26 U.S.C. § 1291 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1291: Interest on tax deferral
Interest on tax deferral
Status: in_force

(a) Treatment of distributions and stock dispositions

(1) Distributions

If a United States person receives an excess distribution in respect of stock in a passive foreign investment company, then—

(A) the amount of the excess distribution shall be allocated ratably to each day in the taxpayer's holding period for the stock,

(B) with respect to such excess distribution, the taxpayer's gross income for the current year shall include (as ordinary income) only the amounts allocated under subparagraph (A) to—

(i) the current year, or

(ii) any period in the taxpayer's holding period before the 1st day of the 1st taxable year of the company which begins after December 31, 1986, and for which it was a passive foreign investment company, and

(C) the tax imposed by this chapter for the current year shall be increased by the deferred tax amount (determined under subsection (c)).

(2) Dispositions

If the taxpayer disposes of stock in a passive foreign investment company, then the rules of paragraph (1) shall apply to any gain recognized on such disposition in the same manner as if such gain were an excess distribution.

(3) Definitions

For purposes of this section—

(A) Holding period

The taxpayer's holding period shall be determined under section 1223; except that—

(i) for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution, and

(ii) if section 1296 applied to such stock with respect to the taxpayer for any prior taxable year, such holding period shall be treated as beginning on the first day of the first taxable year beginning after the last taxable year for which section 1296 so applied.

(B) Current year

The term "current year" means the taxable year in which the excess distribution or disposition occurs.

(b) Excess distribution

(1) In general

For purposes of this section, the term "excess distribution" means any distribution in respect of stock received during any taxable year to the extent such distribution does not exceed its ratable portion of the total excess distribution (if any) for such taxable year.

(2) Total excess distribution

For purposes of this subsection—

(A) In general

The term "total excess distribution" means the excess (if any) of—

(i) the amount of the distributions in respect of the stock received by the taxpayer during the taxable year, over

(ii) 125 percent of the average amount received in respect of such stock by the taxpayer during the 3 preceding taxable years (or, if shorter, the portion of the taxpayer's holding period before the taxable year).

For purposes of clause (ii), any excess distribution received during such 3-year period shall be taken into account only to the extent it was included in gross income under subsection (a)(1)(B).

(B) No excess for 1st year

The total excess distributions with respect to any stock shall be zero for the taxable year in which the taxpayer's holding period in such stock begins.

(3) Adjustments

Under regulations prescribed by the Secretary—

(A) determinations under this subsection shall be made on a share-by-share basis, except that shares with the same holding period may be aggregated,

(B) proper adjustments shall be made for stock splits and stock dividends,

(C) if the taxpayer does not hold the stock during the entire taxable year, distributions received during such year shall be annualized,

(D) if the taxpayer's holding period includes periods during which the stock was held by another person, distributions received by such other person shall be taken into account as if received by the taxpayer,

(E) if the distributions are received in a foreign currency, determinations under this subsection shall be made in such currency and the amount of any excess distribution determined in such currency shall be translated into dollars,

(F) proper adjustment shall be made for amounts not includible in gross income by reason of section 959(a) or 1293(c), and

(G) if a charitable deduction was allowable under section 642(c) to a trust for any distribution of its income, proper adjustments shall be made for the deduction so allowable to the extent allocable to distributions or gain in respect of stock in a passive foreign investment company.

(c) Deferred tax amount

For purposes of this section—

(1) In general

The term "deferred tax amount" means, with respect to any distribution or disposition to which subsection (a) applies, an amount equal to the sum of—

(A) the aggregate increases in taxes described in paragraph (2), plus

(B) the aggregate amount of interest (determined in the manner provided under paragraph (3)) on such increases in tax.

Any increase in the tax imposed by this chapter for the current year under subsection (a) to the extent attributable to the amount referred to in subparagraph (B) shall be treated as interest paid under section 6601 on the due date for the current year.

(2) Aggregate increases in taxes

For purposes of paragraph (1)(A), the aggregate increases in taxes shall be determined by multiplying each amount allocated under subsection (a)(1)(A) to any taxable year (other than any taxable year referred to in subsection (a)(1)(B)) by the highest rate of tax in effect for such taxable year under section 1 or 11, whichever applies.

(3) Computation of interest

(A) In general

The amount of interest referred to in paragraph (1)(B) on any increase determined under paragraph (2) for any taxable year shall be determined for the period—

(i) beginning on the due date for such taxable year, and

(ii) ending on the due date for the taxable year with or within which the distribution or disposition occurs,

by using the rates and method applicable under section 6621 for underpayments of tax for such period.

(B) Due date

For purposes of this subsection, the term "due date" means the date prescribed by law (determined without regard to extensions) for filing the return of the tax imposed by this chapter for the taxable year.

(d) Coordination with subparts B and C

(1) In general

This section shall not apply with respect to any distribution paid by a passive foreign investment company, or any disposition of stock in a passive foreign investment company, if such company is a qualified electing fund with respect to the taxpayer for each of its taxable years—

(A) which begins after December 31, 1986, and for which such company is a passive foreign investment company, and

(B) which includes any portion of the taxpayer's holding period.

Except as provided in section 1296(j), this section also shall not apply if an election under section 1296(k) is in effect for the taxpayer's taxable year. In the case of stock which is marked to market under section 475 or any other provision of this chapter, this section shall not apply, except that rules similar to the rules of section 1296(j) shall apply.

(2) Election to recognize gain where company becomes qualified electing fund

(A) In general

If—

(i) a passive foreign investment company becomes a qualified electing fund with respect to the taxpayer for a taxable year which begins after December 31, 1986,

(ii) the taxpayer holds stock in such company on the first day of such taxable year, and

(iii) the taxpayer establishes to the satisfaction of the Secretary the fair market value of such stock on such first day,

the taxpayer may elect to recognize gain as if he sold such stock on such first day for such fair market value.

(B) Additional election for shareholder of controlled foreign corporations

(i) In general

If—

(I) a passive foreign investment company becomes a qualified electing fund with respect to the taxpayer for a taxable year which begins after December 31, 1986,

(II) the taxpayer holds stock in such company on the first day of such taxable year, and

(III) such company is a controlled foreign corporation (as defined in section 957(a)),

 the taxpayer may elect to include in gross income as a dividend received on such first day an amount equal to the portion of the post-1986 earnings and profits of such company attributable (under regulations prescribed by the Secretary) to the stock in such company held by the taxpayer on such first day. The amount treated as a dividend under the preceding sentence shall be treated as an excess distribution and shall be allocated under subsection (a)(1)(A) only to days during periods taken into account in determining the post-1986 earnings and profits so attributable.

(ii) Post-1986 earnings and profits

For purposes of clause (i), the term "post-1986 earnings and profits" means earnings and profits which were accumulated in taxable years of such company beginning after December 31, 1986, and during the period or periods the stock was held by the taxpayer while the company was a passive foreign investment company.

(iii) Coordination with section 959(e)

For purposes of section 959(e), any amount included in gross income under this subparagraph shall be treated as included in gross income under section 1248(a).

(C) Adjustments

In the case of any stock to which subparagraph (A) or (B) applies—

(i) the adjusted basis of such stock shall be increased by the gain recognized under subparagraph (A) or the amount treated as a dividend under subparagraph (B), as the case may be, and

(ii) the taxpayer's holding period in such stock shall be treated as beginning on the first day referred to in such subparagraph.

(e) Certain basis, etc., rules made applicable

Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar to the rules of subsections (c), (d), and (e) of section 1246 (as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004) shall apply for purposes of this section; except that—

(1) the reduction under subsection (e) of such section shall be the excess of the basis determined under section 1014 over the adjusted basis of the stock immediately before the decedent's death, and

(2) such a reduction shall not apply in the case of a decedent who was a nonresident alien at all times during his holding period in the stock.

(f) Recognition of gain

To the extent provided in regulations, in the case of any transfer of stock in a passive foreign investment company where (but for this subsection) there is not full recognition of gain, the excess (if any) of—

(1) the fair market value of such stock, over

(2) its adjusted basis,

shall be treated as gain from the sale or exchange of such stock and shall be recognized notwithstanding any provision of law. Proper adjustment shall be made to the basis of any such stock for gain recognized under the preceding sentence.

(g) Coordination with foreign tax credit rules

(1) In general

If there are creditable foreign taxes with respect to any distribution in respect of stock in a passive foreign investment company—

(A) the amount of such distribution shall be determined for purposes of this section with regard to section 78,

(B) the excess distribution taxes shall be allocated ratably to each day in the taxpayer's holding period for the stock, and

(C) to the extent—

(i) that such excess distribution taxes are allocated to a taxable year referred to in subsection (a)(1)(B), such taxes shall be taken into account under section 901 for the current year, and

(ii) that such excess distribution taxes are allocated to any other taxable year, such taxes shall reduce (subject to the principles of section 904(d) and not below zero) the increase in tax determined under subsection (c)(2) for such taxable year by reason of such distribution (but such taxes shall not be taken into account under section 901).

(2) Definitions

For purposes of this subsection—

(A) Creditable foreign taxes

The term "creditable foreign taxes" means, with respect to any distribution, any withholding tax imposed with respect to such distribution, but only if the taxpayer chooses the benefits of section 901 and such taxes are creditable under section 901 (determined without regard to paragraph (1)(C)(ii)).

(B) Excess distribution taxes

The term "excess distribution taxes" means, with respect to any distribution, the portion of the creditable foreign taxes with respect to such distribution which is attributable (on a pro rata basis) to the portion of such distribution which is an excess distribution.

(C) Section 1248 gain

The rules of this subsection also shall apply in the case of any gain which but for this section would be includible in gross income as a dividend under section 1248.

(Added Pub. L. 99–514, title XII, §1235(a), Oct. 22, 1986, 100 Stat. 2566; amended Pub. L. 100–647, title I, §1012(p)(1), (3), (6), (7), (9), (12)–(14), (28), (31), (33), title VI, §6127(b), Nov. 10, 1988, 102 Stat. 3515–3517, 3520, 3521, 3715; Pub. L. 105–34, title XI, §1122(b), Aug. 5, 1997, 111 Stat. 976; Pub. L. 105–206, title VI, §6011(c)(2), July 22, 1998, 112 Stat. 818; Pub. L. 107–16, title V, §542(e)(5)(B), June 7, 2001, 115 Stat. 85; Pub. L. 108–357, title IV, §413(c)(24), Oct. 22, 2004, 118 Stat. 1509; Pub. L. 111–147, title V, §521(b), Mar. 18, 2010, 124 Stat. 112; Pub. L. 111–312, title III, §301(a), Dec. 17, 2010, 124 Stat. 3300; Pub. L. 115–97, title I, §14301(c)(34), Dec. 22, 2017, 131 Stat. 2224; Pub. L. 115–141, div. U, title IV, §401(a)(183), Mar. 23, 2018, 132 Stat. 1193.)

Editorial Notes

References in Text

The date of the enactment of the American Jobs Creation Act of 2004, referred to in subsec. (e), is the date of enactment of Pub. L. 108–357, which was approved Oct. 22, 2004.

Amendments

2018—Subsec. (e). Pub. L. 115–141 substituted "subsections (c), (d), and (e)" for "subsections (c) and (d) (e)," in introductory provisions.

2017—Subsec. (g)(2)(A). Pub. L. 115–97 substituted "any distribution, any withholding tax imposed with respect to such distribution, but only if" for "any distribution—

"(i) any foreign taxes deemed paid under section 902 with respect to such distribution, and

"(ii) any withholding tax imposed with respect to such distribution,

but only if".

2010—Subsec. (e). Pub. L. 111–312, which directed that subsec. (e) be amended to read as if amendment by Pub. L. 107–16, §542(e)(5)(B), had never been enacted, was executed by inserting "(e)," after "subsections (c) and (d)" and substituting "; except that—" and pars. (1) and (2) for the period at end. See 2001 Amendment note below.

Pub. L. 111–147 substituted "and (d)" for ", (d), and (f)".

2004—Subsec. (b)(3)(F). Pub. L. 108–357, §413(c)(24)(A), substituted "959(a)" for "551(d), 959(a),".

Subsec. (e). Pub. L. 108–357, §413(c)(24)(B), inserted "(as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004)" after "section 1246" in introductory provisions.

2001—Subsec. (e). Pub. L. 107–16, §542(e)(5)(B), struck out "(e)," after "subsections (c), (d)," and substituted period at end for "; except that—

"(1) the reduction under subsection (e) of such section shall be the excess of the basis determined under section 1014 over the adjusted basis of the stock immediately before the decedent's death, and

"(2) such a reduction shall not apply in the case of a decedent who was a nonresident alien at all times during his holding period in the stock."

1998—Subsec. (d)(1). Pub. L. 105–206 inserted at end "In the case of stock which is marked to market under section 475 or any other provision of this chapter, this section shall not apply, except that rules similar to the rules of section 1296(j) shall apply."

1997—Subsec. (a)(3)(A). Pub. L. 105–34, §1122(b)(3), amended heading and text of subpar. (A) generally. Prior to amendment, text read as follows: "The taxpayer's holding period shall be determined under section 1223; except that, for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution."

Subsec. (d). Pub. L. 105–34, §1122(b)(2), substituted "subparts B and C" for "subpart B" in heading.

Subsec. (d)(1). Pub. L. 105–34, §1122(b)(1), inserted concluding provisions.

1988—Subsec. (a)(1)(B)(ii). Pub. L. 100–647, §1012(p)(12), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: "any period in the taxpayer's holding period before the 1st day of the 1st taxable year of the company for which it was a passive foreign investment company (or, if later, January 1, 1987), and".

Subsec. (a)(3)(A). Pub. L. 100–647, §1012(p)(14), substituted "for purposes of applying this section to" for "in the case of".

Subsec. (a)(4), (5). Pub. L. 100–647, §1012(p)(7)(A), struck out par. (4) which related to coordination with section 904, and par. (5) which related to section 902 not applying.

Subsec. (b)(2)(A). Pub. L. 100–647, §1012(p)(13), inserted at end "For purposes of clause (ii), any excess distribution received during such 3-year period shall be taken into account only to the extent it was included in gross income under subsection (a)(1)(B)."

Subsec. (b)(3)(F). Pub. L. 100–647, §1012(p)(3), added subpar. (F).

Subsec. (b)(3)(G). Pub. L. 100–647, §1012(p)(33), added subpar. (G).

Subsec. (c)(1). Pub. L. 100–647, §1012(p)(31), inserted at end "Any increase in the tax imposed by this chapter for the current year under subsection (a) to the extent attributable to the amount referred to in subparagraph (B) shall be treated as interest paid under section 6601 on the due date for the current year."

Subsec. (d)(1). Pub. L. 100–647, §6127(b)(1), inserted "with respect to the taxpayer" after "qualified electing fund".

Pub. L. 100–647, §1012(p)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "This section shall not apply with respect to—

"(A) any distribution paid by a passive foreign investment company during a taxable year for which such company is a qualified electing fund, and

"(B) any disposition of stock in a passive foreign investment company if such company is a qualified electing fund for each of its taxable years—

"(i) which begins after December 31, 1986, and for which such company is a passive foreign investment company, and

"(ii) which includes any portion of the taxpayer's holding period."

Subsec. (d)(2)(A)(i). Pub. L. 100–647, §6127(b)(2), inserted "with respect to the taxpayer" after "qualified electing fund".

Subsec. (d)(2)(B). Pub. L. 100–647, §1012(p)(28), added subpar. (B) and struck out former subpar. (B) which related to adjustments to basis of stock to which subpar. (A) applies.

Subsec. (d)(2)(B)(i)(I). Pub. L. 100–647, §6127(b)(2), inserted "with respect to the taxpayer" after "qualified electing fund".

Subsec. (d)(2)(C). Pub. L. 100–647, §1012(p)(28), added subpar. (C).

Subsec. (e). Pub. L. 100–647, §1012(p)(6)(B), substituted "Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar".

Subsec. (e)(2). Pub. L. 100–647, §1012(p)(9), struck out "not" before "a nonresident".

Subsec. (f). Pub. L. 100–647, §1012(p)(6)(A), amended subsec. (f) generally. Prior to amendment, subsec. (f), "Nonrecognition provisions", read as follows: "To the extent provided in regulations, gain shall be recognized on any disposition of stock in a passive foreign investment company."

Subsec. (g). Pub. L. 100–647, §1012(p)(7)(B), added subsec. (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title.

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–312 applicable to estates of decedents dying, and transfers made after Dec. 31, 2009, except as otherwise provided, see section 301(e) of Pub. L. 111–312, set out as an Effective and Termination Dates of 2010 Amendment note under section 121 of this title.

Pub. L. 111–147, title V, §521(c), Mar. 18, 2010, 124 Stat. 112, provided that: "The amendments made by this section [amending this section and section 1298 of this title] take effect on the date of the enactment of this Act [Mar. 18, 2010]."

Effective Date of 2004 Amendment

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

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to estates of decedents dying after Dec. 31, 2009, see section 542(f)(1) of Pub. L. 107–16, set out as a note under section 121 of this title.

Effective Date of 1998 Amendment

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

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to taxable years of United States persons beginning after Dec. 31, 1997, and to taxable years of foreign corporations ending with or within such taxable years of United States persons, see section 1124 of Pub. L. 105–34, set out as a note under section 532 of this title.

Effective Date of 1988 Amendment

Amendment by section 1012(p)(1), (3), (6), (7), (9), (12)–(14), (28), (31), (33) 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.

Amendment by section 6127(b) of Pub. L. 100–647 effective as if included in the amendments made by section 1235 of Pub. L. 99–514, see section 6127(c)(1) of Pub. L. 100–647, set out as a note under section 1295 of this title.

Effective Date

Pub. L. 99–514, title XII, §1235(h), Oct. 22, 1986, 100 Stat. 2576, provided that: "The amendments made by this section [enacting this section and sections 1293 to 1297 of this title and amending sections 532, 542, 551, 851, 904, 951, 1246, and 6503 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 1986."
26 U.S.C. § 6050B (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 61 / Section 6050B: Returns relating to unemployment compensation
Returns relating to unemployment compensation
Status: in_force

(a) Requirement of reporting

Every person who makes payments of unemployment compensation aggregating $10 or more to any individual during any calendar year shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amounts of such payments and the name and address of the individual to whom paid.

(b) Statements to be furnished to individuals with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing—

(1) the name, address, and phone number of the information contact of the person required to make such return, and

(2) the aggregate amount of payments to the individual required to be shown on such return.

The written statement required under the preceding sentence shall be furnished to the individual on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.

(c) Definitions

For purposes of this section—

(1) Unemployment compensation

The term "unemployment compensation" has the meaning given to such term by section 85(b).

(2) Person

The term "person" means the officer or employee having control of the payment of the unemployment compensation, or the person appropriately designated for purposes of this section.

(Added Pub. L. 95–600, title I, §112(b), Nov. 6, 1978, 92 Stat. 2777; amended Pub. L. 99–514, title XV, §1501(c)(7), Oct. 22, 1986, 100 Stat. 2738; Pub. L. 104–168, title XII, §1201(a)(7), July 30, 1996, 110 Stat. 1469; Pub. L. 104–188, title I, §1704(t)(14), Aug. 20, 1996, 110 Stat. 1888.)

Editorial Notes

Amendments

1996—Subsec. (b)(1). Pub. L. 104–168 substituted "name, address, and phone number of the information contact" for "name and address".

Subsec. (c)(1). Pub. L. 104–188 substituted "section 85(b)" for "section 85(c)".

1986—Subsec. (b). Pub. L. 99–514, in amending subsec. (b) generally, substituted references to persons required to make a return for former references to persons making a return and references to individuals whose names are required to be set forth for former references to individuals whose names are set forth, and struck out provision directing that no statement is required to be furnished to individuals if the aggregate amount of payments to such individual shown on the return is less than $10.

Statutory Notes and Related Subsidiaries

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–168 applicable to statements required to be furnished after Dec. 31, 1996 (determined without regard to any extension), see section 1201(b) of Pub. L. 104–168, set out as a note under section 6041 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1986, see section 1501(e) of Pub. L. 99–514, set out as an Effective Date note under section 6721 of this title.

Effective Date

Section applicable to payments of unemployment compensation made after Dec. 31, 1978, in taxable years ending after such date, but not applicable to payments made for weeks of unemployment ending before Dec. 1, 1978, see section 112(d) of Pub. L. 95–600, as amended, set out as a note under section 85 of this title.

Waiver of Statute of Limitations

For provisions relating to credit or refund of overpayment of tax resulting from 1984 amendment to section 112(d) of Pub. L. 95–600, see section 1075(b) of Pub. L. 98–369, set out as a note under section 85 of this title.
26 U.S.C. § 4944 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 42 / Section 4944: Taxes on investments which jeopardize charitable purpose
Taxes on investments which jeopardize charitable purpose
Status: in_force

(a) Initial taxes

(1) On the private foundation

If a private foundation invests any amount in such a manner as to jeopardize the carrying out of any of its exempt purposes, there is hereby imposed on the making of such investment a tax equal to 10 percent of the amount so invested for each year (or part thereof) in the taxable period. The tax imposed by this paragraph shall be paid by the private foundation.

(2) On the management

In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any foundation manager in the making of the investment, knowing that it is jeopardizing the carrying out of any of the foundation's exempt purposes, a tax equal to 10 percent of the amount so invested for each year (or part thereof) in the taxable period, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who participated in the making of the investment.

(b) Additional taxes

(1) On the foundation

In any case in which an initial tax is imposed by subsection (a)(1) on the making of an investment and such investment is not removed from jeopardy within the taxable period, there is hereby imposed a tax equal to 25 percent of the amount of the investment. The tax imposed by this paragraph shall be paid by the private foundation.

(2) On the management

In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the removal from jeopardy, there is hereby imposed a tax equal to 5 percent of the amount of the investment. The tax imposed by this paragraph shall be paid by any foundation manager who refused to agree to part or all of the removal from jeopardy.

(c) Exception for program-related investments

For purposes of this section, investments, the primary purpose of which is to accomplish one or more of the purposes described in section 170(c)(2)(B), and no significant purpose of which is the production of income or the appreciation of property, shall not be considered as investments which jeopardize the carrying out of exempt purposes.

(d) Special rules

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

(1) Joint and several liability

If more than one person is liable under subsection (a)(2) or (b)(2) with respect to any one investment, all such persons shall be jointly and severally liable under such paragraph with respect to such investment.

(2) Limit for management

With respect to any one investment, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $20,000.

(e) Definitions

For purposes of this section—

(1) Taxable period

The term "taxable period" means, with respect to any investment which jeopardizes the carrying out of exempt purposes, the period beginning with the date on which the amount is so invested and ending on the earliest of—

(A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212,

(B) the date on which the tax imposed by subsection (a)(1) is assessed, or

(C) the date on which the amount so invested is removed from jeopardy.

(2) Removal from jeopardy

An investment which jeopardizes the carrying out of exempt purposes shall be considered to be removed from jeopardy when such investment is sold or otherwise disposed of, and the proceeds of such sale or other disposition are not investments which jeopardize the carrying out of exempt purposes.

(Added Pub. L. 91–172, title I, §101(b), Dec. 30, 1969, 83 Stat. 511; amended Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–596, §2(a)(1)(E), (2)(D), (3)(D), Dec. 24, 1980, 94 Stat. 3469–3471; Pub. L. 109–280, title XII, §1212(d), Aug. 17, 2006, 120 Stat. 1074.)

Editorial Notes

Codification

Section 1212(d) of Pub. L. 109–280, which directed the amendment of section 4944 without specifying the act to be amended, was executed to this section, which is section 4944 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2006 Amendment notes below.

Amendments

2006—Subsec. (a). Pub. L. 109–280, §1212(d)(1), substituted "10 percent" for "5 percent" in pars. (1) and (2). See Codification note above.

Subsec. (d)(2). Pub. L. 109–280, §1212(d)(2), substituted "$10,000," for "$5,000," and "$20,000." for "$10,000." See Codification note above.

1980—Subsec. (b)(1). Pub. L. 96–596, §2(a)(1)(E), substituted "taxable period" for "correction period".

Subsec. (e)(1)(B), (C). Pub. L. 96–596, §2(a)(2)(D), added subpar. (B) and redesignated former subpar. (B) as (C).

Subsec. (e)(3). Pub. L. 96–596, §2(a)(3)(D), struck out par. (3), which defined correction period, with respect to any investment which jeopardizes the carrying out of exempt purposes, as the period beginning with the date on which such investment is entered into and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (b)(1) of this section under section 6212 of this title, extended by any period in which a deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines is reasonable and necessary to bring about removal from jeopardy.

1976—Subsec. (e)(3)(B). Pub. L. 94–455 struck out "or his delegate" after "Secretary".

Statutory Notes and Related Subsidiaries

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to taxable years beginning after Aug. 17, 2006, see section 1212(f) of Pub. L. 109–280, set out as a note under section 4941 of this title.

Effective Date of 1980 Amendment

For effective date of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an Effective Date note under section 4961 of this title.
26 U.S.C. § 6311 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 64 / Section 6311: Payment of tax by commercially acceptable means
Payment of tax by commercially acceptable means
Status: in_force

(a) Authority to receive

It shall be lawful for the Secretary to receive for internal revenue taxes (or in payment for internal revenue stamps) any commercially acceptable means that the Secretary deems appropriate to the extent and under the conditions provided in regulations prescribed by the Secretary.

(b) Ultimate liability

If a check, money order, or other method of payment, including payment by credit card, debit card, or charge card so received is not duly paid, or is paid and subsequently charged back to the Secretary, the person by whom such check, or money order, or other method of payment has been tendered shall remain liable for the payment of the tax or for the stamps, and for all legal penalties and additions, to the same extent as if such check, money order, or other method of payment had not been tendered.

(c) Liability of banks and others

If any certified, treasurer's, or cashier's check (or other guaranteed draft), or any money order, or any other means of payment that has been guaranteed by a financial institution (such as a credit card, debit card, or charge card transaction which has been guaranteed expressly by a financial institution) so received is not duly paid, the United States shall, in addition to its right to exact payment from the party originally indebted therefor, have a lien for—

(1) the amount of such check (or draft) upon all assets of the financial institution on which drawn,

(2) the amount of such money order upon all the assets of the issuer thereof, or

(3) the guaranteed amount of any other transaction upon all the assets of the institution making such guarantee,

and such amount shall be paid out of such assets in preference to any other claims whatsoever against such financial institution, issuer, or guaranteeing institution, except the necessary costs and expenses of administration and the reimbursement of the United States for the amount expended in the redemption of the circulating notes of such financial institution.

(d) Payment by other means

(1) Authority to prescribe regulations

The Secretary shall prescribe such regulations as the Secretary deems necessary to receive payment by commercially acceptable means, including regulations that—

(A) specify which methods of payment by commercially acceptable means will be acceptable,

(B) specify when payment by such means will be considered received,

(C) identify types of nontax matters related to payment by such means that are to be resolved by persons ultimately liable for payment and financial intermediaries, without the involvement of the Secretary, and

(D) ensure that tax matters will be resolved by the Secretary, without the involvement of financial intermediaries.

(2) Authority to enter into contracts

Notwithstanding section 3718(f) of title 31, United States Code, the Secretary is authorized to enter into contracts to obtain services related to receiving payment by other means where cost beneficial to the Government. The Secretary may not pay any fee or provide any other consideration under any such contract for the use of credit, debit, or charge cards for the payment of taxes imposed by subtitle A. The preceding sentence shall not apply to the extent that the Secretary ensures that any such fee or other consideration is fully recouped by the Secretary in the form of fees paid to the Secretary by persons paying taxes imposed under subtitle A with credit, debit, or charge cards pursuant to such contract. Notwithstanding the preceding sentence, the Secretary shall seek to minimize the amount of any fee or other consideration that the Secretary pays under any such contract.

(3) Special provisions for use of credit cards

If use of credit cards is accepted as a method of payment of taxes pursuant to subsection (a)—

(A) a payment of internal revenue taxes (or a payment for internal revenue stamps) by a person by use of a credit card shall not be subject to section 161 of the Truth in Lending Act (15 U.S.C. 1666), or to any similar provisions of State law, if the error alleged by the person is an error relating to the underlying tax liability, rather than an error relating to the credit card account such as a computational error or numerical transposition in the credit card transaction or an issue as to whether the person authorized payment by use of the credit card,

(B) a payment of internal revenue taxes (or a payment for internal revenue stamps) shall not be subject to section 170 of the Truth in Lending Act (15 U.S.C. 1666i), or to any similar provisions of State law,

(C) a payment of internal revenue taxes (or a payment for internal revenue stamps) by a person by use of a debit card shall not be subject to section 908 of the Electronic Fund Transfer Act (15 U.S.C. 1693f), or to any similar provisions of State law, if the error alleged by the person is an error relating to the underlying tax liability, rather than an error relating to the debit card account such as a computational error or numerical transposition in the debit card transaction or an issue as to whether the person authorized payment by use of the debit card,

(D) the term "creditor" under section 103(g) of the Truth in Lending Act (15 U.S.C. 1602(g)) shall not include the Secretary with respect to credit card transactions in payment of internal revenue taxes (or payment for internal revenue stamps), and

(E) notwithstanding any other provision of law to the contrary, in the case of payment made by credit card or debit card transaction of an amount owed to a person as the result of the correction of an error under section 161 of the Truth in Lending Act (15 U.S.C. 1666) or section 908 of the Electronic Fund Transfer Act (15 U.S.C. 1693f), the Secretary is authorized to provide such amount to such person as a credit to that person's credit card or debit card account through the applicable credit card or debit card system.

(e) Confidentiality of information

(1) In general

Except as otherwise authorized by this subsection, no person may use or disclose any information relating to credit or debit card transactions obtained pursuant to section 6103(k)(9) other than for purposes directly related to the processing of such transactions, or the billing or collection of amounts charged or debited pursuant thereto.

(2) Exceptions

(A) Debit or credit card issuers or others acting on behalf of such issuers may also use and disclose such information for purposes directly related to servicing an issuer's accounts.

(B) Debit or credit card issuers or others directly involved in the processing of credit or debit card transactions or the billing or collection of amounts charged or debited thereto may also use and disclose such information for purposes directly related to—

(i) statistical risk and profitability assessment;

(ii) transferring receivables, accounts, or interest therein;

(iii) auditing the account information;

(iv) complying with Federal, State, or local law; and

(v) properly authorized civil, criminal, or regulatory investigation by Federal, State, or local authorities.

(3) Procedures

Use and disclosure of information under this paragraph shall be made only to the extent authorized by written procedures promulgated by the Secretary.

(4) Cross reference

For provision providing for civil damages for violation of paragraph (1), see section 7431.

(Aug. 16, 1954, ch. 736, 68A Stat. 777; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title IV, §448(a), July 18, 1984, 98 Stat. 817; Pub. L. 105–34, title XII, §1205(a), Aug. 5, 1997, 111 Stat. 995; Pub. L. 105–206, title VI, §6012(b)(1), July 22, 1998, 112 Stat. 819; Pub. L. 105–277, div. J, title IV, §4003(k), Oct. 21, 1998, 112 Stat. 2681–910; Pub. L. 115–141, div. U, title IV, §401(a)(280), Mar. 23, 2018, 132 Stat. 1197; Pub. L. 116–25, title II, §2303, July 1, 2019, 133 Stat. 1013.)

Editorial Notes

Amendments

2019—Subsec. (d)(2). Pub. L. 116–25 inserted at end "The preceding sentence shall not apply to the extent that the Secretary ensures that any such fee or other consideration is fully recouped by the Secretary in the form of fees paid to the Secretary by persons paying taxes imposed under subtitle A with credit, debit, or charge cards pursuant to such contract. Notwithstanding the preceding sentence, the Secretary shall seek to minimize the amount of any fee or other consideration that the Secretary pays under any such contract."

2018—Subsec. (d)(3)(D). Pub. L. 115–141 substituted "section 103(g)" for "section 103(f)" and "1602(g)" for "1602(f)".

1998—Subsec. (d)(2). Pub. L. 105–277 substituted "under any such contract for the use of credit, debit, or charge cards for the payment of taxes imposed by subtitle A" for "under such contracts".

Subsec. (e)(1). Pub. L. 105–206 substituted "section 6103(k)(9)" for "section 6103(k)(8)".

1997—Pub. L. 105–34 amended section catchline and text generally, substituting provisions relating to payment of tax by commercially acceptable means for provisions consisting of subsecs. (a) and (b) relating to payment by check or money order and liability if a check or money order received is not duly paid.

1984—Subsec. (b)(2). Pub. L. 98–369 substituted "or cashier's check (or other guaranteed draft)" for "or cashier's check", "the amount of such check (or draft)" for "the amount of such check", and "the financial institution" for "the bank or trust company", and substituted "such financial institution" for "such bank" in two places.

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

Statutory Notes and Related Subsidiaries

Effective Date of 1998 Amendments

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

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

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 effective on the day 9 months after Aug. 5, 1997, see section 1205(d) of Pub. L. 105–34, set out as a note under section 6103 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title IV, §448(b), July 18, 1984, 98 Stat. 818, provided that: "The amendments made by subsection (a) [amending this section] shall take effect on the date of the enactment of this Act [July 18, 1984]."

Regulations

Pub. L. 105–206, title III, §3703, July 22, 1998, 112 Stat. 777, provided that: "The Secretary of the Treasury or the Secretary's delegate shall establish such rules, regulations, and procedures as are necessary to allow payment of taxes by check or money order made payable to the United States Treasury."

Required Notice of Certain Payments

Pub. L. 104–168, title XII, §1202, July 30, 1996, 110 Stat. 1470, provided that: "If any payment is received by the Secretary of the Treasury or his delegate from any taxpayer and the Secretary cannot associate such payment with such taxpayer, the Secretary shall make reasonable efforts to notify the taxpayer of such inability within 60 days after the receipt of such payment."
26 U.S.C. § 513 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 513: Unrelated trade or business
Unrelated trade or business
Status: in_force

(a) General rule

The term "unrelated trade or business" means, in the case of any organization subject to the tax imposed by section 511, any trade or business the conduct of which is not substantially related (aside from the need of such organization for income or funds or the use it makes of the profits derived) to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501 (or, in the case of an organization described in section 511(a)(2)(B), to the exercise or performance of any purpose or function described in section 501(c)(3)), except that such term does not include any trade or business—

(1) in which substantially all the work in carrying on such trade or business is performed for the organization without compensation; or

(2) which is carried on, in the case of an organization described in section 501(c)(3) or in the case of a college or university described in section 511(a)(2)(B), by the organization primarily for the convenience of its members, students, patients, officers, or employees, or, in the case of a local association of employees described in section 501(c)(4) organized before May 27, 1969, which is the selling by the organization of items of work-related clothes and equipment and items normally sold through vending machines, through food dispensing facilities, or by snack bars, for the convenience of its members at their usual places of employment; or

(3) which is the selling of merchandise, substantially all of which has been received by the organization as gifts or contributions.

(b) Special rule for trusts

The term "unrelated trade or business" means, in the case of—

(1) a trust computing its unrelated business taxable income under section 512 for purposes of section 681; or

(2) a trust described in section 401(a), or section 501(c)(17), which is exempt from tax under section 501(a);

any trade or business regularly carried on by such trust or by a partnership of which it is a member.

(c) Advertising, etc., activities

For purposes of this section, the term "trade or business" includes any activity which is carried on for the production of income from the sale of goods or the performance of services. For purposes of the preceding sentence, an activity does not lose identity as a trade or business merely because it is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may, or may not, be related to the exempt purposes of the organization. Where an activity carried on for profit constitutes an unrelated trade or business, no part of such trade or business shall be excluded from such classification merely because it does not result in profit.

(d) Certain activities of trade shows, State fairs, etc.

(1) General rule

The term "unrelated trade or business" does not include qualified public entertainment activities of an organization described in paragraph (2)(C), or qualified convention and trade show activities of an organization described in paragraph (3)(C).

(2) Qualified public entertainment activities

For purposes of this subsection—

(A) Public entertainment activity

The term "public entertainment activity" means any entertainment or recreational activity of a kind traditionally conducted at fairs or expositions promoting agricultural and educational purposes, including, but not limited to, any activity one of the purposes of which is to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment.

(B) Qualified public entertainment activity

The term "qualified public entertainment activity" means a public entertainment activity which is conducted by a qualifying organization described in subparagraph (C) in—

(i) conjunction with an international, national, State, regional, or local fair or exposition,

(ii) accordance with the provisions of State law which permit the activity to be operated or conducted solely by such an organization, or by an agency, instrumentality, or political subdivision of such State, or

(iii) accordance with the provisions of State law which permit such an organization to be granted a license to conduct not more than 20 days of such activity on payment to the State of a lower percentage of the revenue from such licensed activity than the State requires from organizations not described in section 501(c)(3), (4), or (5).

(C) Qualifying organization

For purposes of this paragraph, the term "qualifying organization" means an organization which is described in section 501(c) (3), (4), or (5) which regularly conducts, as one of its substantial exempt purposes, an agricultural and educational fair or exposition.

(3) Qualified convention and trade show activities

(A) Convention and trade show activities

The term "convention and trade show activity" means any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows, including, but not limited to, any activity one of the purposes of which is to attract persons in an industry generally (without regard to membership in the sponsoring organization) as well as members of the public to the show for the purpose of displaying industry products or to stimulate interest in, and demand for, industry products or services, or to educate persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry.

(B) Qualified convention and trade show activity

The term "qualified convention and trade show activity" means a convention and trade show activity carried out by a qualifying organization described in subparagraph (C) in conjunction with an international, national, State, regional, or local convention, annual meeting, or show conducted by an organization described in subparagraph (C) if one of the purposes of such organization in sponsoring the activity is the promotion and stimulation of interest in, and demand for, the products and services of that industry in general or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization, and the show is designed to achieve such purpose through the character of the exhibits and the extent of the industry products displayed.

(C) Qualifying organization

For purposes of this paragraph, the term "qualifying organization" means an organization described in section 501(c)(3), (4), (5), or (6) which regularly conducts as one of its substantial exempt purposes a show which stimulates interest in, and demand for, the products of a particular industry or segment of such industry or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization.

(4) Such activities not to affect exempt status

An organization described in section 501(c) (3), (4), or (5) shall not be considered as not entitled to the exemption allowed under section 501(a) solely because of qualified public entertainment activities conducted by it.

(e) Certain hospital services

In the case of a hospital described in section 170(b)(1)(A)(iii), the term "unrelated trade or business" does not include the furnishing of one or more of the services described in section 501(e)(1)(A) to one or more hospitals described in section 170(b)(1)(A)(iii) if—

(1) such services are furnished solely to such hospitals which have facilities to serve not more than 100 inpatients;

(2) such services, if performed on its own behalf by the recipient hospital, would constitute activities in exercising or performing the purpose or function constituting the basis for its exemption; and

(3) such services are provided at a fee or cost which does not exceed the actual cost of providing such services, such cost including straight line depreciation and a reasonable amount for return on capital goods used to provide such services.

(f) Certain bingo games

(1) In general

The term "unrelated trade or business" does not include any trade or business which consists of conducting bingo games.

(2) Bingo game defined

For purposes of paragraph (1), the term "bingo game" means any game of bingo—

(A) of a type in which usually—

(i) the wagers are placed,

(ii) the winners are determined, and

(iii) the distribution of prizes or other property is made,

in the presence of all persons placing wagers in such game,

(B) the conducting of which is not an activity ordinarily carried out on a commercial basis, and

(C) the conducting of which does not violate any State or local law.

(g) Certain pole rentals

In the case of a mutual or cooperative telephone or electric company, the term "unrelated trade or business" does not include engaging in qualified pole rentals (as defined in section 501(c)(12)(D)).

(h) Certain distributions of low cost articles without obligation to purchase and exchanges and rentals of member lists

(1) In general

In the case of an organization which is described in section 501 and contributions to which are deductible under paragraph (2) or (3) of section 170(c), the term "unrelated trade or business" does not include—

(A) activities relating to the distribution of low cost articles if the distribution of such articles is incidental to the solicitation of charitable contributions, or

(B) any trade or business which consists of—

(i) exchanging with another such organization names and addresses of donors to (or members of) such organization, or

(ii) renting such names and addresses to another such organization.

(2) Low cost article defined

For purposes of this subsection—

(A) In general

The term "low cost article" means any article which has a cost not in excess of $5 to the organization which distributes such item (or on whose behalf such item is distributed).

(B) Aggregation rule

If more than 1 item is distributed by or on behalf of an organization to a single distributee in any calendar year, the aggregate of the items so distributed in such calendar year to such distributee shall be treated as 1 article for purposes of subparagraph (A).

(C) Indexation of $5 amount

In the case of any taxable year beginning in a calendar year after 1987, the $5 amount in subparagraph (A) shall be increased by an amount equal to—

(i) $5, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting "calendar year 1987" for "calendar year 2016" in subparagraph (A)(ii) thereof.

(3) Distribution which is incidental to the solicitation of charitable contributions described

For purposes of this subsection, any distribution of low cost articles by an organization shall be treated as a distribution incidental to the solicitation of charitable contributions only if—

(A) such distribution is not made at the request of the distributee,

(B) such distribution is made without the express consent of the distributee, and

(C) the articles so distributed are accompanied by—

(i) a request for a charitable contribution (as defined in section 170(c)) by the distributee to such organization, and

(ii) a statement that the distributee may retain the low cost article regardless of whether such distributee makes a charitable contribution to such organization.

(i) Treatment of certain sponsorship payments

(1) In general

The term "unrelated trade or business" does not include the activity of soliciting and receiving qualified sponsorship payments.

(2) Qualified sponsorship payments

For purposes of this subsection—

(A) In general

The term "qualified sponsorship payment" means any payment made by any person engaged in a trade or business with respect to which there is no arrangement or expectation that such person will receive any substantial return benefit other than the use or acknowledgement of the name or logo (or product lines) of such person's trade or business in connection with the activities of the organization that receives such payment. Such a use or acknowledgement does not include advertising such person's products or services (including messages containing qualitative or comparative language, price information, or other indications of savings or value, an endorsement, or an inducement to purchase, sell, or use such products or services).

(B) Limitations

(i) Contingent payments

The term "qualified sponsorship payment" does not include any payment if the amount of such payment is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.

(ii) Safe harbor does not apply to periodicals and qualified convention and trade show activities

The term "qualified sponsorship payment" does not include—

(I) any payment which entitles the payor to the use or acknowledgement of the name or logo (or product lines) of the payor's trade or business in regularly scheduled and printed material published by or on behalf of the payee organization that is not related to and primarily distributed in connection with a specific event conducted by the payee organization, or

(II) any payment made in connection with any qualified convention or trade show activity (as defined in subsection (d)(3)(B)).

(3) Allocation of portions of single payment

For purposes of this subsection, to the extent that a portion of a payment would (if made as a separate payment) be a qualified sponsorship payment, such portion of such payment and the other portion of such payment shall be treated as separate payments.

(j) Debt management plan services

The term "unrelated trade or business" includes the provision of debt management plan services (as defined in section 501(q)(4)(B)) by any organization other than an organization which meets the requirements of section 501(q).

(Aug. 16, 1954, ch. 736, 68A Stat. 172; Pub. L. 86–667, §4, July 14, 1960, 74 Stat. 536; Pub. L. 91–172, title I, §121(b)(4), (c), Dec. 30, 1969, 83 Stat. 541, 542; Pub. L. 94–455, title XIII, §§1305(a), 1311(a), Oct. 4, 1976, 90 Stat. 1716, 1729; Pub. L. 95–502, title III, §301(a), Oct. 21, 1978, 92 Stat. 1702; Pub. L. 96–605, title I, §106(b), Dec. 28, 1980, 94 Stat. 3524; Pub. L. 99–514, title XVI, §§1601(a), 1602(a), (b), Oct. 22, 1986, 100 Stat. 2766, 2767; Pub. L. 101–508, title XI, §11101(d)(1)(G), Nov. 5, 1990, 104 Stat. 1388–405; Pub. L. 103–66, title XIII, §13201(b)(3)(H), Aug. 10, 1993, 107 Stat. 459; Pub. L. 105–34, title IX, §965(a), Aug. 5, 1997, 111 Stat. 893; Pub. L. 109–280, title XII, §1220(b), Aug. 17, 2006, 120 Stat. 1088; Pub. L. 115–97, title I, §11002(d)(1)(Z), Dec. 22, 2017, 131 Stat. 2060.)

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

2017—Subsec. (h)(2)(C)(ii). Pub. L. 115–97 substituted "for 'calendar year 2016' in subparagraph (A)(ii)" for "for 'calendar year 1992' in subparagraph (B)".

2006—Subsec. (j). Pub. L. 109–280, which directed the addition of subsec. (j) to section 513, without specifying the act to be amended, was executed by making the addition to this section, which is section 513 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.

1997—Subsec. (i). Pub. L. 105–34 added subsec. (i).

1993—Subsec. (h)(2)(C)(ii). Pub. L. 103–66 substituted "calendar year 1992" for "calendar year 1989".

1990—Subsec. (h)(2)(C)(ii). Pub. L. 101–508 inserted before period at end ", by substituting 'calendar year 1987' for 'calendar year 1989' in subparagraph (B) thereof".

1986—Subsec. (d)(3)(B). Pub. L. 99–514, §1602(a), inserted "or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization".

Subsec. (d)(3)(C). Pub. L. 99–514, §1602(b), substituted "section 501(c)(3), (4), (5), or (6)" for "section 501(c)(5) or (6)" and inserted "or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization".

Subsec. (h). Pub. L. 99–514, §1601(a), added subsec. (h).

1980—Subsec. (g). Pub. L. 96–605 added subsec. (g).

1978—Subsec. (f). Pub. L. 95–502 added subsec. (f).

1976—Subsec. (d). Pub. L. 94–455, §1305(a), added subsec. (d).

Subsec. (e). Pub. L. 94–455, §1311(a), added subsec. (e).

1969—Subsec. (a)(2). Pub. L. 91–172, §121(b)(4), inserted reference to local associations of employees described in section 501(c)(4) of this title and organized before May 27, 1969.

Subsec. (c). Pub. L. 91–172, §121(c), substituted "Advertising, etc., activities" for "Special rule for certain publishing businesses", in heading, and, in text, substituted provisions extending definition of trade or business to include any activity carried on for the production of income from the sale of goods or the performance of services, for provisions referring to publishing businesses carried on by an organization during a taxable year beginning before Jan. 1, 1953.

1960—Subsec. (b)(2). Pub. L. 86–667 included trusts described in section 501(c)(17).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by 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.

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to taxable years beginning after Aug. 17, 2006, with transition rule for existing organizations, see section 1220(c) of Pub. L. 109–280, set out as a note under section 501 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title IX, §965(b), Aug. 5, 1997, 111 Stat. 894, provided that: "The amendment made by this section [amending this section] shall apply to payments solicited or received after December 31, 1997."

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable to taxable years beginning after Dec. 31, 1992, see section 13201(c) of Pub. L. 103–66, set out as a note under section 1 of this title.

Effective Date of 1990 Amendment

Amendment by 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.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XVI, §1601(b), Oct. 22, 1986, 100 Stat. 2767, provided that: "The amendment made by this section [amending this section] shall apply to distributions of low cost articles and exchanges and rentals of member lists after the date of the enactment of this Act [Oct. 22, 1986]."

Pub. L. 99–514, title XVI, §1602(c), Oct. 22, 1986, 100 Stat. 2768, provided that: "The amendments made by this section [amending this section] shall apply to activities in taxable years beginning after the date of the enactment of this Act [Oct. 22, 1986]."

Effective Date of 1980 Amendment

Pub. L. 96–605, title I, §106(c)(2), Dec. 29, 1980, 94 Stat. 3524, provided that: "The amendment made by subsection (b) [amending this section] shall apply to taxable years beginning after December 31, 1969."

Effective Date of 1978 Amendment

Pub. L. 95–502, title III, §301(b), Oct. 21, 1978, 92 Stat. 1702, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1969."

Effective Date of 1976 Amendment

Pub. L. 94–455, title XIII, §1305(b), Oct. 4, 1976, 90 Stat. 1717, provided that: "The amendments made by subsection (a) [amending this section] apply to qualified public entertainment activities in taxable years beginning after December 31, 1962, and to qualified convention and trade show activities in taxable years beginning after the date of enactment of this Act [Oct. 4, 1976]."

Pub. L. 94–455, title XIII, §1311(b), Oct. 4, 1976, 90 Stat. 1730, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendment made by this section [amending this section] shall apply to all taxable years to which the Internal Revenue Code of 1986 [formerly I.R.C. 1954] [this title] applies."

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91–172, set out as a note under section 511 of this title.

Effective Date of 1960 Amendment

Amendment by Pub. L. 86–667 applicable to taxable years beginning after Dec. 31, 1959, see section 6 of Pub. L. 86–667, set out as a note under section 501 of this title.

Conducting of Certain Games of Chance Not Treated as Unrelated Trade or Business

Pub. L. 98–369, div. A, title III, §311, July 18, 1984, 98 Stat. 786, as amended by Pub. L. 99–514, §2, title XVIII, §1834, Oct. 22, 1986, 100 Stat. 2095, 2852, provided that:

"(a) General Rule.—For purposes of section 513 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (defining unrelated trade or business), the term 'unrelated trade or business' does not include any trade or business which consists of conducting any game of chance if—

"(1) such game of chance is conducted by a nonprofit organization,

"(2) the conducting of such game by such organization does not violate any State or local law, and

"(3) as of October 5, 1983—

"(A) there was a State law (originally enacted on April 22, 1977) in effect which permitted the conducting of such game of chance by such nonprofit organization, but

"(B) the conducting of such game of chance by organizations which were not nonprofit organizations would have violated such law.

"(b) Effective Date.—Subsection (a) shall apply to games of chance conducted after June 30, 1981, in taxable years ending after such date."

[Pub. L. 99–514, title XVIII, §1834, Oct. 22, 1986, 100 Stat. 2852, as amended by Pub. L. 100–647, title VI, §6201, Nov. 10, 1988, 102 Stat. 3730, provided in part that: "The amendment made by this section [amending section 311 of Pub. L. 98–369, set out above] shall apply to games of chance conducted after October 22, 1986, in taxable years ending after such date".]
26 U.S.C. § 7705 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 79 / Section 7705: Certified professional employer organizations
Certified professional employer organizations
Status: in_force

(a) In general

For purposes of this title, the term "certified professional employer organization" means a person who applies to be treated as a certified professional employer organization for purposes of section 3511 and has been certified by the Secretary as meeting the requirements of subsection (b).

(b) Certification requirements

A person meets the requirements of this subsection if such person—

(1) demonstrates that such person (and any owner, officer, and other persons as may be specified in regulations) meets such requirements as the Secretary shall establish, including requirements with respect to tax status, background, experience, business location, and annual financial audits,

(2) agrees that it will satisfy the bond and independent financial review requirements of subsection (c) on an ongoing basis,

(3) agrees that it will satisfy such reporting obligations as may be imposed by the Secretary,

(4) computes its taxable income using an accrual method of accounting unless the Secretary approves another method,

(5) agrees to verify on such periodic basis as the Secretary may prescribe that it continues to meet the requirements of this subsection, and

(6) agrees to notify the Secretary in writing within such time as the Secretary may prescribe of any change that materially affects the continuing accuracy of any agreement or information that was previously made or provided under this subsection.

(c) Bond and independent financial review

(1) In general

An organization meets the requirements of this paragraph if such organization—

(A) meets the bond requirements of paragraph (2), and

(B) meets the independent financial review requirements of paragraph (3).

(2) Bond

(A) In general

A certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle C (in a form acceptable to the Secretary) that is in an amount at least equal to the amount specified in subparagraph (B).

(B) Amount of bond

For the period April 1 of any calendar year through March 31 of the following calendar year, the amount of the bond required is equal to the greater of—

(i) 5 percent of the organization's liability under section 3511 for taxes imposed by subtitle C during the preceding calendar year (but not to exceed $1,000,000), or

(ii) $50,000.

(3) Independent financial review requirements

A certified professional employer organization meets the requirements of this paragraph if such organization—

(A) has, as of the most recent audit date, caused to be prepared and provided to the Secretary (in such manner as the Secretary may prescribe) an opinion of an independent certified public accountant as to whether the certified professional employer organization's financial statements are presented fairly in accordance with generally accepted accounting principles, and

(B) provides to the Secretary an assertion regarding Federal employment tax payments and an examination level attestation on such assertion from an independent certified public accountant not later than the last day of the second month beginning after the end of each calendar quarter.

Such assertion shall state that the organization has withheld and made deposits of all taxes imposed by chapters 21, 22, and 24 in accordance with regulations imposed by the Secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated, in all material respects.

(4) Controlled group rules

For purposes of the requirements of paragraphs (2) and (3), all certified professional employer organizations that are members of a controlled group within the meaning of sections 414(b) and (c) shall be treated as a single organization.

(5) Failure to file assertion and attestation

If the certified professional employer organization fails to file the assertion and attestation required by paragraph (3) with respect to any calendar quarter, then the requirements of paragraph (3) with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation.

(6) Audit date

For purposes of paragraph (3)(A), the audit date shall be six months after the completion of the organization's fiscal year.

(d) Suspension and revocation authority

The Secretary may suspend or revoke a certification of any person under subsection (b) for purposes of section 3511 if the Secretary determines that such person is not satisfying the agreements or requirements of subsections (b) or (c), or fails to satisfy applicable accounting, reporting, payment, or deposit requirements.

(e) Work site employee

For purposes of this title—

(1) In general

The term "work site employee" means, with respect to a certified professional employer organization, an individual who—

(A) performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph (2), and

(B) performs services at a work site meeting the requirements of paragraph (3).

(2) Service contract requirements

A contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified professional employer organization shall—

(A) assume responsibility for payment of wages to such individual, without regard to the receipt or adequacy of payment from the customer for such services,

(B) assume responsibility for reporting, withholding, and paying any applicable taxes under subtitle C, with respect to such individual's wages, without regard to the receipt or adequacy of payment from the customer for such services,

(C) assume responsibility for any employee benefits which the service contract may require the certified professional employer organization to provide, without regard to the receipt or adequacy of payment from the customer for such benefits,

(D) assume responsibility for recruiting, hiring, and firing workers in addition to the customer's responsibility for recruiting, hiring, and firing workers,

(E) maintain employee records relating to such individual, and

(F) agree to be treated as a certified professional employer organization for purposes of section 3511 with respect to such individual.

(3) Work site coverage requirement

The requirements of this paragraph are met with respect to an individual if at least 85 percent of the individuals performing services for the customer at the work site where such individual performs services are subject to 1 or more contracts with the certified professional employer organization which meet the requirements of paragraph (2) (but not taking into account those individuals who are excluded employees within the meaning of section 414(q)(5)).

(f) Public disclosure

The Secretary shall make available to the public the name and address of—

(1) each person certified as a professional employer organization under subsection (a), and

(2) each person whose certification as a professional employer organization is suspended or revoked under subsection (d).

(g) Determination of employment status

Except to the extent necessary for purposes of section 3511, nothing in this section shall be construed to affect the determination of who is an employee or employer for purposes of this title.

(h) Regulations

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

(Added Pub. L. 113–295, div. B, title II, §206(b), Dec. 19, 2014, 128 Stat. 4067.)

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable with respect to wages for services performed on or after January 1 of the first calendar year beginning more than 12 months after Dec. 19, 2014, see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title.

Certified Professional Employer Organization Certification Program

Pub. L. 113–295, div. B, title II, §206(g)(2), Dec. 19, 2014, 128 Stat. 4071, provided that: "The Secretary of the Treasury shall establish the certification program described in section 7705(b) of the Internal Revenue Code of 1986, as added by subsection (b), not later than 6 months before the effective date determined under paragraph (1) [see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title]."
26 U.S.C. § 7803 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 80 / Section 7803: Commissioner of Internal Revenue; other officials
Commissioner of Internal Revenue; other officials
Status: in_force

(a) Commissioner of Internal Revenue

(1) Appointment

(A) In general

There shall be in the Department of the Treasury a Commissioner of Internal Revenue who shall be appointed by the President, by and with the advice and consent of the Senate. Such appointment shall be made from individuals who, among other qualifications, have a demonstrated ability in management.

(B) Term

The term of the Commissioner of Internal Revenue shall be a 5-year term, beginning with a term to commence on November 13, 1997. Each subsequent term shall begin on the day after the date on which the previous term expires.

(C) Vacancy

Any individual appointed as Commissioner of Internal Revenue during a term as defined in subparagraph (B) shall be appointed for the remainder of that term.

(D) Removal

The Commissioner may be removed at the will of the President.

(E) Reappointment

The Commissioner may be appointed to serve more than one term.

(2) Duties

The Commissioner shall have such duties and powers as the Secretary may prescribe, including the power to—

(A) administer, manage, conduct, direct, and supervise the execution and application of the internal revenue laws or related statutes and tax conventions to which the United States is a party; and

(B) recommend to the President a candidate for appointment as Chief Counsel for the Internal Revenue Service when a vacancy occurs, and recommend to the President the removal of such Chief Counsel.

If the Secretary determines not to delegate a power specified in subparagraph (A) or (B), such determination may not take effect until 30 days after the Secretary notifies the Committees on Ways and Means, Government Reform and Oversight, and Appropriations of the House of Representatives and the Committees on Finance, Governmental Affairs, and Appropriations of the Senate.

(3) Execution of duties in accord with taxpayer rights

In discharging his duties, the Commissioner shall ensure that employees of the Internal Revenue Service are familiar with and act in accord with taxpayer rights as afforded by other provisions of this title, including—

(A) the right to be informed,

(B) the right to quality service,

(C) the right to pay no more than the correct amount of tax,

(D) the right to challenge the position of the Internal Revenue Service and be heard,

(E) the right to appeal a decision of the Internal Revenue Service in an independent forum,

(F) the right to finality,

(G) the right to privacy,

(H) the right to confidentiality,

(I) the right to retain representation, and

(J) the right to a fair and just tax system.

(4) Consultation with Board

The Commissioner shall consult with the Oversight Board on all matters set forth in paragraphs (2) and (3) (other than paragraph (3)(A)) of section 7802(d).

(b) Chief Counsel for the Internal Revenue Service

(1) Appointment

There shall be in the Department of the Treasury a Chief Counsel for the Internal Revenue Service who shall be appointed by the President, by and with the consent of the Senate.

(2) Duties

The Chief Counsel shall be the chief law officer for the Internal Revenue Service and shall perform such duties as may be prescribed by the Secretary, including the duty—

(A) to be legal advisor to the Commissioner and the Commissioner's officers and employees;

(B) to furnish legal opinions for the preparation and review of rulings and memoranda of technical advice;

(C) to prepare, review, and assist in the preparation of proposed legislation, treaties, regulations, and Executive orders relating to laws which affect the Internal Revenue Service;

(D) to represent the Commissioner in cases before the Tax Court; and

(E) to determine which civil actions should be litigated under the laws relating to the Internal Revenue Service and prepare recommendations for the Department of Justice regarding the commencement of such actions.

If the Secretary determines not to delegate a power specified in subparagraph (A), (B), (C), (D), or (E), such determination may not take effect until 30 days after the Secretary notifies the Committees on Ways and Means, Government Reform and Oversight, and Appropriations of the House of Representatives and the Committees on Finance, Governmental Affairs, and Appropriations of the Senate.

(3) Persons to whom Chief Counsel reports

The Chief Counsel shall report directly to the Commissioner of Internal Revenue, except that—

(A) the Chief Counsel shall report to both the Commissioner and the General Counsel for the Department of the Treasury with respect to—

(i) legal advice or interpretation of the tax law not relating solely to tax policy;

(ii) tax litigation; and

(B) the Chief Counsel shall report to the General Counsel with respect to legal advice or interpretation of the tax law relating solely to tax policy.

If there is any disagreement between the Commissioner and the General Counsel with respect to any matter jointly referred to them under subparagraph (A), such matter shall be submitted to the Secretary or Deputy Secretary for resolution.

(4) Chief Counsel personnel

All personnel in the Office of Chief Counsel shall report to the Chief Counsel.

(c) Office of the Taxpayer Advocate

(1) Establishment

(A) In general

There is established in the Internal Revenue Service an office to be known as the "Office of the Taxpayer Advocate".

(B) National Taxpayer Advocate

(i) In general

The Office of the Taxpayer Advocate shall be under the supervision and direction of an official to be known as the "National Taxpayer Advocate". The National Taxpayer Advocate shall report directly to the Commissioner of Internal Revenue and shall be entitled to compensation at the same rate as the highest rate of basic pay established for the Senior Executive Service under section 5382 of title 5, United States Code.

(ii) Appointment

The National Taxpayer Advocate shall be appointed by the Secretary of the Treasury after consultation with the Commissioner of Internal Revenue and the Oversight Board and without regard to the provisions of title 5, United States Code, relating to appointments in the competitive service or the Senior Executive Service.

(iii) Qualifications

An individual appointed under clause (ii) shall have—

(I) a background in customer service as well as tax law; and

(II) experience in representing individual taxpayers.

(iv) Restriction on employment

An individual may be appointed as the National Taxpayer Advocate only if such individual was not an officer or employee of the Internal Revenue Service during the 2-year period ending with such appointment and such individual agrees not to accept any employment with the Internal Revenue Service for at least 5 years after ceasing to be the National Taxpayer Advocate. Service as an officer or employee of the Office of the Taxpayer Advocate shall not be taken into account in applying this clause.

(2) Functions of office

(A) In general

It shall be the function of the Office of the Taxpayer Advocate to—

(i) assist taxpayers in resolving problems with the Internal Revenue Service;

(ii) identify areas in which taxpayers have problems in dealings with the Internal Revenue Service;

(iii) to the extent possible, propose changes in the administrative practices of the Internal Revenue Service to mitigate problems identified under clause (ii); and

(iv) identify potential legislative changes which may be appropriate to mitigate such problems.

(B) Annual reports

(i) Objectives

Not later than June 30 of each calendar year, the National Taxpayer Advocate shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in such calendar year. Any such report shall contain full and substantive analysis, in addition to statistical information.

(ii) Activities

Not later than December 31 of each calendar year, the National Taxpayer Advocate shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the activities of the Office of the Taxpayer Advocate during the fiscal year ending during such calendar year. Any such report shall contain full and substantive analysis, in addition to statistical information, and shall—

(I) identify the initiatives the Office of the Taxpayer Advocate has taken on improving taxpayer services and Internal Revenue Service responsiveness;

(II) contain recommendations received from individuals with the authority to issue Taxpayer Assistance Orders under section 7811;

(III) contain a summary of the 10 most serious problems encountered by taxpayers, including a description of the nature of such problems;

(IV) contain an inventory of the items described in subclauses (I), (II), and (III) for which action has been taken and the result of such action;

(V) contain an inventory of the items described in subclauses (I), (II), and (III) for which action remains to be completed and the period during which each item has remained on such inventory;

(VI) contain an inventory of the items described in subclauses (I), (II), and (III) for which no action has been taken, the period during which each item has remained on such inventory, the reasons for the inaction, and identify any Internal Revenue Service official who is responsible for such inaction;

(VII) identify any Taxpayer Assistance Order which was not honored by the Internal Revenue Service in a timely manner, as specified under section 7811(b);

(VIII) identify any Taxpayer Advocate Directive which was not honored by the Internal Revenue Service in a timely manner, as specified under paragraph (5);

(IX) contain recommendations for such administrative and legislative action as may be appropriate to resolve problems encountered by taxpayers;

(X) identify areas of the tax law that impose significant compliance burdens on taxpayers or the Internal Revenue Service, including specific recommendations for remedying these problems;

(XI) identify the 10 most litigated issues for each category of taxpayers, including recommendations for mitigating such disputes;

(XII) with respect to any statistical information included in such report, include a statement of whether such statistical information was reviewed or provided by the Secretary under section 6108(d) and, if so, whether the Secretary determined such information to be statistically valid and based on sound statistical methodology; and

(XIII) include such other information as the National Taxpayer Advocate may deem advisable.

(iii) Report to be submitted directly

Each report required under this subparagraph shall be provided directly to the committees described in clause (i) without any prior review or comment from the Commissioner, the Secretary of the Treasury, the Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The preceding sentence shall not apply with respect to statistical information provided to the Secretary for review, or received from the Secretary, under section 6108(d).

(iv) Coordination with report of Treasury Inspector General for Tax Administration

To the extent that information required to be reported under clause (ii) is also required to be reported under paragraph (1) or (2) of subsection (d) by the Treasury Inspector General for Tax Administration, the National Taxpayer Advocate shall not contain such information in the report submitted under such clause.

(C) Other responsibilities

The National Taxpayer Advocate shall—

(i) monitor the coverage and geographic allocation of local offices of taxpayer advocates;

(ii) develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to local offices of taxpayer advocates;

(iii) ensure that the local telephone number for each local office of the taxpayer advocate is published and available to taxpayers served by the office; and

(iv) in conjunction with the Commissioner, develop career paths for local taxpayer advocates choosing to make a career in the Office of the Taxpayer Advocate.

(D) Personnel actions

(i) In general

The National Taxpayer Advocate shall have the responsibility and authority to—

(I) appoint local taxpayer advocates and make available at least 1 such advocate for each State; and

(II) evaluate and take personnel actions (including dismissal) with respect to any employee of any local office of a taxpayer advocate described in subclause (I).

(ii) Consultation

The National Taxpayer Advocate may consult with the appropriate supervisory personnel of the Internal Revenue Service in carrying out the National Taxpayer Advocate's responsibilities under this subparagraph.

(E) Coordination with Treasury Inspector General for Tax Administration

Before beginning any research or study, the National Taxpayer Advocate shall coordinate with the Treasury Inspector General for Tax Administration to ensure that the National Taxpayer Advocate does not duplicate any action that the Treasury Inspector General for Tax Administration has already undertaken or has a plan to undertake.

(3) Responsibilities of Commissioner

The Commissioner shall establish procedures requiring a formal response to all recommendations submitted to the Commissioner by the National Taxpayer Advocate within 3 months after submission to the Commissioner.

(4) Operation of local offices

(A) In general

Each local taxpayer advocate—

(i) shall report to the National Taxpayer Advocate or delegate thereof;

(ii) may consult with the appropriate supervisory personnel of the Internal Revenue Service regarding the daily operation of the local office of the taxpayer advocate;

(iii) shall, at the initial meeting with any taxpayer seeking the assistance of a local office of the taxpayer advocate, notify such taxpayer that the taxpayer advocate offices operate independently of any other Internal Revenue Service office and report directly to Congress through the National Taxpayer Advocate; and

(iv) may, at the taxpayer advocate's discretion, not disclose to the Internal Revenue Service contact with, or information provided by, such taxpayer.

(B) Maintenance of independent communications

Each local office of the taxpayer advocate shall maintain a separate phone, facsimile, and other electronic communication access, and a separate post office address.

(5) Taxpayer Advocate Directives

In the case of any Taxpayer Advocate Directive issued by the National Taxpayer Advocate pursuant to a delegation of authority from the Commissioner of Internal Revenue—

(A) the Commissioner or a Deputy Commissioner shall modify, rescind, or ensure compliance with such directive not later than 90 days after the issuance of such directive, and

(B) in the case of any directive which is modified or rescinded by a Deputy Commissioner, the National Taxpayer Advocate may (not later than 90 days after such modification or rescission) appeal to the Commissioner, and the Commissioner shall (not later than 90 days after such appeal is made) ensure compliance with such directive as issued by the National Taxpayer Advocate or provide the National Taxpayer Advocate with the reasons for any modification or rescission made or upheld by the Commissioner pursuant to such appeal.

(d) Additional duties of the Treasury Inspector General for Tax Administration

(1) Annual reporting

The Treasury Inspector General for Tax Administration shall include in one of the semiannual reports under section 405 of title 5, United States Code—

(A) an evaluation of the compliance of the Internal Revenue Service with—

(i) restrictions under section 1204 of the Internal Revenue Service Restructuring and Reform Act of 1998 on the use of enforcement statistics to evaluate Internal Revenue Service employees;

(ii) restrictions under section 7521 on directly contacting taxpayers who have indicated that they prefer their representatives be contacted;

(iii) required procedures under section 6320 upon the filing of a notice of a lien;

(iv) required procedures under subchapter D of chapter 64 for seizure of property for collection of taxes, including required procedures under section 6330 regarding levies; and

(v) restrictions under section 3707 of the Internal Revenue Service Restructuring and Reform Act of 1998 on designation of taxpayers;

(B) a review and a certification of whether or not the Secretary is complying with the requirements of section 6103(e)(8) to disclose information to an individual filing a joint return on collection activity involving the other individual filing the return;

(C) information regarding extensions of the statute of limitations for assessment and collection of tax under section 6501 and the provision of notice to taxpayers regarding requests for such extension;

(D) an evaluation of the adequacy and security of the technology of the Internal Revenue Service;

(E) any termination or mitigation under section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998;

(F) information regarding improper denial of requests for information from the Internal Revenue Service identified under paragraph (3)(A); and

(G) information regarding any administrative or civil actions with respect to violations of the fair debt collection provisions of section 6304, including—

(i) a summary of such actions initiated since the date of the last report; and

(ii) a summary of any judgments or awards granted as a result of such actions.

(2) Semiannual reports

(A) In general.—The Treasury Inspector General for Tax Administration shall include in each semiannual report under section 405 of title 5, United States Code—

(i) the number of taxpayer complaints during the reporting period;

(ii) the number of employee misconduct and taxpayer abuse allegations received by the Internal Revenue Service or the Inspector General during the period from taxpayers, Internal Revenue Service employees, and other sources;

(iii) a summary of the status of such complaints and allegations; and

(iv) a summary of the disposition of such complaints and allegations, including the outcome of any Department of Justice action and any monies paid as a settlement of such complaints and allegations.

(B) Clauses (iii) and (iv) of subparagraph (A) shall only apply to complaints and allegations of serious employee misconduct.

(3) Other responsibilities

The Treasury Inspector General for Tax Administration shall—

(A) conduct periodic audits of a statistically valid sample of the total number of determinations made by the Internal Revenue Service to deny written requests to disclose information to taxpayers on the basis of section 6103 of this title or section 552(b)(7) of title 5, United States Code;

(B) establish and maintain a toll-free telephone number for taxpayers to use to confidentially register complaints of misconduct by Internal Revenue Service employees and incorporate the telephone number in the statement required by section 6227 of the Omnibus Taxpayer Bill of Rights (Internal Revenue Service Publication No. 1); and

(C) not later than December 31, 2010, submit a written report to Congress on the implementation of section 6103(k)(10).

(e) Independent Office of Appeals

(1) Establishment

There is established in the Internal Revenue Service an office to be known as the "Internal Revenue Service Independent Office of Appeals".

(2) Chief of Appeals

(A) In general

The Internal Revenue Service Independent Office of Appeals shall be under the supervision and direction of an official to be known as the "Chief of Appeals". The Chief of Appeals shall report directly to the Commissioner of Internal Revenue and shall be entitled to compensation at the same rate as the highest rate of basic pay established for the Senior Executive Service under section 5382 of title 5, United States Code.

(B) Appointment

The Chief of Appeals shall be appointed by the Commissioner of Internal Revenue without regard to the provisions of title 5, United States Code, relating to appointments in the competitive service or the Senior Executive Service.

(C) Qualifications

An individual appointed under subparagraph (B) shall have experience and expertise in—

(i) administration of, and compliance with, Federal tax laws,

(ii) a broad range of compliance cases, and

(iii) management of large service organizations.

(3) Purposes and duties of office

It shall be the function of the Internal Revenue Service Independent Office of Appeals to resolve Federal tax controversies without litigation on a basis which—

(A) is fair and impartial to both the Government and the taxpayer,

(B) promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and

(C) enhances public confidence in the integrity and efficiency of the Internal Revenue Service.

(4) Right of appeal

The resolution process described in paragraph (3) shall be generally available to all taxpayers.

(5) Limitation on designation of cases as not eligible for referral to Independent Office of Appeals

(A) In general

If any taxpayer which is in receipt of a notice of deficiency authorized under section 6212 requests referral to the Internal Revenue Service Independent Office of Appeals and such request is denied, the Commissioner of Internal Revenue shall provide such taxpayer a written notice which—

(i) provides a detailed description of the facts involved, the basis for the decision to deny the request, and a detailed explanation of how the basis of such decision applies to such facts, and

(ii) describes the procedures prescribed under subparagraph (C) for protesting the decision to deny the request.

(B) Report to Congress

The Commissioner of Internal Revenue shall submit a written report to Congress on an annual basis which includes the number of requests described in subparagraph (A) which were denied and the reasons (described by category) that such requests were denied.

(C) Procedures for protesting denial of request

The Commissioner of Internal Revenue shall prescribe procedures for protesting to the Commissioner of Internal Revenue a denial of a request described in subparagraph (A).

(D) Not applicable to frivolous positions

This paragraph shall not apply to a request for referral to the Internal Revenue Service Independent Office of Appeals which is denied on the basis that the issue involved is a frivolous position (within the meaning of section 6702(c)).

(6) Staff

(A) In general

All personnel in the Internal Revenue Service Independent Office of Appeals shall report to the Chief of Appeals.

(B) Access to staff of Office of the Chief Counsel

The Chief of Appeals shall have authority to obtain legal assistance and advice from the staff of the Office of the Chief Counsel. The Chief Counsel shall ensure, to the extent practicable, that such assistance and advice is provided by staff of the Office of the Chief Counsel who were not involved in the case with respect to which such assistance and advice is sought and who are not involved in preparing such case for litigation.

(7) 1 Access to case files

(A) In general

In any case in which a conference with the Internal Revenue Service Independent Office of Appeals has been scheduled upon request of a specified taxpayer, the Chief of Appeals shall ensure that such taxpayer is provided access to the nonprivileged portions of the case file on record regarding the disputed issues (other than documents provided by the taxpayer to the Internal Revenue Service) not later than 10 days before the date of such conference.

(B) Taxpayer election to expedite conference

If the taxpayer so elects, subparagraph (A) shall be applied by substituting "the date of such conference" for "10 days before the date of such conference".

(C) Specified taxpayer

For purposes of this paragraph—

(i) In general

The term "specified taxpayer" means—

(I) in the case of any taxpayer who is a natural person, a taxpayer whose adjusted gross income does not exceed $400,000 for the taxable year to which the dispute relates, and

(II) in the case of any other taxpayer, a taxpayer whose gross receipts do not exceed $5 million for the taxable year to which the dispute relates.

(ii) Aggregation rule

Rules similar to the rules of section 448(c)(2) shall apply for purposes of clause (i)(II).

(f) Internal Revenue Service Chief Information Officer

(1) In general

There shall be in the Internal Revenue Service an Internal Revenue Service Chief Information Officer (hereafter referred to in this subsection as the "IRS CIO") who shall be appointed by the Commissioner of Internal Revenue.

(2) Centralized responsibility for Internal Revenue Service information technology

The Commissioner of Internal Revenue (and the Secretary) shall act through the IRS CIO with respect to all development, implementation, and maintenance of information technology for the Internal Revenue Service. Any reference in this subsection to the IRS CIO which directs the IRS CIO to take any action, or to assume any responsibility, shall be treated as a reference to the Commissioner of Internal Revenue acting through the IRS CIO.

(3) General duties and responsibilities

The IRS CIO shall—

(A) be responsible for the development, implementation, and maintenance of information technology for the Internal Revenue Service,

(B) ensure that the information technology of the Internal Revenue Service is secure and integrated,

(C) maintain operational control of all information technology for the Internal Revenue Service,

(D) be the principal advocate for the information technology needs of the Internal Revenue Service, and

(E) consult with the Chief Procurement Officer of the Internal Revenue Service to ensure that the information technology acquired for the Internal Revenue Service is consistent with—

(i) the goals and requirements specified in subparagraphs (A) through (D), and

(ii) the strategic plan developed under paragraph (4).

(4) Strategic plan

(A) In general

The IRS CIO shall develop and implement a multiyear strategic plan for the information technology needs of the Internal Revenue Service. Such plan shall—

(i) include performance measurements of such technology and of the implementation of such plan,

(ii) include a plan for an integrated enterprise architecture of the information technology of the Internal Revenue Service,

(iii) include and take into account the resources needed to accomplish such plan,

(iv) take into account planned major acquisitions of information technology by the Internal Revenue Service, and

(v) align with the needs and strategic plan of the Internal Revenue Service.

(B) Plan updates

The IRS CIO shall, not less frequently than annually, review and update the strategic plan under subparagraph (A) (including the plan for an integrated enterprise architecture described in subparagraph (A)(ii)) to take into account the development of new information technology and the needs of the Internal Revenue Service.

(5) Scope of authority

(A) Information technology

For purposes of this subsection, the term "information technology" has the meaning given such term by section 11101 of title 40, United States Code.

(B) Internal Revenue Service

Any reference in this subsection to the Internal Revenue Service includes a reference to all components of the Internal Revenue Service, including—

(i) the Office of the Taxpayer Advocate,

(ii) the Criminal Investigation Division of the Internal Revenue Service, and

(iii) except as otherwise provided by the Secretary with respect to information technology related to matters described in subsection (b)(3)(B), the Office of the Chief Counsel.

(Aug. 16, 1954, ch. 736, 68A Stat. 915; Pub. L. 92–310, title II, §230(e), June 6, 1972, 86 Stat. 209; Pub. L. 94–455, title XIX, §1906(a)(58), (b)(13)(A), Oct. 4, 1976, 90 Stat. 1833, 1834; Pub. L. 105–206, title I, §1102(a), July 22, 1998, 112 Stat. 697; Pub. L. 110–176, §1(a), Jan. 4, 2008, 121 Stat. 2532; Pub. L. 110–428, §2(c), Oct. 15, 2008, 122 Stat. 4840; Pub. L. 114–113, div. Q, title IV, §401(a), Dec. 18, 2015, 129 Stat. 3117; Pub. L. 116–25, title I, §§1001(a), 1301(a)–(b)(2), (3)(B)–(c), title II, §2101(a), July 1, 2019, 133 Stat. 983, 991–993, 1008; Pub. L. 117–286, §4(b)(46), Dec. 27, 2022, 136 Stat. 4348.)

Editorial Notes

References in Text

The provisions of title 5 relating to appointments in the competitive service and the Senior Executive Service, referred to in subsec. (c)(1)(B)(ii), are classified generally to section 3301 et seq. of Title 5, Government Organization and Employees.

Sections 1203, 1204, and 3707 of the Internal Revenue Service Restructuring and Reform Act of 1998, referred to in subsec. (d)(1)(A)(i), (v), (E), are sections 1203, 1204, and 3707 of Pub. L. 105–206, which are set out as notes under sections 7804, 7804, and 6651, respectively, of this title.

Section 6227 of the Omnibus Taxpayer Bill of Rights, referred to in subsec. (d)(3)(B), is section 6227 of Pub. L. 100–647, which is set out as a note under section 7801 of this title.

Amendments

2022—Subsec. (d)(1). Pub. L. 117–286, §4(b)(46)(A), substituted "section 405 of title 5, United States Code" for "section 5 of the Inspector General Act of 1978" in introductory provisions.

Subsec. (d)(2)(A). Pub. L. 117–286, §4(b)(46)(B), substituted "section 405 of title 5, United States Code" for "section 5 of the Inspector General Act of 1978" in introductory provisions.

2019—Subsec. (c)(1)(B)(i). Pub. L. 116–25, §1301(c), struck out before period at end ", or, if the Secretary of the Treasury so determines, at a rate fixed under section 9503 of such title".

Subsec. (c)(2)(B)(ii)(III). Pub. L. 116–25, §1301(b)(1), substituted "the 10 most" for "at least 20 of the most".

Subsec. (c)(2)(B)(ii)(VIII) to (XIII). Pub. L. 116–25, §1301(a)(2), (b)(3)(B), added subcls. (VIII) and (XII), redesignated former subcls. (VIII) to (X) as (IX) to (XI), respectively, and redesignated former subcl. (XI) first as (XII), then as (XIII).

Subsec. (c)(2)(B)(iii). Pub. L. 116–25, §1301(b)(3)(C), inserted at end "The preceding sentence shall not apply with respect to statistical information provided to the Secretary for review, or received from the Secretary, under section 6108(d)."

Subsec. (c)(2)(E). Pub. L. 116–25, §1301(b)(2), added subpar. (E).

Subsec. (c)(5). Pub. L. 116–25, §1301(a)(1), added par. (5).

Subsec. (e). Pub. L. 116–25, §1001(a), added subsec. (e).

Subsec. (f). Pub. L. 116–25, §2101(a), added subsec. (f).

2015—Subsec. (a)(3), (4). Pub. L. 114–113 added par. (3) and redesignated former par. (3) as (4).

2008—Subsec. (a)(1). Pub. L. 110–176 amended par. (1) generally, substituting provisions relating to appointment, consisting of subpars. (A) to (E), for similar provisions, consisting of subpars. (A) to (D).

Subsec. (d)(3)(C). Pub. L. 110–428 added subpar. (C).

1998—Pub. L. 105–206 amended section catchline and text generally, substituting present provisions for provisions which: in subsec. (a), authorized appointment of persons for administration and enforcement of internal revenue laws; in subsec. (b), directed Secretary to determine and designate posts of duty of employees in field service, and authorized Secretary to order such employees to duty within and outside District of Columbia; and in subsec. (c), directed Secretary to issue notice and demand for failure to account for and pay over money or property collected in connection with internal revenue laws, and deemed amount so demanded to be imposed and assessed upon the officer or employee upon the date of such notice and demand. See section 7804 of this title.

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

Subsecs. (c), (d). Pub. L. 94–455, §1906(a)(58), redesignated subsec. (d) as (c).

1972—Subsec. (c). Pub. L. 92–310 repealed subsec. (c) which related to bonds of officers and employees.

Statutory Notes and Related Subsidiaries

Change of Name

Pub. L. 116–25, title I, §1001(c), July 1, 2019, 133 Stat. 985, provided that: "Any reference in any provision of law, or regulation or other guidance, to the Internal Revenue Service Office of Appeals shall be treated as a reference to the Internal Revenue Service Independent Office of Appeals."

Committee on Government Reform and Oversight of House of Representatives changed to Committee on Government Reform of House of Representatives by House Resolution No. 5, One Hundred Sixth Congress, Jan. 6, 1999. Committee on Government Reform of House of Representatives changed to Committee on Oversight and Government Reform of House of Representatives by House Resolution No. 6, One Hundred Tenth Congress, Jan. 5, 2007. Committee on Oversight and Government Reform of House of Representatives changed to Committee on Oversight and Reform of House of Representatives by House Resolution No. 6, One Hundred Sixteenth Congress, Jan. 9, 2019. Committee on Oversight and Reform of House of Representatives changed to Committee on Oversight and Accountability of House of Representatives by House Resolution No. 5, One Hundred Eighteenth Congress, Jan. 9, 2023.

Committee on Governmental Affairs of Senate changed to Committee on Homeland Security and Governmental Affairs of Senate, effective Jan. 4, 2005, by Senate Resolution No. 445, One Hundred Eighth Congress, Oct. 9, 2004.

Effective Date of 2019 Amendment

Pub. L. 116–25, title I, §1001(e), July 1, 2019, 133 Stat. 985, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 6015, 6320, 6330, 6603, 6621, 7122, 7123, 7430, 7522, and 7612 of this title] shall take effect on the date of the enactment of this Act [July 1, 2019].

"(2) Access to case files.—Section 7803(e)(7) of the Internal Revenue Code of 1986, as added by subsection (a), shall apply to conferences occurring after the date which is 1 year after the date of the enactment of this Act."

Amendment by section 1301(a)–(b)(2), (3)(B)–(c) of Pub. L. 116–25 effective July 1, 2019, except that amendment by section 1301(c) of Pub. L. 116–25 applicable to compensation paid to individuals appointed as the National Taxpayer Advocate after Mar. 31, 2019, see section 1301(d) of Pub. L. 116–25, set out as a note under section 6108 of this title.

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title IV, §401(b), Dec. 18, 2015, 129 Stat. 3117, provided that: "The amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [Dec. 18, 2015]."

Effective Date of 2008 Amendment

Amendment by Pub. L. 110–428 applicable to disclosures made after Dec. 31, 2008, see section 2(d) of Pub. L. 110–428, set out as a note under section 6103 of this title.

Pub. L. 110–176, §1(b), Jan. 4, 2008, 121 Stat. 2532, provided that: "The amendment made by this section [amending this section] shall apply as if included in the amendment made by section 1102(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 [Pub. L. 105–206]."

Effective Date of 1998 Amendment

Pub. L. 105–206, title I, §1102(f), July 22, 1998, 112 Stat. 705, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section, sections 6212, 6323, 6343, 7611, and 7811 of this title, and section 5109 of Title 5, Government Organization and Employees] shall take effect on the date of the enactment of this Act [July 22, 1998].

"(2) Chief counsel.—Section 7803(b)(3) of the Internal Revenue Code of 1986, as added by this section, shall take effect on the date that is 90 days after the date of the enactment of this Act.

"(3) National taxpayer advocate.—Notwithstanding section 7803(c)(1)(B)(iv) of such Code, as added by this section, in appointing the first National Taxpayer Advocate after the date of the enactment of this Act, the Secretary of the Treasury—

"(A) shall not appoint any individual who was an officer or employee of the Internal Revenue Service at any time during the 2-year period ending on the date of appointment; and

"(B) need not consult with the Internal Revenue Service Oversight Board if the Oversight Board has not been appointed.

"(4) Current officers.—

"(A) In the case of an individual serving as Commissioner of Internal Revenue on the date of the enactment of this Act who was appointed to such position before such date, the 5-year term required by section 7803(a)(1) of such Code, as added by this section, shall begin as of the date of such appointment.

"(B) Clauses (ii), (iii), and (iv) of section 7803(c)(1)(B) of such Code, as added by this section, shall not apply to the individual serving as Taxpayer Advocate on the date of the enactment of this Act."

Savings Provisions

Pub. L. 116–25, title I, §1001(d), July 1, 2019, 133 Stat. 985, provided that: "Rules similar to the rules of paragraphs (2) through (6) of section 1001(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 [Pub. L. 105–206, 26 U.S.C. 7801 note] shall apply for purposes of this section [amending this section and sections 6015, 6320, 6330, 6603, 6621, 7122, 7123, 7430, 7522, and 7612 of this title and enacting provisions set out as notes under this section] (and the amendments made by this section)."

Coordination of IRS CIO and Chief Procurement Officer of the Internal Revenue Service

Pub. L. 116–25, title II, §2101(c), July 1, 2019, 133 Stat. 1010, provided that:

"(1) In general.—The Chief Procurement Officer of the Internal Revenue Service shall—

"(A) identify all significant IRS information technology acquisitions and provide written notification to the Internal Revenue Service Chief Information Officer (hereafter referred to in this subsection as the 'IRS CIO') of each such acquisition in advance of such acquisition, and

"(B) regularly consult with the IRS CIO regarding acquisitions of information technology for the Internal Revenue Service, including meeting with the IRS CIO regarding such acquisitions upon request.

"(2) Significant irs information technology acquisitions.—For purposes of this subsection, the term 'significant IRS information technology acquisitions' means—

"(A) any acquisition of information technology for the Internal Revenue Service in excess of $1 million; and

"(B) such other acquisitions of information technology for the Internal Revenue Service (or categories of such acquisitions) as the IRS CIO, in consultation with the Chief Procurement Officer of the Internal Revenue Service, may identify.

"(3) Scope.—Terms used in this subsection which are also used in section 7803(f) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall have the same meaning as when used in such section."

1 See Effective Date of 2019 Amendment note below.
26 U.S.C. § 505 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 505: Additional requirements for organizations described in paragraph (9) or (17) of section 501(c)
Additional requirements for organizations described in paragraph (9) or (17) of section 501(c)
Status: in_force

(a) Certain requirements must be met in the case of organizations described in section 501(c)(9)

(1) Voluntary employees' beneficiary associations, etc.

An organization described in section 501(c)(9) which is part of a plan shall not be exempt from tax under section 501(a) unless such plan meets the requirements of subsection (b) of this section.

(2) Exception for collective bargaining agreements

Paragraph (1) shall not apply to any organization which is part of a plan maintained pursuant to an agreement between employee representatives and 1 or more employers if the Secretary finds that such agreement is a collective bargaining agreement and that such plan was the subject of good faith bargaining between such employee representatives and such employer or employers.

(b) Nondiscrimination requirements

(1) In general

Except as otherwise provided in this subsection, a plan meets the requirements of this subsection only if—

(A) each class of benefits under the plan is provided under a classification of employees which is set forth in the plan and which is found by the Secretary not to be discriminatory in favor of employees who are highly compensated individuals, and

(B) in the case of each class of benefits, such benefits do not discriminate in favor of employees who are highly compensated individuals.

A life insurance, disability, severance pay, or supplemental unemployment compensation benefit shall not be considered to fail to meet the requirements of subparagraph (B) merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan.

(2) Exclusion of certain employees

For purposes of paragraph (1), there may be excluded from consideration—

(A) employees who have not completed 3 years of service,

(B) employees who have not attained age 21,

(C) seasonal employees or less than half-time employees,

(D) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and 1 or more employers which the Secretary finds to be a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining between such employee representatives and such employer or employers, and

(E) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

(3) Application of subsection where other nondiscrimination rules provided

In the case of any benefit for which a provision of this chapter other than this subsection provides nondiscrimination rules, paragraph (1) shall not apply but the requirements of this subsection shall be met only if the nondiscrimination rules so provided are satisfied with respect to such benefit.

(4) Aggregation rules

At the election of the employer, 2 or more plans of such employer may be treated as 1 plan for purposes of this subsection.

(5) Highly compensated individual

For purposes of this subsection, the determination as to whether an individual is a highly compensated individual shall be made under rules similar to the rules for determining whether an individual is a highly compensated employee (within the meaning of section 414(q)).

(6) Compensation

For purposes of this subsection, the term "compensation" has the meaning given such term by section 414(s).

(7) Compensation limit

A plan shall not be treated as meeting the requirements of this subsection unless under the plan the annual compensation of each employee taken into account for any year does not exceed $200,000. The Secretary shall adjust the $200,000 amount at the same time, and by the same amount, as any adjustment under section 401(a)(17)(B). This paragraph shall not apply in determining whether the requirements of section 79(d) are met.

(c) Requirement that organization notify Secretary that it is applying for tax-exempt status

(1) In general

An organization shall not be treated as an organization described in paragraph (9) or (17) of section 501(c)—

(A) unless it has given notice to the Secretary, in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or

(B) for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection.

(2) Special rule for existing organizations

In the case of any organization in existence on July 18, 1984, the time for giving notice under paragraph (1) shall not expire before the date 1 year after such date of the enactment.

(Added Pub. L. 98–369, div. A, title V, §513(a), July 18, 1984, 98 Stat. 863; amended Pub. L. 99–514, title XI, §§1114(b)(16), 1151(e)(2)(B), (g)(6), (j)(3), title XVIII, §§1851(c), 1899A(16), Oct. 22, 1986, 100 Stat. 2452, 2506–2508, 2863, 2959; Pub. L. 100–647, title I, §1011B(a)(27)(C), (31)(B), (32), Nov. 10, 1988, 102 Stat. 3487, 3488; Pub. L. 101–140, title II, §§203(a)(1), (2), 204(c), Nov. 8, 1989, 103 Stat. 830, 833; Pub. L. 103–66, title XIII, §13212(c), Aug. 10, 1993, 107 Stat. 472; Pub. L. 107–16, title VI, §611(c)(1), June 7, 2001, 115 Stat. 97; Pub. L. 115–141, div. U, title IV, §401(b)(21)(D), Mar. 23, 2018, 132 Stat. 1203.)

Editorial Notes

Amendments

2018—Pub. L. 115–141, §401(b)(21)(D)(i), substituted "paragraph (9) or (17)" for "paragraph (9), (17), or (20)" in section catchline.

Subsec. (a). Pub. L. 115–141, §401(b)(21)(D)(ii), substituted "section 501(c)(9)" for "paragraph (9) or (20) of section 501(c)" in heading.

Subsec. (a)(1). Pub. L. 115–141, §401(b)(21)(D)(iii), substituted "section 501(c)(9)" for "paragraph (9) or (20) of subsection (c) of section 501".

Subsec. (c)(1). Pub. L. 115–141, §401(b)(21)(D)(iv), substituted "paragraph (9) or (17)" for "paragraph (9), (17), or (20)" in introductory provisions.

2001—Subsec. (b)(7). Pub. L. 107–16 substituted "$200,000" for "$150,000" in two places.

1993—Subsec. (b)(7). Pub. L. 103–66 substituted "Compensation limit" for "$200,000 compensation limit" in heading and "exceed $150,000. The Secretary shall adjust the $150,000 amount at the same time, and by the same amount, as any adjustment under section 401(a)(17)(B)." for "exceed $200,000. The Secretary shall adjust the $200,000 amount at the same time and in the same manner as under section 415(d)." in text.

1989—Subsec. (a)(1). Pub. L. 101–140, §203(a)(2), amended par. (1) to read as if amendments by Pub. L. 100–647, §1011B(a)(27)(C), had not been enacted, see 1988 Amendment note below.

Subsec. (b)(2). Pub. L. 101–140, §203(a)(2), amended par. (2) to read as if amendments by Pub. L. 100–647, §1011B(a)(31)(B), had not been enacted, see 1988 Amendment note below.

Pub. L. 101–140, §203(a)(1), amended par. (2) to read as if amendments by Pub. L. 99–514, §1151(g)(6), had not been enacted, see 1986 Amendment note below.

Subsec. (b)(7). Pub. L. 101–140, §204(c), inserted at end "This paragraph shall not apply in determining whether the requirements of section 79(d) are met."

1988—Subsec. (a)(1). Pub. L. 100–647, §1011B(a)(27)(C), inserted at end "This paragraph shall not apply to any organization by reason of a failure to meet the requirements of subsection (b) with respect to a benefit to which section 89 applies."

Subsec. (b)(2). Pub. L. 100–647, §1011B(a)(31)(B), substituted "there shall be" for "there may be" and "who are" for "who may be".

Subsec. (b)(7). Pub. L. 100–647, §1011B(a)(32), added par. (7).

1986—Subsec. (a)(1). Pub. L. 99–514, §1851(c)(1), struck out "of an employer" before "shall".

Subsec. (a)(2). Pub. L. 99–514, §1851(c)(4), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "Paragraph (1) shall not apply to any organization which is part of a plan maintained pursuant to 1 or more collective bargaining agreements between 1 or more employee organizations and 1 or more employers."

Subsec. (b)(1). Pub. L. 99–514, §1851(c)(2), (3), substituted "as otherwise provided in this subsection" for "as provided in paragraph (2)" in introductory provision, and in subpar. (B) substituted "highly compensated individuals" for "highly compensated employees".

Subsec. (b)(2). Pub. L. 99–514, §1151(g)(6), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "For purposes of paragraph (1), there may be excluded from consideration—

"(A) employees who have not completed 3 years of service,

"(B) employees who have not attained age 21,

"(C) seasonal employees or less than half-time employees,

"(D) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and 1 or more employers which the Secretary finds to be a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining between such employee representatives and such employer or employers, and

"(E) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3))."

Subsec. (b)(4). Pub. L. 99–514, §1151(e)(2)(B), amended par. (4) generally. Prior to amendment, par. (4) read as follows: "For purposes of this subsection—

"(A) Aggregation of plans.—At the election of the employer, 2 or more plans of such employer may be treated as 1 plan.

"(B) Treatment of related employers.—Rules similar to the rules of subsections (b), (c), (m), and (n) of section 414 shall apply. For purposes of the preceding sentence, section 414(n) shall be applied without regard to paragraph (5)."

Subsec. (b)(5). Pub. L. 99–514, §1114(b)(16), amended par. (5) generally. Prior to amendment, par. (5) read as follows: "For purposes of this subsection, the term 'highly compensated individual' has the meaning given such term by section 105(h)(5). For purposes of the preceding sentence, section 105(h)(5) shall be applied by substituting '10 percent' for '25 percent'."

Subsec. (b)(6). Pub. L. 99–514, §1151(j)(3), added par. (6).

Subsec. (c)(2). Pub. L. 99–514, §1899A(16), substituted "July 18, 1984" for "the date of the enactment of the Tax Reform Act of 1984".

Statutory Notes and Related Subsidiaries

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to years beginning after Dec. 31, 2001, see section 611(i)(1) of Pub. L. 107–16, set out as a note under section 415 of this title.

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable, except as otherwise provided, to benefits accruing in plan years beginning after Dec. 31, 1993, see section 13212(d) of Pub. L. 103–66, set out as a note under section 401 of this title.

Effective Date of 1989 Amendment

Amendment by section 203(a)(1), (2) of Pub. L. 101–140 effective as if included in section 1151 of Pub. L. 99–514, see section 203(c) of Pub. L. 101–140, set out as a note under section 79 of this title.

Pub. L. 101–140, title II, §204(d)(4), Nov. 8, 1989, 103 Stat. 833, provided that: "The amendment made by subsection (c) [amending this section] shall take effect as if included in the amendment made by section 1011B(a)(32) of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100–647]."

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 1114(b)(16) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub. L. 99–514, set out as a note under section 414 of this title.

Amendment by section 1151(e)(2)(B), (g)(6), (j)(3) of Pub. L. 99–514 applicable, with certain qualifications and exceptions, to years beginning after Dec. 31, 1988, see section 1151(k) of Pub. L. 99–514, as amended, set out as a note under section 79 of this title.

Amendment by section 1851(c) 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

Pub. L. 98–369, div. A, title V, §513(c), July 18, 1984, 98 Stat. 865, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—The amendments made by this section [enacting this section] shall apply to years beginning after December 31, 1984.

"(2) Treatment of certain benefits in pay status as of january 1, 1985.—For purposes of determining whether a plan meets the requirements of section 505(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)), there may (at the election of the employer) be excluded from consideration all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. The preceding sentence shall not apply to any payment to the extent such payment is increased by any plan amendment adopted after June 22, 1984."

Regulations

Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of Pub. L. 99–514, see section 1141 of Pub. L. 99–514, set out as a note under section 401 of this title.

Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990

No monies appropriated by Pub. L. 101–136 to be used to implement or enforce section 1151 of Pub. L. 99–514 or the amendments made by such section, see section 528 of Pub. L. 101–136, set out as a note under section 89 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.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
26 U.S.C. § 5173 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 51 / Section 5173: Bonds
Bonds
Status: in_force

(a) Operations at, and withdrawals from, distilled spirits plant must be covered by bond

(1) Operations

Except as provided under section 5551(d), no person intending to establish a distilled spirits plant may commence operations at such plant unless such person has furnished bond covering operations at such plant.

(2) Withdrawals

Except as provided under section 5551(d), no distilled spirits (other than distilled spirits withdrawn under section 5214 or 7510) may be withdrawn from bonded premises except on payment of tax unless the proprietor of the bonded premises has furnished bond covering such withdrawal.

(b) Operations bonds

The bond required by paragraph (1) of subsection (a) shall meet the requirements of paragraph (1), (2), or (3) of this subsection:

(1) One plant bond

The bond covers operations at a single distilled spirits plant.

(2) Adjacent wine cellar bond

The bond covers operations at a distilled spirits plant and at an adjacent bonded wine cellar.

(3) Area bond

The bond covers operations at 2 or more distilled spirits plants (and adjacent bonded wine cellars) which—

(A) are located in the same geographical area (as designated in regulations prescribed by the Secretary), and

(B) are operated by the same person (or, in the case of a corporation, by such corporation and its controlled subsidiaries).

(c) Withdrawal bonds

The bond required by paragraph (2) of subsection (a) shall cover withdrawals from 1 or more bonded premises the operations at which could be covered by the same operations bond under subsection (b).

(d) Unit bonds

Under regulations prescribed by the Secretary, the requirements of paragraphs (1) and (2) of subsection (a) shall be treated as met by a unit bond which covers both operations at, and withdrawals from, 1 or more bonded premises which could be covered by the same operations bond under subsection (b).

(e) Terms and conditions

(1) In general

Any bond furnished under this section shall be conditioned that the person furnishing the bond—

(A) will faithfully comply with all provisions of law and regulations relating to the activities covered by such bond, and

(B) will pay—

(i) all taxes imposed by this chapter, and

(ii) all penalties incurred by, or fines imposed on, such person for violation of any such provision.

(2) Other terms and conditions

Any bond furnished under this section shall contain such other terms and conditions as may be required by regulations prescribed by the Secretary.

(f) Amount

(1) In general

The penal sum of any bond shall be the amount determined under regulations prescribed by the Secretary.

(2) Maximum and minimum amount

The Secretary shall by regulations prescribe a minimum amount and a maximum amount for each type of bond which may be furnished under this section.

(g) Total amount available

The total amount of any bond furnished under this section shall be available for the satisfaction of any liability incurred under the terms and conditions of such bond.

(h) Special rules

For purposes of this section—

(1) Withdrawal bonds

In the case of any bond furnished under this section which covers withdrawals but not operations—

(A) such bond shall be in addition to the operations bond, and

(B) if distilled spirits are withdrawn under such bond, the operations bond shall no longer cover liability for payment of the tax on the spirits withdrawn.

(2) Adjacent wine cellars

(A) Requirements

No wine cellar shall be treated as being adjacent to a distilled spirits plant unless—

(i) such distilled spirits plant is qualified under this subchapter for the production of distilled spirits, and

(ii) such wine cellar and the distilled spirits plant are operated by the same person (or, in the case of a corporation, by such corporation and its controlled subsidiaries).

(B) Bond in lieu of wine cellar bond

In the case of any adjacent wine cellar, a bond furnished under this section which covers operations at such wine cellar shall be in lieu of any bond which would otherwise be required under section 5354 with respect to such wine cellar (other than supplemental bonds required under the second sentence of section 5354).

(Added Pub. L. 85–859, title II, §201, Sept. 2, 1958, 72 Stat. 1349; amended Pub. L. 91–659, §4, Jan. 8, 1971, 84 Stat. 1966; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–39, title VIII, §805(c), July 26, 1979, 93 Stat. 276; Pub. L. 114–113, div. Q, title III, §332(b)(2)(A), Dec. 18, 2015, 129 Stat. 3105.)

Editorial Notes

Prior Provisions

A prior section 5173, act Aug. 16, 1954, ch. 736, 68A Stat. 628, related to "distillery fixtures and equipment", prior to the general revision of this chapter by Pub. L. 85–859. See sections 5178(a)(1)(A), (2)(B)(C), (c)(1) and 5202(b) of this title.

Provisions similar to those comprising subsecs. (a), (b), (b)(1), (b)(1)(A) to (C), (b)(3), (c), (c)(1), (d) and (e)(1) of this section were contained in prior sections of act Aug. 16, 1954, prior to the general revision of this chapter by Pub. L. 85–859, as follows:

 

Present subsecs.:Prior sections

(a)
5172, 5176(a), 5231, 5232(a), 5272(a), 5301–5303, 5304(a)(5), 5305, 5311(a)(3).

(b)
5176 (a), (d).

(b)(1)
5176(a), 5177(c).

(b)(1)(A)–(C)
5177(b)(1)–(3).

(b)(3)
5177(b)(4).

(c)
5232(a), 5302, 5303, 5306, 5331(a)(3).

(c)(1)
5232(a).

(d)
5272(a).

(e)(1)
5304(a)(5).

The prior sections, act Aug. 16, 1954, ch. 736, are set out in 68A Stat. 627, 629 to 631, 643, 650, 654, 655, 657, 662.

Amendments

2015—Subsec. (a)(1). Pub. L. 114–113, §332(b)(2)(A)(i), substituted "Except as provided under section 5551(d), no person" for "No person".

Subsec. (a)(2). Pub. L. 114–113, §332(b)(2)(A)(ii), substituted "Except as provided under section 5551(d), no distilled spirits" for "No distilled spirits".

1979—Pub. L. 96–39, among other changes, struck out provisions relating to liens on distillery property and the furnishing of indemnity bonds as methods of securing tax payments and inserted provisions relating to the one plant operations bond, which will cover the operations at a bonded wine cellar which is adjacent to the distilled spirits plant and operated by the same person.

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

1971—Subsec. (b)(1). Pub. L. 91–659, §4(b), extended exception clause in parenthetical by making reference to cl. (4) of this subsection.

Subsec. (b)(2). Pub. L. 91–659, §4(c), inserted reference to par. (4).

Subsec. (b)(4). Pub. L. 91–659, §4(a), added par. (4).

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Amendment by Pub. L. 114–113 applicable to any calendar quarters beginning more than 1 year after Dec. 18, 2015, see section 332(c) of Pub. L. 114–113, set out as a note under section 5061 of this title.

Effective Date of 1979 Amendment

Amendment by Pub. L. 96–39 effective Jan. 1, 1980, see section 810 of Pub. L. 96–39, set out as a note under section 5001 of this title.

Effective Date of 1971 Amendment

Amendment by Pub. L. 91–659 effective on first day of first calendar month which begins more than 90 days after Jan. 8, 1971, see section 6 of Pub. L. 91–659, set out as an Effective Date note under section 5066 of this title.

Transitional Rules Relating to All-In-Bond Method

Pub. L. 96–39, title VIII, §809(c), July 26, 1979, 93 Stat. 292, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "For purposes of section 5173 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to bonds), each person who intends to continue operation at a premises after December 31, 1979, shall be treated as intending to establish a distilled spirits plant on such premises on January 1, 1980."
26 U.S.C. § 5690 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 51 / Section 5690: Definition of the term "person"
Definition of the term "person"
Status: in_force

The term "person", as used in this subchapter, includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

(Added Pub. L. 85–859, title II, §201, Sept. 2, 1958, 72 Stat. 1413.)

Editorial Notes

Prior Provisions

A prior section 5690, act Aug. 16, 1954, ch. 736, 68A Stat. 702, consisted of provisions similar to those comprising this section, prior to the general revision of this chapter by Pub. L. 85–859.
26 U.S.C. § 1273 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1273: Determination of amount of original issue discount
Determination of amount of original issue discount
Status: in_force

(a) General rule

For purposes of this subpart—

(1) In general

The term "original issue discount" means the excess (if any) of—

(A) the stated redemption price at maturity, over

(B) the issue price.

(2) Stated redemption price at maturity

The term "stated redemption price at maturity" means the amount fixed by the last modification of the purchase agreement and includes interest and other amounts payable at that time (other than any interest based on a fixed rate, and payable unconditionally at fixed periodic intervals of 1 year or less during the entire term of the debt instrument).

(3) ¼ of 1 percent de minimis rule

If the original issue discount determined under paragraph (1) is less than—

(A) ¼ of 1 percent of the stated redemption price at maturity, multiplied by

(B) the number of complete years to maturity,

then the original issue discount shall be treated as zero.

(b) Issue price

For purposes of this subpart—

(1) Publicly offered debt instruments not issued for property

In the case of any issue of debt instruments—

(A) publicly offered, and

(B) not issued for property,

the issue price is the initial offering price to the public (excluding bond houses and brokers) at which price a substantial amount of such debt instruments was sold.

(2) Other debt instruments not issued for property

In the case of any issue of debt instruments not issued for property and not publicly offered, the issue price of each such instrument is the price paid by the first buyer of such debt instrument.

(3) Debt instruments issued for property where there is public trading

In the case of a debt instrument which is issued for property and which—

(A) is part of an issue a portion of which is traded on an established securities market, or

(B)(i) is issued for stock or securities which are traded on an established securities market, or

(ii) to the extent provided in regulations, is issued for property (other than stock or securities) of a kind regularly traded on an established market,

the issue price of such debt instrument shall be the fair market value of such property.

(4) Other cases

Except in any case—

(A) to which paragraph (1), (2), or (3) of this subsection applies, or

(B) to which section 1274 applies,

the issue price of a debt instrument which is issued for property shall be the stated redemption price at maturity.

(5) Property

In applying this subsection, the term "property" includes services and the right to use property, but such term does not include money.

(c) Special rules for applying subsection (b)

For purposes of subsection (b)—

(1) Initial offering price; price paid by the first buyer

The terms "initial offering price" and "price paid by the first buyer" include the aggregate payments made by the purchaser under the purchase agreement, including modifications thereof.

(2) Treatment of investment units

In the case of any debt instrument and an option, security, or other property issued together as an investment unit—

(A) the issue price for such unit shall be determined in accordance with the rules of this subsection and subsection (b) as if it were a debt instrument,

(B) the issue price determined for such unit shall be allocated to each element of such unit on the basis of the relationship of the fair market value of such element to the fair market value of all elements in such unit, and

(C) the issue price of any debt instrument included in such unit shall be the portion of the issue price of the unit allocated to the debt instrument under subparagraph (B).

(Added Pub. L. 98–369, div. A, title I, §41(a), July 18, 1984, 98 Stat. 536; amended Pub. L. 99–514, title XVIII, §1803(a)(10), Oct. 22, 1986, 100 Stat. 2794.)

Editorial Notes

Amendments

1986—Subsec. (b)(3)(B). Pub. L. 99–514 amended subpar. (B) generally, designating existing provisions as cl. (i) and adding cl. (ii).

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

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

Effective Date

Section applicable to taxable years ending after July 18, 1984, except as otherwise provided, see section 44 of Pub. L. 98–369, set out as a note under section 1271 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
26 U.S.C. § 3131 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 21 / Subchapter D / Section 3131: Credit for paid sick leave
Credit for paid sick leave
Status: in_force

(a) In general

In the case of an employer, there shall be allowed as a credit against applicable employment taxes for each calendar quarter an amount equal to 100 percent of the qualified sick leave wages paid by such employer with respect to such calendar quarter.

(b) Limitations and refundability

(1) Wages taken into account

The amount of qualified sick leave wages taken into account under subsection (a), plus any increases under subsection (e), with respect to any individual shall not exceed $200 ($511 in the case of any day any portion of which is paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the Emergency Paid Sick Leave Act, applied with the modification described in subsection (c)(2)(A)(i)) for any day (or portion thereof) for which the individual is paid qualified sick leave wages.

(2) Overall limitation on number of days taken into account

The aggregate number of days taken into account under paragraph (1) for any calendar quarter shall not exceed the excess (if any) of—

(A) 10, over

(B) the aggregate number of days so taken into account during preceding calendar quarters in such calendar year (other than the first quarter of calendar year 2021).

(3) Credit limited to certain employment taxes

The credit allowed by subsection (a) with respect to any calendar quarter shall not exceed the applicable employment taxes for such calendar quarter on the wages paid with respect to the employment of all employees of the employer.

(4) Refundability of excess credit

(A) Credit is refundable

If the amount of the credit under subsection (a) exceeds the limitation of paragraph (3) for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded under sections 6402(a) and 6413(b).

(B) Advancing credit

In anticipation of the credit, including the refundable portion under subparagraph (A), the credit shall be advanced, according to forms and instructions provided by the Secretary, up to an amount calculated under subsection (a), subject to the limits under paragraph (1) and (2), all calculated through the end of the most recent payroll period in the quarter.

(c) Qualified sick leave wages

For purposes of this section—

(1) In general

The term "qualified sick leave wages" means wages paid by an employer which would be required to be paid by reason of the Emergency Paid Sick Leave Act as if such Act applied after March 31, 2021.

(2) Rules of application

For purposes of determining whether wages are qualified sick leave wages under paragraph (1)—

(A) In general

The Emergency Paid Sick Leave Act shall be applied—

(i) by inserting ", the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee's employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization" after "medical diagnosis" in section 5102(a)(3) thereof, and

(ii) by applying section 5102(b)(1) of such Act separately with respect to each calendar year after 2020 (and, in the case of calendar year 2021, without regard to the first quarter thereof).

(B) Leave must meet requirements

If an employer fails to comply with any requirement of such Act (determined without regard to section 5109 thereof) with respect to paid sick time (as defined in section 5110 of such Act), amounts paid by such employer with respect to such paid sick time shall not be taken into account as qualified sick leave wages. For purposes of the preceding sentence, an employer which takes an action described in section 5104 of such Act shall be treated as failing to meet a requirement of such Act.

(d) Allowance of credit for certain health plan expenses

(1) In general

The amount of the credit allowed under subsection (a) shall be increased by so much of the employer's qualified health plan expenses as are properly allocable to the qualified sick leave wages for which such credit is so allowed.

(2) Qualified health plan expenses

For purposes of this subsection, the term "qualified health plan expenses" means amounts paid or incurred by the employer to provide and maintain a group health plan (as defined in section 5000(b)(1)), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a).

(3) Allocation rules

For purposes of this section, qualified health plan expenses shall be allocated to qualified sick leave wages in such manner as the Secretary may prescribe. Except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among covered employees and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).

(e) Allowance of credit for amounts paid under certain collectively bargained agreements

(1) In general

The amount of the credit allowed under subsection (a) shall be increased by the sum of—

(A) so much of the employer's collectively bargained defined benefit pension plan contributions as are properly allocable to the qualified sick leave wages for which such credit is so allowed, plus

(B) so much of the employer's collectively bargained apprenticeship program contributions as are properly allocable to the qualified sick leave wages for which such credit is so allowed.

(2) Collectively bargained defined benefit pension plan contributions

For purposes of this subsection—

(A) In general

The term "collectively bargained defined benefit pension plan contributions" means, with respect to any calendar quarter, contributions which—

(i) are paid or incurred by an employer during the calendar quarter on behalf of its employees to a defined benefit plan (as defined in section 414(j)), which meets the requirements of section 401(a),

(ii) are made based on a pension contribution rate, and

(iii) are required to be made pursuant to the terms of a collective bargaining agreement in effect with respect to such calendar quarter.

(B) Pension contribution rate

The term "pension contribution rate" means the contribution rate that the employer is obligated to pay on behalf of its employees under the terms of a collective bargaining agreement for benefits under a defined benefit plan under such agreement, as such rate is applied to contribution base units (as defined by section 4001(a)(11) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301(a)(11)).1

(C) Allocation rules

The amount of collectively bargained defined benefit pension plan contributions allocated to qualified sick leave wages for any calendar quarter shall be the product of—

(i) the pension contribution rate (expressed as an hourly rate), and

(ii) the number of hours for which qualified sick leave wages were provided to employees covered under the collective bargaining agreement described in subparagraph (A)(iii) during the calendar quarter.

(3) Collectively bargained apprenticeship program contributions

For purposes of this section—

(A) In general

The term "collectively bargained apprenticeship program contributions" means, with respect to any calendar quarter, contributions which—

(i) are paid or incurred by an employer on behalf of its employees with respect to the calendar quarter to a registered apprenticeship program,

(ii) are made based on an apprenticeship program contribution rate, and

(iii) are required to be made pursuant to the terms of a collective bargaining agreement that is in effect with respect to such calendar quarter.

(B) Registered apprenticeship program

The term "registered apprenticeship program" means an apprenticeship registered under the Act of August 16, 1937 (commonly known as the "National Apprenticeship Act"; 50 Stat. 664, chapter 663; 29 U.S.C. 50 et seq.) that meets the standards of subpart A of part 29 and part 30 of title 29, Code of Federal Regulations.

(C) Apprenticeship program contribution rate

The term "apprenticeship program contribution rate" means the contribution rate that the employer is obligated to pay on behalf of its employees under the terms of a collective bargaining agreement for benefits under a registered apprenticeship program under such agreement, as such rate is applied to contribution base units (as defined by section 4001(a)(11) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301(a)(11)).1

(D) Allocation rules

The amount of collectively bargained apprenticeship program contributions allocated to qualified sick leave wages for any calendar quarter shall be the product of—

(i) the apprenticeship program contribution rate (expressed as an hourly rate), and

(ii) the number of hours for which qualified sick leave wages were provided to employees covered under the collective bargaining agreement described in subparagraph (A)(iii) during the calendar quarter.

(f) Definitions and special rules

(1) Applicable employment taxes

For purposes of this section, the term "applicable employment taxes" means the following:

(A) The taxes imposed under section 3111(b).

(B) So much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b).

(2) Wages

For purposes of this section, the term "wages" means wages (as defined in section 3121(a), determined without regard to paragraphs (1) through (22) of section 3121(b)) and compensation (as defined in section 3231(e), determined without regard to the sentence in paragraph (1) thereof which begins "Such term does not include remuneration").

(3) Denial of double benefit

For purposes of chapter 1, the gross income of the employer, for the taxable year which includes the last day of any calendar quarter with respect to which a credit is allowed under this section, shall be increased by the amount of such credit. Any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under sections 45A, 45P, 45S, 51, 3132, and 3134. In the case of any credit allowed under section 2301 of the CARES Act or section 41 with respect to wages taken into account under this section, the credit allowed under this section shall be reduced by the portion of the credit allowed under such section 2301 or section 41 which is attributable to such wages.

(4) Election to not take certain wages into account

This section shall not apply to so much of the qualified sick leave wages paid by an eligible employer as such employer elects (at such time and in such manner as the Secretary may prescribe) to not take into account for purposes of this section.

(5) Certain governmental employers

No credit shall be allowed under this section to the Government of the United States or to any agency or instrumentality thereof. The preceding sentence shall not apply to any organization described in section 501(c)(1) and exempt from tax under section 501(a).

(6) Extension of limitation on assessment

Notwithstanding section 6501, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 5 years after the later of—

(A) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed, or

(B) the date on which such return is treated as filed under section 6501(b)(2).

(7) Coordination with certain programs

(A) In general

This section shall not apply to so much of the qualified sick leave wages paid by an eligible employer as are taken into account as payroll costs in connection with—

(i) a covered loan under section 7(a)(37) or 7A of the Small Business Act,

(ii) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or

(iii) a restaurant revitalization grant under section 5003 of the American Rescue Plan Act of 2021.

(B) Application where PPP loans not forgiven

The Secretary shall issue guidance providing that payroll costs paid during the covered period shall not fail to be treated as qualified sick leave wages under this section by reason of subparagraph (A)(i) to the extent that—

(i) a covered loan of the taxpayer under section 7(a)(37) of the Small Business Act is not forgiven by reason of a decision under section 7(a)(37)(J) of such Act, or

(ii) a covered loan of the taxpayer under section 7A of the Small Business Act is not forgiven by reason of a decision under section 7A(g) of such Act.

Terms used in the preceding sentence which are also used in section 7A(g) or 7(a)(37)(J) of the Small Business Act shall, when applied in connection with either such section, have the same meaning as when used in such section, respectively.

(g) Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including—

(1) regulations or other guidance to prevent the avoidance of the purposes of the limitations under this section,

(2) regulations or other guidance to minimize compliance and record-keeping burdens under this section,

(3) regulations or other guidance providing for waiver of penalties for failure to deposit amounts in anticipation of the allowance of the credit allowed under this section,

(4) regulations or other guidance for recapturing the benefit of credits determined under this section in cases where there is a subsequent adjustment to the credit determined under subsection (a),

(5) regulations or other guidance to ensure that the wages taken into account under this section conform with the paid sick time required to be provided under the Emergency Paid Sick Leave Act,

(6) regulations or other guidance to permit the advancement of the credit determined under subsection (a), and

(7) regulations or other guidance with respect to the allocation, reporting, and substantiation of collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions.

(h) Application of section

This section shall apply only to wages paid with respect to the period beginning on April 1, 2021, and ending on September 30, 2021.

(i) Treatment of deposits

The Secretary shall waive any penalty under section 6656 for any failure to make a deposit of applicable employment taxes if the Secretary determines that such failure was due to the anticipation of the credit allowed under this section.

(j) Non-discrimination requirement

No credit shall be allowed under this section to any employer for any calendar quarter if such employer, with respect to the availability of the provision of qualified sick leave wages to which this section otherwise applies for such calendar quarter, discriminates in favor of highly compensated employees (within the meaning of section 414(q)), full-time employees, or employees on the basis of employment tenure with such employer.

(Added Pub. L. 117–2, title IX, §9641(a), Mar. 11, 2021, 135 Stat. 161.)

Editorial Notes

References in Text

The Emergency Paid Sick Leave Act and such Act, referred to in subsecs. (b)(1), (c)(1), (2), and (g)(5), is division E (§5101 et seq.) of Pub. L. 116–127, Mar. 18, 2020, 134 Stat. 195, which is set out as a note under section 2601 of Title 29, Labor.

The National Apprenticeship Act, referred to in subsec. (e)(3)(B), is act Aug. 16, 1937, ch. 663, 50 Stat. 664, which is classified generally to chapter 4C (§50 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 50 of Title 29 and Tables.

Section 2301 of the CARES Act, referred to in subsec. (f)(3), is section 2301 of title II of div. A of Pub. L. 116–136, which is set out as a note under section 3111 of this title.

Section 7 of the Small Business Act, referred to in subsec. (f)(7)(A)(i), (B), is classified to section 636 of Title 15, Commerce and Trade.

Section 7A of the Small Business Act, referred to in subsec. (f)(7)(A)(i), (B), is classified to section 636m of Title 15, Commerce and Trade.

Section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, referred to in subsec. (f)(7)(A)(ii), is classified to section 9009a of Title 15, Commerce and Trade.

Section 5003 of the American Rescue Plan Act of 2021, referred to in subsec. (f)(7)(A)(iii), is classified to section 9009c of Title 15, Commerce and Trade.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 117–2, title IX, §9641(d), Mar. 11, 2021, 135 Stat. 171, provided that: "The amendments made by this section [enacting sections 3131 to 3133 of this title and amending section 1324 of Title 31, Money and Finance] shall apply to amounts paid with respect to calendar quarters beginning after March 31, 2021."

1 So in original. Another closing parenthesis probably should precede the period.
26 U.S.C. § 26 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 26: Limitation based on tax liability; definition of tax liability
Limitation based on tax liability; definition of tax liability
Status: in_force

(a) Limitation based on amount of tax

The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—

(1) the taxpayer's regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and

(2) the tax imposed by section 55(a) for the taxable year.

(b) Regular tax liability

For purposes of this part—

(1) In general

The term "regular tax liability" means the tax imposed by this chapter for the taxable year.

(2) Exception for certain taxes

For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:

(A) section 55 (relating to minimum tax),

(B) section 59A (relating to base erosion and anti-abuse tax),

(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),

(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),

(E) section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),

(F) section 531 (relating to accumulated earnings tax),

(G) section 541 (relating to personal holding company tax),

(H) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),

(I) section 1374 (relating to tax on certain built-in gains of S corporations),

(J) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),

(K) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),

(L) sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),

(M) section 860E(e) (relating to taxes with respect to certain residual interests),

(N) section 884 (relating to branch profits tax),

(O) sections 453(l)(3) and 453A(c) (relating to interest on certain deferred tax liabilities),

[(P) Repealed. Pub. L. 115–141, div. U, title IV, §401(b)(2), Mar. 23, 2018, 132 Stat. 1201.]

(Q) section 220(f)(4) (relating to additional tax on Archer MSA distributions not used for qualified medical expenses),

(R) section 138(c)(2) (relating to penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained),

(S) sections 106(e)(3)(A)(ii), 223(b)(8)(B)(i)(II), and 408(d)(9)(D)(i)(II) (relating to certain failures to maintain high deductible health plan coverage),

(T) section 170(o)(3)(B) (relating to recapture of certain deductions for fractional gifts),

(U) section 223(f)(4) (relating to additional tax on health savings account distributions not used for qualified medical expenses),

(V) subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A (relating to interest and additional tax with respect to certain deferred compensation),

(W) section 36(f) (relating to recapture of homebuyer credit),

(X) section 457A(c)(1)(B) (relating to determinability of amounts of compensation),

(Y) section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses), and

(Z) section 24(j)(2) (relating to excess advance payments).

(c) Tentative minimum tax

For purposes of this part, the term "tentative minimum tax" means the amount determined under section 55(b)(1).

(Added §25, renumbered §26, Pub. L. 98–369, div. A, title IV, §472, title VI, §612(a), July 18, 1984, 98 Stat. 827, 905; amended Pub. L. 99–499, title V, §516(b)(1)(A), Oct. 17, 1986, 100 Stat. 1770; Pub. L. 99–514, title II, §261(c), title VI, §632(c)(1), title VII, §701(c)(1), Oct. 22, 1986, 100 Stat. 2214, 2277, 2340; Pub. L. 100–647, title I, §§1006(t)(16)(C), 1007(g)(1), 1011A(c)(10), 1012(q)(8), title IV, §4005(g)(4), title V, §5012(b)(2), Nov. 10, 1988, 102 Stat. 3425, 3434, 3476, 3524, 3650, 3662; Pub. L. 101–239, title VII, §§7811(c)(1), (2), 7821(a)(4)(A), Dec. 19, 1989, 103 Stat. 2406, 2407, 2424; Pub. L. 104–188, title I, §1621(b)(1), Aug. 20, 1996, 110 Stat. 1866; Pub. L. 105–34, title II, §213(e)(1), title XVI, §1602(a)(1), Aug. 5, 1997, 111 Stat. 817, 1093; Pub. L. 105–277, div. J, title II, §2001(a), Oct. 21, 1998, 112 Stat. 2681–901; Pub. L. 106–170, title V, §501(a), Dec. 17, 1999, 113 Stat. 1918; Pub. L. 106–554, §1(a)(7) [title II, §202(a)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–628; Pub. L. 107–16, title II, §§201(b)(2)(D), 202(f)(2)(C), title VI, §618(b)(2)(C), June 7, 2001, 115 Stat. 46, 49, 108; Pub. L. 107–22, §1(b)(2)(A), July 26, 2001, 115 Stat. 197; Pub. L. 107–147, title IV, §§415(a), 417(23)(B), title VI, §601(a), Mar. 9, 2002, 116 Stat. 54, 57, 59; Pub. L. 108–311, title III, §312(a), title IV, §§401(a)(1), 408(a)(5)(A), Oct. 4, 2004, 118 Stat. 1181, 1183, 1191; Pub. L. 109–135, title IV, §§403(hh)(1), 412(c), Dec. 21, 2005, 119 Stat. 2631, 2636; Pub. L. 109–222, title III, §302(a), May 17, 2006, 120 Stat. 353; Pub. L. 110–166, §3(a), Dec. 26, 2007, 121 Stat. 2461; Pub. L. 110–172, §11(a)(3), Dec. 29, 2007, 121 Stat. 2484; Pub. L. 110–289, div. C, title I, §3011(b)(1), July 30, 2008, 122 Stat. 2891; Pub. L. 110–343, div. B, title I, §106(e)(2)(D), title II, §205(d)(1)(D), div. C, title I, §101(a), title VIII, §801(b), Oct. 3, 2008, 122 Stat. 3817, 3839, 3863, 3931; Pub. L. 111–5, div. B, title I, §§1004(b)(3), 1011(a), 1142(b)(1)(D), 1144(b)(1)(D), Feb. 17, 2009, 123 Stat. 314, 319, 330, 332; Pub. L. 111–148, title X, §10909(b)(2)(E), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, §101(b)(1), title II, §202(a), Dec. 17, 2010, 124 Stat. 3298, 3299; Pub. L. 112–240, title I, §104(c)(1), Jan. 2, 2013, 126 Stat. 2321; Pub. L. 113–295, div. A, title II, §221(a)(12)(B), div. B, title I, §102(e)(1), Dec. 19, 2014, 128 Stat. 4038, 4062; Pub. L. 115–97, title I, §14401(c), Dec. 22, 2017, 131 Stat. 2233; Pub. L. 115–141, div. U, title IV, §401(b)(2), (d)(1)(D)(ii), Mar. 23, 2018, 132 Stat. 1201, 1206; Pub. L. 117–2, title IX, §9611(b)(4)(A), Mar. 11, 2021, 135 Stat. 150.)

Editorial Notes

Amendments

2021—Subsec. (b)(2)(Z). Pub. L. 117–2 added subpar. (Z).

2018—Subsec. (a)(1). Pub. L. 115–141, §401(d)(1)(D)(ii), substituted "section 27" for "section 27(a)".

Subsec. (b)(2)(P). Pub. L. 115–141, §401(b)(2), struck out subpar. (P) which read as follows: "section 860K (relating to treatment of transfers of high-yield interests to disqualified holders),".

2017—Subsec. (b)(2)(B). Pub. L. 115–97 added subpar. (B).

2014—Subsec. (b)(2)(B). Pub. L. 113–295, §221(a)(12)(B), struck out subpar. (B) which read as follows: "section 59A (relating to environmental tax),".

Subsec. (b)(2)(Y). Pub. L. 113–295, §102(e)(1), added subpar. (Y).

2013—Subsec. (a). Pub. L. 112–240 amended subsec. (a) generally. Prior to amendment, subsec. (a) related to limitation based on amount of tax with a special rule for taxable years 2000 through 2011.

2010—Subsec. (a)(1). Pub. L. 111–148, §10909(b)(2)(E), (c), as amended by Pub. L. 111–312, §101(b)(1), temporarily struck out "23," before "24," in introductory provisions. See Effective and Termination Dates of 2010 Amendment note below.

Subsec. (a)(2). Pub. L. 111–312, §202(a), substituted "2011" for "2009" in heading and "2009, 2010, or 2011" for "or 2009" in introductory provisions.

2009—Subsec. (a)(1). Pub. L. 111–5, §1144(b)(1)(D), inserted "30B," after "30," in introductory provisions.

Pub. L. 111–5, §1142(b)(1)(D), inserted "30," after "25D," in introductory provisions.

Pub. L. 111–5, §1004(b)(3), inserted "25A(i)," after "24," in introductory provisions.

Subsec. (a)(2). Pub. L. 111–5, §1011(a), substituted "2009" for "2008" in heading and "2008, or 2009" for "or 2008" in introductory provisions.

2008—Subsec. (a)(1). Pub. L. 110–343, §205(d)(1)(D), substituted "25D, and 30D" for "and 25D" in introductory provisions.

Pub. L. 110–343, §106(e)(2)(D), substituted "25B, and 25D" for "and 25B" in introductory provisions.

Subsec. (a)(2). Pub. L. 110–343, §101(a), substituted "2008" for "2007" in heading and "2007, or 2008" for "or 2007" in introductory provisions.

Subsec. (b)(2)(W). Pub. L. 110–289 added subpar. (W).

Subsec. (b)(2)(X). Pub. L. 110–343, §801(b), added subpar. (X).

2007—Subsec. (a)(2). Pub. L. 110–166 substituted "2007" for "2006" in heading and "2006, or 2007" for "or 2006" in introductory provisions.

Subsec. (b)(2)(S) to (V). Pub. L. 110–172 added subpars. (S) and (T) and redesignated former subpars. (S) and (T) as (U) and (V), respectively.

2006—Subsec. (a)(2). Pub. L. 109–222 substituted "2006" for "2005" in heading and "2005, or 2006" for "or 2005" in introductory provisions.

2005—Subsec. (b)(2)(E). Pub. L. 109–135, §412(c), substituted "section 530(d)(4)" for "section 530(d)(3)".

Subsec. (b)(2)(T). Pub. L. 109–135, §403(hh)(1), added subpar. (T).

2004—Subsec. (a)(2). Pub. L. 108–311, §312(a), substituted "rule for taxable years 2000 through 2005" for "rule for 2000, 2001, 2002, and 2003" in heading and "2003, 2004, or 2005" for "or 2003" in text.

Subsec. (b)(2)(R). Pub. L. 108–311, §408(a)(5)(A), substituted "Medicare Advantage MSA" for "Medicare+Choice MSA".

Subsec. (b)(2)(S). Pub. L. 108–311, §401(a)(1), added subpar. (S).

2002—Subsec. (a)(1). Pub. L. 107–147, §417(23)(B), amended directory language of Pub. L. 107–16, §618(b)(2)(C). See 2001 Amendment note below.

Subsec. (a)(2). Pub. L. 107–147, §601(a), substituted "rule for 2000, 2001, 2002, and 2003" for "rule for 2000 and 2001" in heading and "during 2000, 2001, 2002, or 2003," for "during 2000 or 2001," in introductory provisions.

Subsec. (b)(2)(P), (Q). Pub. L. 107–147, §415(a), which directed striking "and" at end of subpar. (P) and substituting ", and" for the period at the end of subpar. (Q), was executed to subpars. (P) and (Q) as redesignated by Pub. L. 105–34, §213(e)(1), to reflect the probable intent of Congress. See 1997 Amendment notes below.

Subsec. (b)(2)(R). Pub. L. 107–147, §415(a), added subpar. (R).

2001—Subsec. (a)(1). Pub. L. 107–16, §618(b)(2)(C), as amended by Pub. L. 107–147, §417(23)(B), substituted ", 24, and 25B" for "and 24" in introductory provisions.

Pub. L. 107–16, §202(f)(2)(C), substituted "sections 23 and 24" for "section 24" in introductory provisions.

Pub. L. 107–16, §201(b)(2)(D), inserted "(other than section 24)" after "this subpart" in introductory provisions.

Subsec. (b)(2)(E). Pub. L. 107–22 substituted "Coverdell education savings" for "education individual retirement".

2000—Subsec. (b)(2)(Q). Pub. L. 106–554 substituted "Archer MSA" for "medical savings account".

1999—Subsec. (a). Pub. L. 106–170 reenacted subsec. heading without change and amended text generally. Prior to amendment, text read as follows: "The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the excess (if any) of—

"(1) the taxpayer's regular tax liability for the taxable year, over

"(2) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).

For purposes of paragraph (2), the taxpayer's tentative minimum tax for any taxable year beginning during 1998 shall be treated as being zero."

1998—Subsec. (a). Pub. L. 105–277 inserted concluding provisions.

1997—Subsec. (b)(2)(E) to (O). Pub. L. 105–34, §213(e)(1), added subpar. (E) and redesignated former subpars. (E) to (N) as (F) to (O), respectively. Former subpar. (O) redesignated (P).

Subsec. (b)(2)(P). Pub. L. 105–34, §213(e)(1), redesignated subpar. (P) as (Q).

Pub. L. 105–34, §1602(a)(1), added subpar. (P).

Subsec. (b)(2)(Q). Pub. L. 105–34, §213(e)(1), redesignated subpar. (P) as (Q).

1996—Subsec. (b)(2)(O). Pub. L. 104–188 added subpar. (O).

1989—Subsec. (b)(2)(C), (D). Pub. L. 101–239, §7811(c)(1), amended subpars. (C) and (D) generally. Prior to amendment, subpars. (C) and (D) read as follows:

"(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to additional tax on certain distributions),

"(D) section 72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans),".

Subsec. (b)(2)(K). Pub. L. 101–239, §7811(c)(2), added subpar. (K) and struck out former subpar. (K) which was identical.

Subsec. (b)(2)(L), (M). Pub. L. 101–239, §7811(c)(2), added subpars. (L) and (M) and struck out former subpars. (L) and (M) which read as follows:

"(L) section 860E(e) (relating to taxes with respect to certain residual interests), and

"(L) section 884 (relating to branch profits tax), and

"(M) section 143(m) (relating to recapture of portion of federal subsidy from use of mortgage bonds and mortgage credit certificates)."

Subsec. (b)(2)(N). Pub. L. 101–239, §7821(a)(4)(A), which directed amendment of subsec. (b)(2) of this section "as amended by section 11811" by adding subpar. (N), was executed as if it directed amendment of subsec. (b)(2) of this section "as amended by section 7811", to reflect the probable intent of Congress and the renumbering of section 11811 of H.R. 3299 as section 7811 prior to the enactment of H.R. 3299 into law as Pub. L. 101–239.

1988—Subsec. (b)(2)(C). Pub. L. 100–647, §1011A(c)(10)(A), struck out ", (o)(2)," after "subsection (m)(5)(B)".

Pub. L. 100–647, §5012(b)(2), substituted "(q), or (v)" for "or (q)".

Subsec. (b)(2)(D). Pub. L. 100–647, §1011A(c)(10)(B), substituted "72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans)" for "408(f) (relating to additional tax on income from certain retirement accounts)".

Subsec. (b)(2)(K). Pub. L. 100–647, §1007(g)(1), substituted "corporations)." for "corporations,".

Subsec. (b)(2)(L). Pub. L. 100–647, §1012(q)(8), added subpar. (L) relating to branch profits tax.

Pub. L. 100–647, §1006(t)(16)(C), added subpar. (L) relating to taxes with respect to certain residual interests.

Subsec. (b)(2)(M). Pub. L. 100–647, §4005(g)(4), added subpar. (M).

1986—Subsec. (a). Pub. L. 99–514, §701(c)(1)(A), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: "The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer's tax liability for such taxable year."

Subsec. (b). Pub. L. 99–514, §701(c)(1)(B)(i), (v), substituted "Regular tax liability" for "Tax liability" in heading and "this part" for "this section" in introductory provisions.

Subsec. (b)(1). Pub. L. 99–514, §701(c)(1)(B)(ii), substituted "regular tax liability" for "tax liability".

Subsec. (b)(2). Pub. L. 99–499 added subpar. (B) and redesignated former subpars. (B) to (J) as (C) to (K), respectively.

Pub. L. 99–514, §701(c)(1)(B)(iii), substituted "section 55 (relating to minimum tax)" for "section 56 (relating to corporate minimum tax)" in subpar. (A).

Pub. L. 99–514, §632(c)(1), substituted "certain built-in gains" for "certain capital gains" in subpar. (G).

Pub. L. 99–514, §261(c), added subpar. (I).

Pub. L. 99–514, §701(c)(1)(B)(iv), added subpar. (J).

Subsec. (c). Pub. L. 99–514, §701(c)(1)(C), amended subsec. (c) generally, substituting provisions relating to tentative minimum tax for provisions referring to section 55(c) of this title for similar rule for alternative minimum tax for taxpayers other than corporations.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 117–2 applicable to taxable years beginning after Dec. 31, 2020, see section 9611(c)(1) of Pub. L. 117–2, set out as a note under section 24 of this title.

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §14401(e), Dec. 22, 2017, 131 Stat. 2234, provided that: "The amendments made by this section [enacting section 59A of this title and amending this section and sections 882, 6038A, 6425, and 6655 of this title] shall apply to base erosion payments (as defined in section 59A(d) of the Internal Revenue Code of 1986 [26 U.S.C. 59A(d)], as added by this section) paid or accrued in taxable years beginning after December 31, 2017."

Effective Date of 2014 Amendment

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

Amendment by section 102(e)(1) of Pub. L. 113–295 applicable to taxable years beginning after Dec. 31, 2014, see section 102(f)(1) of div. B of Pub. L. 113–295, set out as a note under section 552a of Title 5, Government Organization and Employees.

Effective Date of 2013 Amendment

Amendment by Pub. L. 112–240 applicable to taxable years beginning after Dec. 31, 2011, see section 104(d) of Pub. L. 112–240, set out as a note under section 23 of this title.

Effective and Termination Dates of 2010 Amendment

Pub. L. 111–312, title II, §202(b), Dec. 17, 2010, 124 Stat. 3299, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009."

Amendment by Pub. L. 111–148 terminated applicable to taxable years beginning after Dec. 31, 2011, and section is amended to read as if such amendment had never been enacted, see section 10909(c) of Pub. L. 111–148, set out as a note under section 1 of this title.

Amendment by Pub. L. 111–148 applicable to taxable years beginning after Dec. 31, 2009, see section 10909(d) of Pub. L. 111–148, set out as a note under section 1 of this title.

Effective Date of 2009 Amendment

Amendment by section 1004(b)(3) of Pub. L. 111–5 applicable to taxable years beginning after Dec. 31, 2008, see section 1004(d) of Pub. L. 111–5, set out as an Effective and Termination Dates of 2009 Amendment note under section 24 of this title.

Pub. L. 111–5, div. B, title I, §1011(b), Feb. 17, 2009, 123 Stat. 319, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2008."

Amendment by section 1142(b)(1)(D) of Pub. L. 111–5 applicable to vehicles acquired after Feb. 17, 2009, see section 1142(c) of Pub. L. 111–5, set out as an Effective and Termination Dates of 2009 Amendment note under section 24 of this title.

Amendment by section 1144(b)(1)(D) of Pub. L. 111–5 applicable to taxable years beginning after Dec. 31, 2008, see section 1144(c) of Pub. L. 111–5, set out as an Effective and Termination Dates of 2009 Amendment note under section 24 of this title.

Effective Date of 2008 Amendment

Amendment by section 106(e)(2)(D) of Pub. L. 110–343 applicable to taxable years beginning after Dec. 31, 2007, see section 106(f)(1) of div. B of Pub. L. 110–343, set out as an Effective and Termination Dates of 2008 Amendment note under section 23 of this title.

Amendment by section 205(d)(1)(D) of Pub. L. 110–343 applicable to taxable years beginning after Dec. 31, 2008, see section 205(e) of div. B of Pub. L. 110–343, set out as an Effective and Termination Dates of 2008 Amendment note under section 24 of this title.

Pub. L. 110–343, div. C, title I, §101(b), Oct. 3, 2008, 122 Stat. 3863, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2007."

Amendment by section 801(b) of Pub. L. 110–343 applicable to amounts deferred which are attributable to services performed after Dec. 31, 2008, with certain exceptions, see section 801(d) of div. C of Pub. L. 110–343, set out as an Effective Date note under section 457A of this title.

Pub. L. 110–289, div. C, title I, §3011(c), July 30, 2008, 122 Stat. 2891, provided that: "The amendments made by this section [enacting section 36 of this title, amending this section and section 6211 of this title and section 1324 of Title 31, Money and Finance, and renumbering former section 36 of this title as section 37 of this title] shall apply to residences purchased on or after April 9, 2008, in taxable years ending on or after such date."

Effective Date of 2007 Amendment

Pub. L. 110–166, §3(b), Dec. 26, 2007, 121 Stat. 2461, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2006."

Effective Date of 2006 Amendment

Pub. L. 109–222, title III, §302(b), May 17, 2006, 120 Stat. 353, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2005."

Effective Date of 2005 Amendment

Pub. L. 109–135, title IV, §403(nn), Dec. 21, 2005, 119 Stat. 2632, provided that: "The amendments made by this section [see Tables for classification] shall take effect as if included in the provisions of the American Jobs Creation Act of 2004 [Pub. L. 108–357] to which they relate."

Effective Date of 2004 Amendment

Pub. L. 108–311, title III, §312(c), Oct. 4, 2004, 118 Stat. 1181, provided that: "The amendments made by this section [amending this section and section 904 of this title] shall apply to taxable years beginning after December 31, 2003."

Pub. L. 108–311, title IV, §401(b), Oct. 4, 2004, 118 Stat. 1183, provided that: "The amendments made by subsection (a) [amending this section and section 35 of this title] shall take effect as if included in section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 [Pub. L. 108–173]."

Effective Date of 2002 Amendment

Pub. L. 107–147, title IV, §415(b), Mar. 9, 2002, 116 Stat. 54, provided that: "The amendment made by this section [amending this section] shall take effect as if included in section 4006 of the Balanced Budget Act of 1997 [Pub. L. 105–33]."

Pub. L. 107–147, title VI, §601(c), Mar. 9, 2002, 116 Stat. 59, provided that: "The amendments made by this section [amending this section and section 904 of this title] shall apply to taxable years beginning after December 31, 2001."

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 inapplicable to taxable years beginning during 2004 or 2005, see section 312(b)(2) of Pub. L. 108–311, set out as a note under section 23 of this title.

Amendment by Pub. L. 107–16 inapplicable to taxable years beginning during 2002 and 2003, see section 601(b)(2) of Pub. L. 107–147, set out as a note under section 23 of this title.

Pub. L. 107–22, §1(c), July 26, 2001, 115 Stat. 197, provided that: "The amendments made by this section [amending this section and sections 72, 135, 529, 530, 4973, 4975, and 6693 of this title] shall take effect on the date of the enactment of this Act [July 26, 2001]."

Amendment by section 201(b)(2)(D) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 201(e)(2) of Pub. L. 107–16, set out as a note under section 24 of this title.

Amendment by section 202(f)(2)(C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 202(g)(1) of Pub. L. 107–16, set out as a note under section 23 of this title.

Amendment by section 618(b)(2)(C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 618(d) of Pub. L. 107–16, set out as a note under section 24 of this title.

Effective Date of 1999 Amendment

Amendment by Pub. L. 106–170 applicable to taxable years beginning after Dec. 31, 1998, see section 501(c) of Pub. L. 106–170, set out as a note under section 24 of this title.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–277 applicable to taxable years beginning after Dec. 31, 1997, see section 2001(c) of Pub. L. 105–277, set out as a note under section 24 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title II, §213(f), Aug. 5, 1997, 111 Stat. 817, provided that: "The amendments made by this section [enacting section 530 of this title and amending this section and sections 135, 4973, 4975, and 6693 of this title] shall apply to taxable years beginning after December 31, 1997."

Pub. L. 105–34, title XVI, §1602(i), Aug. 5, 1997, 111 Stat. 1096, provided that: "The amendments made by this section [amending this section and sections 162, 220, 264, 877, 2107, 2501, 4975, 6050Q, 6652, 6693, 6724, and 7702B of this title, renumbering section 6039F of this title as section 6039G of this title, and amending provisions set out as a note under section 264 of this title] shall take effect as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104–191] to which such amendments relate."

Effective Date of 1996 Amendment

Pub. L. 104–188, title I, §1621(d), Aug. 20, 1996, 110 Stat. 1867, provided that: "The amendments made by this section [enacting sections 860H to 860L of this title and amending this section and sections 56, 382, 582, 856, 860G, 1202, and 7701 of this title] shall take effect on September 1, 1997."

Effective Date of 1989 Amendment

Amendment by section 7811(c)(1), (2) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Pub. L. 101–239, title VII, §7823, Dec. 19, 1989, 103 Stat. 2425, provided that: "Except as otherwise provided in this part [part II (§§7821–7823) of subtitle H of title VII of Pub. L. 101–239, amending this section and sections 453A, 842, 1503, 6427, 6655, 6863, 7519, 7611, 9502, 9503, and 9508 of this title and enacting provisions set out as notes under sections 56 and 7519 of this title], any amendment made by this part shall take effect as if included in the provision of the 1987 Act [Pub. L. 100–203, title X] to which such amendment relates."

Effective Date of 1988 Amendment

Amendment by section 1006(t)(16)(C) of Pub. L. 100–647 applicable, with certain exceptions, to transfers after Mar. 31, 1988, and to excess inclusions for periods after Mar. 31, 1988, see section 1006(t)(16)(D)(ii)–(iv) of Pub. L. 100–647, set out as a note under section 860E of this title.

Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) 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.

Amendment by section 4005(g)(4) of Pub. L. 100–647 applicable, with certain exceptions, to financing provided, and mortgage credit certificates issued, after Dec. 31, 1990, see section 4005(h)(3) of Pub. L. 100–647, set out as a note under section 143 of this title.

Amendment by section 5012(b)(2) of Pub. L. 100–647 applicable to contracts entered into on or after June 21, 1988, with special rule where death benefit increases by more than $150,000, certain other material changes taken into account, and certain exchanges permitted, see section 5012(e) of Pub. L. 100–647, set out as an Effective Date note under section 7702A of this title.

Effective Date of 1986 Amendment

Amendment by section 261(c) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 261(g) of Pub. L. 99–514, set out as an Effective Date note under section 7518 of this title.

Amendment by section 632(c)(1) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, but only in cases where the return for the taxable year is filed pursuant to an S election made after Dec. 31, 1986, see section 633(b) of Pub. L. 99–514, as amended, set out as an Effective Date note under section 336 of this title.

Amendment by section 632(c)(1) of Pub. L. 99–514 not applicable in the case of certain transactions, see section 54(d)(3)(D) of Pub. L. 98–369, as amended, set out as an Effective Date of 1984 Amendment note under section 311 of this title.

Amendment by section 701(c)(1) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as an Effective Date note under section 55 of this title.

Pub. L. 99–499, title V, §516(c), Oct. 17, 1986, 100 Stat. 1772, provided that: "The amendments made by this section [enacting section 59A of this title and amending this section and sections 164, 275, 936, 1561, 6154, 6425, and 6655 of this title] shall apply to taxable years beginning after December 31, 1986."

Effective Date

Section 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 an Effective Date of 1984 Amendment note under section 21 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.

Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States

For applicability of amendment by section 701(c)(1) of Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.

Treatment of Tax Imposed Under Former Section 409(c)

Pub. L. 98–369, div. A, title IV, §491(f)(5), July 18, 1984, 98 Stat. 853, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "For purposes of section 26(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this Act), any tax imposed by section 409(c) of such Code (as in effect before its repeal by this section) shall be treated as a tax imposed by section 408(f) of such Code."
26 U.S.C. § 7406 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 76 / Section 7406: Disposition of judgments and moneys recovered
Disposition of judgments and moneys recovered
Status: in_force

All judgments and moneys recovered or received for taxes, costs, forfeitures, and penalties shall be paid to the Secretary as collections of internal revenue taxes.

(Aug. 16, 1954, ch. 736, 68A Stat. 875; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

Editorial Notes

Amendments

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