporation described in paragraph (2), such corporation meets the average annual adjusted financial statement income test for a taxable year if—

(I) the corporation meets the requirements of clause (i) for such taxable year (determined after the application of paragraph (2)), and

(II) the average annual adjusted financial statement income of such corporation (determined without regard to the application of paragraph (2) and without regard to section 56A(d)) for the 3-taxable-year-period ending with such taxable year is $100,000,000 or more.

(C) Exception

Notwithstanding subparagraph (A), the term "applicable corporation" shall not include any corporation which otherwise meets the requirements of subparagraph (A) if—

(i) such corporation—

(I) has a change in ownership, or

(II) has a specified number (to be determined by the Secretary and which shall, as appropriate, take into account the facts and circumstances of the taxpayer) of consecutive taxable years, including the most recent taxable year, in which the corporation does not meet the average annual adjusted financial statement income test of subparagraph (B), and

(ii) the Secretary determines that it would not be appropriate to continue to treat such corporation as an applicable corporation.

The preceding sentence shall not apply to any corporation if, after the Secretary makes the determination described in clause (ii), such corporation meets the average annual adjusted financial statement income test of subparagraph (B) for any taxable year beginning after the first taxable year for which such determination applies.

(D) Special rules for determining applicable corporation status

Solely for purposes of determining whether a corporation is an applicable corporation under this paragraph, all adjusted financial statement income of persons treated as a single employer with such corporation under subsection (a) or (b) of section 52 shall be treated as adjusted financial statement income of such corporation, and adjusted financial statement income of such corporation shall be determined without regard to paragraphs (2)(D)(i) and (11) of section 56A(c).

(E) Other special rules

(i) Corporations in existence for less than 3 years

If the corporation was in existence for less than 3-taxable years, subparagraph (B) shall be applied on the basis of the period during which such corporation was in existence.

(ii) Short taxable years

Adjusted financial statement income for any taxable year of less than 12 months shall be annualized by multiplying the adjusted financial statement income for the short period by 12 and dividing the result by the number of months in the short period.

(iii) Treatment of predecessors

Any reference in this subparagraph to a corporation shall include a reference to any predecessor of such corporation.

(2) Special rule for foreign-parented multinational groups

(A) In general

If a corporation is a member of a foreign-parented multinational group for any taxable year, then, solely for purposes of determining whether such corporation meets the average annual adjusted financial statement income test under paragraph (1)(B)(ii)(I) for such taxable year, the adjusted financial statement income of such corporation for such taxable year shall include the adjusted financial statement income of all members of such group. Solely for purposes of this subparagraph, adjusted financial statement income shall be determined without regard to paragraphs (2)(D)(i), (3), (4), and (11) of section 56A(c).

(B) Foreign-parented multinational group

For purposes of subparagraph (A), the term "foreign-parented multinational group" means, with respect to any taxable year, two or more entities if—

(i) at least one entity is a domestic corporation and another entity is a foreign corporation,

(ii) such entities are included in the same applicable financial statement with respect to such year, and

(iii) either—

(I) the common parent of such entities is a foreign corporation, or

(II) if there is no common parent, the entities are treated as having a common parent which is a foreign corporation under subparagraph (D).

(C) Foreign corporations engaged in a trade or business within the United States

For purposes of this paragraph, if a foreign corporation is engaged in a trade or business within the United States, such trade or business shall be treated as a separate domestic corporation that is wholly owned by the foreign corporation.

(D) Other rules

The Secretary shall, applying the principles of this section, prescribe rules for the application of this paragraph, including rules for the determination of—

(i) the entities (if any) which are to be to be treated under subparagraph (B)(iii)(II) as having a common parent which is a foreign corporation,

(ii) the entities to be included in a foreign-parented multinational group, and

(iii) the common parent of a foreign-parented multinational group.

(3) Regulations or other guidance

The Secretary shall provide regulations or other guidance for the purposes of carrying out this subsection, including regulations or other guidance—

(A) providing a simplified method for determining whether a corporation meets the requirements of paragraph (1), and

'(B) 1 addressing the application of this subsection to a corporation that experiences a change in ownership.

(l) Corporate AMT foreign tax credit

(1) In general

For purposes of this part, if an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N for any taxable year, the corporate AMT foreign tax credit for the taxable year of the applicable corporation is an amount equal to sum of—

(A) the lesser of—

(i) the aggregate of the applicable corporation's pro rata share (as determined under section 56A(c)(3)) of the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States which are—

(I) taken into account on the applicable financial statement of each controlled foreign corporation with respect to which the applicable corporation is a United States shareholder, and

(II) paid or accrued (for Federal income tax purposes) by each such controlled foreign corporation, or

(ii) the product of the amount of the adjustment under section 56A(c)(3) and the percentage specified in section 55(b)(2)(A)(i), and

(B) in the case of an applicable corporation that is a domestic corporation, the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States to the extent such taxes are—

(i) taken into account on the applicable corporation's applicable financial statement, and

(ii) paid or accrued (for Federal income tax purposes) by the applicable corporation.

(2) Carryover of excess tax paid

For any taxable year for which an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N, the excess of the amount described in paragraph (1)(A)(i) over the amount described in paragraph (1)(A)(ii) shall increase the amount described in paragraph (1)(A)(i) in any of the first 5 succeeding taxable years to the extent not taken into account in a prior taxable year.

(3) Regulations or other guidance

The Secretary shall provide for such regulations or other guidance as is necessary to carry out the purposes of this subsection.

(Added Pub. L. 99–514, title VII, §701(a), Oct. 22, 1986, 100 Stat. 2336; amended Pub. L. 100–647, title I, §§1007(e), 1014(e)(5)(A), Nov. 10, 1988, 102 Stat. 3432, 3561; Pub. L. 101–239, title VII, §§7611(f)(5)(B), (6), 7612(e)(1), 7811(d)(1)(A), (j)(7), Dec. 19, 1989, 103 Stat. 2373, 2374, 2408, 2412; Pub. L. 101–508, title XI, §§11101(d)(3), 11531(b)(2), 11702(d), 11801(c)(2)(D), Nov. 5, 1990, 104 Stat. 1388–405, 1388–490, 1388–514, 1388–523; Pub. L. 102–486, title XIX, §1915(c)(3), Oct. 24, 1992, 106 Stat. 3024; Pub. L. 104–188, title I, §§1601(b)(2)(D), 1702(a)(1), 1703(e), 1704(m)(3), Aug. 20, 1996, 110 Stat. 1833, 1868, 1875, 1883; Pub. L. 105–34, title X, §1057(a), title XI, §1103(a), title XII, §1201(b)(1), Aug. 5, 1997, 111 Stat. 945, 966, 994; Pub. L. 105–206, title VI, §§6011(a), 6023(2), July 22, 1998, 112 Stat. 817, 824; Pub. L. 108–357, title IV, §421(a)(1), Oct. 22, 2004, 118 Stat. 1514; Pub. L. 115–97, title I, §§11002(d)(4), 12001(b)(3)(C), (10), Dec. 22, 2017, 131 Stat. 2061, 2093; Pub. L. 115–141, div. U, title IV, §401(d)(1)(D)(ii), Mar. 23, 2018, 132 Stat. 1206; Pub. L. 117–169, title I, §§10101(a)(2), (c), 13904(a), Aug. 16, 2022, 136 Stat. 1818, 1827, 2014.)

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

Amendments

2022—Subsec. (k). Pub. L. 117–169, §10101(a)(2), added subsec. (k).

Subsec. (k)(1)(D). Pub. L. 117–169, §13904(a), amended subpar. (D) generally. Prior to amendment, text of subpar. (D) read as follows:

"(i) In general.—Solely for purposes of determining whether a corporation is an applicable corporation under this paragraph, all adjusted financial statement income of persons treated as a single employer with such corporation under subsection (a) or (b) of section 52 (determined with the modifications described in clause (ii)) shall be treated as adjusted financial statement income of such corporation, and adjusted financial statement income of such corporation shall be determined without regard to paragraphs (2)(D)(i) and (11) of section 56A(c).

"(ii) Modifications.—For purposes of this subparagraph—

"(I) section 52(a) shall be applied by substituting 'component members' for 'members', and

"(II) for purposes of applying section 52(b), the term 'trade or business' shall include any activity treated as a trade or business under paragraph (5) or (6) of section 469(c) (determined without regard to the phrase 'To the extent provided in regulations' in such paragraph (6)).

"(iii) Component member.—For purposes of this subparagraph, the term 'component member' has the meaning given such term by section 1563(b), except that the determination shall be made without regard to section 1563(b)(2)."

Subsec. (l). Pub. L. 117–169, §10101(c), added subsec. (l).

2018—Subsec. (a)(1). Pub. L. 115–141 substituted "27" for "27(a)" in introductory provisions.

2017—Subsec. (a)(1)(C). Pub. L. 115–97, §12001(b)(3)(C)(i), substituted "section 55(b)(1) in lieu of the highest rate of tax specified in section 1" for "subparagraph (A)(i) or (B)(i) of section 55(b)(1) (whichever applies) in lieu of the highest rate of tax specified in section 1 or 11 (whichever applies)".

Subsec. (a)(2). Pub. L. 115–97, §12001(b)(3)(C)(ii), substituted "means the amount determined under the first sentence of section 55(b)(1)(A)." for "means—

"(A) in the case of a taxpayer other than a corporation, the amount determined under the first sentence of section 55(b)(1)(A)(i), or

"(B) in the case of a corporation, the amount determined under section 55(b)(1)(B)(i)."

Subsec. (b). Pub. L. 115–97, §12001(b)(10), struck out subsec. (b). Text read as follows: "In the case of any corporation for which a credit is allowable for the taxable year under section 30A or 936, alternative minimum taxable income shall not include any income with respect to which a credit is determined under section 30A or 936."

Subsec. (f). Pub. L. 115–97, §12001(b)(10), struck out subsec. (f). Text read as follows: "Except as otherwise provided in this part, section 291 (relating to cutback of corporate preferences) shall apply before the application of this part."

Subsec. (j)(2)(B). Pub. L. 115–97, §11002(d)(4), substituted "for '2016' in subparagraph (A)(ii)" for "for '1992' in subparagraph (B)".

2004—Subsec. (a)(2) to (4). Pub. L. 108–357 redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which related to limitation on alternative minimum tax foreign tax credit and carryback and carryforward of excess.

1998—Subsec. (a)(3), (4). Pub. L. 105–206, §6011(a), redesignated par. (3), relating to election to use simplified section 904 limitation, as (4).

Subsec. (b). Pub. L. 105–206, §6023(2), substituted "credits under section 30A or 936" for "section 936 credit" in heading.

1997—Subsec. (a)(2)(C). Pub. L. 105–34, §1057(a), struck out subpar. (C) which read as follows:

"(C) Exception.—Subparagraph (A) shall not apply to any domestic corporation if—

"(i) more than 50 percent of the stock of such domestic corporation (by vote and value) is owned by United States persons who are not members of an affiliated group (as defined in section 1504 of such Code) which includes such corporation,

"(ii) all of the activities of such corporation are conducted in 1 foreign country with which the United States has an income tax treaty in effect and such treaty provides for the exchange of information between such foreign country and the United States,

"(iii) all of the current earnings and profits of such corporation are distributed at least annually (other than current earnings and profits retained for normal maintenance or capital replacements or improvements of an existing business), and

"(iv) all of such distributions by such corporation to United States persons are used by such persons in a trade or business conducted in the United States."

Subsec. (a)(3). Pub. L. 105–34, §1103(a), added par. (3) relating to election to use simplified section 904 limitation.

Subsec. (j). Pub. L. 105–34, §1201(b)(1), amended subsec. (j) generally, restating limitation on exemption amount, adding provisions for inflation adjustment of such amount, and deleting provisions relating to limitation based on parental minimum tax and unused parental minimum tax exemption.

1996—Subsec. (a)(1)(A). Pub. L. 104–188, §1703(e)(1), substituted "the pre-credit tentative minimum tax" for "the amount determined under section 55(b)(1)(A)".

Subsec. (a)(1)(C). Pub. L. 104–188, §1703(e)(2), substituted "specified in subparagraph (A)(i) or (B)(i) of section 55(b)(1) (whichever applies)" for "specified in section 55(b)(1)(A)".

Subsec. (a)(2)(A)(i). Pub. L. 104–188, §1703(e)(1), substituted "the pre-credit tentative minimum tax" for "the amount determined under section 55(b)(1)(A)".

Subsec. (a)(2)(A)(ii). Pub. L. 104–188, §1703(e)(3), substituted "which would be the pre-credit tentative minimum tax" for "which would be determined under section 55(b)(1)(A)".

Subsec. (a)(3). Pub. L. 104–188, §1703(e)(4), added par. (3).

Subsec. (b). Pub. L. 104–188, §1601(b)(2)(D), substituted "section 30A or 936, alternative minimum taxable income shall not include any income with respect to which a credit is determined under section 30A or 936." for "section 936, alternative minimum taxable income shall not include any amount with respect to which the requirements of subparagraph (A) or (B) of section 936(a)(1) are met."

Subsec. (j)(1)(B). Pub. L. 104–188, §1704(m)(3), substituted "twice the amount in effect for the taxable year under section 63(c)(5)(A)" for "$1,000".

Subsec. (j)(3)(B). Pub. L. 104–188, §1702(a)(1), substituted "section 1(g)(3)(B)" for "section 1(i)(3)(B)".

1992—Subsec. (a)(2)(A)(ii). Pub. L. 102–486 substituted "and section 57(a)(2)(E)" for "and the alternative tax energy preference deduction under section 56(h)".

1990—Subsec. (a)(1)(B) to (D). Pub. L. 101–508, §11801(c)(2)(D), inserted "and" at end of subpar. (B), redesignated subpar. (D) as (C), and struck out former subpar. (C) which read as follows: "for purposes of section 904, any increase in alternative minimum taxable income by reason of section 56(c)(1)(A) (relating to adjustment for book income) shall have the same proportionate source (and character) as alternative minimum taxable income determined without regard to such increase, and".

Subsec. (a)(2)(A)(ii). Pub. L. 101–508, §11531(b)(2), inserted before period at end "and the alternative tax energy preference deduction under section 56(h)".

Subsec. (j). Pub. L. 101–508, §11101(d)(3)(A), substituted "section 1(g)" for "section 1(i)" in pars. (1), (2)(A), (B)(i)(I), (II), (D), and (3).

Subsec. (j)(1)(B). Pub. L. 101–508, §11702(d)(1), inserted "(or, if greater, the child's share of the unused parental minimum tax exemption)" before period at end.

Subsec. (j)(2)(C). Pub. L. 101–508, §11101(d)(3)(B), substituted "section 1(g)(3)(B)" for "section 1(i)(3)(B)".

Subsec. (j)(2)(D). Pub. L. 101–508, §11702(d)(3), substituted "paragraphs (3)(D), (5), and (6)" for "paragraphs (5) and (6)".

Subsec. (j)(3). Pub. L. 101–508, §11702(d)(2), added par. (3).

1989—Subsec. (a)(2)(C). Pub. L. 101–239, §7612(e)(1), added subpar. (C).

Subsec. (e)(1). Pub. L. 101–239, §7611(f)(5)(B), inserted before period at end "(or, in the case of a qualified expenditure described in paragraph (2)(C), over the 60-month period beginning with the month in which such expenditure was paid or incurred)".

Subsec. (g). Pub. L. 101–239, §7811(d)(1)(A), substituted "for the taxable year for which the item is taken into account or for any other taxable year" for "for any taxable year".

Subsec. (i). Pub. L. 101–239, §7611(f)(6), substituted "amounts" for "interest" in heading and "any amount shall" for "interest shall" in text.

Subsec. (j)(2)(D). Pub. L. 101–239, §7811(j)(7), substituted "Other rules" for "Others rules" in heading.

1988—Subsec. (a)(1)(D). Pub. L. 100–647, §1007(e)(3), added subpar. (D).

Subsec. (e)(2). Pub. L. 100–647, §1007(e)(1), inserted "(determined without regard to section 291)" after "as a deduction".

Subsec. (h). Pub. L. 100–647, §1007(e)(2), substituted "taxable year with the adjustments of sections 56, 57, and 58" for "taxable year—

"(1) with the adjustments of section 56, and

"(2) by not taking into account any deduction to the extent such deduction is an item of tax preference under section 57(a)".

Subsec. (i). Pub. L. 100–647, §1007(e)(4), inserted "(other than this part)" after "of this subtitle" and substituted "subtitle" for "title" before "solely".

Subsec. (j). Pub. L. 100–647, §1014(e)(5)(A), added subsec. (j).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Amendment by section 10101(a)(2), (c) of Pub. L. 117–169 applicable to taxable years beginning after Dec. 31, 2022, see section 10101(f) of Pub. L. 117–169, set out as a note under section 11 of this title.

Effective Date of 2017 Amendment

Amendment by section 11002(d)(4) 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 12001(b)(3)(C), (10) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title.

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 421(b) of Pub. L. 108–357, set out as a note under section 53 of this title.

Effective Date of 1998 Amendment

Amendment by section 6023(2) of Pub. L. 105–206 effective July 22, 1998, see section 6023(32) of Pub. L. 105–206, set out as a note under section 34 of this title.

Amendment by section 6011(a) of Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, §1057(b), Aug. 5, 1997, 111 Stat. 945, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997]."

Pub. L. 105–34, title XI, §1103(b), Aug. 5, 1997, 111 Stat. 966, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1997."

Pub. L. 105–34, title XII, §1201(c), Aug. 5, 1997, 111 Stat. 994, provided that: "The amendments made by this section [amending this section and sections 63 and 6103 of this title] shall apply to taxable years beginning after December 31, 1997."

Effective Date of 1996 Amendment

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

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

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

Amendment by section 1704(m)(3) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, see section 1704(m)(4) of Pub. L. 104–188, set out as a note under section 1 of this title.

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–486 applicable to taxable years beginning after Dec. 31, 1992, see section 1915(d) of Pub. L. 102–486, set out as a note under section 56 of this title.

Effective Date of 1990 Amendment

Amendment by section 11101(d)(3) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11101(e) of Pub. L. 101–508, set out as a note under section 1 of this title.

Amendment by section 11531(b)(2) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11531(c) of Pub. L. 101–508, set out as a note under section 56 of this title.

Pub. L. 101–508, title XI, §11702(j), Nov. 5, 1990, 104 Stat. 1388–516, provided that: "Any amendment made by this section [amending this section and sections 135, 216, 355, 367, 447, 453B, 468B, 2056, 2056A, 2523, 4980B, and 6114 of this title] shall take effect as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100–647] to which such amendment relates."

Effective Date of 1989 Amendment

Amendment by section 7611(f)(6) of Pub. L. 101–239 applicable to taxable years beginning after Dec. 31, 1989, see section 7611(g)(1) of Pub. L. 101–239, set out as a note under section 56 of this title.

Amendment by section 7611(f)(5)(B) of Pub. L. 101–239 applicable to costs paid or incurred in taxable years beginning after Dec. 31, 1989, see section 7611(g)(2) of Pub. L. 101–239, set out as a note under section 56 of this title.

Pub. L. 101–239, title VII, §7612(e)(2), Dec. 19, 1989, 103 Stat. 2375, provided that:

"(A) In general.—The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after March 31, 1990.

"(B) Special rule for year which includes march 31, 1990.—In the case of any taxable year (of a corporation described in subparagraph (C) of section 59(a)(2) of the Internal Revenue Code of 1986 (as added by paragraph (1))) which begins after December 31, 1989, and includes March 31, 1990, the amount determined under clause (ii) of section 59(a)(2)(A) of such Code shall be an amount which bears the same ratio to the amount which would have been determined under such clause without regard to this subparagraph as the number of days in such taxable year on or before March 31, 1990, bears to the total number of days in such taxable year."

Amendment by section 7811(d)(1)(A), (j)(7) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by section 1007(e) 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 I, §1014(e)(5)(B), Nov. 10, 1988, 102 Stat. 3562, provided that: "The amendment made by subparagraph (A) [amending this section] shall apply to taxable years beginning after December 31, 1988."

Effective Date

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

Savings Provision

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

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

Consideration of Certain Taxes Treated as Paid or Accrued Under Section 904(c) in Determination of Alternative Minimum Tax Foreign Tax Credit

Pub. L. 100–647, title I, §1007(f)(5), Nov. 10, 1988, 102 Stat. 3434, provided that: "In determining the amount of the alternative minimum tax foreign tax credit under section 59 of the 1986 Code, there shall not be taken into account any taxes paid or accrued in a taxable year beginning after December 31, 1986, which are treated under section 904(c) of the 1986 Code as paid or accrued in a taxable year beginning on or before December 31, 1986."

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

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

1 So in original.
26 U.S.C. § 172 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 172: Net operating loss deduction
Net operating loss deduction
Status: in_force

(a) Deduction allowed

There shall be allowed as a deduction for the taxable year an amount equal to—

(1) in the case of a taxable year beginning before January 1, 2021, the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and

(2) in the case of a taxable year beginning after December 31, 2020, the sum of—

(A) the aggregate amount of net operating losses arising in taxable years beginning before January 1, 2018, carried to such taxable year, plus

(B) the lesser of—

(i) the aggregate amount of net operating losses arising in taxable years beginning after December 31, 2017, carried to such taxable year, or

(ii) 80 percent of the excess (if any) of—

(I) taxable income computed without regard to the deductions under this section and sections 199A and 250, over

(II) the amount determined under subparagraph (A).

For purposes of this subtitle, the term "net operating loss deduction" means the deduction allowed by this subsection.

(b) Net operating loss carrybacks and carryovers

(1) Years to which loss may be carried

(A) General rule

A net operating loss for any taxable year—

(i) shall be a net operating loss carryback to the extent provided in subparagraphs (B), (C)(i), and (D), and

(ii) except as provided in subparagraph (C)(ii), shall be a net operating loss carryover—

(I) in the case of a net operating loss arising in a taxable year beginning before January 1, 2018, to each of the 20 taxable years following the taxable year of the loss, and

(II) in the case of a net operating loss arising in a taxable year beginning after December 31, 2017, to each taxable year following the taxable year of the loss.

(B) Farming losses

(i) In general

In the case of any portion of a net operating loss for the taxable year which is a farming loss with respect to the taxpayer, such loss shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss.

(ii) Farming loss

For purposes of this section, the term "farming loss" means the lesser of—

(I) the amount which would be the net operating loss for the taxable year if only income and deductions attributable to farming businesses (as defined in section 263A(e)(4)) are taken into account, or

(II) the amount of the net operating loss for such taxable year.

(iii) Coordination with paragraph (2)

For purposes of applying paragraph (2), a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year.

(iv) Election

Any taxpayer entitled to a 2-year carryback under clause (i) from any loss year may elect not to have such clause apply to such loss year. Such election shall be made in such manner as prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.

(C) Insurance companies

In the case of an insurance company (as defined in section 816(a)) other than a life insurance company, the net operating loss for any taxable year—

(i) shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss, and

(ii) shall be a net operating loss carryover to each of the 20 taxable years following the taxable year of the loss.

(D) Special rule for losses arising in 2018, 2019, and 2020

(i) In general

In the case of any net operating loss arising in a taxable year beginning after December 31, 2017, and before January 1, 2021—

(I) such loss shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of such loss, and

(II) subparagraphs (B) and (C)(i) shall not apply.

(ii) Special rules for REITs

For purposes of this subparagraph—

(I) In general

A net operating loss for a REIT year shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss.

(II) Special rule

In the case of any net operating loss for a taxable year which is not a REIT year, such loss shall not be carried to any preceding taxable year which is a REIT year.

(III) REIT year

For purposes of this subparagraph, the term "REIT year" means any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to the taxpayer.

(iii) Special rule for life insurance companies

 In the case of a life insurance company, if a net operating loss is carried pursuant to clause (i)(I) to a life insurance company taxable year beginning before January 1, 2018, such net operating loss carryback shall be treated in the same manner as an operations loss carryback (within the meaning of section 810 as in effect before its repeal) of such company to such taxable year.

(iv) Rule relating to carrybacks to years to which section 965 applies

If a net operating loss of a taxpayer is carried pursuant to clause (i)(I) to any taxable year in which an amount is includible in gross income by reason of section 965(a), the taxpayer shall be treated as having made the election under section 965(n) with respect to each such taxable year.

(v) Special rules for elections under paragraph (3)

(I) Special election to exclude section 965 years

If the 5-year carryback period under clause (i)(I) with respect to any net operating loss of a taxpayer includes 1 or more taxable years in which an amount is includible in gross income by reason of section 965(a), the taxpayer may, in lieu of the election otherwise available under paragraph (3), elect under such paragraph to exclude all such taxable years from such carryback period.

(II) Time of elections

An election under paragraph (3) (including an election described in subclause (I)) with respect to a net operating loss arising in a taxable year beginning in 2018 or 2019 shall be made by the due date (including extensions of time) for filing the taxpayer's return for the first taxable year ending after the date of the enactment of this subparagraph.

(2) Amount of carrybacks and carryovers

The entire amount of the net operating loss for any taxable year (hereinafter in this section referred to as the "loss year") shall be carried to the earliest of the taxable years to which (by reason of paragraph (1)) such loss may be carried. The portion of such loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sentence, the taxable income for any such prior taxable year shall—

(A) be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,

(B) not be considered to be less than zero, and

(C) for taxable years beginning after December 31, 2020, be reduced by 20 percent of the excess (if any) described in subsection (a)(2)(B)(ii) for such taxable year.

(3) Election to waive carryback

Any taxpayer entitled to a carryback period under paragraph (1) may elect to relinquish the entire carryback period with respect to a net operating loss for any taxable year. Such election shall be made in such manner as may be prescribed by the Secretary, and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss for which the election is to be in effect. Such election, once made for any taxable year, shall be irrevocable for such taxable year.

(c) Net operating loss defined

For purposes of this section, the term "net operating loss" means the excess of the deductions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection (d).

(d) Modifications

The modifications referred to in this section are as follows:

(1) Net operating loss deduction

No net operating loss deduction shall be allowed.

(2) Capital gains and losses of taxpayers other than corporations

In the case of a taxpayer other than a corporation—

(A) the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includable on account of gains from sales or exchanges of capital assets; and

(B) the exclusion provided by section 1202 shall not be allowed.

(3) Deduction for personal exemptions

No deduction shall be allowed under section 151 (relating to personal exemptions). No deduction in lieu of any such deduction shall be allowed.

(4) Nonbusiness deductions of taxpayers other than corporations

In the case of a taxpayer other than a corporation, the deductions allowable by this chapter which are not attributable to a taxpayer's trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or business. For purposes of the preceding sentence—

(A) any gain or loss from the sale or other disposition of—

(i) property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or

(ii) real property used in the trade or business,

shall be treated as attributable to the trade or business;

(B) the modifications specified in paragraphs (1), (2)(B), and (3) shall be taken into account;

(C) any deduction for casualty or theft losses allowable under paragraph (2) or (3) of section 165(c) shall be treated as attributable to the trade or business; and

(D) any deduction allowed under section 404 to the extent attributable to contributions which are made on behalf of an individual who is an employee within the meaning of section 401(c)(1) shall not be treated as attributable to the trade or business of such individual.

(5) Computation of deduction for dividends received

The deductions allowed by sections 243 (relating to dividends received by corporations) and 245 (relating to dividends received from certain foreign corporations) shall be computed without regard to section 246(b) (relating to limitation on aggregate amount of deductions).

(6) Modifications related to real estate investment trusts

In the case of any taxable year for which part II of subchapter M (relating to real estate investment trusts) applies to the taxpayer—

(A) the net operating loss for such taxable year shall be computed by taking into account the adjustments described in section 857(b)(2) (other than the deduction for dividends paid described in section 857(b)(2)(B));

(B) where such taxable year is a "prior taxable year" referred to in paragraph (2) of subsection (b), the term "taxable income" in such paragraph shall mean "real estate investment trust taxable income" (as defined in section 857(b)(2)); and

(C) subsection (a)(2)(B)(ii)(I) shall be applied by substituting "real estate investment trust taxable income (as defined in section 857(b)(2) but without regard to the deduction for dividends paid (as defined in section 561))" for "taxable income".

[(7) Repealed. Pub. L. 115–97, title I, §13305(b)(3), Dec. 22, 2017, 131 Stat. 2126]

(8) Qualified business income deduction

Any deduction under section 199A shall not be allowed.

(9) Deduction for foreign-derived intangible income

The deduction under section 250 shall not be allowed.

(e) Law applicable to computations

In determining the amount of any net operating loss carryback or carryover to any taxable year, the necessary computations involving any other taxable year shall be made under the law applicable to such other taxable year.

(f) Special rule for insurance companies

In the case of an insurance company (as defined in section 816(a)) other than a life insurance company—

(1) the amount of the deduction allowed under subsection (a) shall be the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and

(2) subparagraph (C) of subsection (b)(2) shall not apply.

(g) Cross references

(1) For treatment of net operating loss carryovers in certain corporate acquisitions, see section 381.

(2) For special limitation on net operating loss carryovers in case of a corporate change of ownership, see section 382.

(Aug. 16, 1954, ch. 736, 68A Stat. 63; Pub. L. 85–866, title I, §§14(a), (b), 64(b), title II, §203(a), (b), Sept. 2, 1958, 72 Stat. 1611, 1656, 1678; Pub. L. 87–710, §1, Sept. 27, 1962, 76 Stat. 648; Pub. L. 87–792, §7(f), Oct. 10, 1962, 76 Stat. 829; Pub. L. 87–794, title III, §317(b), Oct. 11, 1962, 76 Stat. 889; Pub. L. 88–272, title II, §§210(a), (b), 234(b)(5), Feb. 26, 1964, 78 Stat. 47, 48, 115; Pub. L. 90–225, §3(a), Dec. 27, 1967, 81 Stat. 732; Pub. L. 91–172, title IV, §431(b), Dec. 30, 1969, 83 Stat. 619; Pub. L. 91–677, §2(a)–(c), Jan. 12, 1971, 84 Stat. 2061; Pub. L. 94–455, title VIII, §806(a)–(c), title X, §1052(c)(3), title XVI, §1606(b), (c), title XIX, §§1901(a)(29), 1906(b)(13)(A), title XXI, §2126, Oct. 4, 1976, 90 Stat. 1598, 1648, 1755, 1756, 1769, 1834, 1920; Pub. L. 95–30, title I, §102(b)(2), May 23, 1977, 91 Stat. 137; Pub. L. 95–600, title III, §371(a), (b), title VI, §601(b)(1), title VII, §§701(d)(1), 703(p)(1), Nov. 6, 1978, 92 Stat. 2859, 2896, 2900, 2943; Pub. L. 96–222, title I, §§103(a)(15), 106(a)(1), (6), (7), Apr. 1, 1980, 94 Stat. 214, 221; Pub. L. 96–595, §1(a), Dec. 24, 1980, 94 Stat. 3464; Pub. L. 97–34, title II, §207(a), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97–354, §5(a)(22), Oct. 19, 1982, 96 Stat. 1694; Pub. L. 97–362, title I, §102(a)–(c), Oct. 25, 1982, 96 Stat. 1727, 1728; Pub. L. 98–369, div. A, title I, §§91(d), 177(c), title IV, §491(d)(5), title VII, §722(a)(4), July 18, 1984, 98 Stat. 606, 710, 849, 973; Pub. L. 99–514, title I, §104(b)(4), title III, §301(b)(3), title IX, §§901(d)(4)(B), 903(a), (b), title XIII, §1303(b)(1), (2), title XVIII, §1899A(6), Oct. 22, 1986, 100 Stat. 2105, 2217, 2380, 2383, 2658, 2958; Pub. L. 100–647, title I, §§1003(a)(1), 1009(c), Nov. 10, 1988, 102 Stat. 3382, 3449; Pub. L. 101–239, title VII, §7211(a), (b), Dec. 19, 1989, 103 Stat. 2342, 2343; Pub. L. 101–508, title XI, §§11324(a), 11701(d), 11704(a)(2), 11811(a)–(b)(2)(A), (3), (4), Nov. 5, 1990, 104 Stat. 1388–465, 1388–507, 1388–518, 1388–530, 1388–532 to 1388–534; Pub. L. 103–66, title XIII, §13113(d)(1), Aug. 10, 1993, 107 Stat. 429; Pub. L. 104–188, title I, §§1702(h)(2), (16), 1704(t)(5), (30), Aug. 20, 1996, 110 Stat. 1873, 1874, 1887, 1889; Pub. L. 105–34, title X, §1082(a), (b), Aug. 5, 1997, 111 Stat. 950; Pub. L. 105–277, div. J, title II, §2013(a)–(c), title III, §3004(a), title IV, §§4003(h), 4004(a), Oct. 21, 1998, 112 Stat. 2681–902, 2681–905, 2681–910; Pub. L. 107–147, title I, §102(a), (b), title IV, §417(8), Mar. 9, 2002, 116 Stat. 25, 56; Pub. L. 108–311, title IV, §403(b)(1), Oct. 4, 2004, 118 Stat. 1187; Pub. L. 109–58, title XIII, §1311, Aug. 8, 2005, 119 Stat. 1009; Pub. L. 109–135, title IV, §§402(f), 403(a)(17), Dec. 21, 2005, 119 Stat. 2611, 2619; Pub. L. 110–343, div. C, title VII, §§706(a)(2)(D)(v), (vi), 708(a), (b), (d), Oct. 3, 2008, 122 Stat. 3922, 3924, 3925; Pub. L. 111–5, div. B, title I, §1211(a), (b), Feb. 17, 2009, 123 Stat. 335, 336; Pub. L. 111–92, §13(a), Nov. 6, 2009, 123 Stat. 2992; Pub. L. 113–295, div. A, title II, §§211(c)(1)(B), 221(a)(30)(A), (B), (41)(B), Dec. 19, 2014, 128 Stat. 4033, 4041, 4044; Pub. L. 115–97, title I, §§11011(d)(1), 13302(a)–(c)(2)(A), (d), 13305(b)(3), 14202(b)(1), Dec. 22, 2017, 131 Stat. 2071, 2121–2123, 2126, 2216; Pub. L. 115–141, div. T, §101(a)(2)(B), div. U, title IV, §401(a)(53), Mar. 23, 2018, 132 Stat. 1155, 1186; Pub. L. 116–136, div. A, title II, §2303(a)(1)–(2)(B), (b), (c)(2), Mar. 27, 2020, 134 Stat. 352, 353, 355.)

Editorial Notes

References in Text

The date of the enactment of this subparagraph, referred to in subsec. (b)(1)(D)(v)(II), is the date of enactment of Pub. L. 116–136, which was approved Mar. 27, 2020.

Amendments

2020—Subsec. (a). Pub. L. 116–136, §2303(a)(1), substituted "an amount equal to—" and pars. (1) and (2) for "an amount equal to the lesser of—

"(1) the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, or

"(2) 80 percent of taxable income computed without regard to the deduction allowable under this section."

Subsec. (b)(1)(A). Pub. L. 116–136, §2303(c)(2), amended subpar. (A) generally. Prior to amendment, text read as follows: "Except as otherwise provided in this paragraph, a net operating loss for any taxable year—

"(i) except as otherwise provided in this paragraph, shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss, and

"(ii) shall be a net operating loss carryover to each taxable year following the taxable year of the loss."

Subsec. (b)(1)(A)(i). Pub. L. 116–136, §2303(b)(2), substituted ", (C)(i), and (D)" for "and (C)(i)".

Subsec. (b)(1)(D). Pub. L. 116–136, §2303(b)(1), added subpar. (D).

Subsec. (b)(2)(C). Pub. L. 116–136, §2303(a)(2)(A), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: "not exceed the amount determined under subsection (a)(2) for such prior taxable year."

Subsec. (d)(6)(C). Pub. L. 116–136, §2303(a)(2)(B), substituted "subsection (a)(2)(B)(ii)(I)" for "subsection (a)(2)".

2018—Subsec. (d)(5). Pub. L. 115–141, §401(a)(53), substituted "sections 243" for "section 243".

Subsec. (d)(8). Pub. L. 115–141, §101(a)(2)(B), substituted "Any deduction" for "The deduction".

2017—Subsec. (a). Pub. L. 115–97, §13302(a)(1), amended subsec. (a) generally. Prior to amendment, text read as follows: "There shall be allowed as a deduction for the taxable year an amount equal to the aggregate of (1) the net operating loss carryovers to such year, plus (2) the net operating loss carrybacks to such year. For purposes of this subtitle, the term 'net operating loss deduction' means the deduction allowed by this subsection."

Subsec. (b)(1)(A)(i). Pub. L. 115–97, §13302(b)(1)(A), substituted "except as otherwise provided in this paragraph, shall not be a net operating loss carryback to any taxable year" for "shall be a net operating loss carryback to each of the 2 taxable years".

Subsec. (b)(1)(A)(ii). Pub. L. 115–97, §13302(b)(1)(B), substituted "to each taxable year" for "to each of the 20 taxable years".

Subsec. (b)(1)(B). Pub. L. 115–97, §13302(b)(2), (c)(1), added subpar. (B) and struck out former subpar. (B). Prior to amendment, text read as follows:

"(i) In general.—A net operating loss for a REIT year shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss.

"(ii) Special rule.—In the case of any net operating loss for a taxable year which is not a REIT year, such loss shall not be carried back to any taxable year which is a REIT year.

"(iii) REIT year.—For purposes of this subparagraph, the term 'REIT year' means any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to the taxpayer."

Subsec. (b)(1)(C). Pub. L. 115–97, §13302(b)(2), (d)(1), added subpar. (C) and struck out former subpar. (C). Prior to amendment, text read as follows: "In the case of a taxpayer which has a specified liability loss (as defined in subsection (f)) for a taxable year, such specified liability loss shall be a net operating loss carryback to each of the 10 taxable years preceding the taxable year of such loss."

Subsec. (b)(1)(D) to (F). Pub. L. 115–97, §13302(b)(2), struck out subpars. (D) to (F) which related to corporate equity reduction interest loss, retention of 3-year carryback in certain cases, and farming losses, respectively.

Subsec. (b)(2). Pub. L. 115–97, §13302(a)(2), substituted "shall—" and subpars. (A) to (C) for "shall be computed—

"(A) with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and

"(B) by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,

and the taxable income so computed shall not be considered to be less than zero."

Subsec. (d)(6)(C). Pub. L. 115–97, §13302(a)(3), added subpar. (C).

Subsec. (d)(7). Pub. L. 115–97, §13305(b)(3), struck out par. (7). Text read as follows: "The deduction under section 199 shall not be allowed."

Subsec. (d)(8). Pub. L. 115–97, §11011(d)(1), added par. (8).

Subsec. (d)(9). Pub. L. 115–97, §14202(b)(1), added par. (9).

Subsecs. (f), (g). Pub. L. 115–97, §13302(d)(2), added subsec. (f) and redesignated former subsec. (f) as (g).

Pub. L. 115–97, §13302(c)(2)(A), redesignated subsec. (i) as (f) and struck out former subsecs. (f) and (g) which related to rules relating to specified liability loss and corporate equity reduction interest losses, respectively.

Subsecs. (h), (i). Pub. L. 115–97, §13302(c)(2)(A), struck out subsec. (h) relating to farming loss rules and redesignated subsec. (i) as (f).

2014—Subsec. (b)(1)(D). Pub. L. 113–295, §221(a)(30)(A)(i), redesignated subpar. (E) as (D) and struck out former subpar. (D). Prior to amendment, text of subpar. (D) read as follows: "In the case of any bank (as defined in section 585(a)(2)), the portion of the net operating loss for any taxable year beginning after December 31, 1986, and before January 1, 1994, which is attributable to the deduction allowed under section 166(a) shall be a net operating loss carryback to each of the 10 taxable years preceding the taxable year of the loss and a net operating loss carryover to each of the 5 taxable years following the taxable year of such loss."

Subsec. (b)(1)(D)(i)(II). Pub. L. 113–295, §221(a)(30)(B)(i), struck out "ending after August 2, 1989" after "loss limitation year".

Subsec. (b)(1)(D)(ii). Pub. L. 113–295, §221(a)(30)(B)(ii), substituted "subsection (g)" for "subsection (h)".

Subsec. (b)(1)(E). Pub. L. 113–295, §221(a)(30)(A)(i), redesignated subpar. (F) as (E). Former subpar. (E) redesignated (D).

Subsec. (b)(1)(E)(ii). Pub. L. 113–295, §221(a)(30)(B)(iv), substituted "subsection (h))." for "subsection (i)) or qualified disaster loss (as defined in subsection (j))." in concluding provisions.

Subsec. (b)(1)(E)(ii)(II). Pub. L. 113–295, §221(a)(30)(B)(iii), substituted "section 165(i)(5)" for "section 165(h)(3)(C)(i)".

Subsec. (b)(1)(F). Pub. L. 113–295, §221(a)(30)(B)(v), substituted "subsection (h)" for "subsection (i)".

Pub. L. 113–295, §221(a)(30)(A)(i), redesignated subpar. (G) as (F). Former subpar. (F) redesignated (E).

Subsec. (b)(1)(F)(ii)(II). Pub. L. 113–295, §211(c)(1)(B), substituted "section 165(h)(3)(C)(i)" for "subsection (h)(3)(C)(i)".

Subsec. (b)(1)(G) to (J). Pub. L. 113–295, §221(a)(30)(A)(i), redesignated subpar. (G) as (F) and struck out subpars. (H) to (J) which related to carryback for 2008 or 2009 net operating losses, transmission property and pollution control investment, and certain losses attributable to federally declared disasters, respectively.

Subsec. (d)(5). Pub. L. 113–295, §221(a)(41)(B), amended par. (5) generally. Prior to amendment, text read as follows: "The deductions allowed by sections 243 (relating to dividends received by corporations), 244 (relating to dividends received on certain preferred stock of public utilities), and 245 (relating to dividends received from certain foreign corporations) shall be computed without regard to section 246(b) (relating to limitation on aggregate amount of deductions); and the deduction allowed by section 247 (relating to dividends paid on certain preferred stock of public utilities) shall be computed without regard to subsection (a)(1)(B) of such section."

Subsec. (g). Pub. L. 113–295, §221(a)(30)(A)(ii), redesignated subsec. (h) as (g) and struck out former subsec. (g) which related to rules relating to bad debt losses of commercial banks.

Subsec. (g)(2)(F). Pub. L. 113–295, §221(a)(30)(B)(vi), struck out subpar. (F). Text read as follows: "If any of the 3 taxable years described in subparagraph (C)(ii) end on or before August 2, 1989, the taxpayer may substitute for the amount determined under such subparagraph an amount equal to the interest paid or accrued (determined on an annualized basis) during the taxpayer's taxable year which includes August 3, 1989, on indebtedness of the taxpayer outstanding on August 2, 1989."

Subsec. (g)(4)(B)(ii), (C). Pub. L. 113–295, §221(a)(30)(B)(vii), substituted "subsection (b)(1)(D)" for "subsection (b)(1)(E)".

Subsec. (h). Pub. L. 113–295, §221(a)(30)(A)(ii), redesignated subsec. (i) as (h). Former subsec. (h) redesignated (g).

Subsec. (h)(1). Pub. L. 113–295, §221(a)(30)(B)(viii), struck out concluding provisions which read as follows: "Such term shall not include any qualified disaster loss (as defined in subsection (j))."

Subsec. (h)(3). Pub. L. 113–295, §221(a)(30)(B)(ix), substituted "subsection (b)(1)(F)" for "subsection (b)(1)(G)" in two places.

Subsecs. (i) to (k). Pub. L. 113–295, §221(a)(30)(A)(ii), redesignated subsecs. (i) and (k) as (h) and (i), respectively, and struck out subsec. (j) which related to rules relating to qualified disaster losses.

2009—Subsec. (b)(1)(H). Pub. L. 111–92 amended subpar. (H) generally. Prior to amendment, subpar. (H) provided for carryback for 2008 net operating losses of small businesses.

Pub. L. 111–5, §1211(a), amended subpar. (H) generally. Prior to amendment, subpar. (H) read as follows: "In the case of a net operating loss for any taxable year ending during 2001 or 2002, subparagraph (A)(i) shall be applied by substituting '5' for '2' and subparagraph (F) shall not apply."

Subsecs. (k), (l). Pub. L. 111–5, §1211(b), redesignated subsec. (l) as (k) and struck out former subsec. (k). Prior to amendment, text read as follows: "Any taxpayer entitled to a 5-year carryback under subsection (b)(1)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year."

2008—Subsec. (b)(1)(F)(ii). Pub. L. 110–343, §708(d)(1), inserted "or qualified disaster loss (as defined in subsection (j))" before period at end of concluding provisions.

Subsec. (b)(1)(F)(ii)(II). Pub. L. 110–343, §706(a)(2)(D)(v), substituted "federally declared disasters (as defined by subsection (h)(3)(C)(i))" for "Presidentially declared disasters (as defined in section 1033(h)(3))".

Subsec. (b)(1)(F)(ii)(III). Pub. L. 110–343, §706(a)(2)(D)(vi), substituted "federally declared disasters" for "Presidentially declared disasters".

Subsec. (b)(1)(J). Pub. L. 110–343, §708(a), added subpar. (J).

Subsec. (i)(1). Pub. L. 110–343, §708(d)(2), inserted concluding provisions.

Subsecs. (j) to (l). Pub. L. 110–343, §708(b), added subsec. (j) and redesignated former subsecs. (j) and (k) as (k) and (l), respectively.

2005—Subsec. (b)(1)(I). Pub. L. 109–58 added subpar. (I).

Subsec. (b)(1)(I)(i). Pub. L. 109–135, §402(f)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "At the election of the taxpayer in any taxable year ending after December 31, 2005, and before January 1, 2009, in the case of a net operating loss in a taxable year ending after December 31, 2002, and before January 1, 2006, there shall be a net operating loss carryback to each of the 5 years preceding the taxable year of such loss to the extent that such loss does not exceed 20 percent of the sum of electric transmission property capital expenditures and pollution control facility capital expenditures of the taxpayer for the taxable year preceding the taxable year in which such election is made."

Subsec. (b)(1)(I)(ii)(I). Pub. L. 109–135, §402(f)(2), substituted "for a taxable year" for "in a taxable year".

Subsec. (b)(1)(I)(iv) to (vi). Pub. L. 109–135, §402(f)(3), added cl. (iv), redesignated cl. (vi) as (v), and struck out former cls. (iv) and (v) which read as follows:

"(iv) Application for adjustment.—In the case of any portion of a net operating loss to which an election under clause (i) applies, an application under section 6411(a) with respect to such loss shall not fail to be treated as timely filed if filed within 24 months after the due date specified under such section.

"(v) Special rules relating to refund.—For purposes of a net operating loss to which an election under clause (i) applies, references in sections 6501(h), 6511(d)(2)(A), and 6611(f)(1) to the taxable year in which such net operating loss arises or result in a net loss carryback shall be treated as references to the taxable year in which such election occurs."

Subsec. (d)(7). Pub. L. 109–135, §403(a)(17), added par. (7).

2004—Subsec. (b)(1)(H). Pub. L. 108–311 struck out "a taxpayer which has" after "In the case of".

2002—Subsec. (b)(1)(F)(i). Pub. L. 107–147, §417(8), substituted "3 taxable years" for "3 years" and "2 taxable years" for '2 years".

Subsec. (b)(1)(H). Pub. L. 107–147, §102(a), added subpar. (H).

Subsecs. (j), (k). Pub. L. 107–147, §102(b), added subsec. (j) and redesignated former subsec. (j) as (k).

1998—Subsec. (b)(1)(F)(ii). Pub. L. 105–277, §2013(c), inserted concluding provisions.

Subsec. (b)(1)(F)(iv). Pub. L. 105–277, §4003(h), added cl. (iv).

Subsec. (b)(1)(G). Pub. L. 105–277, §2013(a), added subpar. (G).

Subsec. (d)(4)(C). Pub. L. 105–277, §4004(a), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: "any deduction allowable under section 165(c)(3) (relating to casualty losses) shall not be taken into account; and".

Subsec. (f)(1)(B). Pub. L. 105–277, §3004(a), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "Any amount (not described in subparagraph (A)) allowable as a deduction under this chapter with respect to a liability which arises under a Federal or State law or out of any tort of the taxpayer if—

"(i) in the case of a liability arising out of a Federal or State law, the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year, or

"(ii) in the case of a liability arising out of a tort, such liability arises out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurs at least 3 years before the beginning of the taxable year.

A liability shall not be taken into account under subparagraph (B) unless the taxpayer used an accrual method of accounting throughout the period or periods during which the acts or failures to act giving rise to such liability occurred."

Subsecs. (i), (j). Pub. L. 105–277, §2013(b), added subsec. (i) and redesignated former subsec. (i) as (j).

1997—Subsec. (b)(1)(A)(i). Pub. L. 105–34, §1082(a)(1), substituted "2" for "3".

Subsec. (b)(1)(A)(ii). Pub. L. 105–34, §1082(a)(2), substituted "20" for "15".

Subsec. (b)(1)(F). Pub. L. 105–34, §1082(b), added subpar. (F).

1996—Subsec. (b)(1)(E)(ii). Pub. L. 104–188, §1702(h)(2), substituted "subsection (h)" for "subsection (m)".

Subsec. (h)(3)(B)(i). Pub. L. 104–188, §1704(t)(5), substituted "corporation." for "corporation," at end.

Subsec. (h)(4)(B). Pub. L. 104–188, §1704(t)(30), substituted "For purposes of subsection (b)(2)—" for "For purposes of subsection (b)(2)" in introductory provisions.

Subsec. (h)(4)(C). Pub. L. 104–188, §1702(h)(16), substituted "(b)(1)(E)" for "(b)(1)(M)".

1993—Subsec. (d)(2). Pub. L. 103–66, §13113(d)(1)(A), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: "In the case of a taxpayer other than a corporation, the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includible on account of gains from sales or exchanges of capital assets."

Subsec. (d)(4)(B). Pub. L. 103–66, §13113(d)(1)(B), which directed the insertion of ", (2)(B)," after "paragraph (1)", was executed by making the insertion after "paragraphs (1)" to reflect the probable intent of Congress.

1990—Subsec. (b). Pub. L. 101–508, §11811(a), amended subsec. (b) generally, substituting present provisions for provisions delineating years to which loss may be carried, relating to amount of carrybacks and carryovers, and providing for special rules for foreign expropriation losses.

Subsec. (b)(1)(M)(iii). Pub. L. 101–508, §11701(d), struck out "a C corporation" after "means" in introductory provisions, substituted "a C corporation which acquires" for "which acquires" in subcl. (I), "a C corporation" for "a corporation" in subcl. (II), and "any C corporation which is a successor" for "any successor corporation" in subcl. (III).

Subsec. (f). Pub. L. 101–508, §11811(b)(1), (2)(A), redesignated subsec. (j) as (f), substituted heading for one which read: "Rules relating to product liability losses", and amended text generally, substituting present provisions for provisions defining terms "product liability loss" and "product liability", and providing for an election with respect to carrybacks of such losses.

Subsec. (g). Pub. L. 101–508, §11811(b)(1), redesignated subsec. (l) as (g) and struck out former subsec. (g) which related to carryover of net operating losses for certain regulated transportation corporations.

Subsec. (g)(2). Pub. L. 101–508, §11811(b)(3), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "In applying paragraph (2) of subsection (b), the portion of the net operating loss for any taxable year which is attributable to the deduction allowed under section 166(a) shall be treated in a manner similar to the manner in which a foreign expropriation loss is treated."

Subsec. (h). Pub. L. 101–508, §11811(b)(1), redesignated subsec. (m) as (h) and struck out former subsec. (h) which defined "foreign expropriation loss".

Subsec. (h)(3)(B)(ii). Pub. L. 101–508, §11324(a), in par. (3)(B)(ii), formerly subsec. (m)(3)(B)(ii), substituted heading for one which read: "Exceptions" and amended text generally. Prior to amendment, text read as follows: "The term 'major stock acquisition' shall not include—

"(I) a qualified stock purchase (within the meaning of section 338) to which an election under section 338 applies, or

"(II) except as provided in regulations, an acquisition in which a corporation acquires stock of another corporation which, immediately before the acquisition, was a member of an affiliated group (within the meaning of section 1504(a)) other than the common parent of such group."

Subsec. (h)(4)(B). Pub. L. 101–508, §11811(b)(4), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "In applying paragraph (2) of subsection (b), the corporate equity reduction interest loss shall be treated in a manner similar to the manner in which a foreign expropriation loss is treated."

Pub. L. 101–508, §11704(a)(2), substituted "subsection (b)(2)" for "subsection (B)(2)" in heading.

Subsec. (i). Pub. L. 101–508, §11811(b)(1), redesignated subsec. (n) as (i) and struck out former subsec. (i) which provided for rules relating to mortgage disposition losses of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

Subsec. (j). Pub. L. 101–508, §11811(b)(1), redesignated subsec. (j) as (f).

Subsec. (k). Pub. L. 101–508, §11811(b)(1), struck out subsec. (k) which related to definitions and special rules relating to deferred statutory or tort liability losses.

Subsecs. (l) to (n). Pub. L. 101–508, §11811(b)(1), redesignated subsecs. (l) to (n) as (g) to (i), respectively.

1989—Subsec. (b)(1)(M). Pub. L. 101–239, §7211(a), added subpar. (M).

Subsecs. (m), (n). Pub. L. 101–239, §7211(b), added subsec. (m) and redesignated former subsec. (m) as (n).

1988—Subsec. (b)(1)(A). Pub. L. 100–647, §1009(c)(2), substituted "Except as otherwise provided in this paragraph, a net operating loss" for "Except as provided in subparagraphs (D), (E), (F), (G), (H), (I), (J), (K), (L), and (M), a net operating loss".

Subsec. (b)(1)(B). Pub. L. 100–647, §1009(c)(3), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "Except as provided in subparagraphs (C), (D), and (E), a net operating loss for any taxable year ending after December 31, 1955, shall be a net operating loss carryover to each of the 5 taxable years following the taxable year of such loss. Except as provided in subparagraphs (C), (D), (E), (F), (G), (H), (J), (L), and (M), a net operating loss for any taxable year ending after December 31, 1975, shall be a net operating loss carryover to each of the 15 taxable years following the taxable year of such loss."

Subsec. (b)(1)(K) to (M). Pub. L. 100–647, §1009(c)(1), redesignated subpars. (L) and (M) as (K) and (L), respectively.

Subsec. (d)(4)(B). Pub. L. 100–647, §1003(a)(1), substituted "paragraphs (1) and (3)" for "paragraphs (1), (2)(B), and (3)".

1986—Subsec. (b)(1)(A), (B). Pub. L. 99–514, §903(b)(2)(A), (B), inserted reference to subpars. (L) and (M).

Subsec. (b)(1)(F). Pub. L. 99–514, §903(a)(1), inserted "and before January 1, 1987,".

Pub. L. 99–514, §901(d)(4)(B), substituted "referred to in section 582(c)(5)" for "to which section 585, 586, or 593 applies".

Subsec. (b)(1)(G). Pub. L. 99–514, §903(a)(2), inserted "and before January 1, 1987,".

Subsec. (b)(1)(H). Pub. L. 99–514, §903(a)(3)(A), struck out "after December 31, 1981," and inserted "after December 31, 1981, and before January 1, 1987,".

Pub. L. 99–514, §903(a)(3)(B), which directed that subpar. (H) be amended by striking out "after December 31, 1984," and inserting "after December 31, 1984, and before January 1, 1987,", was executed by striking out "after December 31, 1984" and inserting "after December 31, 1984, and before January 1, 1987", to reflect the probable intent of Congress and the fact that no comma appeared after "1984" and was not necessary after "1987".

Subsec. (b)(1)(J), (K). Pub. L. 99–514, §1303(b)(1), redesignated subpar. (K) as (J) and struck out former subpar. (J) which read as follows: "In the case of an electing GSOC which has a net operating loss for any taxable year such loss shall not be a net operating loss carryback to any taxable year preceding the year of such loss, but shall be a net operating loss carryover to each of the 10 taxable years following the year of such loss."

Subsec. (b)(1)(L), (M). Pub. L. 99–514, §903(b)(1), added subpars. (L) and (M).

Subsec. (d)(2). Pub. L. 99–514, §301(b)(3), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "In the case of a taxpayer other than a corporation—

"(A) the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includible on account of gains from sales or exchanges of capital assets; and

"(B) the deduction for long-term capital gains provided by section 1202 shall not be allowed."

Subsec. (d)(6). Pub. L. 99–514, §1899A(6), added heading.

Subsec. (d)(7). Pub. L. 99–514, §104(b)(4), struck out par. (7), zero bracket amount, which read as follows: "In the case of a taxpayer other than a corporation, the zero bracket amount shall be treated as a deduction allowed by this chapter. For purposes of subsection (c)—

"(A) the deduction provided by the preceding sentence shall be in lieu of any itemized deductions of the taxpayer, and

"(B) such sentence shall not apply to an individual who elects to itemize deductions."

Subsec. (k)(2), (4). Pub. L. 99–514, §1303(b)(2), substituted "subsection (b)(1)(J)" for "subsection (b)(1)(K)".

Subsecs. (l), (m). Pub. L. 99–514, §903(b)(2)(C), added subsec. (l) and redesignated former subsec. (l) as (m).

1984—Subsec. (b)(1)(A). Pub. L. 98–369, §91(d)(3)(A), substituted "(J), and (K)" for "and (J)".

Subsec. (b)(1)(H). Pub. L. 98–369, §177(c)(1)(A), inserted ", or a net operating loss of the Federal Home Loan Mortgage Corporation for any taxable year beginning after December 31, 1984" in introductory provisions.

Subsec. (b)(1)(H)(i), (ii). Pub. L. 98–369, §177(c)(1)(B), (C), struck out "FNMA" before "mortgage disposition loss".

Subsec. (b)(1)(K). Pub. L. 98–369, §91(d)(1), added subpar. (K).

Subsec. (b)(2)(A). Pub. L. 98–369, §722(a)(4)(A), substituted "and (5)" for "and (6)".

Subsec. (d)(4)(D). Pub. L. 98–369, §491(d)(5), struck out "or section 405(c)" after "section 404".

Subsec. (d)(6) to (8). Pub. L. 98–369, §722(a)(4)(B), redesignated pars. (7) and (8) as (6) and (7), respectively.

Subsec. (h). Pub. L. 98–369, §91(d)(3)(B), substituted "this section" for "subsection (b)" in introductory provisions.

Subsec. (i). Pub. L. 98–369, §177(c)(2), substituted "Mortgage disposition loss of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation" for "FNMA mortgage disposition loss" in heading and struck out "FNMA" before "mortgage disposition loss" wherever appearing in text.

Subsec. (j). Pub. L. 98–369, §91(d)(3)(B), substituted "this section" for "subsection (b)" in introductory provisions.

Subsecs. (k), (l). Pub. L. 98–369, §91(d)(2), added subsec. (k) and redesignated former subsec. (k) as (l).

1982—Subsec. (b)(1)(A). Pub. L. 97–362, §102(c)(1), substituted "(H), (I), and (J)" for "(H), and (I)".

Subsec. (b)(1)(B). Pub. L. 97–362, §102(c)(2), substituted "(H), and (J)" for "and (I)".

Subsec. (b)(1)(H). Pub. L. 97–362, §102(a), added subpar. (H). Former subpar. (H) redesignated (I).

Subsec. (b)(1)(I). Pub. L. 97–362, §102(a), (c)(3), redesignated former subpar. (H) as (I) and substituted "subsection (j)" for "subsection (i)". Former subpar. (I) redesignated (J).

Subsec. (b)(1)(J). Pub. L. 97–362, §102(a), redesignated former subpar. (I) as (J).

Subsec. (f). Pub. L. 97–354 struck out subsec. (f) relating to net operating loss of electing small business corporation.

Subsec. (i). Pub. L. 97–362, §102(b), added subsec. (i). Former subsec. (i) redesignated (j).

Subsec. (j). Pub. L. 97–362, §102(b), (c)(4), redesignated former subsec. (i) as (j) and, in par. (3) of subsec. (j) as so redesignated, substituted "subsection (b)(1)(I)" for "subsection (b)(1)(H)" wherever appearing. Former subsec. (j) redesignated (k).

Subsec. (k). Pub. L. 97–362, §102(b), redesignated former subsec. (j) as (k).

1981—Subsec. (b)(1)(B). Pub. L. 97–34, §207(a)(1), substituted "15 taxable years" for "7 taxable years".

Subsec. (b)(1)(C). Pub. L. 97–34, §207(a)(2)(A), substituted "ending after December 31, 1955, and before January 1, 1976, shall" for "ending after December 31, 1955, shall" and struck out provision that, for any taxable year ending after Dec. 31, 1975, the preceding sentence was to be applied by substituting "9 taxable years" for "7 taxable years".

Subsec. (b)(1)(E)(i)(II). Pub. L. 97–34, §207(a)(2)(B)(i), substituted "15" for "8".

Subsec. (b)(1)(E)(ii). Pub. L. 97–34, §207(a)(2)(B)(ii), struck out designation subclause "(I)" for provisions prohibiting a loss carryback to any taxable year which is a REIT year and struck out provision formerly designated as subclause (II) directing that the number of taxable years to which a loss could be a net operating loss carryover under subparagraph (B) be increased (to a number not greater than 8) by the number of taxable years to which such loss could not be a net operating loss carryback by reason of subclause (I).

Subsec. (g)(3)(C). Pub. L. 97–34, §207(a)(2)(C), struck out subpar. (C) which provided that, in the case of a net operating loss carryover from a loss year ending after Dec. 31, 1975, subpars. (A) and (B) were to be applied by substituting "8th taxable year" for "6th taxable year" and "9th taxable year" for "7th taxable year".

1980—Subsec. (b)(1)(A). Pub. L. 96–222, §106(a)(6), substituted ", (H), and (I)" for "and (H)".

Pub. L. 96–222, §103(a)(15), amended directory language of Pub. L. 95–600, §371(a)(2), to correct an error, and did not involve any change in text. See 1978 Amendment note for subsec. (b)(1)(A) below.

Subsec. (b)(1)(B). Pub. L. 96–222, §106(a)(7), substituted "(G), and (I)" for "and (G)".

Subsec. (b)(1)(E). Pub. L. 96–595 generally revised subpar. (E) to permit a trust which was formerly a real estate investment trust an additional year of carryforward of net operating losses for each year it was denied a net operating loss carryback because of its status as a real estate investment trust, and removed the restriction that a net operating loss incurred before 1976 can be carried forward to the 6th, 7th, or 8th year only if it qualified as a real estate investment trust for all years from the loss year through the carryover year.

Subsec. (b)(1)(I). Pub. L. 96–222, §106(a)(1), redesignated former subpar. (H), added by section 601(b) of Pub. L. 95–600 relating to an electing GSOC, as (I).

1978—Subsec. (b)(1)(A). Pub. L. 95–600, §371(a)(2), as amended by Pub. L. 96–222, §103(a)(15), substituted "(G), and (H)" for "and (G)".

Pub. L. 95–600, §703(p)(1)(A), struck out provisions relating to net operating loss carryback with respect to a taxable year ending on or after Dec. 31, 1962, for which a certification has been issued under section 317 of the Trade Expansion Act of 1962.

Subsec. (b)(1)(B). Pub. L. 95–600, §701(d)(1), inserted reference to subpar. (G).

Subsec. (b)(1)(H). Pub. L. 95–600, §371(a)(1), added subpar. (H) relating to product liability losses.

Pub. L. 95–600, §601(b)(1), added subpar. (H) relating to an electing GSOC.

Subsec. (b)(3)(A). Pub. L. 95–600, §703(p)(1)(B), redesignated subpar. (C) as (A). Former subpar. (A), which related to conditions for application of paragraph (1)(A)(ii), was struck out.

Subsec. (b)(3)(B). Pub. L. 95–600, §703(p)(1)(B), (C), redesignated subpar. (D) as (B) and substituted "subparagraph (A)(iii)" for "subparagraph (C)(iii)". Former subpar. (B), which related to the applicability of paragraph (1)(A)(ii) to partnerships and electing small business corporations, was struck out.

Subsec. (b)(3)(C). Pub. L. 95–600, §703(p)(1)(B), redesignated subpar. (E) as (C). Former subpar. (C) redesignated (A).

Subsec. (b)(3)(D), (E). Pub. L. 95–600, §703(p)(1)(B), redesignated subpars. (D) and (E) as (B) and (C), respectively.

Subsecs. (i), (j). Pub. L. 95–600, §371(b), added subsec. (i) and redesignated former subsec. (i) as (j).

1977—Subsec. (d)(8). Pub. L. 95–30 added par. (8).

1976—Subsec. (b)(1)(B). Pub. L. 94–455, §806(a), inserted "Except as provided in subparagraphs (C), (D), (E), and (F), a net operating loss for any taxable year ending after December 31, 1975, shall be a net operating loss carryover to each of the 7 taxable years following the taxable year of such loss" after "year of such loss".

Subsec. (b)(1)(C). Pub. L. 94–455, §§806(b)(1), 1901(a)(29)(C)(ii), inserted "For any taxable year ending after December 31, 1975, the preceding sentence shall be applied by substituting '9 taxable years' for '7 taxable years' " after "year of such loss", substituted "subsection (g)(1)" for "subsection (j)(1)" after "as defined in" and "subsection (g)" for "subsection (j)" after "as provided in".

Subsec. (b)(1)(D). Pub. L. 94–455, §§1901(a)(29)(C)(iii), 2126, substituted "subsection (h)" for "subsection (k)" after "as defined in" and "20" for "15" after "expropriation loss, to each of the".

Subsec. (b)(1)(E). Pub. L. 94–455, §1606(b), added subpar. (E).

Subsec. (b)(2). Pub. L. 94–455, §1901(a)(29)(C)(iv), substituted "subsection (g)" for "subsections (i) and (j)" after "provided in".

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

Subsec. (b)(3)(A)(i), (ii). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" in two places after "Secretary".

Subsec. (b)(3)(C)(i). Pub. L. 94–455, §1901(a)(29)(C)(iii), substituted "subsection (h)" for "subsection (k)" after "as defined in".

Subsec. (b)(3)(C)(ii), (iii). Pub. L. 94–455, §1906(b)(13)(A), struck out "Or his delegate" in two places after "Secretary".

Subsec. (b)(3)(E). Pub. L. 94–455, §§806(c), 1901(a)(29)(A)(ii), added subpar. (E). Former subpar. (E), which related to applicability of special rules in computing taxpayer's net operating loss deduction, was struck out.

Subsec. (b)(3)(F). Pub. L. 94–455, §1901(a)(29)(A)(ii), struck out subpar. (F) which defined "class of products" and provided for the use of information compiled or published by Secretary of Commerce or manufacturers as prima facie evidence of the total number of units of such class of products manufactured and produced in the United States in a calendar year.

Subsec. (c). Pub. L. 94–455, §1901(a)(29)(B), struck out "(for any taxable year ending after December 31, 1953)" after "means".

Subsec. (d)(5), (6). Pub. L. 94–455, §1052(c)(3), struck out par. (5) relating to special deductions for corporations concerning partially tax-exempt interest and Western Hemisphere corporations, and redesignated par. (6) as (5).

Subsec. (d)(7). Pub. L. 94–455, §1606(c), added par. (7).

Subsec. (e). Pub. L. 94–455, §1901(a)(29)(D), struck out "The preceding sentence shall apply with respect to all taxable years, whether they begin before, on, or after January 1, 1954" after "applicable to such other taxable year".

Subsec. (f). Pub. L. 94–455, §1901(a)(29)(C)(i), redesignated subsec. (h) as (f). Former subsec. (f), relating to net operating loss deduction for taxable years beginning in 1953 and ending in 1954, was struck out.

Subsec. (g). Pub. L. 94–455, §1901(a)(29)(C)(i), redesignated subsec. (j) as (g). Former subsec. (g), relating to special transitional rules to be applied to net operating loss deductions, was struck out.

Subsec. (g)(3)(C). Pub. L. 94–455, §806(b)(2), added subpar. (C).

Subsec. (g)(4). Pub. L. 94–455, §1901(a)(29)(E), struck out par. (4) relating to carryover of net operating loss for certain regulated transportation corporations for taxable years beginning in 1955 and ending in 1956.

Subsec. (h). Pub. L. 94–455, §1901(a)(29)(C)(i), redesignated subsec. (k) as (h). Former subsec. (h) redesignated (f).

Subsec. (i). Pub. L. 94–455, §1901(a)(29)(C)(i), redesignated subsec. (l) as (i). Former subsec. (i), relating to carryback of net operating loss for taxable years beginning in 1957 and ending in 1958, was struck out.

Subsecs. (j) to (l). Pub. L. 94–455, §1901(a)(29)(C)(i), redesignated subsecs. (j) to (l) as (g) to (i), respectively.

1971—Subsec. (b)(1)(D). Pub. L. 91–677, §2(a), inserted "(or, with respect to that portion of the net operating loss for such year attributable to a Cuban expropriation loss, to each of the 15 taxable years following the taxable year of such loss)" after "the 10 taxable years following the taxable year of such loss".

Subsec. (b)(2). Pub. L. 91–677, §2(b), inserted provisions relating to treatment of Cuban expropriation losses.

Subsec. (k)(3). Pub. L. 91–677, §2(c), added par. (3).

1969—Subsec. (b)(1). Pub. L. 91–172 substituted "(E), (F), and (G)", for "and (E)" in subpar. (A)(i) and added subpars. (F) and (G).

1967—Subsec. (b)(1). Pub. L. 90–225, §3(a)(1)–(3), inserted reference to subpar. (E) in subpars. (A)(i) and (B), and added subpar. (E).

Subsec. (b)(3)(E), (F). Pub. L. 90–225, §3(a)(4), added subpars. (E) and (F).

1964—Subsec. (b). Pub. L. 88–272, §210(a)(1)–(4), (b), inserted subpar. (D) in par. (1), references to such subpar. (D) in par. (1)(A)(i) and (1)(B), subpars. (C) and (D) in par. (3), provided that the net operating loss deduction in par. (2)(B) be determined without regard to that portion of a net operating loss due to a foreign expropriation loss, if such portion may not, under par. (1)(D), be carried back to such prior taxable year, and that if a portion of the net operating loss is attributable to foreign expropriation to which par. (1)(D) applied, such portion shall be considered a separate loss for such year to be applied after the other portion of such net operating loss.

Subsec. (j)(1), (2), Pub. L. 88–272, §234(b)(5), substituted references to section 7701(a)(33) for references to section 1503(c)(1) or (2), wherever appearing.

Subsecs. (k), (l). Pub. L. 88–272, §210(a)(5), added subsec. (k) and redesignated former subsec. (k) as (l).

1962—Subsec. (b)(1). Pub. L. 87–794 designated existing provisions as cl. (A)(i) and struck out provisions therefrom which authorized a net operating loss for any taxable year ending after Dec. 31, 1957, to be a net operating loss carryover to each of the 5 taxable years following the taxable year of such loss, and added cls. (A)(ii), (B), and (C).

Subsec. (b)(2). Pub. L. 87–794 inserted reference to subsection (j), and substituted "shall be carried to the earliest of the taxable years to which (by reason of paragraph (1))" for "shall be carried to the earliest of the 8 taxable years to which (by reason of subparagraphs (A) and (B) of paragraph (1))", and "each of the other taxable years" for "each of the other 7 taxable years".

Subsec. (b)(3). Pub. L. 87–794 added par. (3).

Pub. L. 87–710, §1(a), authorized a carryover of a net operating loss for any taxable year ending after Dec. 31, 1955, to each of the 5 taxable years following the taxable year of loss, or when such loss occurs in the case of regulated transportation corporation, except as provided in subsec. (j), then to each of the 7 taxable years following the taxable year of loss, and struck out provisions authorizing a net operating loss for any taxable years ending Dec. 31, 1957, to be carried over to each of the 5 taxable years following the taxable year of such loss, in par. (1), and inserted reference to subsec. (j) in par. (2).

Subsec. (d)(4)(D). Pub. L. 87–792 added subpar. (D).

Subsecs. (j), (k). Pub. L. 87–710, §1(b), added subsec. (j) and redesignated former subsec. (j) as (k).

1958—Subsec. (b). Pub. L. 85–866, §203(a), substituted "1957" for "1953", and "3" for "2" in par. (1), and substituted "subsection (i)" for "subsection (f)", "8" for "7", and "7" for "6" in par. (2).

Subsecs. (f)(3), (4). Pub. L. 85–866, §14(a), added pars. (3) and (4).

Subsec. (g)(3), (4). Pub. L. 85–866, §14(b), added par. (3) and redesignated former par. (3) as (4).

Subsecs. (h) to (j). Pub. L. 85–866, §§64(b), 203(b), added subsecs. (h) and (i) and redesignated former subsec. (h) as (j).

Statutory Notes and Related Subsidiaries

Effective Date of 2020 Amendment

Pub. L. 116–136, div. A, title II, §2303(d), Mar. 27, 2020, 134 Stat. 355, provided that:

"(1) Net operating loss limitation.—The amendments made by subsection (a) [amending this section and section 860E of this title] shall apply—

"(A) to taxable years beginning after December 31, 2017, and

"(B) to taxable years beginning on or before December 31, 2017, to which net operating losses arising in taxable years beginning after December 31, 2017, are carried.

"(2) Carryovers and carrybacks.—The amendment made by subsection (b) [amending this section] shall apply to—

"(A) net operating losses arising in taxable years beginning after December 31, 2017, and

"(B) taxable years beginning before, on, or after such date to which such net operating losses are carried.

"(3) Technical amendments.—The amendments made by subsection (c) [amending this section and provisions set out as a note under this section] shall take effect as if included in the provisions of Public Law 115–97 to which they relate.

"(4) Special rule.—In the case of a net operating loss arising in a taxable year beginning before January 1, 2018, and ending after December 31, 2017—

"(A) an application under section 6411(a) of the Internal Revenue Code of 1986 with respect to the carryback of such net operating loss shall not fail to be treated as timely filed if filed not later than the date which is 120 days after the date of the enactment of this Act [Mar. 27, 2020], and

"(B) an election to—

"(i) forgo any carryback of such net operating loss,

"(ii) reduce any period to which such net operating loss may be carried back, or

"(iii) revoke any election made under section 172(b) to forgo any carryback of such net operating loss,

shall not fail to be treated as timely made if made not later than the date which is 120 days after the date of the enactment of this Act."

Effective Date of 2018 Amendment

Amendment by section 101(a)(2)(B) of Pub. L. 115–141 effective as if included in section 11011 of Pub. L. 115–97, see section 101(d) of Pub. L. 115–141, set out as a note under section 62 of this title.

Effective Date of 2017 Amendment

Amendment by section 11011(d)(1) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11011(e) of Pub. L. 115–97, set out as a note under section 62 of this title.

Pub. L. 115–97, title I, §13302(e), Dec. 22, 2017, 131 Stat. 21233, as amended by Pub. L. 116–136, div. A, title II, §2303(c)(1), Mar. 27, 2020, 134 Stat. 354, provided that:

"(1) Net operating loss limitation.—The amendments made by subsections (a) and (d)(2) [amending this section] shall apply to—

"(A) taxable years beginning after December 31, 2017, and

"(B) taxable years beginning on or before such date to which net operating losses arising in taxable years beginning after such date are carried.

"(2) Carryovers and carrybacks.—The amendments made by subsections (b), (c), and (d)(1) [amending this section and section 537 of this title] shall apply to net operating losses arising in taxable years beginning after December 31, 2017."

Amendment by section 13305(b)(3) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Pub. L. 115–97, set out as a note under section 74 of this title.

Pub. L. 115–97, title I, §14202(c), Dec. 22, 2017, 131 Stat. 2216, provided that: "The amendments made by this section [enacting section 250 of this title and amending this section and sections 246 and 469 of this title] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 2014 Amendment

Amendment by section 211(c)(1)(B) of Pub. L. 113–295 effective as if included in the provisions of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008, Pub. L. 110–343, div. C, to which such amendment relates, see section 211(d) of Pub. L. 113–295, set out as a note under section 143 of this title.

Pub. L. 113–295, div. A, title II, §221(a)(41)(K), Dec. 19, 2014, 128 Stat. 4044, provided that: "The amendments made by this paragraph [amending this section and sections 243, 246, 246A, 263, 277, 301, 469, 512, 805, 810, 812, 815, 832, 833, 1059, and 1244 of this title and repealing sections 244 and 247 of this title] shall not apply to preferred stock issued before October 1, 1942 (determined in the same manner as under section 247 of the Internal Revenue Code of 1986 as in effect before its repeal by such amendments)."

Except as otherwise provided in section 221(a) of Pub. L. 113–295, amendment by section 221(a)(30)(A), (B), (41)(B) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2009 Amendment

Amendment by Pub. L. 111–92 applicable to net operating losses arising in taxable years ending after Dec. 31, 2007, with transition provisions and exception for TARP recipients, see section 13(e), (f) of Pub. L. 111–92, set out as a note under section 56 of this title.

Pub. L. 111–5, div. B, title I, §1211(d), Feb. 17, 2009, 123 Stat. 336, provided that:

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

"(2) Transitional rule.—In the case of a net operating loss for a taxable year ending before the date of the enactment of this Act [Feb. 17, 2009]—

"(A) any election made under section 172(b)(3) of the Internal Revenue Code of 1986 with respect to such loss may (notwithstanding such section) be revoked before the applicable date,

"(B) any election made under [former] section 172(b)(1)(H) of such Code with respect to such loss shall (notwithstanding such section) be treated as timely made if made before the applicable date, and

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

For purposes of this paragraph, the term 'applicable date' means the date which is 60 days after the date of the enactment of this Act [Feb. 17, 2009]."

Effective Date of 2008 Amendment

Amendment by section 706(a)(2)(D)(v), (vi) of Pub. L. 110–343 applicable to disasters declared in taxable years beginning after Dec. 31, 2007, see section 706(d)(1) of Pub. L. 110–343, set out as a note under section 56 of this title.

Amendment by section 708(a), (b), (d) of Pub. L. 110–343 applicable to losses arising in taxable years beginning after Dec. 31, 2007, in connection with disasters declared after such date, see section 708(e) of Pub. L. 110–343, set out as a note under section 56 of this title.

Effective Date of 2005 Amendment

Amendment by 402(f) of Pub. L. 109–135 effective as if included in the provision of the Energy Policy Act of 2005, Pub. L. 109–58, to which such amendment relates, see section 402(m)(1) of Pub. L. 109–135, set out as an Effective and Termination Dates of 2005 Amendments note under section 23 of this title.

Amendment by section 403(a)(17) of Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–311 effective as if included in the provisions of the Job Creation and Worker Assistance Act of 2002, Pub. L. 107–147, to which such amendment relates, see section 403(f) of Pub. L. 108–311, set out as a note under section 56 of this title.

Effective Date of 2002 Amendment

Pub. L. 107–147, title I, §102(d), Mar. 9, 2002, 116 Stat. 26, provided that: "Except as provided in subsection (c) [amending section 56 of this title and enacting provisions set out as a note under section 56 of this title], the amendments made by this section [amending this section and section 56 of this title] shall apply to net operating losses for taxable years ending after December 31, 2000."

Effective Date of 1998 Amendment

Pub. L. 105–277, div. J, title II, §2013(d), Oct. 21, 1998, 112 Stat. 2681–903, provided that: "The amendments made by this section [amending this section] shall apply to net operating losses for taxable years beginning after December 31, 1997."

Pub. L. 105–277, div. J, title III, §3004(b), Oct. 21, 1998, 112 Stat. 2681–906, provided that: "The amendment made by this section [amending this section] shall apply to net operating losses arising in taxable years ending after the date of the enactment of this Act [Oct. 21, 1998]."

Amendment by section 4003(h) of 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.

Pub. L. 105–277, div. J, title IV, §4004(c)(1), Oct. 21, 1998, 112 Stat. 2681–911, provided that: "The amendments made by subsections (a) and (b)(3) [amending this section and section 873 of this title] shall apply to taxable years beginning after December 31, 1983."

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, §1082(c), Aug. 5, 1997, 111 Stat. 951, provided that: "The amendments made by this section [amending this section] shall apply to net operating losses for taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997]."

Effective Date of 1996 Amendment

Amendment by section 1702(h)(2), (16) of Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable to stock issued after Aug. 10, 1993, see section 13113(e) of Pub. L. 103–66, set out as a note under section 53 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11324(b), Nov. 5, 1990, 104 Stat. 1388–465, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply to acquisitions after October 9, 1990.

"(2) Binding contract exception.—The amendment made by subsection (a) shall not apply to any acquisition pursuant to a written binding contract in effect on October 9, 1990, and at all times thereafter before such acquisition."

Amendment by section 11701(d) of Pub. L. 101–508 effective, except as otherwise provided, as if included in the provision of the Revenue Reconciliation Act of 1989, Pub. L. 101–239, title VII, to which such amendment relates, see section 11701(n) of Pub. L. 101–508, set out as a note under section 42 of this title.

Pub. L. 101–508, title XI, §11811(c), Nov. 5, 1990, 104 Stat. 1388–534, provided that: "The amendments made by this section [amending this section] shall apply to net operating losses for taxable years beginning after December 31, 1990."

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, §7211(c), Dec. 19, 1989, 103 Stat. 2345, provided that:

"(1) In general.—Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to corporate equity reduction transactions occurring after August 2, 1989, in taxable years ending after August 2, 1989.

"(2) Exceptions.—In determining whether a corporate equity reduction transaction has occurred after August 2, 1989, there shall not be taken into account—

"(A) acquisitions or redemptions of stock, or distributions with respect to stock, occurring on or before August 2, 1989,

"(B) acquisitions or redemptions of stock after August 2, 1989, pursuant to a binding written contract (or tender offer filed with the Securities and Exchange Commission) in effect on August 2, 1989, and at all times thereafter before such acquisition or redemption, or

"(C) any distribution with respect to stock after August 2, 1989, which was declared on or before August 2, 1989.

Any distribution to which the preceding sentence applies shall be taken into account under section 172(m)(3)(C)(ii)(I) of the Internal Revenue Code of 1986 (relating to base period for distributions)."

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 section 104(b)(4) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title.

Amendment by section 301(b)(3) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 301(c) of Pub. L. 99–514, set out as a note under section 62 of this title.

Amendment by section 901(d)(4)(B) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 901(e) of Pub. L. 99–514, set out as a note under section 166 of this title.

Pub. L. 99–514, title IX, §903(c), Oct. 22, 1986, 100 Stat. 2384, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to losses incurred in taxable years beginning after December 31, 1986.

"(2) Additional carryforward period for losses of thrift institutions.—Subparagraph (M) of section 172(b)(1) of the Internal Revenue Code of 1986 (as added by this section) shall apply to losses incurred in taxable years beginning after December 31, 1981."

Amendment by section 1303(b)(1), (2) of Pub. L. 99–514 effective Oct. 22, 1986, see section 1311(f) of Pub. L. 99–514, as amended, set out as an Effective Date; Transitional Rules note under section 141 of this title.

Effective Date of 1984 Amendment

Amendment by section 91(d) of Pub. L. 98–369 applicable to losses for taxable years beginning after Dec. 31, 1983, see section 91(g)(6) of Pub. L. 98–369, as amended, set out as a note under section 461 of this title.

Pub. L. 98–369, div. A, title I, §177(d), July 18, 1984, 98 Stat. 711, as amended by Pub. L. 99–514, §2, title XVIII, §1812(d)(2), Oct. 22, 1986, 100 Stat. 2095, 2836, provided that:

"(1) In general.—The amendments made by this section [amending this section and section 246 of this title and section 1452 of Title 12, Banks and Banking] shall take effect on January 1, 1985.

"(2) Adjusted basis of assets.—

"(A) In general.—Except as otherwise provided in subparagraph (B), the adjusted basis of any asset of the Federal Home Loan Mortgage Corporation held on January 1, 1985, shall—

"(i) for purposes of determining any loss, be equal to the lesser of the adjusted basis of such asset or the fair market value of such asset as of such date, and

"(ii) for purposes of determining any gain, be equal to the higher of the adjusted basis of such asset or the fair market value of such asset as of such date.

"(B) Special rule for tangible depreciable property.—In the case of any tangible property which—

"(i) is of a character subject to the allowance for depreciation provided by section 167 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and

"(ii) is held by the Federal Home Loan Mortgage Corporation on January 1, 1985,

the adjusted basis of such property shall be equal to the lesser of the basis of such property or the fair market value of such property as of such date.

"(3) Treatment of participation certificates.—

"(A) In general.—Paragraph (2) shall not apply to any right to receive income with respect to any mortgage pool participation certificate or other similar interest in any mortgage (not including any mortgage).

"(B) Treatment of certain sales after march 15, 1984, and before january 1, 1985.—If any gain is realized on the sale or exchange of any right described in subparagraph (A) after March 15, 1984, and before January 1, 1985, the gain shall not be recognized when realized but shall be recognized on January 1, 1985.

"(4) Clarification of earnings and profits of federal home loan mortgage corporation.—

"(A) Treatment of distribution of preferred stock, etc.—For purposes of the Internal Revenue Code of 1986, the distribution of preferred stock by the Federal Home Loan Mortgage Corporation during December of 1984, and the other distributions of such stock by Federal Home Loan Banks during January of 1985, shall be treated as if they were distributions of money equal to the fair market value of the stock on the date of the distribution by the Federal Home Loan Banks (and such stock shall be treated as if it were purchased with the money treated as so distributed). No deduction shall be allowed under section 243 of the Internal Revenue Code of 1986 with respect to any dividend paid by the Federal Home Loan Mortgage Corporation out of earnings and profits accumulated before January 1, 1985.

"(B) Section 246(a) not to apply to distributions out of earnings and profits accumulated during 1985.—Subsection (a) of section 246 of the Internal Revenue Code of 1986 shall not apply to any dividend paid by the Federal Home Loan Mortgage Corporation during 1985 out of earnings and profits accumulated after December 31, 1984.

"(5) Adjusted basis.—For purposes of this subsection, the adjusted basis of any asset shall be determined under part II of subchapter O of the Internal Revenue Code of 1986.

"(6) No carrybacks for years before 1985.—No net operating loss, capital loss, or excess credit of the Federal Home Loan Mortgage Corporation for any taxable year beginning after December 31, 1984, shall be allowed as a carryback to any taxable year beginning before January 1, 1985.

"(7) No deduction allowed for interest on replacement obligations.—

"(A) In general.—The Federal Home Loan Mortgage Corporation shall not be allowed any deduction for interest accruing after December 31, 1984, on any replacement obligation.

"(B) Replacement obligation defined.—For purposes of subparagraph (A), the term 'replacement obligation' means any obligation to any person created after March 15, 1984, which the Secretary of the Treasury or his delegate determines replaces any equity or debt interest of a Federal Home Loan Bank or any other person in the Federal Home Loan Mortgage Corporation existing on such date. The preceding sentence shall not apply to any obligation with respect to which the Federal Home Loan Mortgage Corporation establishes that there is no tax avoidance effect."

Amendment by section 491(d)(5) of Pub. L. 98–369 applicable to obligations issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98–369, set out as a note under section 62 of this title.

Pub. L. 98–369, div. A, title VII, §722(a)(6), July 18, 1984, 98 Stat. 973, provided that: "Any amendment made by this subsection [amending this section and sections 57, 1256, and 5684 of this title, and provisions set out as a note under section 338 of this title] shall take effect as if included in the provisions of the Technical Corrections Act of 1982 [Pub. L. 97–448] to which such amendment relates."

Effective Date of 1982 Amendment

Pub. L. 97–362, title I, §102(d), Oct. 25, 1982, 96 Stat. 1728, provided that: "The amendments made by this section [amending this section] shall apply to net operating losses for taxable years beginning after December 31, 1981."

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

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to net operating losses in taxable years ending after Dec. 31, 1975, with special effective date for the amendment by section 207(a)(2)(B)(i) of Pub. L. 97–34, and net operating loss for any taxable year ending on or before Dec. 31, 1975, which could be a net operating loss carryover to a taxable year ending in 1981 by reason of subsec. (b)(1)(E)(ii) (as in effect before the date of enactment of Pub. L. 97–34 and as modified by section 1(b) of Pub. L. 96–595), to be a net operating loss carryover under this section to each of the 15 taxable years following the taxable year of such loss, see section 209(c)(1) of Pub. L. 97–34, set out as an Effective Date note under section 168 of this title.

Effective Date of 1980 Amendment

Pub. L. 96–595, §1(b), Dec. 24, 1980, 94 Stat. 3464, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendment made by subsection (a) [amending this section] shall apply to the determination of the net operating loss deduction for taxable years ending after October 4, 1976. For purposes of applying the preceding sentence to any net operating loss for a taxable year which is not a REIT year and which ends on or before October 4, 1976, subclause (II) of [former] section 172(b)(1)(E)(ii) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall be applied by substituting 'the number of REIT years to which such loss was a net operating loss carryback' for 'the number of taxable years to which such loss may not be a net operating loss carryback by reason of subclause (I)'. In the case of a net operating loss for a taxable year described in the preceding sentence, subclause (II) of [former] section 172(b)(1)(E)(ii) of such Code shall not apply to any taxpayer which acted so as to cause it to cease to qualify as a 'real estate investment trust' within the meaning of section 856 of such Code if the principal purpose for such action was to secure the benefit of the allowance of a net operating loss carryover under [former] section 172(b)(1)(B) of such Code."

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

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §371(d), Nov. 6, 1978, 92 Stat. 2860, provided that: "The amendments made by this section [amending this section and section 537 of this title] shall apply with respect to taxable years beginning after September 30, 1979."

Pub. L. 95–600, title VI, §601(d), Nov. 6, 1978, 92 Stat. 2897, provided that: "The amendments made by this section [enacting sections 1391 to 1397 and 6039B of this title and amending this section and sections 1016 and 3402 of this title] shall apply with respect to corporations chartered after December 31, 1978, and before January 1, 1984."

Pub. L. 95–600, title VII, §701(d)(2), Nov. 6, 1978, 92 Stat. 2900, provided that: "The amendment made by paragraph (1) [amending this section] shall apply to losses incurred in taxable years ending after December 31, 1975."

Pub. L. 95–600, title VII, §703(p)(4), Nov. 6, 1978, 92 Stat. 2944, provided that: "The amendments made by this subsection [amending this section and sections 6501 and 6511 of this title] shall apply with respect to losses sustained in taxable years ending after the date of the enactment of this Act [Nov. 6, 1978]."

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

Pub. L. 94–455, title VIII, §806(g)(1), Oct. 4, 1976, 90 Stat. 1605, provided that: "The amendments made by subsections (a), (b), (c), and (d) [amending this section and sections 812 and 825 of this title] shall apply to losses incurred in taxable years ending after December 31, 1975."

Amendment by section 1052(c)(3) of Pub. L. 94–455 effective with respect to taxable years beginning after December 31, 1979, see section 1052(d) of Pub. L. 94–455, set out as a note under section 170 of this title.

Amendment by section 1606(b), (c) of Pub. L. 94–455 effective for taxable years ending after Oct. 4, 1976, see section 1608(c) of Pub. L. 94–455, set out as a note under section 857 of this title.

Amendment by section 1901(a)(29) of Pub. L. 94–455 effective for taxable years ending after Oct. 4, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1971 Amendment

Pub. L. 91–677, §2(d), Jan. 12, 1971, 84 Stat. 2062, provided that: "The amendments made by this section [amending this section] shall apply in respect of foreign expropriation losses sustained in taxable years ending after December 31, 1958."

Effective Date of 1967 Amendment

Pub. L. 90–225, §3(b), Dec. 27, 1967, 81 Stat. 733, provided that: "No interest shall be paid or allowed with respect to any overpayment of tax resulting from the application of the amendments made by subsection (a) [amending this section] for any period prior to the date of the enactment of this Act [Dec. 27, 1967]."

Pub. L. 90–225, §3(c), Dec. 27, 1967, 81 Stat. 733, provided that: "The amendments made by subsection (a) [amending this section] shall apply with respect to net operating losses sustained in taxable years ending after December 31, 1966."

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §210(c), Feb. 26, 1964, 78 Stat. 49, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by this section [amending this section] shall apply in respect of foreign expropriation losses (as defined in section 172(k) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as amended by subsection (a)(5) of this section), sustained in taxable years ending after December 31, 1958."

Amendment by section 234(b)(5) of Pub. L. 88–272 applicable to taxable years beginning after Dec. 31, 1963, see section 234(c) of Pub. L. 88–272, set out as a note under section 1503 of this title.

Effective Date of 1962 Amendment

Pub. L. 87–794, title III, §317(b), Oct. 11, 1962, 76 Stat. 889, provided that the amendment made by that section is effective with respect to net operating losses for taxable years ending after Dec. 31, 1955.

Amendment by Pub. L. 87–792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Pub. L. 87–792, set out as a note under section 22 of this title.

Pub. L. 87–710, §2, Sept. 27, 1962, 76 Stat. 649, provided that: "The amendments made by the first section of this Act [amending this section] shall apply only with respect to net operating losses for taxable years ending after December 31, 1955."

Effective Date of 1958 Amendment

Pub. L. 85–866, title II, §203(c), Sept. 2, 1958, 72 Stat. 1679, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall apply in respect of net operating losses for taxable years ending after December 31, 1957."

Amendment by section 14(a), (b) of Pub. L. 85–866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85–866, set out as a note under section 165 of this title.

Pub. L. 85–866, title I, §64(e), Sept. 2, 1958, 72 Stat. 1657, provided that: "The amendments made by this section [enacting sections 1371 to 1377 and 6037 of this title, amending this section and sections 1016 and 1504, and renumbering former section 6037 as 6038 of this title] shall apply only with respect to taxable years beginning after December 31, 1957".

Anti-Abuse Rules

Pub. L. 111–92, §13(d), Nov. 6, 2009, 123 Stat. 2994, provided that: "The Secretary of [the] Treasury or the Secretary's designee shall prescribe such rules as are necessary to prevent the abuse of the purposes of the amendments made by this section [amending this section and sections 56 and 810 of this title], including anti-stuffing rules, anti-churning rules (including rules relating to sale-leasebacks), and rules similar to the rules under section 1091 of the Internal Revenue Code of 1986 relating to losses from wash sales."

Pub. L. 111–5, div. B, title I, §1211(c), Feb. 17, 2009, 123 Stat. 336, provided that: "The Secretary of [the] Treasury or the Secretary's designee shall prescribe such rules as are necessary to prevent the abuse of the purposes of the amendments made by this section [amending this section], including anti-stuffing rules, anti-churning rules (including rules relating to sale-leasebacks), and rules similar to the rules under section 1091 of the Internal Revenue Code of 1986 relating to losses from wash sales."

Savings Provision

For provisions that nothing in amendment by section 11811 of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

Special Rules With Respect to Farming Losses

Pub. L. 116–136, div. A, title II, §2303(e), as added by Pub. L. 116–260, div. N, title II, §281(a), Dec. 27, 2020, 134 Stat. 1983, provided that:

"(1) Election to disregard application of amendments made by subsections (a) and (b).—

"(A) In general.—If a taxpayer who has a farming loss (within the meaning of section 172(b)(1)(B)(ii) of the Internal Revenue Code of 1986) for any taxable year beginning in 2018, 2019, or 2020 makes an election under this paragraph, then—

"(i) the amendments made by subsection (a) [amending this section and section 860E of this title] shall not apply to any taxable year beginning in 2018, 2019, or 2020, and

"(ii) the amendments made by subsection (b) [amending this section] shall not apply to any net operating loss arising in any taxable year beginning in 2018, 2019, or 2020.

"(B) Election.—

"(i) In general.—Except as provided in clause (ii)(II), an election under this paragraph shall be made in such manner as may be prescribed by the Secretary. Such election, once made, shall be irrevocable.

"(ii) Time for making election.—

"(I) In general.—An election under this paragraph shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxpayer's first taxable year ending after the date of the enactment of the COVID-related Tax Relief Act of 2020 [subtitle B of title II of div. N of Pub. L. 116–260, approved Dec. 27, 2020].

"(II) Previously filed returns.—In the case of any taxable year for which the taxpayer has filed a return of Federal income tax before the date of the enactment of the COVID-related Tax Relief Act of 2020 which disregards the amendments made by subsections (a) and (b), such taxpayer shall be treated as having made an election under this paragraph unless the taxpayer amends such return to reflect such amendments by the due date (including extensions of time) for filing the taxpayer's return for the first taxable year ending after the date of the enactment of the COVID-related Tax Relief Act of 2020.

"(C) Regulations.—The Secretary of the Treasury (or the Secretary's delegate) shall issue such regulations and other guidance as may be necessary to carry out the purposes of this paragraph, including regulations and guidance relating to the application of the rules of section 172(a) of the Internal Revenue Code of 1986 (as in effect before the date of the enactment of the CARES Act [Pub. L. 116–136, approved Mar. 27, 2020]) to taxpayers making an election under this paragraph.

"(2) Revocation of election to waive carryback.—The last sentence of section 172(b)(3) of the Internal Revenue Code of 1986 and the last sentence of section 172(b)(1)(B) of such Code shall not apply to any election—

"(A) which was made before the date of the enactment of the COVID-related Tax Relief Act of 2020, and

"(B) which relates to the carryback period provided under section 172(b)(1)(B) of such Code with respect to any net operating loss arising in taxable years beginning in 2018 or 2019."

[Pub. L. 116–260, div. N, title II, §281(b), Dec. 27, 2020, 134 Stat. 1984, provided that: "The amendment made by this section [enacting section 2303(e) of Pub. L. 116–136, set out above] shall take effect as if included in section 2303 of the CARES Act [Pub. L. 116–136]."]

Net Operating Loss Carryback for Taxable Year Ending During 2001 or 2002

Pub. L. 108–311, title IV, §403(b)(2), Oct. 4, 2004, 118 Stat. 1187, provided that: "In the case of a net operating loss for a taxable year ending during 2001 or 2002—

"(A) an application under section 6411(a) of the Internal Revenue Code of 1986 with respect to such loss shall not fail to be treated as timely filed if filed before November 1, 2002,

"(B) any election made under section 172(b)(3) of such Code may (notwithstanding such section) be revoked before November 1, 2002, and

"(C) any election made under [former] section 172(j) of such Code shall (notwithstanding such section) be treated as timely made if made before November 1, 2002."

Amtrak Reform Legislation

Pub. L. 105–134, title III, §301(b), Dec. 2, 1997, 111 Stat. 2585, provided that: "This Act [see Short Title of 1997 Amendment note set out under section 20101 of Title 49, Transportation] constitutes Amtrak reform legislation within the meaning of section 977(f)(1) of the Taxpayer Relief Act of 1997 [Pub. L. 105–34, set out as a note below]."

Elective Carryback of Existing Carryovers of National Railroad Passenger Corporation

Pub. L. 105–34, title IX, §977, Aug. 5, 1997, 111 Stat. 899, as amended by Pub. L. 105–178, title IX, §9007(a), June 9, 1998, 112 Stat. 506; Pub. L. 105–206, title VI, §6009(e), July 22, 1998, 112 Stat. 812, provided that:

"(a) Elective Carryback.—

"(1) In general.—If the National Railroad Passenger Corporation (in this section referred to as the 'Corporation')—

"(A) makes an election under this section for its first taxable year ending after September 30, 1997, and

"(B) agrees to the conditions specified in paragraph (2),

then the Corporation shall be treated as having made a payment of the tax imposed by chapter 1 of the Internal Revenue Code of 1986 for such first taxable year and the succeeding taxable year in an amount (for each such taxable year) equal to 50 percent of the amount determined under paragraph (3). Each such payment shall be treated as having been made by the Corporation on the last day prescribed by law (without regard to extensions) for filing its return of tax under chapter 1 of such Code for the taxable year to which such payment relates.

"(2) Conditions.—

"(A) In general.—This section shall only apply to the Corporation if it agrees (in such manner as the Secretary of the Treasury or his delegate may prescribe) to—

"(i) except as provided in clause (ii), use any refund of the payment described in paragraph (1) (and any interest thereon) solely to finance qualified expenses of the Corporation, and

"(ii) make the payments to non-Amtrak States as described in subsection (c).

"(B) Repayment.—

"(i) In general.—The Corporation shall repay to the United States any amount not used in accordance with this paragraph and any amount remaining unused as of January 1, 2010.

"(ii) Special rules.—For purposes of clause (i)—

     "(I) no amount shall be treated as remaining unused as of January 1, 2010, if it is obligated as of such date for a qualified expense, and

     "(II) the Corporation shall not be treated as failing to meet the requirements of clause (i) by reason of investing any amount for a temporary period.

"(3) Amount.—For purposes of paragraph (1)—

"(A) In general.—The amount determined under this paragraph shall be the lesser of—

"(i) 35 percent of the Corporation's existing qualified carryovers, or

"(ii) the Corporation's net tax liability for the carryback period.

"(B) Dollar limit.—Such amount shall not exceed $2,323,000,000.

"(b) Existing Qualified Carryovers; Net Tax Liability.—For purposes of this section—

"(1) Existing qualified carryovers.—The term 'existing qualified carryovers' means the aggregate of the amounts which are net operating loss carryovers under section 172(b) of the Internal Revenue Code of 1986 to the Corporation's first taxable year ending after September 30, 1997.

"(2) Net tax liability for carryback period.—

"(A) In general.—The Corporation's net tax liability for the carryback period is the aggregate of the net tax liability of the Corporation's railroad predecessors for taxable years in the carryback period.

"(B) Net tax liability.—The term 'net tax liability' means, with respect to any taxable year, the amount of the tax imposed by chapter 1 of the Internal Revenue Code of 1986 (or any corresponding provision of prior law) for such taxable year, reduced by the sum of the credits allowable against such tax under such Code (or any corresponding provision of prior law).

"(C) Carryback period.—The term 'carryback period' means the period—

"(i) which begins with the first taxable year of any railroad predecessor beginning before January 1, 1971, for which there is a net tax liability, and

"(ii) which ends with the last taxable year of any railroad predecessor beginning before January 1, 1971.

"(3) Railroad predecessor.—

"(A) In general.—The term 'railroad predecessor' means—

"(i) any railroad which entered into a contract under section 401 or 404(a) of the Rail Passenger Service Act of 1970 [former sections 561 and 564(a) of Title 45, Railroads] relieving the railroad of its entire responsibility for the provision of intercity rail passenger service, and

"(ii) any predecessor thereof.

"(B) Consolidated returns.—If any railroad described in subparagraph (A) was a member of an affiliated group which filed a consolidated return for any taxable year in the carryback period, each member of such group shall be treated as a railroad predecessor for such year.

"(c) Payments to Non-Amtrak States.—

"(1) In general.—Within 30 days after receipt of any refund of any payment described in subsection (a)(1), the Corporation shall pay to each non-Amtrak State an amount equal to 1 percent of the amount of such refund.

"(2) Use of payment.—Each non-Amtrak State shall use the payment described in paragraph (1) (and any interest thereon) solely to finance qualified expenses of the State.

"(3) Repayment.—A non-Amtrak State shall pay to the United States—

"(A) any portion of the payment received by the State under paragraph (1) (and any interest thereon) which is used for a purpose other than to finance qualified expenses of the State or which remains unused as of January 1, 2010, or

"(B) if such State ceases to be a non-Amtrak State, the portion of such payment (and any interest thereon) remaining as of the date of the cessation.

Rules similar to the rules of subsection (a)(2)(B) shall apply for purposes of this paragraph.

"(d) Tax Consequences.—

"(1) Reduction in carryovers.—If the Corporation elects the application of this section, the Corporation's existing qualified carryovers shall be reduced by an amount equal to the amount determined under subsection (a)(3) divided by 0.35.

"(2) Reduction in tax paid by railroad predecessors.—

"(A) In general.—The Secretary of the Treasury or his delegate shall appropriately adjust the tax account of each railroad predecessor to reduce the net tax liability of such predecessor for taxable years beginning in the carryback period which is offset by reason of the application of this section.

"(B) FIFO ordering rule.—The Secretary shall make the adjustments under subparagraph (A) first for the earliest year in the carryback period and then for each subsequent year in such period.

"(C) No effect on other taxpayers.—In no event shall any taxpayer other than the Corporation be allowed a refund or credit by reason of this section.

"(D) Waiver of limitations.—If the adjustment under subparagraph (A) is barred by the operation of any law or rule of law, such law or rule of law shall be waived solely for purposes of making such adjustment.

"(3) Tax treatment of expenditures.—With respect to any payment by the Corporation of qualified expenses described in subsection (e)(1)(A) during any taxable year from the amount of any refund of the payment described in subsection (a)(1)—

"(A) no deduction shall be allowed to the Corporation with respect to any amount paid or incurred which is attributable to such amount, and

"(B) the basis of any property shall be reduced by the portion of the cost of such property which is attributable to such amount.

"(4) Payments to a non-amtrak state.—No deduction shall be allowed to the Corporation under chapter 1 of the Internal Revenue Code of 1986 for any payment to a non-Amtrak State required under subsection (a)(2)(A)(ii).

"(e) Definitions.—For purposes of this section—

"(1) Qualified expenses.—The term 'qualified expenses' means expenses incurred for—

"(A) in the case of the Corporation—

"(i) the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity passenger rail service, and

"(ii) the payment of interest and principal on obligations incurred for such acquisition, upgrading, and maintenance, and

"(B) in the case of a non-Amtrak State—

"(i) the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity passenger rail service,

"(ii) the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity bus service,

"(iii) the purchase of intercity passenger rail services from the Corporation,

"(iv) capital expenditures related to State-owned rail operations in the State,

"(v) any project that is eligible to receive funding under section 5309, 5310, or 5311 of title 49, United States Code,

"(vi) any project that is eligible to receive funding under section 103, 130, 133, 144, 149, or 152 of title 23, United States Code,

"(vii) the upgrading and maintenance of intercity primary and rural air service facilities, and the purchase of intercity air service between primary and rural airports and regional hubs,

"(viii) the provision of passenger ferryboat service within the State,

"(ix) the provision of harbor improvements within the State, and

"(x) the payment of interest and principal on obligations incurred for such acquisition, upgrading, maintenance, purchase, expenditures, provision, and projects.

In the case of a non-Amtrak State which provides its own intercity passenger rail service on the date of the enactment of this paragraph [Aug. 5, 1997], subparagraph (B) shall be applied by only taking into account clauses (i) and (iv).

"(2) Non-amtrak state.—The term 'non-Amtrak State' means any State which is not receiving intercity passenger rail service from the Corporation as of the date of the enactment of this Act [Aug. 5, 1997].

"(f) Authorizing Reform Required.—

"(1) In general.—The Secretary of the Treasury shall not make payment of any refund of any payment described in subsection (a)(1) earlier than the date of the enactment of Federal legislation, other than legislation included in this section, which is enacted after July 29, 1997, and which authorizes reforms of the National Railroad Passenger Corporation.

"(2) No interest.—Notwithstanding any other provision of law, if the payment of any refund is delayed by reason of paragraph (1), no interest shall accrue with respect to such payment prior to the 45th day following the date of the enactment of Federal legislation described in paragraph (1).

"(3) Estimate of revenue.—For purposes of estimating revenues under budget reconciliation, the impact of this section on Federal revenues shall be determined without regard to this subsection."

[Pub. L. 105–178, title IX, §9007(b), June 9, 1998, 112 Stat. 506, provided that: "The amendments made by this section [amending section 977 of Pub. L. 105–34, set out above] shall take effect as if included in the enactment of section 977 of the Taxpayer Relief Act of 1997 [Pub. L. 105–34]."]

Deduction for Special Assessments

Subsec. (f) of this section not applicable to deduction for special assessments, see section 2711(2) of Pub. L. 104–208, set out as a note under section 162 of this title.

Carryback of Deferred Statutory or Tort Liability Loss to Taxable Year Beginning Before January 1, 1984

Pub. L. 101–508, title XI, §11811(b)(2)(B), Nov. 5, 1990, 104 Stat. 1388–533, provided that: "The portion of any loss which is attributable to a deferred statutory or tort liability loss (as defined in section 172(k) of the Internal Revenue Code of 1986 as in effect on the day before the date of the enactment of this Act [Nov. 5, 1990]) may not be carried back to any taxable year beginning before January 1, 1984, by reason of the amendment made by subparagraph (A) [amending this section]."

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.

Refund or Credit of Overpayment; Limitations; Interest

Pub. L. 85–866, title I, §14, Sept. 2, 1958, 72 Stat. 1611, provided that if any refund or credit of any overpayment resulting from application of subsecs. (a) and (b) of Pub. L. 85–866, amending former subsecs. (f)(3), (4) and (g)(3), (4), was prevented on Sept. 2, 1958 or 6 months thereafter, by operation of any law or rule of law, refund was to be allowed if a claim was filed within six months of the date of such date but such refund was to be without interest.

Interest Attributable to Net Operating Loss Carryback for Certain Taxable Years Ending in 1954

For payment of interest attributable to net operating loss carryback, see section 83(e) of Pub. L. 85–866, set out as a note under section 6601 of this title.
26 U.S.C. § 1353 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1353: Notional shipping income
Notional shipping income
Status: in_force

(a) In general

For purposes of this subchapter, the notional shipping income of an electing corporation shall be the sum of the amounts determined under subsection (b) for each qualifying vessel operated by such electing corporation.

(b) Amounts

(1) In general

For purposes of subsection (a), the amount of notional shipping income of an electing corporation for each qualifying vessel for the taxable year shall equal the product of—

(A) the daily notional shipping income, and

(B) the number of days during the taxable year that the electing corporation operated such vessel as a qualifying vessel in United States foreign trade.

(2) Treatment of vessels the income from which is not otherwise subject to tax

In the case of a qualifying vessel any of the income from which is not included in gross income by reason of section 883 or otherwise, the amount of notional shipping income from such vessel for the taxable year shall be the amount which bears the same ratio to such shipping income (determined without regard to this paragraph) as the gross income from the operation of such vessel in the United States foreign trade bears to the sum of such gross income and the income so excluded.

(c) Daily notional shipping income

For purposes of subsection (b), the daily notional shipping income from the operation of a qualifying vessel is—

(1) 40 cents for each 100 tons of so much of the net tonnage of the vessel as does not exceed 25,000 net tons, and

(2) 20 cents for each 100 tons of so much of the net tonnage of the vessel as exceeds 25,000 net tons.

(d) Multiple operators of vessel

If for any period 2 or more persons are operators of a qualifying vessel, the notional shipping income from the operation of such vessel for such period shall be allocated among such persons on the basis of their respective ownership, charter, and operating agreement interests in such vessel or on such other basis as the Secretary may prescribe by regulations.

(Added Pub. L. 108–357, title II, §248(a), Oct. 22, 2004, 118 Stat. 1450; amended Pub. L. 109–135, title IV, §403(g)(1)(A), Dec. 21, 2005, 119 Stat. 2624.)

Editorial Notes

Amendments

2005—Subsec. (d). Pub. L. 109–135 substituted "ownership, charter, and operating agreement interests" for "ownership and charter interests".

Statutory Notes and Related Subsidiaries

Effective Date of 2005 Amendment

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

Effective Date

Section applicable to taxable years beginning after Oct. 22, 2004, see section 248(c) of Pub. L. 108–357, set out as an Effective Date of 2004 Amendments note under section 56 of this title.
26 U.S.C. § 2651 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 13 / Section 2651: Generation assignment
Generation assignment
Status: in_force

(a) In general

For purposes of this chapter, the generation to which any person (other than the transferor) belongs shall be determined in accordance with the rules set forth in this section.

(b) Lineal descendants

(1) In general

An individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and such individual with the number of generations between the grandparent and the transferor.

(2) On spouse's side

An individual who is a lineal descendant of a grandparent of a spouse (or former spouse) of the transferor (other than such spouse) shall be assigned to that generation which results from comparing the number of generations between such grandparent and such individual with the number of generations between such grandparent and such spouse.

(3) Treatment of legal adoptions, etc.

For purposes of this subsection—

(A) Legal adoptions

A relationship by legal adoption shall be treated as a relationship by blood.

(B) Relationships by half-blood

A relationship by the half-blood shall be treated as a relationship of the whole-blood.

(c) Marital relationship

(1) Marriage to transferor

An individual who has been married at any time to the transferor shall be assigned to the transferor's generation.

(2) Marriage to other lineal descendants

An individual who has been married at any time to an individual described in subsection (b) shall be assigned to the generation of the individual so described.

(d) Persons who are not lineal descendants

An individual who is not assigned to a generation by reason of the foregoing provisions of this section shall be assigned to a generation on the basis of the date of such individual's birth with—

(1) an individual born not more than 12½ years after the date of the birth of the transferor assigned to the transferor's generation,

(2) an individual born more than 12½ years but not more than 37½ years after the date of the birth of the transferor assigned to the first generation younger than the transferor, and

(3) similar rules for a new generation every 25 years.

(e) Special rule for persons with a deceased parent

(1) In general

For purposes of determining whether any transfer is a generation-skipping transfer, if—

(A) an individual is a descendant of a parent of the transferor (or the transferor's spouse or former spouse), and

(B) such individual's parent who is a lineal descendant of the parent of the transferor (or the transferor's spouse or former spouse) is dead at the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time),

such individual shall be treated as if such individual were a member of the generation which is 1 generation below the lower of the transferor's generation or the generation assignment of the youngest living ancestor of such individual who is also a descendant of the parent of the transferor (or the transferor's spouse or former spouse), and the generation assignment of any descendant of such individual shall be adjusted accordingly.

(2) Limited application of subsection to collateral heirs

This subsection shall not apply with respect to a transfer to any individual who is not a lineal descendant of the transferor (or the transferor's spouse or former spouse) if, at the time of the transfer, such transferor has any living lineal descendant.

(f) Other special rules

(1) Individuals assigned to more than 1 generation

Except as provided in regulations, an individual who, but for this subsection, would be assigned to more than 1 generation shall be assigned to the youngest such generation.

(2) Interests through entities

Except as provided in paragraph (3), if an estate, trust, partnership, corporation, or other entity has an interest in property, each individual having a beneficial interest in such entity shall be treated as having an interest in such property and shall be assigned to a generation under the foregoing provisions of this subsection.

(3) Treatment of certain charitable organizations and governmental entities

Any—

(A) organization described in section 511(a)(2),

(B) charitable trust described in section 511(b)(2), and

(C) governmental entity,

shall be assigned to the transferor's generation.

(Added Pub. L. 99–514, title XIV, §1431(a), Oct. 22, 1986, 100 Stat. 2725; amended Pub. L. 100–647, title I, §1014(g)(11), (19), Nov. 10, 1988, 102 Stat. 3565, 3567; Pub. L. 105–34, title V, §511(a), Aug. 5, 1997, 111 Stat. 860.)

Editorial Notes

Amendments

1997—Subsecs. (e), (f). Pub. L. 105–34 added subsec. (e) and redesignated former subsec. (e) as (f).

1988—Subsec. (b)(2). Pub. L. 100–647, §1014(g)(19), inserted "(or former spouse)" after "a spouse".

Subsec. (e)(3). Pub. L. 100–647, §1014(g)(11), amended par. (3) generally, including governmental entities among the organizations to be assigned to transferor's generation.

Statutory Notes and Related Subsidiaries

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to terminations, distributions, and transfers occurring after Dec. 31, 1997, see section 511(c) of Pub. L. 105–34, set out as a note under section 2612 of this title.

Effective Date of 1988 Amendment

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

Effective Date

Section applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as a note under section 2601 of this title.
26 U.S.C. § 6045B (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 61 / Section 6045B: Returns relating to actions affecting basis of specified securities
Returns relating to actions affecting basis of specified securities
Status: in_force

(a) In general

According to the forms or regulations prescribed by the Secretary, any issuer of a specified security shall make a return setting forth—

(1) a description of any organizational action which affects the basis of such specified security of such issuer,

(2) the quantitative effect on the basis of such specified security resulting from such action, and

(3) such other information as the Secretary may prescribe.

(b) Time for filing return

Any return required by subsection (a) shall be filed not later than the earlier of—

(1) 45 days after the date of the action described in subsection (a), or

(2) January 15 of the year following the calendar year during which such action occurred.

(c) Statements to be furnished to holders of specified securities or their nominees

According to the forms or regulations prescribed by the Secretary, every person required to make a return under subsection (a) with respect to a specified security shall furnish to the nominee with respect to the specified security (or certificate holder if there is no nominee) a written statement showing—

(1) the name, address, and phone number of the information contact of the person required to make such return,

(2) the information required to be shown on such return with respect to such security, and

(3) such other information as the Secretary may prescribe.

The written statement required under the preceding sentence shall be furnished to the holder on or before January 15 of the year following the calendar year during which the action described in subsection (a) occurred.

(d) Specified security

For purposes of this section, the term "specified security" has the meaning given such term by section 6045(g)(3)(B). No return shall be required under this section with respect to actions described in subsection (a) with respect to a specified security which occur before the applicable date (as defined in section 6045(g)(3)(C)) with respect to such security.

(e) Public reporting in lieu of return

The Secretary may waive the requirements under subsections (a) and (c) with respect to a specified security, if the person required to make the return under subsection (a) makes publicly available, in such form and manner as the Secretary determines necessary to carry out the purposes of this section—

(1) the name, address, phone number, and email address of the information contact of such person, and

(2) the information described in paragraphs (1), (2), and (3) of subsection (a).

(Added Pub. L. 110–343, div. B, title IV, §403(d)(1), Oct. 3, 2008, 122 Stat. 3859.)

Statutory Notes and Related Subsidiaries

Effective Date

Section effective Jan. 1, 2011, see section 403(e)(1) of Pub. L. 110–343, set out as an Effective Date of 2008 Amendment note under section 1012 of this title.
26 U.S.C. § 2013 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 11 / Section 2013: Credit for tax on prior transfers
Credit for tax on prior transfers
Status: in_force

(a) General rule

The tax imposed by section 2001 shall be credited with all or a part of the amount of the Federal estate tax paid with respect to the transfer of property (including property passing as a result of the exercise or non-exercise of a power of appointment) to the decedent by or from a person (herein designated as a "transferor") who died within 10 years before, or within 2 years after, the decedent's death. If the transferor died within 2 years of the death of the decedent, the credit shall be the amount determined under subsections (b) and (c). If the transferor predeceased the decedent by more than 2 years, the credit shall be the following percentage of the amount so determined—

(1) 80 percent, if within the third or fourth years preceding the decedent's death;

(2) 60 percent, if within the fifth or sixth years preceding the decedent's death;

(3) 40 percent, if within the seventh or eighth years preceding the decedent's death; and

(4) 20 percent, if within the ninth or tenth years preceding the decedent's death.

(b) Computation of credit

Subject to the limitation prescribed in subsection (c), the credit provided by this section shall be an amount which bears the same ratio to the estate tax paid (adjusted as indicated hereinafter) with respect to the estate of the transferor as the value of the property transferred bears to the taxable estate of the transferor (determined for purposes of the estate tax) decreased by any death taxes paid with respect to such estate. For purposes of the preceding sentence, the estate tax paid shall be the Federal estate tax paid increased by any credits allowed against such estate tax under section 2012, or corresponding provisions of prior laws, on account of gift tax, and for any credits allowed against such estate tax under this section on account of prior transfers where the transferor acquired property from a person who died within 10 years before the death of the decedent.

(c) Limitation on credit

(1) In general

The credit provided in this section shall not exceed the amount by which—

(A) the estate tax imposed by section 2001 or section 2101 (after deducting the credits provided for in sections 2010, 2012, and 2014) computed without regard to this section, exceeds

(B) such tax computed by excluding from the decedent's gross estate the value of such property transferred and, if applicable, by making the adjustment hereinafter indicated.

If any deduction is otherwise allowable under section 2055 or section 2106(a)(2) (relating to charitable deduction) then, for the purpose of the computation indicated in subparagraph (B), the amount of such deduction shall be reduced by that part of such deduction which the value of such property transferred bears to the decedent's entire gross estate reduced by the deductions allowed under sections 2053 and 2054, or section 2106(a)(1) (relating to deduction for expenses, losses, etc.). For purposes of this section, the value of such property transferred shall be the value as provided for in subsection (d) of this section.

(2) Two or more transferors

If the credit provided in this section relates to property received from 2 or more transferors, the limitation provided in paragraph (1) of this subsection shall be computed by aggregating the value of the property so transferred to the decedent. The aggregate limitation so determined shall be apportioned in accordance with the value of the property transferred to the decedent by each transferor.

(d) Valuation of property transferred

The value of property transferred to the decedent shall be the value used for the purpose of determining the Federal estate tax liability of the estate of the transferor but—

(1) there shall be taken into account the effect of the tax imposed by section 2001 or 2101, or any estate, succession, legacy, or inheritance tax, on the net value to the decedent of such property;

(2) where such property is encumbered in any manner, or where the decedent incurs any obligation imposed by the transferor with respect to such property, such encumbrance or obligation shall be taken into account in the same manner as if the amount of a gift to the decedent of such property was being determined; and

(3) if the decedent was the spouse of the transferor at the time of the transferor's death, the net value of the property transferred to the decedent shall be reduced by the amount allowed under section 2056 (relating to marital deductions), as a deduction from the gross estate of the transferor.

(e) Property defined

For purposes of this section, the term "property" includes any beneficial interest in property, including a general power of appointment (as defined in section 2041).

(f) Treatment of additional tax imposed under section 2032A

If section 2032A applies to any property included in the gross estate of the transferor and an additional tax is imposed with respect to such property under section 2032A(c) before the date which is 2 years after the date of the decedent's death, for purposes of this section—

(1) the additional tax imposed by section 2032A(c) shall be treated as a Federal estate tax payable with respect to the estate of the transferor; and

(2) the value of such property and the amount of the taxable estate of the transferor shall be determined as if section 2032A did not apply with respect to such property.

(Aug. 16, 1954, ch. 736, 68A Stat. 377; Pub. L. 94–455, title XIX, §1902(a)(2), title XX, §§2001(c)(1)(C), 2003(c), 2006(b)(2), Oct. 4, 1976, 90 Stat. 1804, 1850, 1862, 1888; Pub. L. 99–514, title XIV, §1432(c)(2), Oct. 22, 1986, 100 Stat. 2730; Pub. L. 100–647, title I, §1011A(g)(7), Nov. 10, 1988, 102 Stat. 3481; Pub. L. 105–34, title X, §1073(b)(2), Aug. 5, 1997, 111 Stat. 948; Pub. L. 107–16, title V, §532(c)(2), June 7, 2001, 115 Stat. 74.)

Editorial Notes

Amendments

2001—Subsec. (c)(1)(A). Pub. L. 107–16 struck out "2011," after "sections 2010,".

1997—Subsec. (g). Pub. L. 105–34 struck out heading and text of subsec. (g). Prior to amendment, text read as follows: "For purposes of this section, the estate tax paid shall not include any portion of such tax attributable to section 4980A(d)."

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

1986—Subsec. (g). Pub. L. 99–514 struck out subsec. (g) which provided for treatment of tax imposed on certain generation-skipping transfers.

1976—Subsec. (b). Pub. L. 94–455, §2001(c)(1)(C)(i), struck out "and increased by the exemption provided for by section 2052 or section 2106(a)(3), or the corresponding provisions of prior laws, in determining the taxable estate of the transferor for purposes of the estate tax" after "death taxes paid with respect to such estate".

Subsec. (c)(1)(A). Pub. L. 94–455, §2001(c)(1)(C)(ii), substituted "credits provided for in sections 2010, 2011, 2012, and 2014) computed" for "credits for State death taxes, gift tax, and foreign death taxes provided for in sections 2011, 2012, and 2014) computed".

Subsec. (d)(3). Pub. L. 94–455, §1902(a)(2), struck out ", or the corresponding provision of prior law," after "marital deductions)".

Subsec. (f). Pub. L. 94–455, §2003(c), added subsec. (f).

Subsec. (g). Pub. L. 94–455, §2006(b)(2), added subsec. (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2001 Amendment

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

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to estates of decedents dying after Dec. 31, 1996, see section 1073(c) of Pub. L. 105–34, set out as an Effective Date of Repeal note under section 4980A 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 generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as an Effective Date note under section 2601 of this title.

Effective Date of 1976 Amendment

Amendment by section 1902(a)(2) of Pub. L. 94–455 applicable to estates of decedents dying after Oct. 4, 1976, see section 1902(c)(1) of Pub. L. 94–455, set out as a note under section 2012 of this title.