26 U.S.C. § 3401 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 24 / Section 3401: Definitions
Definitions
Status: in_force

(a) Wages

For purposes of this chapter, the term "wages" means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include remuneration paid—

(1) for active service performed in a month for which such employee is entitled to the benefits of section 112 (relating to certain combat zone compensation of members of the Armed Forces of the United States) to the extent remuneration for such service is excludable from gross income under such section,

(2) for agricultural labor (as defined in section 3121(g)) unless the remuneration paid for such labor is wages (as defined in section 3121(a)),

(3) for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority,

(4) for service not in the course of the employer's trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for such service is $50 or more and such service is performed by an individual who is regularly employed by such employer to perform such service. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if—

(A) on each of some 24 days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer's trade or business, or

(B) such individual was regularly employed (as determined under subparagraph (A)) by such employer in the performance of such service during the preceding calendar quarter,

(5) for services by a citizen or resident of the United States for a foreign government or an international organization,

(6) for such services, performed by a nonresident alien individual, as may be designated by regulations prescribed by the Secretary,

[(7) Repealed. Pub. L. 89–809, title I, §103(k), Nov. 13, 1966, 80 Stat. 1554]

(8)(A) for services for an employer (other than the United States or any agency thereof)—

(i) performed by a citizen of the United States if, at the time of the payment of such remuneration, it is reasonable to believe that such remuneration will be excluded from gross income under section 911, or

(ii) performed in a foreign country or in a possession of the United States by such a citizen if, at the time of the payment of such remuneration, the employer is required by the law of any foreign country or possession of the United States to withhold income tax upon such remuneration,

(B) for services for an employer (other than the United States or any agency thereof) performed by a citizen of the United States within a possession of the United States (other than Puerto Rico), if it is reasonable to believe that at least 80 percent of the remuneration to be paid to the employee by such employer during the calendar year will be for such services,

(C) for services for an employer (other than the United States or any agency thereof) performed by a citizen of the United States within Puerto Rico, if it is reasonable to believe that during the entire calendar year the employee will be a bona fide resident of Puerto Rico, or

(D) for services for the United States (or any agency thereof) performed by a citizen of the United States within a possession of the United States to the extent the United States (or such agency) withholds taxes on such remuneration pursuant to an agreement with such possession,

(9) for services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order,

(10)(A) for services performed by an individual under the age of 18 in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution, or

(B) for services performed by an individual in, and at the time of, the sale of newspapers or magazines to ultimate consumers, under an arrangement under which the newspapers or magazines are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which the newspapers or magazines are charged to him, whether or not he is guaranteed a minimum amount of compensation for such services, or is entitled to be credited with the unsold newspapers or magazines turned back,

(11) for services not in the course of the employer's trade or business, to the extent paid in any medium other than cash,

(12) to, or on behalf of, an employee or his beneficiary—

(A) from or to a trust described in section 401(a) which is exempt from tax under section 501(a) at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust,

(B) under or to an annuity plan which, at the time of such payment, is a plan described in section 403(a),

(C) for a payment described in section 402(h)(1) and (2) if, at the time of such payment, it is reasonable to believe that the employee will be entitled to an exclusion under such section for payment,

(D) under an arrangement to which section 408(p) applies, or

(E) under or to an eligible deferred compensation plan which, at the time of such payment, is a plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A),

(13) pursuant to any provision of law other than section 5(c) or 6(1) of the Peace Corps Act, for service performed as a volunteer or volunteer leader within the meaning of such Act,

(14) in the form of group-term life insurance on the life of an employee,

(15) to or on behalf of an employee if (and to the extent that) at the time of the payment of such remuneration it is reasonable to believe that a corresponding deduction is allowable under section 217 (determined without regard to section 274(n)),

(16)(A) as tips in any medium other than cash,1

(B) as cash tips to an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more,

(17) for service described in section 3121(b)(20),

(18) for any payment made, or benefit furnished, to or for the benefit of an employee if at the time of such payment or such furnishing it is reasonable to believe that the employee will be able to exclude such payment or benefit from income under section 127, 129, 134(b)(4), or 134(b)(5),

(19) for any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from income under section 74(c), 108(f)(4), 117, or 132,

(20) for any medical care reimbursement made to or for the benefit of an employee under a self-insured medical reimbursement plan (within the meaning of section 105(h)(6)),

(21) for any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 106(b),

(22) any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 106(d), or

(23) for any benefit or payment which is excludable from the gross income of the employee under section 139B(b).

The term "wages" includes any amount includible in gross income of an employee under section 409A and payment of such amount shall be treated as having been made in the taxable year in which the amount is so includible.

(b) Payroll period

For purposes of this chapter, the term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by his employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

(c) Employee

For purposes of this chapter, the term "employee" includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation.

(d) Employer

For purposes of this chapter, the term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that—

(1) if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term "employer" (except for purposes of subsection (a)) means the person having control of the payment of such wages, and

(2) in the case of a person paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, the term "employer" (except for purposes of subsection (a)) means such person.

[(e) Repealed. Pub. L. 115–97, title I, §11041(c)(2)(A), Dec. 22, 2017, 131 Stat. 2082]

(f) Tips

For purposes of subsection (a), the term "wages" includes tips received by an employee in the course of his employment. Such wages shall be deemed to be paid at the time a written statement including such tips is furnished to the employer pursuant to section 6053(a) or (if no statement including such tips is so furnished) at the time received.

(g) Crew leader rules to apply

Rules similar to the rules of section 3121(o) shall apply for purposes of this chapter.

(h) Differential wage payments to active duty members of the uniformed services

(1) In general

For purposes of subsection (a), any differential wage payment shall be treated as a payment of wages by the employer to the employee.

(2) Differential wage payment

For purposes of paragraph (1), the term "differential wage payment" means any payment which—

(A) is made by an employer to an individual with respect to any period during which the individual is performing service in the uniformed services (as defined in chapter 43 of title 38, United States Code) while on active duty for a period of more than 30 days, and

(B) represents all or a portion of the wages the individual would have received from the employer if the individual were performing service for the employer.

(i) Qualified stock for which an election is in effect under section 83(i)

For purposes of subsection (a), qualified stock (as defined in section 83(i)) with respect to which an election is made under section 83(i) shall be treated as wages—

(1) received on the earliest date described in section 83(i)(1)(B), and

(2) in an amount equal to the amount included in income under section 83 for the taxable year which includes such date.

(Aug. 16, 1954, ch. 736, 68A Stat. 455; Aug. 9, 1955, ch. 681, 69 Stat. 616; Pub. L. 87–256, §110(g)(1), Sept. 21, 1961, 75 Stat. 537; Pub. L. 87–293, title II, §201(c), Sept. 22, 1961, 75 Stat. 625; Pub. L. 87–792, §7(l), Oct. 10, 1962, 76 Stat. 830; Pub. L. 88–272, title II, §§204(b), 213(c), Feb. 26, 1964, 78 Stat. 36, 52; Pub. L. 89–97, title III, §313(d)(1), (2), July 30, 1965, 79 Stat. 383, 384; Pub. L. 89–809, title I, §103(k), Nov. 13, 1966, 80 Stat. 1554; Pub. L. 92–279, §2, Apr. 26, 1972, 86 Stat. 125; Pub. L. 93–406, title II, §2002(g)(7), Sept. 2, 1974, 88 Stat. 970; Pub. L. 94–455, title XII, §1207(e)(1)(C), title XV, §1501(b)(7), title XIX, §§1903(c), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1707, 1736, 1810, 1834; Pub. L. 95–600, title I, §164(b)(1), Nov. 6, 1978, 92 Stat. 2813; Pub. L. 95–615, §207(a), Nov. 8, 1978, 92 Stat. 3108; Pub. L. 96–222, title I, §103(a)(13)(A), Apr. 1, 1980, 94 Stat. 213; Pub. L. 97–34, title I, §§112(b)(5), 124(e)(2)(A), title III, §311(h)(6), Aug. 13, 1981, 95 Stat. 195, 200, 282; Pub. L. 97–448, title I, §103(c)(12)(B), Jan. 12, 1983, 96 Stat. 2377; Pub. L. 98–369, div. A, title IV, §491(d)(38), title V, §531(d)(4), July 18, 1984, 98 Stat. 851, 885; Pub. L. 99–514, title I, §122(e)(4), title XII, §1272(c), Oct. 22, 1986, 100 Stat. 2112, 2594; Pub. L. 100–647, title I, §§1001(g)(4)(B)(iii), 1011(f)(9), 1011B(a)(22)(D), (33), Nov. 10, 1988, 102 Stat. 3352, 3463, 3486, 3488; Pub. L. 101–140, title II, §203(a)(2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101–239, title VII, §7631(a), (b), Dec. 19, 1989, 103 Stat. 2378; Pub. L. 101–508, title XI, §11703(f)(1), Nov. 5, 1990, 104 Stat. 1388–517; Pub. L. 104–117, §1(c), Mar. 20, 1996, 110 Stat. 828; Pub. L. 104–188, title I, §§1421(b)(8)(D), 1704(t)(4)(C), Aug. 20, 1996, 110 Stat. 1798, 1887; Pub. L. 104–191, title III, §301(c)(2)(C), Aug. 21, 1996, 110 Stat. 2049; Pub. L. 105–206, title VI, §6023(14), (15), July 22, 1998, 112 Stat. 825; Pub. L. 107–16, title VI, §641(a)(1)(D)(i), June 7, 2001, 115 Stat. 119; Pub. L. 108–121, title I, §106(b)(4), Nov. 11, 2003, 117 Stat. 1339; Pub. L. 108–173, title XII, §1201(d)(2)(C), Dec. 8, 2003, 117 Stat. 2477; Pub. L. 108–357, title III, §320(b)(4), title VIII, §885(b)(2), Oct. 22, 2004, 118 Stat. 1473, 1639; Pub. L. 108–375, div. A, title V, §585(b)(2)(D), Oct. 28, 2004, 118 Stat. 1932; Pub. L. 109–135, title IV, §412(tt), Dec. 21, 2005, 119 Stat. 2640; Pub. L. 110–245, title I, §§105(a)(1), 115(c), June 17, 2008, 122 Stat. 1628, 1637; Pub. L. 115–97, title I, §§11041(c)(2)(A), 13603(b)(1), Dec. 22, 2017, 131 Stat. 2082, 2163; Pub. L. 115–141, div. U, title IV, §401(a)(217), Mar. 23, 2018, 132 Stat. 1194.)

Editorial Notes

References in Text

Sections 5(c) and 6(1) of the Peace Corps Act, referred to in subsec. (a)(13), are classified to sections 2504(c) and 2505(1), respectively, of Title 22, Foreign Relations and Intercourse.

Amendments

2018—Subsec. (a). Pub. L. 115–141 made numerous technical amendments to pars. and subpars. throughout subsec. (a), resulting in the appearance of a comma or ", or" at end.

2017—Subsec. (e). Pub. L. 115–97, §11041(c)(2)(A), struck out subsec. (e). Text read as follows: "For purposes of this chapter, the term 'number of withholding exemptions claimed' means the number of withholding exemptions claimed in a withholding exemption certificate in effect under section 3402(f), or in effect under the corresponding section of prior law, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero."

Subsec. (i). Pub. L. 115–97, §13603(b)(1), added subsec. (i).

2008—Subsec. (a)(23). Pub. L. 110–245, §115(c), added par. (23).

Subsec. (h). Pub. L. 110–245, §105(a)(1), added subsec. (h).

2005—Subsecs. (g), (h). Pub. L. 109–135 redesignated subsec. (h) as (g).

2004—Subsec. (a). Pub. L. 108–357, §885(b)(2), inserted concluding provisions.

Subsec. (a)(18). Pub. L. 108–375 substituted "134(b)(4), or 134(b)(5)" for "or 134(b)(4)".

Subsec. (a)(19). Pub. L. 108–357, §320(b)(4), inserted "108(f)(4)," after "74(c),".

2003—Subsec. (a)(18). Pub. L. 108–121 substituted ", 129, or 134(b)(4)" for "or 129".

Subsec. (a)(22). Pub. L. 108–173 added par. (22).

2001—Subsec. (a)(12)(E). Pub. L. 107–16 added subpar. (E).

1998—Subsec. (a)(19), (21). Pub. L. 105–206 inserted "for" after par. designation.

1996—Subsec. (a)(1). Pub. L. 104–188, §1704(t)(4)(C), substituted "combat zone compensation" for "combat pay".

Pub. L. 104–117 inserted before semicolon "to the extent remuneration for such service is excludable from gross income under such section".

Subsec. (a)(12)(D). Pub. L. 104–188, §1421(b)(8)(D), added subpar. (D).

Subsec. (a)(21). Pub. L. 104–191 added par. (21).

1990—Subsec. (a)(20). Pub. L. 101–508 added par. (20).

1989—Subsec. (a)(2). Pub. L. 101–239, §7631(a), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "for agricultural labor (as defined in section 3121(g)); or".

Subsec. (g). Pub. L. 101–140 amended this section to read as if amendments by Pub. L. 100–647, §1011B(a)(22)(D), had not been enacted, see 1988 Amendment note below.

Subsec. (h). Pub. L. 101–239, §7631(b), added subsec. (h).

1988—Subsec. (a)(12)(C). Pub. L. 100–647, §1011(f)(9), substituted "section 402(h)(1) and (2)" for "section 219" and "an exclusion" for "a deduction".

Subsec. (a)(15). Pub. L. 100–647, §1001(g)(4)(B)(iii), inserted "(determined without regard to section 274(n))" after "section 217".

Subsec. (a)(19), (20). Pub. L. 100–647, §1011B(a)(33), redesignated par. (20) as (19) and struck out former par. (19) which excluded medical care reimbursement made to or for benefit of employee under self-insured medical reimbursement plan.

Subsec. (g). Pub. L. 100–647, §1011B(a)(22)(D), added subsec. (g) relating to benefits provided under certain employee benefit plans.

1986—Subsec. (a)(8)(D). Pub. L. 99–514, §1272(c), added subpar. (D).

Subsec. (a)(20). Pub. L. 99–514, §122(e)(4), inserted reference to section 74(c).

1984—Subsec. (a). Pub. L. 98–369, §531(d)(4)(A), inserted "(including benefits)" in introductory provisions.

Subsec. (a)(12). Pub. L. 98–369, §491(d)(38), struck out subpar. (C) which provided: "under or to a bond purchase plan which, at the time of such payment, is a qualified bond purchase plan described in section 405(a);" and redesignated subpar. (D) as (C).

Subsec. (a)(20). Pub. L. 98–369, §531(d)(4)(B), added par. (20).

1983—Subsec. (a)(12)(D). Pub. L. 97–448 substituted "section 219" for "section 219(a)".

1981—Subsec. (a)(12)(D). Pub. L. 97–34, §311(h)(6), substituted "section 219(a)" for "section 219(a) or 220(a)".

Subsec. (a)(18). Pub. L. 97–34, §124(e)(2)(A), substituted "section 127 or 129" for "section 127".

Pub. L. 97–34, §112(b)(5), redesignated par. (19) as (18). Former par. (18), relating to remuneration paid to or on behalf of an employee if (and to the extent that) at the time of the payment of such remuneration it was reasonable to believe that a corresponding deduction was allowable under section 913 (relating to deduction for certain expenses of living abroad), was struck out.

Subsec. (a)(19), (20). Pub. L. 97–34, §112(b)(5), redesignated par. (20) as (19). Former par. (19) redesignated (18).

1980—Subsec. (a)(18) to (20). Pub. L. 96–222 redesignated par. (18), added by Pub. L. 95–600, as (19), in par. (19) as so redesignated, substituted "section 127; or" for "section 124.", and added par. (20).

1978—Subsec. (a)(18). Pub. L. 95–615 added par. (18) relating to payments or benefits excludable from income under section 124.

Pub. L. 95–600 added par. (18) relating to remuneration for which a corresponding deduction is allowable under section 913.

1976—Subsec. (a)(6). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (a)(12)(D). Pub. L. 94–455, §1501(b)(7), inserted "or 220(a)" after "section 219(a)".

Subsec. (a)(17). Pub. L. 94–455, §1207(e)(1)(C), added par. (17).

Subsec. (c). Pub. L. 94–455, §1903(c), struck out "Territory" after "a State".

1974—Subsec. (a)(12)(D). Pub. L. 93–406 added subpar. (D).

1972—Subsec. (a)(1). Pub. L. 92–279 struck out "as a member of the Armed Forces of the United States" after "active service", substituted "employee" for "member", and parenthetical text "(relating to certain combat pay of members of the Armed Forces of the United States)".

1966—Subsec. (a)(6), (7). Pub. L. 89–809, §103(k), struck out par. (6) dealing with services performed by nonresident alien individuals other than residents of contiguous countries who enter and leave the United States at frequent intervals, residents of Puerto Rico if such services are performed as an employee of the United States or any agency thereof, or individuals temporarily present in the United States as nonimmigrants under certain conditions, redesignated par. (7) as (6), and in par (6) as so redesignated, struck out "who is a resident of a contiguous country and who enters and leaves the United States at frequent intervals" after "nonresident alien individual".

1965—Subsec. (a)(16). Pub. L. 89–97, §313(d)(2), added par. (16).

Subsec. (f). Pub. L. 89–97, §313(d)(1), added subsec. (f).

1964—Subsec. (a)(14). Pub. L. 88–272, §204(b), added par. (14).

Subsec. (a)(15). Pub. L. 88–272, §213(c), added par. (15).

1962—Subsec. (a)(12)(B), (C). Pub. L. 87–792 substituted "is a plan described in section 403(a)" for "meets the requirements of section 401(a)(3), (4), (5), and (6)", in subpar. (B), and added subpar. (C).

1961—Subsec. (a)(6)(C). Pub. L. 87–256 added subpar. (C).

Subsec. (a)(13). Pub. L. 87–293 added par. (13).

1955—Subsec. (a). Act Aug. 9, 1955, excluded from definition of wages, remuneration paid for services performed in a possession of the United States by a United States citizen if the employer is required by the law of the possession to withhold income tax on the remuneration.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by section 11041(c)(2)(A) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11041(f)(1) of Pub. L. 115–97, set out as a note under section 151 of this title.

Amendment by section 13603(b)(1) of Pub. L. 115–97 applicable to stock attributable to options exercised, or restricted stock units settled, after Dec. 31, 2017, see section 13603(f)(1) of Pub. L. 115–97, set out as a note under section 83 of this title.

Effective Date of 2008 Amendment

Pub. L. 110–245, title I, §105(a)(2), June 17, 2008, 122 Stat. 1628, provided that: "The amendment made by this subsection [amending this section] shall apply to remuneration paid after December 31, 2008."

Amendment by section 115(c) of Pub. L. 110–245 effective as if included in section 5 of Pub. L. 110–142, see section 115(d) of Pub. L. 110–245, set out as a note under section 3121 of this title.

Effective Date of 2004 Amendments

Amendment by Pub. L. 108–375 applicable to travel benefits provided after Oct. 28, 2004, see section 585(b)(3) of Pub. L. 108–375, set out as a note under section 134 of this title.

Amendment by section 320(b)(4) of Pub. L. 108–357 applicable to amounts received by an individual in taxable years beginning after Dec. 31, 2003, see section 320(c) of Pub. L. 108–357, set out as a note under section 108 of this title.

Amendment by section 885(b)(2) of Pub. L. 108–357 applicable to amounts deferred after Dec. 31, 2004, with special rules relating to earnings and material modifications and exception for nonelective deferred compensation, see section 885(d) of Pub. L. 108–357, set out as an Effective Date note under section 409A of this title.

Effective Date of 2003 Amendments

Amendment by Pub. L. 108–173 applicable to taxable years beginning after Dec. 31, 2003, see section 1201(k) of Pub. L. 108–173, set out as a note under section 62 of this title.

Amendment by Pub. L. 108–121 applicable to taxable years beginning after Dec. 31, 2002, see section 106(c) of Pub. L. 108–121, set out as a note under section 134 of this title.

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to distributions after Dec. 31, 2001, see section 641(f)(1) of Pub. L. 107–16, set out as a note under section 402 of this title.

Effective Date of 1996 Amendments

Amendment by Pub. L. 104–191 applicable to taxable years beginning after Dec. 31, 1996, see section 301(j) of Pub. L. 104–191, set out as a note under section 62 of this title.

Amendment by section 1421(b)(8)(D) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1421(e) of Pub. L. 104–188, set out as a note under section 72 of this title.

Amendment by Pub. L. 104–117 applicable to remuneration paid after Mar. 20, 1996, see section 1(e) of Pub. L. 104–117, set out in a Treatment of Certain Individuals Performing Services in Certain Hazardous Duty Areas; Effective Date note under section 112 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, §11703(f)(2), Nov. 5, 1990, 104 Stat. 1388–518, provided that: "The amendment made by paragraph (1) [amending this section] shall apply as if included in the amendments made by section 1151 of the Tax Reform Act of 1986 [Pub. L. 99–514, see Effective Date of 1986 Amendment note set out under section 79 of this title] but shall not apply to any amount paid before the date of the enactment of this Act [Nov. 5, 1990] which the employer treated as wages for purposes of chapter 24 of the Internal Revenue Code of 1986 when paid."

Effective Date of 1989 Amendments

Pub. L. 101–239, title VII, §7631(c), Dec. 19, 1989, 103 Stat. 2378, provided that: "The amendments made by this section [amending this section] shall apply to remuneration paid after December 31, 1989."

Amendment by 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.

Effective Date of 1988 Amendment

Amendment by sections 1001(g)(4)(B)(iii), 1011(f)(9), and 1011B(a)(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 1011B(a)(22)(D) of Pub. L. 100–647 not applicable to any individual who separated from service with the employer before Jan. 1, 1989, see section 1011B(a)(22)(F) of Pub. L. 100–647, set out as a note under section 3121 of this title.

Effective Date of 1986 Amendment

Amendment by section 122(e)(4) of Pub. L. 99–514 applicable to prizes and awards granted after Dec. 31, 1986, see section 151(c) of Pub. L. 99–514, set out as a note under section 1 of this title.

Amendment by section 1272(c) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.

Effective Date of 1984 Amendment

Amendment by section 491(d)(38) of Pub. L. 98–369 applicable to obligations issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98–369, set out as a note under section 62 of this title.

Amendment by section 531(d)(4) of Pub. L. 98–369 effective Jan. 1, 1985, see section 531(h) of Pub. L. 98–369, set out as an Effective Date note under section 132 of this title.

Effective Date of 1983 Amendment

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

Effective Date of 1981 Amendment

Amendment by section 112(b)(5) of Pub. L. 97–34 applicable with respect to taxable years beginning after Dec. 31, 1981, see section 115 of Pub. L. 97–34, set out as a note under section 911 of this title.

Amendment by section 124(e)(2)(A) of Pub. L. 97–34 applicable to remuneration paid after Dec. 31, 1981, see section 124(f)(2) of Pub. L. 97–34, set out as a note under section 21 of this title.

Amendment by section 311(h)(6) of Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see section 311(i)(1) of Pub. L. 97–34, set out as a note under section 219 of this title.

Effective Date of 1980 Amendment

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

Effective Date of 1978 Amendments

Amendment by Pub. L. 95–615 applicable to remuneration paid after Nov. 8, 1978, but with taxpayers allowed to elect not to have the amendment apply with respect to any taxable year beginning after Dec. 31, 1977, and before Jan. 1, 1979, see section 209(b), (c) of Pub. L. 95–615, set out as a note under section 911 of this title.

Amendment by Pub. L. 95–600 applicable with respect to taxable years beginning after Dec. 31, 1978, see section 164(d) of Pub. L. 95–600, set out as a note under section 127 of this title.

Effective Date of 1976 Amendment

Amendment by section 1501(b)(7) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1501(d) of Pub. L. 94–455, set out as a note under section 62 of this title.

Effective Date of 1974 Amendment

Amendment by Pub. L. 93–406 effective on Jan. 1, 1975, see section 2002(i)(2) of Pub. L. 93–406, set out as an Effective Date note under section 4973 of this title.

Effective Date of 1972 Amendment

Pub. L. 92–279, §3(b), Apr. 26, 1972, 86 Stat. 125, provided that: "The amendments made by section 2 [amending this section] shall apply to wages paid on or after the first day of the first calendar month which begins more than 30 days after the date of the enactment of this Act [Apr. 26, 1972]."

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to remuneration paid after Dec. 31, 1966, see section 103(n)(4) of Pub. L. 89–809, set out as a note under section 871 of this title.

Effective Date of 1965 Amendment

Amendment by section 313(d)(1), (2) of Pub. L. 89–97 applicable only with respect to tips received by employees after 1965, see section 313(f) of Pub. L. 89–97, set out as a note under section 6053 of this title.

Effective Date of 1964 Amendment

Amendment by section 204(b) of Pub. L. 88–272 applicable to remuneration paid after Dec. 31, 1963, in the form of group-term life insurance provided after such date, see section 204(d) of Pub. L. 88–272, set out as an Effective Date note under section 79 of this title.

Amendment by section 213(c) of Pub. L. 88–272 applicable to remuneration paid after the seventh day following Feb. 26, 1964, see section 213(d) of Pub. L. 88–272, set out as a note under section 62 of this title.

Effective Date of 1962 Amendment

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

Effective Date of 1961 Amendments

Amendment by Pub. L. 87–293 applicable with respect to remuneration paid after Sept. 22, 1961, see section 201(d) of Pub. L. 87–293, set out as a note under section 912 of this title.

Pub. L. 87–256, §110(h)(4), Sept. 21, 1961, 75 Stat. 538, provided that: "The amendments made by subsection (g) of this section [amending this section and section 3402 of this title] shall apply with respect to wages paid after December 31, 1961."

Short Title of 1966 Amendment

Pub. L. 89–368, §1, Mar. 15, 1966, 80 Stat. 38, provided that: "This Act [enacting sections 276 and 6682 of this title and section 428 of Title 42, The Public Health and Welfare, amending sections 1402, 1403, 3402, 4061, 4251, 4253, 6015, 6154, 6211, 6412, 6654, 7205, and 7701 of this title and section 1202 of Title 19, Customs Duties, and enacting provisions set out as notes under sections 276, 3402, 4061, 4251, 6154, and 6654 of this title and section 428 of Title 42] may be cited as the 'Tax Adjustment Act of 1966'."

Repeals; Amendments and Application of Amendments Unaffected

Section 201(c) of Pub. L. 87–293, cited as a credit to this section, was repealed by Pub. L. 89–572, §5(a), Sept. 13, 1966, 80 Stat. 765. Such repeal not deemed to affect amendments to this section contained in such provisions, and continuation in full force and effect until modified by appropriate authority of all determinations, authorization, regulations, orders, contracts, agreements, and other actions issued, undertaken, or entered into under authority of the repealed provisions, see section 5(b) of Pub. L. 89–572, set out as a note under former section 2515 of Title 22, Foreign Relations and Intercourse.

No Inference To Be Drawn From Amendment by Pub. L. 108–121

No inference to be drawn from amendment to subsec. (a)(18) of this section by section 106 of Pub. L. 108–121 with respect to tax treatment of any amounts under program described in section 134(b)(4) of this title for any taxable year beginning before Jan. 1, 2003, see section 106(d) of Pub. L. 108–121, set out as a note under section 134 of this title.

Plan Amendments Not Required Until January 1, 1998

For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of Pub. L. 104–188 require an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year beginning on or after Jan. 1, 1998, see section 1465 of Pub. L. 104–188, set out as a note under section 401 of this title.

Controversies Involving Whether Individuals Are Employees for Purposes of Employment Taxes

Pub. L. 95–600, title V, §530, Nov. 6, 1978, 92 Stat. 2885, as amended by Pub. L. 96–167, §9(d), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 96–541, §1, Dec. 17, 1980, 94 Stat. 3204; Pub. L. 97–248, title II, §269(c)(1), (2), Sept. 3, 1982, 96 Stat. 552; Pub. L. 99–514, §2, title XVII, §1706(a), Oct. 22, 1986, 100 Stat. 2095, 2781; Pub. L. 104–188, title I, §1122(a), Aug. 20, 1996, 110 Stat. 1766; Pub. L. 109–280, title VIII, §864(a), Aug. 17, 2006, 120 Stat. 1024; Pub. L. 110–458, title I, §108(m), Dec. 23, 2008, 122 Stat. 5110, provided that:

"(a) Termination of Certain Employment Tax Liability.—

"(1) In general.—If—

"(A) for purposes of employment taxes, the taxpayer did not treat an individual as an employee for any period, and

"(B) in the case of periods after December 31, 1978, all Federal tax returns (including information returns) required to be filed by the taxpayer with respect to such individual for such period are filed on a basis consistent with the taxpayer's treatment of such individual as not being an employee,

then, for purposes of applying such taxes for such period with respect to the taxpayer, the individual shall be deemed not to be an employee unless the taxpayer had no reasonable basis for not treating such individual as an employee.

"(2) Statutory standards providing one method of satisfying the requirements of paragraph (1).—For purposes of paragraph (1), a taxpayer shall in any case be treated as having a reasonable basis for not treating an individual as an employee for a period if the taxpayer's treatment of such individual for such period was in reasonable reliance on any of the following:

"(A) judicial precedent, published rulings, technical advice with respect to the taxpayer, or a letter ruling to the taxpayer;

"(B) a past Internal Revenue Service audit of the taxpayer in which there was no assessment attributable to the treatment (for employment tax purposes) of the individuals holding positions substantially similar to the position held by this individual; or

"(C) long-standing recognized practice of a significant segment of the industry in which such individual was engaged.

"(3) Consistency required in the case of prior tax treatment.—Paragraph (1) shall not apply with respect to the treatment of any individual for employment tax purposes for any period ending after December 31, 1978, if the taxpayer (or a predecessor) has treated any individual holding a substantially similar position as an employee for purposes of the employment taxes for any period beginning after December 31, 1977.

"(4) Refund or credit of overpayment.—If refund or credit of any overpayment of an employment tax resulting from the application of paragraph (1) is not barred on the date of the enactment of this Act [Nov. 6, 1978] by any law or rule of law, the period for filing a claim for refund or credit of such overpayment (to the extent attributable to the application of paragraph (1)) shall not expire before the date 1 year after the date of the enactment of this Act.

"(b) Prohibition Against Regulations and Rulings on Employment Status.—No regulation or Revenue Ruling shall be published on or after the date of the enactment of this Act [Nov. 6, 1978] and before the effective date of any law hereafter enacted clarifying the employment status of individuals for purposes of the employment taxes by the Department of the Treasury (including the Internal Revenue Service) with respect to the employment status of any individual for purposes of the employment taxes.

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

"(1) Employment tax.—The term 'employment tax' means any tax imposed by subtitle C of the Internal Revenue Code of 1986 [formerly I.R.C. 1954, section 3101 et seq. of this title].

"(2) Employment status.—The term 'employment status' means the status of an individual, under the usual common law rules applicable in determining the employer-employee relationship, as an employee or as an independent contractor (or other individual who is not an employee).

"(d) Exception.—This section shall not apply in the case of an individual who, pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

"(e) Special Rules for Application of Section.—

"(1) Notice of availability of section.—An officer or employee of the Internal Revenue Service shall, before or at the commencement of any audit inquiry relating to the employment status of one or more individuals who perform services for the taxpayer, provide the taxpayer with a written notice of the provisions of this section.

"(2) Rules relating to statutory standards.—For purposes of subsection (a)(2)—

"(A) a taxpayer may not rely on an audit commenced after December 31, 1996, for purposes of subparagraph (B) thereof unless such audit included an examination for employment tax purposes of whether the individual involved (or any individual holding a position substantially similar to the position held by the individual involved) should be treated as an employee of the taxpayer,

"(B) in no event shall the significant segment requirement of subparagraph (C) thereof be construed to require a reasonable showing of the practice of more than 25 percent of the industry (determined by not taking into account the taxpayer), and

"(C) in applying the long-standing recognized practice requirement of subparagraph (C) thereof—

"(i) such requirement shall not be construed as requiring the practice to have continued for more than 10 years, and

"(ii) a practice shall not fail to be treated as long-standing merely because such practice began after 1978.

"(3) Availability of safe harbors.—Nothing in this section shall be construed to provide that subsection (a) only applies where the individual involved is otherwise an employee of the taxpayer.

"(4) Burden of proof.—

"(A) In general.—If—

"(i) a taxpayer establishes a prima facie case that it was reasonable not to treat an individual as an employee for purposes of this section, and

"(ii) the taxpayer has fully cooperated with reasonable requests from the Secretary of the Treasury or his delegate,

  then the burden of proof with respect to such treatment shall be on the Secretary.

"(B) Exception for other reasonable basis.—In the case of any issue involving whether the taxpayer had a reasonable basis not to treat an individual as an employee for purposes of this section, subparagraph (A) shall only apply for purposes of determining whether the taxpayer meets the requirements of subparagraph (A), (B), or (C) of subsection (a)(2).

"(5) Preservation of prior period safe harbor.—If—

"(A) an individual would (but for the treatment referred to in subparagraph (B)) be deemed not to be an employee of the taxpayer under subsection (a) for any prior period, and

"(B) such individual is treated by the taxpayer as an employee for employment tax purposes for any subsequent period,

then, for purposes of applying such taxes for such prior period with respect to the taxpayer, the individual shall be deemed not to be an employee.

"(6) Substantially similar position.—For purposes of this section, the determination as to whether an individual holds a position substantially similar to a position held by another individual shall include consideration of the relationship between the taxpayer and such individuals.

"(f) Treatment of Test Room Supervisors and Proctors Who Assist in the Administration of College Entrance and Placement Exams.—

"(1) In general.—In the case of an individual described in paragraph (2) who is providing services as a test proctor or room supervisor by assisting in the administration of college entrance or placement examinations, this section shall be applied to such services performed after December 31, 2006 (and remuneration paid for such services) without regard to subsection (a)(3) thereof.

"(2) Applicability.—An individual is described in this paragraph if the individual—

"(A) is providing the services described in subsection (a) to an organization described in section 501(c), and exempt from tax under section 501(a), of the Internal Revenue Code of 1986, and

"(B) is not otherwise treated as an employee of such organization for purposes of subtitle C of such Code (relating to employment taxes)."

[Pub. L. 109–280, title VIII, §864(b), Aug. 17, 2006, 120 Stat. 1024, provided that: "The amendment made by this section [amending section 530 of Pub. L. 95–600, set out above] shall apply to remuneration for services performed after December 31, 2006."]

[Pub. L. 104–188, title I, §1122(b), Aug. 20, 1996, 110 Stat. 1767, provided that:

["(1) In general.—The amendment made by this section [amending section 530 of Pub. L. 95–600, set out above] shall apply to periods after December 31, 1996.

["(2) Notice by internal revenue service.—Section 530(e)(1) of the Revenue Act of 1978 [Pub. L. 95–600] (as added by subsection (a)) shall apply to audits which commence after December 31, 1996.

["(3) Burden of proof.—

["(A) In general.—Section 530(e)(4) of the Revenue Act of 1978 (as added by subsection (a)) shall apply to disputes involving periods after December 31, 1996.

["(B) No inference.—Nothing in the amendments made by this section shall be construed to infer the proper treatment of the burden of proof with respect to disputes involving periods before January 1, 1997."]

[Pub. L. 99–514, title XVII, §1706(b), Oct. 22, 1986, 100 Stat. 2781, provided that: "The amendment made by this section [amending section 530 of Pub. L. 95–600, set out above] shall apply to remuneration paid and services rendered after December 31, 1986."]

1 So in original. Probably should be followed by "or".
26 U.S.C. § 4402 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 35 / Section 4402: Exemptions
Exemptions
Status: in_force

No tax shall be imposed by this subchapter—

(1) Parimutuels

On any wager placed with, or on any wager placed in a wagering pool conducted by, a parimutuel wagering enterprise licensed under State law,

(2) Coin-operated devices

On any wager placed in a coin-operated device (as defined in section 4462 as in effect for years beginning before July 1, 1980), or on any amount paid, in lieu of inserting a coin, token, or similar object, to operate a device described in section 4462(a)(2) (as so in effect), or

(3) State-conducted lotteries, etc.

On any wager placed in a sweepstakes, wagering pool, or lottery which is conducted by an agency of a State acting under authority of State law, but only if such wager is placed with the State agency conducting such sweepstakes, wagering pool, or lottery, or with its authorized employees or agents.

(Aug. 16, 1954, ch. 736, 68A Stat. 525; Pub. L. 85–859, title I, §152(b), Sept. 2, 1958, 72 Stat. 1305; Pub. L. 89–44, title IV, §405(a), title VIII, §813(a), June 21, 1965, 79 Stat. 149, 170; Pub. L. 94–455, title XII, §1208(a), Oct. 4, 1976, 90 Stat. 1709; Pub. L. 95–600, title V, §521(c)(1), Nov. 6, 1978, 92 Stat. 2884.)

Editorial Notes

References in Text

Section 4462, referred to in par. (2), was repealed by Pub. L. 95–600, title V, §521(b), Nov. 6, 1978, 92 Stat. 2884.

Amendments

1978—Par. (2). Pub. L. 95–600 substituted "(as defined in section 4462 as in effect for years beginning before July 1, 1980)" for "with respect to which an occupational tax is imposed by section 4461" and "(as so in effect), or" for "if an occupational tax is imposed with respect to such device by section 4461, or".

1976—Par. (3). Pub. L. 94–455, among other changes, substituted in heading "State-conducted lotteries, etc." for "State-conducted sweepstakes.", and struck out provision that no tax be imposed on any wager placed in a sweepstakes, wagering pool, or lottery in which the ultimate winners are determined by the results of a horse race.

1965—Par. (2). Pub. L. 89–44, §405(a), substituted "section 4462(a)(2)," for "section 4462(a)(2)(B),".

Par. (3). Pub. L. 89–44, §813(a), added par. (3).

1958—Par. (2). Pub. L. 85–859 inserted provisions exempting from the tax amounts paid to operate a device described in section 4462(a)(2)(B), if an occupational tax is imposed with respect to such device by section 4461 of this title.

Statutory Notes and Related Subsidiaries

Effective Date of 1978 Amendment

Pub. L. 95–600, title V, §521(d)(2), Nov. 6, 1978, 92 Stat. 2885, provided that: "The amendments made by subsections (b) [repealing sections 4461 to 4464 of this title] and (c) [amending this section and section 4901 of this title] shall apply with respect to years beginning after June 30, 1980."

Effective Date of 1976 Amendment

Pub. L. 94–455, title XII, §1208(c)(1), Oct. 4, 1976, 90 Stat. 1709, provided that: "The amendment made by subsection (a) [amending this section)] shall apply with respect to wagers placed after March 10, 1964".

Effective Date of 1965 Amendment

Pub. L. 89–44, title VII, §701(c)(2), June 21, 1965, 79 Stat. 157, provided in part that: "The amendments made by sections 403 [amending sections 4461 and 4462 of this title] (relating to occupational tax on coin-operated devices) and 404 [repealing sections 4471 to 4474] (relating to occupational tax on bowling alleys, billiard and pool tables), and by subsections (a) [amending this section], (b) [amending section 4901 of this title] and (d) [amending section 4914 of this title] of section 405 (relating to technical and conforming changes) shall apply on and after July 1, 1965."

Pub. L. 89–44, title VIII, §813(b), June 21, 1965, 79 Stat. 170, provided that: "The amendment made by subsection (a) [amending this section] shall apply with respect to wagers placed after March 10, 1964."

Effective Date of 1958 Amendment

Pub. L. 85–859, title I, §152(c), Sept. 2, 1958, 72 Stat. 1305, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 4462 of this title] shall take effect on the effective date specified in section 1(c) of this Act [the first day of the first calendar quarter beginning more than 60 days after Sept. 2, 1958]. In the case of the year beginning July 1, 1958, where the trade or business on which the tax is imposed under section 4461 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] was commenced before such effective date, the tax imposed for such year solely by reason of the amendment made by subsection (a)—

"(1) shall be the amount reckoned proportionately from such effective date through June 30, 1959, and

"(2) shall be due on, and payable on or before, the last day of the month the first day of which is such effective date."
26 U.S.C. § 447 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 447: Method of accounting for corporations engaged in farming
Method of accounting for corporations engaged in farming
Status: in_force

(a) General rule

Except as otherwise provided by law, the taxable income from farming of—

(1) a corporation engaged in the trade or business of farming, or

(2) a partnership engaged in the trade or business of farming, if a corporation is a partner in such partnership,

shall be computed on an accrual method of accounting. This section shall not apply to the trade or business of operating a nursery or sod farm or to the raising or harvesting of trees (other than fruit and nut trees).

(b) Preproductive period expenses

For rules requiring capitalization of certain preproductive period expenses, see section 263A.

(c) Exception for certain corporations

For purposes of subsection (a), a corporation shall be treated as not being a corporation for any taxable year if it is—

(1) an S corporation, or

(2) a corporation which meets the gross receipts test of section 448(c) for such taxable year.

(d) Coordination with section 481

Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.

(e) Certain annual accrual accounting methods

(1) In general

Notwithstanding subsection (a) or section 263A, if—

(A) for its 10 taxable years ending with its first taxable year beginning after December 31, 1975, a corporation or qualified partnership used an annual accrual method of accounting with respect to its trade or business of farming,

(B) such corporation or qualified partnership raises crops which are harvested not less than 12 months after planting, and

(C) such corporation or qualified partnership has used such method of accounting for all taxable years intervening between its first taxable year beginning after December 31, 1975, and the taxable year,

such corporation or qualified partnership may continue to employ such method of accounting for the taxable year with respect to its qualified farming trade or business.

(2) Annual accrual method of accounting defined

For purposes of paragraph (1), the term "annual accrual method of accounting" means a method under which revenues, costs, and expenses are computed on an accrual method of accounting and the preproductive period expenses incurred during the taxable year are charged to harvested crops or deducted in determining the taxable income for such years.

(3) Certain nonrecognition transfers

For purposes of this subsection, if—

(A) a corporation acquired substantially all the assets of a qualified farming trade or business from another corporation in a transaction in which no gain or loss was recognized to the transferor or transferee corporation, or

(B) a qualified partnership acquired substantially all the assets of a qualified farming trade or business from one of its partners in a transaction to which section 721 applies,

the transferee corporation or qualified partnership shall be deemed to have computed its taxable income on an annual accrual method of accounting during the period for which the transferor corporation or partnership computed its taxable income from such trade or business on an annual accrual method.

(4) Qualified partnership defined

For purposes of this subsection—

(A) Qualified partnership

The term "qualified partnership" means a partnership which is engaged in a qualified farming trade or business and each of the partners of which is a corporation other than—

(i) an S corporation, or

(ii) a personal holding company (within the meaning of section 542(a)).

(B) Qualified farming trade or business

(i) In general

The term "qualified farming trade or business" means the trade or business of farming—

(I) sugar cane,

(II) any plant with a preproductive period (as defined in section 263A(e)(3)) of 2 years or less, and

(III) any other plant (other than any citrus or almond tree) if an election by the corporation under this subparagraph is in effect.

 In the case of a partnership and for purposes of paragraph (3)(A), subclauses (II) and (III) shall not apply.

(ii) Effect of election

For purposes of paragraphs (1) and (2) of section 263A(e), any election under this subparagraph shall be treated as if it were an election under subsection (d)(3) of section 263A.

(iii) Election

Unless the Secretary otherwise consents, an election under this subparagraph may be made only for the corporation's 1st taxable year which begins after December 31, 1986, and during which the corporation engages in a farming business. Any such election, once made, may be revoked only with the consent of the Secretary.

(Added Pub. L. 94–455, title II, §207(c)(1)(A), Oct. 4, 1976, 90 Stat. 1538; amended Pub. L. 95–600, title III, §§351(a), 353(a), title VII, §§701(l)(1), 703(d), Nov. 6, 1978, 92 Stat. 2846, 2847, 2906, 2939; Pub. L. 97–248, title II, §230(a), Sept. 3, 1982, 96 Stat. 495; Pub. L. 97–354, §5(a)(28), (29), Oct. 19, 1982, 96 Stat. 1695; Pub. L. 99–514, title VIII, §803(b)(7), Oct. 22, 1986, 100 Stat. 2356; Pub. L. 100–203, title X, §10205(a)–(c), Dec. 22, 1987, 101 Stat. 1330–395 to 1330–397; Pub. L. 100–647, title I, §1008(b)(5), (6), Nov. 10, 1988, 102 Stat. 3438; Pub. L. 101–508, title XI, §11702(b), Nov. 5, 1990, 104 Stat. 1388–514; Pub. L. 105–34, title X, §1081(a), Aug. 5, 1997, 111 Stat. 949; Pub. L. 115–97, title I, §13102(a)(5), Dec. 22, 2017, 131 Stat. 2102.)

Editorial Notes

Amendments

2017—Subsec. (c). Pub. L. 115–97, §13102(a)(5)(A)(i), in introductory provisions, inserted "for any taxable year" after "not being a corporation".

Subsec. (c)(2). Pub. L. 115–97, §13102(a)(5)(A)(ii), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "a corporation the gross receipts of which meet the requirements of subsection (d)."

Subsec. (d). Pub. L. 115–97, §13102(a)(5)(C), redesignated subsec. (f) as (d) and struck out former subsec. (d) which related to gross receipts requirements.

Subsec. (e). Pub. L. 115–97, §13102(a)(5)(C), redesignated subsec. (g) as (e) and struck out former subsec. (e) which related to members of the same family.

Subsec. (f). Pub. L. 115–97, §13102(a)(5)(C)(ii), redesignated subsec. (f) as (d).

Pub. L. 115–97, §13102(a)(5)(B), amended subsec. (f) generally. Prior to amendment, subsec. (f) related to coordination with section 481.

Subsec. (g). Pub. L. 115–97, §13102(a)(5)(C)(ii), redesignated subsec. (g) as (e).

Subsecs. (h), (i). Pub. L. 115–97, §13102(a)(5)(C)(i), struck out subsecs. (h) and (i) which related to exception for certain closely held corporations and suspense account for family corporations, respectively.

1997—Subsec. (i)(3). Pub. L. 105–34 redesignated par. (5) as (3) and struck out heading and text of former par. (3). Text read as follows: "If—

"(A) the gross receipts of the corporation from the trade or business of farming for the year of the change or any subsequent taxable year, is less than

"(B) such gross receipts for the taxpayer's last taxable year beginning before the year of the change (or for the most recent taxable year for which a reduction in the suspense account was made under this paragraph),

the amount in the suspense account (after taking into account prior reductions) shall be reduced by the percentage by which the amount described in subparagraph (A) is less than the amount described in subparagraph (B)."

Subsec. (i)(4). Pub. L. 105–34 redesignated par. (6) as (4) and struck out heading and text of former par. (4). Text read as follows: "Any reduction in the suspense account under paragraph (3) shall be included in gross income for the taxable year of the reduction."

Subsec. (i)(5), (6). Pub. L. 105–34 added par. (5) and redesignated former pars. (5) and (6) as (3) and (4), respectively.

1990—Subsec. (g)(1)(A). Pub. L. 101–508, §11702(b)(2), substituted "trade or business of farming" for "qualified farming trade or business".

Subsec. (g)(4)(B). Pub. L. 101–508, §11702(b)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "The term 'qualified farming trade or business' means the trade or business of farming sugar cane."

1988—Subsec. (b). Pub. L. 100–647, §1008(b)(5), substituted "period expenses" for "period of expenses" in heading and in text.

Subsec. (g)(1). Pub. L. 100–647, §1008(b)(6), substituted "qualified farming trade or business" for "trade or business of farming" in subpar. (A) and in concluding provisions.

1987—Subsec. (c). Pub. L. 100–203, §10205(a), added subsec. (c), substituting "certain corporations" for "small business and family corporations" in heading and striking out former text which read as follows: "For purposes of subsection (a), a corporation shall be treated as not being a corporation if it is—

"(1) an S corporation,

"(2) a corporation of which at least 50 percent of the total combined voting power of all classes of stock entitled to vote, and at least 50 percent of the total number of shares of all other classes of stock of the corporation, are owned by members of the same family, or

"(3) a corporation the gross receipts of which meet the requirements of subsection (e)."

Subsec. (d). Pub. L. 100–203, §10205(a), added subsec. (d). Former subsec. (d) redesignated (e).

Subsec. (e). Pub. L. 100–203, §10205(c)(1), substituted "subsection (d)" for "subsection (c)(2)".

Pub. L. 100–203, §10205(a), redesignated former subsec. (d) as (e) and struck out former subsec. (e), "Corporation having gross receipts of $1,000,000 or less", which read as follows: "A corporation meets the requirements of this subsection if, for each prior taxable year beginning after December 31, 1975, such corporation (and any predecessor corporation) did not have gross receipts exceeding $1,000,000. For purposes of the preceding sentence, all corporations which are members of a controlled group of corporations (within the meaning of section 1563(a)) shall be treated as one corporation."

Subsec. (h)(1). Pub. L. 100–203, §10205(c)(2)(A), substituted "A corporation is described in this subsection" for "This section shall not apply to any corporation".

Subsec. (h)(1)(A), (B). Pub. L. 100–203, §10205(c)(2)(B), (C), substituted "subsection (e)" for "subsection (d)" and "subsection (e)(1)" for "subsection (d)(1)" wherever appearing.

Subsec. (i). Pub. L. 100–203, §10205(b), added subsec. (i).

1986—Subsec. (a). Pub. L. 99–514, §803(b)(7)(B), which directed that subsec. (a) be amended by striking out "and with the capitalization of preproductive period of expenses described in subsection (b)", was executed by striking out "and with the capitalization of preproductive period expenses described in subsection (b)" after "accrual method of accounting", as the probable intent of Congress.

Subsec. (b). Pub. L. 99–514, §803(b)(7)(A), in amending subsec. (b) generally, substituted in heading "period of expenses" for "period expenses" and in text the cross reference to section 263A for former par. (1) defining "preproductive period expenses", par. (2) relating to exceptions, and par. (3) defining "preproductive period".

Subsec. (g)(1). Pub. L. 99–514, §803(b)(7)(C), substituted "Notwithstanding subsection (a) or section 263A, if" for "If".

1982—Subsec. (c)(1). Pub. L. 97–354, §5(a)(28), substituted "an S corporation" for "an electing small business corporation (within the meaning of section 1371(b))".

Subsec. (g)(1). Pub. L. 97–248, §230(a)(1), inserted "or qualified partnership" after "corporation" wherever appearing.

Subsec. (g)(3). Pub. L. 97–248, §230(a)(2), designated existing provisions from "a corporation acquired" through "transferee corporation", as subpar. (A), inserted "qualified" before "farming trade", and added subpar. (B).

Subsec. (g)(4). Pub. L. 97–354, §5(a)(29), substituted in subpar. (A)(i) "an S corporation" for "an electing small business corporation (within the meaning of section 1371(b))".

Pub. L. 97–248, §230(a)(3), added par. (4).

1978—Subsec. (a). Pub. L. 95–600, §§353(a), 703(d), substituted in provisions following par. (2) "preproductive period expenses" for "preproductive expenses" and "nursery or sod farm" for "nursery".

Subsec. (f)(3). Pub. L. 95–600, §701(l)(1), struck out "(except as otherwise provided in such regulations)" before "be taken" and inserted "(or the remaining taxable years where there is a stated future life of less than 10 taxable years)" after "10 taxable years".

Subsec. (g)(2). Pub. L. 95–600, §703(d), substituted "preproductive period expenses" for "preproductive expenses".

Subsec. (h). Pub. L. 95–600, §351(a), added subsec. (h).

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, with provision for preservation of suspense account rules with respect to any existing suspense accounts, see section 13102(e) of Pub. L. 115–97, set out as a note under section 263A of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, §1081(b), Aug. 5, 1997, 111 Stat. 950, provided that: "The amendments made by this section [amending this section] shall apply to taxable years ending after June 8, 1997."

Effective Date of 1990 Amendment

Amendment by Pub. L. 101–508 effective 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 11702(j) of Pub. L. 101–508, set out as a note under section 59 of this title.

Effective Date of 1988 Amendment

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

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, §10205(d), Dec. 22, 1987, 101 Stat. 1330–397, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1987."

Effective Date of 1986 Amendment

If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by Pub. L. 99–514 is applicable to such interest costs only to the extent such interest costs are attributable to costs which were required to be capitalized under section 263 of the Internal Revenue Code of 1954 and which would have been taken into account in applying section 189 of the Internal Revenue Code of 1954 (as in effect before its repeal by section 803 of Pub. L. 99–514) or, if applicable, section 266 of such Code, see section 7831(d)(2) of Pub. L. 101–239, set out as an Effective Date note under section 263A of this title.

Amendment by Pub. L. 99–514 applicable to costs incurred after Dec. 31, 1986, in taxable years ending after such date, except as otherwise provided, see section 803(d) of Pub. L. 99–514, set out as an Effective Date note under section 263A of this title.

Effective Date of 1982 Amendment

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

Pub. L. 97–248, title II, §230(b), Sept. 3, 1982, 96 Stat. 496, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1981."

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, §351(b), Nov. 6, 1978, 92 Stat. 2846, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1977."

Pub. L. 95–600, title III, §353(b), Nov. 6, 1978, 92 Stat. 2847, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1976."

Pub. L. 95–600, title VII, §703(l)(4), Nov. 6, 1978, 92 Stat. 2907, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendment made by paragraphs (1) [amending this section] and (3) [amending section 464 of this title] shall take effect as if included in section 447 or 464 (as the case may be) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] at the time of the enactment of such sections [Oct. 4, 1976]."

Amendment by section 703(d) of Pub. L. 95–600 effective on Oct. 4, 1976, see section 703(r) of Pub. L. 95–600, set out as a note under section 46 of this title.

Effective Date

Pub. L. 94–455, title II, §207(c)(2), Oct. 4, 1976, 90 Stat. 1541, as amended by Pub. L. 95–30, title IV, §404, May 23, 1977, 91 Stat. 155; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(A) In general.—Except as provided in subparagraph (B), the amendments made by paragraph (1) [enacting this section] shall apply to taxable years beginning after December 31, 1976.

"(B) Special rule for certain corporations.—In the case of a corporation engaged in the trade or business of farming and with respect to which—

"(i) members of two families (within the meaning of paragraph (1) of [former] section 447(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as added by paragraph (1)) owned, on October 4, 1976 (directly or through the application of such [former] section 447(d)), at least 65 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and at least 65 percent of the total number of shares of all other classes of stock of such corporation; or

"(ii) members of three families (within the meaning of paragraph (1) of such [former] section 447(d)) owned, on October 4, 1976 (directly or through the application of such [former] section 447(d)), at least 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and at least 50 percent of the total number of shares of all other classes of stock of such corporation; and substantially all of the stock of such corporation which was not so owned (directly or through the application of such [former] section 447(d)), by members of such three families was owned, on October 4, 1976, directly—

"(I) by employees of the corporation or members of the families (within the meaning of section 267(c)(4) of such Code) of such employees, or

"(II) by a trust for the benefit of the employees of such corporation which is described in section 401(a) of such Code and which is exempt from taxation under section 501(a) of such Code,

the amendments made by paragraph (1) shall apply to taxable years beginning after December 31, 1977."

Accounting for Growing Crops

Pub. L. 95–600, title III, §352, Nov. 6, 1978, 92 Stat. 2846, provided that:

"(a) Application of Section.—This section shall apply to a taxpayer who—

"(1) is a farmer, nurseryman, or florist,

"(2) is on an accrual method of accounting, and

"(3) is not required by section 447 of the Internal Revenue Code of 1954 to capitalize preproductive period expenses.

"(b) Taxpayer May Not Be Required To Inventory Growing Crops.—A taxpayer to whom this section applies may not be required to inventory growing crops for any taxable year beginning after December 31, 1977.

"(c) Taxpayer May Elect To Change To Cash Method.—A taxpayer to whom this section applies may, for any taxable year beginning after December 31, 1977 and before January 1, 1981, change to the cash receipts and disbursements method of accounting with respect to any trade or business in which the principal activity is growing crops.

"(d) Section 481 Of Code To Apply.—Any change in the way in which a taxpayer accounts for the costs of growing crops resulting from the application of subsection (b) or (c)—

"(1) shall not require the consent of the Secretary of the Treasury or his delegate, and

"(2) shall be treated, for purposes of section 481 of the Internal Revenue Code of 1954 as a change in the method of accounting initiated by the taxpayer.

"(e) Growing Crops.—For purposes of this section, the term 'Growing crops' does not include trees grown for lumber, pulp, or other nonlife purposes."

Automatic Ten-Year Adjustment for Farming Syndicates Changing to Accrual Accounting

Pub. L. 95–600, title VII, §703(l)(2), Nov. 6, 1978, 92 Stat. 2906, provided that: "If—

"(A) a farming syndicate (within the meaning of [former] section 464(c) of the Internal Revenue Code of 1954 [now 26 U.S.C. 461(k)]) was in existence on December 31, 1975, and

"(B) such syndicate elects an accrual method of accounting (including the capitalization of preproductive period expenses described in section 447(b) of such Code) for a taxable year beginning before January 1, 1979,

then such election shall be treated as having been made with the consent of the Secretary of the Treasury or his delegate and, under regulations prescribed by the Secretary of the Treasury or his delegate, the net amount of the adjustments required by section 481(a) of such Code to be taken into account by the taxpayer in computing taxable income shall be taken into account in each of the 10 taxable years (or the remaining taxable years where there is a stated future life of less than 10 taxable years) beginning with the year of change."

Election To Change From Static Value Method to Accrual Method of Accounting

Pub. L. 94–455, title II, §207(c)(3), Oct. 4, 1976, 90 Stat. 1541, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(A) In general.—If—

"(i) a corporation has computed its taxable income on an annual accrual method of accounting together with a static value method of accounting for deferred costs of growing crops for the 10 taxable years ending with its first taxable year beginning after December 31, 1975,

"(ii) such corporation raises crops which are harvested not less than 12 months after planting, and

"(iii) such corporation elects, within one year after the date of the enactment of this Act [Oct. 4, 1976] and in such manner as the Secretary of the Treasury or his delegate prescribes, to change to the annual accrual method of accounting (within the meaning of section 447(g)(2) [now section 447(e)(2)] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for taxable years beginning after December 31, 1976,

such change shall be treated as having been made with the consent of the Secretary of the Treasury, and, under regulations prescribed by the Secretary of the Treasury or his delegate, the net amount of the adjustments required by section 481(a) of the Internal Revenue Code of 1986 to be taken into account by the taxpayer in computing taxable income shall (except as otherwise provided in such regulations) be taken into account in each of the 10 taxable years beginning with the year of change.

"(B) Coordination with section 447 of the code.—A corporation which elects under subparagraph (A) to change to the annual accrual method of accounting shall, for purposes of section 447(g) [now section 447(e)] of the Internal Revenue Code of 1986, be deemed to be a corporation which has computed its taxable income on an annual accrual method of accounting for its 10 taxable years ending with its first taxable year beginning after December 31, 1975.

"(C) Certain corporate reorganizations.—For purposes of this paragraph, if a corporation acquired substantially all the assets of a farming trade or business from another corporation in a transaction in which no gain or loss was recognized to the transferor or transferee corporation, the transferee corporation shall be deemed to have computed its taxable income on an annual accrual method of accounting together with a static value method of accounting for deferred costs of growing crops during the period for which the transferor corporation computed its taxable income from such trade or business on such accrual and static value method."
26 U.S.C. § 190 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 190: Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Status: in_force

(a) Treatment as expenses

(1) In general

A taxpayer may elect to treat qualified architectural and transportation barrier removal expenses which are paid or incurred by him during the taxable year as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction.

(2) Election

An election under paragraph (1) shall be made at such time and in such manner as the Secretary prescribes by regulations.

(b) Definitions

For purposes of this section—

(1) Architectural and transportation barrier removal expenses

The term "architectural and transportation barrier removal expenses" means an expenditure for the purpose of making any facility or public transportation vehicle owned or leased by the taxpayer for use in connection with his trade or business more accessible to, and usable by, handicapped and elderly individuals.

(2) Qualified architectural and transportation barrier removal expenses

The term "qualified architectural and transportation barrier removal expense" means, with respect to any such facility or public transportation vehicle, an architectural or transportation barrier removal expense with respect to which the taxpayer establishes, to the satisfaction of the Secretary, that the resulting removal of any such barrier meets the standards promulgated by the Secretary with the concurrence of the Architectural and Transportation Barriers Compliance Board and set forth in regulations prescribed by the Secretary.

(3) Handicapped individual

The term "handicapped individual" means any individual who has a physical or mental disability (including, but not limited to, blindness or deafness) which for such individual constitutes or results in a functional limitation to employment, or who has any physical or mental impairment (including, but not limited to, a sight or hearing impairment) which substantially limits one or more major life activities of such individual.

(c) Limitation

The deduction allowed by subsection (a) for any taxable year shall not exceed $15,000.

(Added Pub. L. 94–455, title XXI, §2122(a), Oct. 4, 1976, 90 Stat. 1914; amended Pub. L. 98–369, div. A, title X, §1062(a)(1), (b), July 18, 1984, 98 Stat. 1047; Pub. L. 99–514, title II, §244, Oct. 22, 1986, 100 Stat. 2183; Pub. L. 101–508, title XI, §§11611(c), 11801(a)(14), Nov. 5, 1990, 104 Stat. 1388–503, 1388–520.)

Editorial Notes

Amendments

1990—Subsec. (c). Pub. L. 101–508, §11611(c), substituted "$15,000" for "$35,000".

Subsec. (d). Pub. L. 101–508, §11801(a)(14), struck out subsec. (d) which related to application of section to taxable years beginning after Dec. 31, 1976, and before Jan. 1, 1983, and to taxable years beginning after Dec. 31, 1983.

1986—Subsec. (d)(2). Pub. L. 99–514 substituted "1983" for "1983, and before January 1, 1986".

1984—Subsec. (c). Pub. L. 98–369, §1062(b), substituted "$35,000" for "$25,000".

Subsec. (d). Pub. L. 98–369, §1062(a)(1), amended subsec. (d) generally, substituting provisions that this section shall apply to taxable years beginning after December 31, 1976, and before January 1, 1983, and to taxable years beginning after December 31, 1983, and before January 1, 1986 for provisions which had required the Secretary to prescribe such regulations as might be necessary to carry out this section within 180 days after October 4, 1976.

Statutory Notes and Related Subsidiaries

Effective Date of 1990 Amendment

Amendment by section 11611(c) of Pub. L. 101–508 applicable to taxable years beginning after Nov. 5, 1990, see section 11611(e)(2) of Pub. L. 101–508, set out as a note under section 38 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title X, §1062(c), July 18, 1984, 98 Stat. 1047, provided that: "The amendment made by subsection (b) [amending this section] shall apply to taxable years beginning after December 31, 1983."

Effective Date

Pub. L. 94–455, title XXI, §2122(c), Oct. 4, 1976, 90 Stat. 1915, as amended by Pub. L. 96–167, §9(c), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 98–369, div. A, title X, §1062(a)(2), July 18, 1984, 98 Stat. 1047, provided that: "The amendments made by this section [enacting this section and amending sections 263, 1245, and 1250 of this title] shall apply to taxable years beginning after December 31, 1976."

Savings Provision

For provisions that nothing in amendment by section 11801(a)(14) of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
26 U.S.C. § 834 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter L / Section 834: Determination of taxable investment income
Determination of taxable investment income
Status: in_force

(a) General rule

For purposes of section 831(b), the term "taxable investment income" means the gross investment income, minus the deductions provided in subsection (c).

(b) Gross investment income

For purposes of subsection (a), the term "gross investment income" means the sum of the following:

(1) The gross amount of income during the taxable year from—

(A) interest, dividends, rents, and royalties,

(B) the entering into of any lease, mortgage, or other instrument or agreement from which the insurance company derives interest, rents, or royalties,

(C) the alteration or termination of any instrument or agreement described in subparagraph (B), and

(D) gains from sales or exchanges of capital assets to the extent provided in subchapter P (relating to capital gains and losses).

(2) The gross income during the taxable year from any trade or business (other than an insurance business) carried on by the insurance company, or by a partnership of which the insurance company is a partner. In computing gross income under this paragraph, there shall be excluded any item described in paragraph (1).

(c) Deductions

In computing taxable investment income, the following deductions shall be allowed:

(1) Tax-free interest

The amount of interest which under section 103 is excluded for the taxable year from gross income.

(2) Investment expenses

Investment expenses paid or accrued during the taxable year. If any general expenses are in part assigned to or included in the investment expenses, the total deduction under this paragraph shall not exceed one-fourth of 1 percent of the mean of the book value of the invested assets held at the beginning and end of the taxable year plus one-fourth of the amount by which taxable investment income (computed without any deduction for investment expenses allowed by this paragraph, for tax-free interest allowed by paragraph (1), or for dividends received allowed by paragraph (7)), exceeds 3¾ percent of the book value of the mean of the invested assets held at the beginning and end of the taxable year.

(3) Real estate expenses

Taxes (as provided in section 164), and other expenses, paid or accrued during the taxable year exclusively on or with respect to the real estate owned by the company. No deduction shall be allowed under this paragraph for any amount paid out for new buildings, or for permanent improvements or betterments made to increase the value of any property.

(4) Depreciation

The depreciation deduction allowed by section 167.

(5) Interest paid or accrued

All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from taxation under this subtitle.

(6) Capital losses

Capital losses to the extent provided in subchapter P (sec. 1201 and following) plus losses from capital assets sold or exchanged in order to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends and similar distributions to policyholders. Capital assets shall be considered as sold or exchanged in order to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends and similar distributions to policyholders to the extent that the gross receipts from their sale or exchange are not greater than the excess, if any, for the taxable year of the sum of dividends and similar distributions paid to policyholders, losses paid, and expenses paid over the sum of the items described in subsection (b) (other than paragraph (1)(D) thereof) and net premiums received. In the application of section 1212 for purposes of this section, the net capital loss for the taxable year shall be the amount by which losses for such year from sales or exchanges of capital assets exceeds the sum of the gains from such sales or exchanges and whichever of the following amounts is the lesser:

(A) the taxable investment income (computed without regard to gains or losses from sales or exchanges of capital assets); or

(B) losses from the sale or exchange of capital assets sold or exchanged to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends and similar distributions to policyholders.

(7) Special deductions

The special deductions allowed by part VIII (except section 248) of subchapter B (sec. 241 and following, relating to dividends received). In applying section 246(b) (relating to limitation on aggregate amount of deductions for dividends received) for purposes of this paragraph, the reference in such section to "taxable income" shall be treated as a reference to "taxable investment income".

(8) Trade or business deductions

The deductions allowed by this subtitle (without regard to this part) which are attributable to any trade or business (other than an insurance business) carried on by the insurance company, or by a partnership of which the insurance company is a partner; except that for purposes of this paragraph—

(A) any item, to the extent attributable to the carrying on of the insurance business, shall not be taken into account, and

(B) the deduction for net operating losses provided in section 172 shall not be allowed.

(9) Depletion

The deduction allowed by section 611 (relating to depletion).

(d) Other applicable rules

(1) Rental value of real estate

The deduction under subsection (c)(3) or (4) on account of any real estate owned and occupied in whole or in part by a mutual insurance company subject to the tax imposed by section 831 shall be limited to an amount which bears the same ratio to such deduction (computed without regard to this paragraph) as the rental value of the space not so occupied bears to the rental value of the entire property.

(2) Amortization of premium and accrual of discount

The gross amount of income during the taxable year from interest and the deduction provided in subsection (c)(1) shall each be decreased to reflect the appropriate amortization of premium and increased to reflect the appropriate accrual of discount attributable to the taxable year on bonds, notes, debentures, or other evidences of indebtedness held by a mutual insurance company subject to the tax imposed by section 831. Such amortization and accrual shall be determined—

(A) in accordance with the method regularly employed by such company, if such method is reasonable, and

(B) in all other cases, in accordance with regulations prescribed by the Secretary.

No accrual of discount shall be required under this paragraph on any bond (as defined in section 171(d)) except in the case of discount which is original issue discount (as defined in section 1273).

(3) Double deductions

Nothing in this part shall permit the same item to be deducted more than once.

(e) Definitions

For purposes of this part—

(1) Net premiums

The term "net premiums" means gross premiums (including deposits and assessments) written or received on insurance contracts during the taxable year less return premiums and premiums paid or incurred for reinsurance. Amounts returned where the amount is not fixed in the insurance contract but depends on the experience of the company or the discretion of the management shall not be included in return premiums but shall be treated as dividends to policyholders under paragraph (2).

(2) Dividends to policyholders

The term "dividends to policyholders" means dividends and similar distributions paid or declared to policyholders. For purposes of the preceding sentence, the term "paid or declared" shall be construed according to the method regularly employed in keeping the books of the insurance company.

(Aug. 16, 1954, ch. 736, 68A Stat. 261, §822; Mar. 13, 1956, ch. 83, §3(a)(3)–(8), 70 Stat. 47, 48; Pub. L. 87–834, §8(b), Oct. 16, 1962, 76 Stat. 991; Pub. L. 88–272, title II, §228(b)(2), Feb. 26, 1964, 78 Stat. 99; Pub. L. 89–809, title I, §104(i)(5), Nov. 13, 1966, 80 Stat. 1562; Pub. L. 94–455, title XIX, §§1901(a)(105), (b)(1)(P)–(S), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1782, 1792, 1834; renumbered §834 and amended Pub. L. 99–514, title X, §1024(a)(3), (c)(7), (8), Oct. 22, 1986, 100 Stat. 2405, 2407; Pub. L. 115–97, title I, §13001(b)(2)(I), Dec. 22, 2017, 131 Stat. 2096.)

Editorial Notes

Amendments

2017—Subsec. (b)(1)(D). Pub. L. 115–97 struck out "sec. 1201 and following," before "relating to capital gains and losses".

1986—Pub. L. 99–514, §1024(a)(3), renumbered section 822 of this title as this section.

Subsec. (a). Pub. L. 99–514, §1024(c)(7), amended subsec. (a) generally. Prior to amendment, subsec. (a), definitions, read as follows: "For purposes of this part—

"(1) The term 'taxable investment income' means the gross investment income, minus the deductions provided in subsection (c).

"(2) The term 'investment loss' means the amount by which the deductions provided in subsection (c) exceed the gross investment income."

Subsec. (d). Pub. L. 99–514, §1024(c)(8), substituted "section 831" for "section 821" in pars. (1) and (2), and inserted "except in the case of discount which is original issue discount (as defined in section 1273)" at end of last sentence in par.

1976—Subsec. (c)(2). Pub. L. 94–455, §1901(b)(1)(P), struck out "partially tax-exempt interest and" before "dividends received allowed by".

Subsec. (c)(5). Pub. L. 94–455, §1901(a)(105)(A), struck out "(other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)" after "purchase or carry obligations".

Subsec. (c)(6)(A). Pub. L. 94–455, §1901(b)(1)(Q), struck out "or to the deduction provided in section 242 for partially tax-exempt interest" after "exchanges of capital assets".

Subsec. (c)(7). Pub. L. 94–455, §1901(b)(1)(R), struck out "partially tax-exempt interest and to" after "and following, relating to".

Subsec. (d)(2). Pub. L. 94–455, §§1901(a)(105)(B), (b)(1)(S), 1906(b)(13)(A), struck out in subpar. (B) "or his delegate" after "Secretary" and substituted in provisions preceding subpar. (A) "and the deduction provided in subsection (c)(1)" for ", the deduction provided in subsection (c)(1), and the deduction allowed by section 242 (relating to partially tax-exempt interest)" and in provisions following subpar. (B) "No accrual" for "For taxable years beginning after December 31, 1962, no accrual".

1966—Subsecs. (e), (f). Pub. L. 89–809 redesignated subsec. (f) as (e). Former subsec. (e), dealing with foreign mutual insurance companies other than life or marine, was struck out.

1964—Subsec. (d)(2). Pub. L. 88–272 provided that for taxable years beginning after Dec. 31, 1962, no accrual of discount shall be required under par. (2) on any bond.

1962—Pub. L. 87–834, §8(b)(1), substituted "Determination of taxable investment income" for "Determination of mutual insurance company taxable income" in section catchline.

Subsec. (a). Pub. L. 87–834, §8(b)(1), defined "taxable investment income" and "investment loss" for purposes of this part, and struck out provisions which defined "mutual insurance company taxable income" for purposes of section 821 of this title, which provisions are now contained in section 821(b) of this title.

Subsec. (c). Pub. L. 87–834, §8(b)(2), (3), substituted "taxable investment income" for "mutual insurance company taxable income" in opening provisions and in pars. (2) and (6)(A), and inserted sentence in par. (7) providing that in applying section 246(b) (relating to limitations on aggregate amount of deductions for dividends received) for purposes of par. (7), reference in such section to "taxable income" shall be treated as a reference to "taxable investment income".

Subsec. (e). Pub. L. 87–834, §8(b)(2), substituted "taxable investment income" for "mutual insurance company taxable income".

Subsec. (f). Pub. L. 87–834, §8(b)(4), added subsec. (f). Provisions of subsec. (f) were formerly contained in section 823 of this title.

1956—Subsec. (b). Act Mar. 13, 1956, §3(a)(3), principally included royalties, and the income from a trade or business other than the insurance business carried on by the insurance company in "gross investment income".

Subsec. (c). Act Mar. 13, 1956, §3(a)(4), (5), (6), clarified the deduction for real estate expenses in par. (3), substituted in par. (6) "the sum of the items described in subsection (b) (other than paragraph (1)(D) thereof) and net premiums received. In the application of section 1212" for "the sum of interest, dividends, rents, and net premiums received. In the application of section 1211", and inserted pars. (8) and (9).

Subsec. (d)(1). Act Mar. 13, 1956, §3(a)(7), substituted "subsection (c)(3) or (4)" for "subsection (e)(3) or (4)".

Subsec. (e). Act Mar. 13, 1956, §3(a)(8), substituted "items described in subsection (b) (other than paragraph (1)(D) thereof" for "interest, dividends, rents,".

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 13001(c)(1) of Pub. L. 115–97, set out as a note under section 11 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1024(e) of Pub. L. 99–514, set out as a note under section 831 of this title.

Effective Date of 1976 Amendment

Amendment by section 1901(a)(105), (b)(1)(P)–(S) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89–809, set out as a note under section 11 of this title.

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–834 applicable with respect to taxable years beginning after Dec. 31, 1962, see section 8(h) of Pub. L. 87–834, set out as a note under section 501 of this title.

Effective Date of 1956 Amendment

Amendment by act Mar. 13, 1956, applicable only to taxable years beginning after Dec. 31, 1954, see section 6 of act Mar. 13, 1956, set out as a note set out under section 316 of this title.
26 U.S.C. § 5861 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 53 / Subchapter C / Section 5861: Prohibited acts
Prohibited acts
Status: in_force

It shall be unlawful for any person—

(a) to engage in business as a manufacturer or importer of, or dealer in, firearms without having paid the special (occupational) tax required by section 5801 for his business or having registered as required by section 5802; or

(b) to receive or possess a firearm transferred to him in violation of the provisions of this chapter; or

(c) to receive or possess a firearm made in violation of the provisions of this chapter; or

(d) to receive or possess a firearm which is not registered to him in the National Firearms Registration and Transfer Record; or

(e) to transfer a firearm in violation of the provisions of this chapter; or

(f) to make a firearm in violation of the provisions of this chapter; or

(g) to obliterate, remove, change, or alter the serial number or other identification of a firearm required by this chapter; or

(h) to receive or possess a firearm having the serial number or other identification required by this chapter obliterated, removed, changed, or altered; or

(i) to receive or possess a firearm which is not identified by a serial number as required by this chapter; or

(j) to transport, deliver, or receive any firearm in interstate commerce which has not been registered as required by this chapter; or

(k) to receive or possess a firearm which has been imported or brought into the United States in violation of section 5844; or

(l) to make, or cause the making of, a false entry on any application, return, or record required by this chapter, knowing such entry to be false.

(Added Pub. L. 90–618, title II, §201, Oct. 22, 1968, 82 Stat. 1234.)

Editorial Notes

Prior Provisions

A prior section 5861, act Aug. 16, 1954, ch. 736, 68A Stat. 729, relating to penalties, was omitted in the general revision of this chapter by Pub. L. 90–618.

Provisions similar to those comprising subsecs. (a), (b), (d), (g), (j), and (k) of this section were contained in prior sections of act Aug. 16, 1954, prior to the general revision of this chapter by Pub. L. 90–618, as follows:

 

Present subsecs.:Prior sections

(a)
5854.

(b)
5851.

(d)
5854.

(g)
5852.

(j)
5855.

(k)
5853.

The prior sections 5851 to 5853, act Aug. 16, 1954, ch. 736, are set out in 68A Stat. 728.

The prior sections 5854 and 5855, Pub. L. 85–859, title II, §203(i)(1), Sept. 2, 1958, are set out in 72 Stat. 1428.

A prior section 5862, act Aug. 16, 1954, ch. 736, 68A Stat. 729, relating to the forfeiture and disposal of any firearm involved in any violation of the provisions of this chapter or any regulation promulgated thereunder, was omitted in the general revision of this chapter by Pub. L. 90–618. The provisions of prior section 5862 of this title are covered by section 5872 of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective on first day of first month following October 1968, see section 207 of Pub. L. 90–618, set out as a note under section 5801 of this title.
26 U.S.C. § 4121 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 32 / Section 4121: Imposition of tax
Imposition of tax
Status: in_force

(a) Tax imposed

(1) In general

There is hereby imposed on coal from mines located in the United States sold by the producer, a tax equal to the rate per ton determined under subsection (b).

(2) Limitation on tax

The amount of the tax imposed by paragraph (1) with respect to a ton of coal shall not exceed the applicable percentage (determined under subsection (b)) of the price at which such ton of coal is sold by the producer.

(b) Determination of rates and limitation on tax

For purposes of subsection (a)—

(1) the rate of tax on coal from underground mines shall be $1.10,

(2) the rate of tax on coal from surface mines shall be $.55, and

(3) the applicable percentage shall be 4.4 percent.

(c) Tax not to apply to lignite

The tax imposed by subsection (a) shall not apply in the case of lignite.

(d) Definitions

For purposes of this subchapter—

(1) Coal from surface mines

Coal shall be treated as produced from a surface mine if all of the geological matter above the coal being mined is removed before the coal is extracted from the earth. Coal extracted by auger shall be treated as coal from a surface mine.

(2) Coal from underground mines

Coal shall be treated as produced from an underground mine if it is not produced from a surface mine.

(3) United States

The term "United States" has the meaning given to it by paragraph (1) of section 638.

(4) Ton

The term "ton" means 2,000 pounds.

(Added Pub. L. 95–227, §2(a), Feb. 10, 1978, 92 Stat. 11; amended Pub. L. 97–119, title I, §102(a), Dec. 29, 1981, 95 Stat. 1635; Pub. L. 99–272, title XIII, §13203(a), (c), Apr. 7, 1986, 100 Stat. 312, 313; Pub. L. 99–514, title XVIII, §1897(a), Oct. 22, 1986, 100 Stat. 2941; Pub. L. 100–203, title X, §10503, Dec. 22, 1987, 101 Stat. 1330–446; Pub. L. 110–343, div. B, title I, §113(a), Oct. 3, 2008, 122 Stat. 3824; Pub. L. 116–94, div. Q, title I, §105(a), Dec. 20, 2019, 133 Stat. 3228; Pub. L. 116–260, div. EE, title I, §149(a), Dec. 27, 2020, 134 Stat. 3056; Pub. L. 117–169, title I, §13901(a), Aug. 16, 2022, 136 Stat. 2013.)

Editorial Notes

Prior Provisions

For prior section 4121, see Prior Provisions note set out preceding this section.

Amendments

2022—Subsec. (e). Pub. L. 117–169 struck out subsec. (e) which related to reduction in amount of tax.

2020—Subsec. (e)(2)(A). Pub. L. 116–260 substituted "December 31, 2021" for "December 31, 2020".

2019—Subsec. (e)(2)(A). Pub. L. 116–94 substituted "December 31, 2020" for "December 31, 2018".

2008—Subsec. (e)(2)(A). Pub. L. 110–343, §113(a)(1), substituted "December 31, 2018" for "January 1, 2014".

Subsec. (e)(2)(B). Pub. L. 110–343, §113(a)(2), substituted "December 31 after 2007" for "January 1 after 1981" in introductory provisions.

1987—Subsec. (e)(2)(A). Pub. L. 100–203 substituted "2014" for "1996".

1986—Subsec. (a). Pub. L. 99–272, §13203(a), amended subsec. (a) generally. Prior to amendment subsec. (a) read as follows: "There is hereby imposed on coal sold by the producer a tax at the rates of—

"(1) 50 cents per ton in the case of coal from underground mines located in the United States, and

"(2) 25 cents per ton in the case of coal from surface mines located in the United States."

Subsec. (b). Pub. L. 99–514 struck out ", in the case of sales during any calendar year beginning after December 31, 1985" after "subsection (a)".

Pub. L. 99–272, §13203(a), amended subsec. (b) generally. Prior to amendment subsec. (b), limitation on tax, read as follows: "The amount of the tax imposed by subsection (a) with respect to a ton of coal shall not exceed 2 percent of the price at which such ton of coal is sold by the producer."

Subsec. (e). Pub. L. 99–272, §13203(c), substituted "Reduction in amount of tax" for "Temporary increase in amount of tax" in heading and amended par. (1) generally. Prior to amendment par. (1) read as follows: "Effective with respect to sales after December 31, 1981, and before the temporary increase termination date—

"(A) subsection (a) shall be applied—

"(i) by substituting '$1' for '50 cents', and

"(ii) by substituting '50 cents' for '25 cents', and

"(B) subsection (b) shall be applied by substituting '4 percent' for '2 percent'."

1981—Subsec. (e). Pub. L. 97–119 added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–169, title I, §13901(b), Aug. 16, 2022, 136 Stat. 2013, provided that: "The amendment made by this section [amending this section] shall apply to sales in calendar quarters beginning after the date which is 1 day after the date of enactment of this Act [Aug. 16, 2022]."

Effective Date of 2020 Amendment

Pub. L. 116–260, div. EE, title I, §149(b), Dec. 27, 2020, 134 Stat. 3056, provided that: "The amendment made by this section [amending this section] shall apply to sales after December 31, 2020."

Effective Date of 2019 Amendment

Pub. L. 116–94, div. Q, title I, §105(b), Dec. 20, 2019, 133 Stat. 3228, provided that: "The amendment made by this section [amending this section] shall apply on and after the first day of the first calendar month beginning after the date of the enactment of this Act [Dec. 20, 2019]."

Effective Date of 1986 Amendments

Pub. L. 99–514, title XVIII, §1897(b), Oct. 22, 1986, 100 Stat. 2941, provided that: "The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendment made by section 13203 of the Consolidated Omnibus Budget Reconciliation Act of 1985 [section 13203 of Pub. L. 99–272, see note below]."

Pub. L. 99–272, title XIII, §13203(d), Apr. 7, 1986, 100 Stat. 313, provided that: "The amendments made by this section [amending this section] shall apply to sales after March 31, 1986."

Effective Date of 1981 Amendment

Pub. L. 97–119, title I, §102(b), Dec. 29, 1981, 95 Stat. 1635, provided that: "The amendment made by subsection (a) [amending this section] shall apply to sales after December 31, 1981."

Effective Date

Pub. L. 95–227, §2(d), Feb. 10, 1978, 92 Stat. 12, provided that: "The amendments made by this section [enacting this section and amending sections 4218, 4221, 4293, and 6416 of this title] shall apply with respect to sales after March 31, 1978."

Pub. L. 95–227, §5, Feb. 10, 1978, 92 Stat. 24, provided that: "Notwithstanding any other provision of this Act [see Short Title of 1978 Amendment note set out under section 1 of this title] to the contrary, no provision of this Act (including any amendment made by any such provision) shall take effect or apply unless an Act, enacted after the date of enactment of this Act [Feb. 10, 1978], contains a provision, explicitly in satisfaction of the requirements of this section, which states that it is the intent of the Congress that the provisions of this Act shall take effect."

[Pub. L. 95–239, §20(c), Mar. 1, 1978, 92 Stat. 106, provided that: "In accordance with the requirements of section 5 of the Black Lung Benefits Revenue Act of 1977 [Pub. L. 95–227, set out above], it is hereby provided that such Act shall take effect in accordance with the provisions of such Act. The provisions of this subsection are hereby deemed to be in explicit satisfaction of the requirements of section 5 of such Act."]

Short Title of 1978 Amendment

For short title of Pub. L. 95–227, Feb. 10, 1978, 92 Stat. 11, as the "Black Lung Benefits Revenue Act of 1977", see Short Title of 1978 Amendments note set out under section 1 of this title.

Special Rules for Refund of the Coal Excise Tax to Certain Coal Producers and Exporters

Pub. L. 110–343, div. B, title I, §114, Oct. 3, 2008, 122 Stat. 3826, provided that:

"(a) Refund.—

"(1) Coal producers.—

"(A) In general.—Notwithstanding subsections (a)(1) and (c) of section 6416 and section 6511 of the Internal Revenue Code of 1986, if—

"(i) a coal producer establishes that such coal producer, or a party related to such coal producer, exported coal produced by such coal producer to a foreign country or shipped coal produced by such coal producer to a possession of the United States, or caused such coal to be exported or shipped, the export or shipment of which was other than through an exporter who meets the requirements of paragraph (2),

"(ii) such coal producer filed an excise tax return on or after October 1, 1990, and on or before the date of the enactment of this Act [Oct. 3, 2008], and

"(iii) such coal producer files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,

  then the Secretary shall pay to such coal producer an amount equal to the tax paid under section 4121 of such Code on such coal exported or shipped by the coal producer or a party related to such coal producer, or caused by the coal producer or a party related to such coal producer to be exported or shipped.

"(B) Special rules for certain taxpayers.—For purposes of this section—

"(i) In general.—If a coal producer or a party related to a coal producer has received a judgment described in clause (iii), such coal producer shall be deemed to have established the export of coal to a foreign country or shipment of coal to a possession of the United States under subparagraph (A)(i).

"(ii) Amount of payment.—If a taxpayer described in clause (i) is entitled to a payment under subparagraph (A), the amount of such payment shall be reduced by any amount paid pursuant to the judgment described in clause (iii).

"(iii) Judgment described.—A judgment is described in this subparagraph if such judgment—

     "(I) is made by a court of competent jurisdiction within the United States,

     "(II) relates to the constitutionality of any tax paid on exported coal under section 4121 of the Internal Revenue Code of 1986, and

     "(III) is in favor of the coal producer or the party related to the coal producer.

"(2) Exporters.—Notwithstanding subsections (a)(1) and (c) of section 6416 and section 6511 of the Internal Revenue Code of 1986, and a judgment described in paragraph (1)(B)(iii) of this subsection, if—

"(A) an exporter establishes that such exporter exported coal to a foreign country or shipped coal to a possession of the United States, or caused such coal to be so exported or shipped,

"(B) such exporter filed a tax return on or after October 1, 1990, and on or before the date of the enactment of this Act [Oct. 3, 2008], and

"(C) such exporter files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,

  then the Secretary shall pay to such exporter an amount equal to $0.825 per ton of such coal exported by the exporter or caused to be exported or shipped, or caused to be exported or shipped, [sic] by the exporter.

"(b) Limitations.—Subsection (a) shall not apply with respect to exported coal if a settlement with the Federal Government has been made with and accepted by, the coal producer, a party related to such coal producer, or the exporter, of such coal, as of the date that the claim is filed under this section with respect to such exported coal. For purposes of this subsection, the term 'settlement with the Federal Government' shall not include any settlement or stipulation entered into as of the date of the enactment of this Act [Oct. 3, 2008], the terms of which contemplate a judgment concerning which any party has reserved the right to file an appeal, or has filed an appeal.

"(c) Subsequent Refund Prohibited.—No refund shall be made under this section to the extent that a credit or refund of such tax on such exported or shipped coal has been paid to any person.

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

"(1) Coal producer.—The term 'coal producer' means the person in whom is vested ownership of the coal immediately after the coal is severed from the ground, without regard to the existence of any contractual arrangement for the sale or other disposition of the coal or the payment of any royalties between the producer and third parties. The term includes any person who extracts coal from coal waste refuse piles or from the silt waste product which results from the wet washing (or similar processing) of coal.

"(2) Exporter.—The term 'exporter' means a person, other than a coal producer, who does not have a contract, fee arrangement, or any other agreement with a producer or seller of such coal to export or ship such coal to a third party on behalf of the producer or seller of such coal and—

"(A) is indicated in the shipper's export declaration or other documentation as the exporter of record, or

"(B) actually exported such coal to a foreign country or shipped such coal to a possession of the United States, or caused such coal to be so exported or shipped.

"(3) Related party.—The term 'a party related to such coal producer' means a person who—

"(A) is related to such coal producer through any degree of common management, stock ownership, or voting control,

"(B) is related (within the meaning of section 144(a)(3) of the Internal Revenue Code of 1986) to such coal producer, or

"(C) has a contract, fee arrangement, or any other agreement with such coal producer to sell such coal to a third party on behalf of such coal producer.

"(4) Secretary.—The term 'Secretary' means the Secretary of [the] Treasury or the Secretary's designee.

"(e) Timing of Refund.—With respect to any claim for refund filed pursuant to this section, the Secretary shall determine whether the requirements of this section are met not later than 180 days after such claim is filed. If the Secretary determines that the requirements of this section are met, the claim for refund shall be paid not later than 180 days after the Secretary makes such determination.

"(f) Interest.—Any refund paid pursuant to this section shall be paid by the Secretary with interest from the date of overpayment determined by using the overpayment rate and method under section 6621 of the Internal Revenue Code of 1986.

"(g) Denial of Double Benefit.—The payment under subsection (a) with respect to any coal shall not exceed—

"(1) in the case of a payment to a coal producer, the amount of tax paid under section 4121 of the Internal Revenue Code of 1986 with respect to such coal by such coal producer or a party related to such coal producer, and

"(2) in the case of a payment to an exporter, an amount equal to $0.825 per ton with respect to such coal exported by the exporter or caused to be exported by the exporter.

"(h) Application of Section.—This section applies only to claims on coal exported or shipped on or after October 1, 1990, through the date of the enactment of this Act [Oct. 3, 2008].

"(i) Standing Not Conferred.—

"(1) Exporters.—With respect to exporters, this section shall not confer standing upon an exporter to commence, or intervene in, any judicial or administrative proceeding concerning a claim for refund by a coal producer of any Federal or State tax, fee, or royalty paid by the coal producer.

"(2) Coal producers.—With respect to coal producers, this section shall not confer standing upon a coal producer to commence, or intervene in, any judicial or administrative proceeding concerning a claim for refund by an exporter of any Federal or State tax, fee, or royalty paid by the producer and alleged to have been passed on to an exporter."

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. § 424 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter D / Section 424: Definitions and special rules
Definitions and special rules
Status: in_force

(a) Corporate reorganizations, liquidations, etc.

For purposes of this part, the term "issuing or assuming a stock option in a transaction to which section 424(a) applies" means a substitution of a new option for the old option, or an assumption of the old option, by an employer corporation, or a parent or subsidiary of such corporation, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation, if—

(1) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares, and

(2) the new option or the assumption of the old option does not give the employee additional benefits which he did not have under the old option.

For purposes of this subsection, the parent-subsidiary relationship shall be determined at the time of any such transaction under this subsection.

(b) Acquisition of new stock

For purposes of this part, if stock is received by an individual in a distribution to which section 305, 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies, and such distribution was made with respect to stock transferred to him upon his exercise of the option, such stock shall be considered as having been transferred to him on his exercise of such option. A similar rule shall be applied in the case of a series of such distributions.

(c) Disposition

(1) In general

Except as provided in paragraphs (2), (3), and (4), for purposes of this part, the term "disposition" includes a sale, exchange, gift, or a transfer of legal title, but does not include—

(A) a transfer from a decedent to an estate or a transfer by bequest or inheritance;

(B) an exchange to which section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies; or

(C) a mere pledge or hypothecation.

(2) Joint tenancy

The acquisition of a share of stock in the name of the employee and another jointly with the right of survivorship or a subsequent transfer of a share of stock into such joint ownership shall not be deemed a disposition, but a termination of such joint tenancy (except to the extent such employee acquires ownership of such stock) shall be treated as a disposition by him occurring at the time such joint tenancy is terminated.

(3) Special rule where incentive stock is acquired through use of other statutory option stock

(A) Nonrecognition sections not to apply

If—

(i) there is a transfer of statutory option stock in connection with the exercise of any incentive stock option, and

(ii) the applicable holding period requirements (under section 422(a)(1) or 423(a)(1)) are not met before such transfer,

then no section referred to in subparagraph (B) of paragraph (1) shall apply to such transfer.

(B) Statutory option stock

For purpose of subparagraph (A), the term "statutory option stock" means any stock acquired through the exercise of an incentive stock option or an option granted under an employee stock purchase plan.

(4) Transfers between spouses or incident to divorce

In the case of any transfer described in subsection (a) of section 1041—

(A) such transfer shall not be treated as a disposition for purposes of this part, and

(B) the same tax treatment under this part with respect to the transferred property shall apply to the transferee as would have applied to the transferor.

(d) Attribution of stock ownership

For purposes of this part, in applying the percentage limitations of sections 422(b)(6) and 423(b)(3)—

(1) the individual with respect to whom such limitation is being determined shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and

(2) stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries.

(e) Parent corporation

For purposes of this part, the term "parent corporation" means any corporation (other than the employer corporation) in an unbroken chain of corporations ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

(f) Subsidiary corporation

For purposes of this part, the term "subsidiary corporation" means any corporation (other than the employer corporation) in an unbroken chain of corporations beginning with the employer corporation if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

(g) Special rule for applying subsections (e) and (f)

In applying subsections (e) and (f) for purposes of sections 422(a)(2) and 423(a)(2), there shall be substituted for the term "employer corporation" wherever it appears in subsections (e) and (f) the term "grantor corporation" or the term "corporation issuing or assuming a stock option in a transaction to which section 424(a) applies", as the case may be.

(h) Modification, extension, or renewal of option

(1) In general

For purposes of this part, if the terms of any option to purchase stock are modified, extended, or renewed, such modification, extension, or renewal shall be considered as the granting of a new option.

(2) Special rule for section 423 options

In the case of the transfer of stock pursuant to the exercise of an option to which section 423 applies and which has been so modified, extended, or renewed, the fair market value of such stock at the time of the granting of the option shall be considered as whichever of the following is the highest—

(A) the fair market value of such stock on the date of the original granting of the option,

(B) the fair market value of such stock on the date of the making of such modification, extension, or renewal, or

(C) the fair market value of such stock at the time of the making of any intervening modification, extension, or renewal.

(3) Definition of modification

The term "modification" means any change in the terms of the option which gives the employee additional benefits under the option, but such term shall not include a change in the terms of the option—

(A) attributable to the issuance or assumption of an option under subsection (a);

(B) to permit the option to qualify under section 423(b)(9); or

(C) in the case of an option not immediately exercisable in full, to accelerate the time at which the option may be exercised.

(i) Stockholder approval

For purposes of this part, if the grant of an option is subject to approval by stockholders, the date of grant of the option shall be determined as if the option had not been subject to such approval.

(j) Cross references

For provisions requiring the reporting of certain acts with respect to a qualified stock option, an incentive stock option, options granted under employer stock purchase plans, or a restricted stock option, see section 6039.

(Added Pub. L. 88–272, title II, §221(a), Feb. 26, 1964, 78 Stat. 71, §425; amended Pub. L. 97–34, title II, §251(b)(2)–(4), Aug. 13, 1981, 95 Stat. 259; Pub. L. 97–448, title I, §102(j)(5), (6), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 98–369, div. A, title V, §555(b), July 18, 1984, 98 Stat. 898; Pub. L. 100–647, title I, §1018(l)(1), (2), Nov. 10, 1988, 102 Stat. 3584; Pub. L. 101–239, title VII, §7811(m)(6), Dec. 19, 1989, 103 Stat. 2412; renumbered §424 and amended Pub. L. 101–508, title XI, §11801(c)(9)(A)(i), (F), Nov. 5, 1990, 104 Stat. 1388–524, 1388–525; Pub. L. 104–188, title I, §1702(h)(13), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 115–141, div. U, title IV, §401(a)(98), Mar. 23, 2018, 132 Stat. 1188.)

Editorial Notes

Prior Provisions

A prior section 424, added Pub. L. 88–272, title II, §221(a), Feb. 26, 1964, 78 Stat. 69; amended Pub. L. 94–455, title VI, §603(c), title XIV, §1402(b)(1)(F), (2), Oct. 4, 1976, 90 Stat. 1574, 1732, related to restricted stock options, prior to repeal by Pub. L. 101–508, title XI, §11801(a)(21), Nov. 5, 1990, 104 Stat. 1388–521. For savings provisions, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

Amendments

2018—Subsec. (g). Pub. L. 115–141 substituted "sections 422(a)(2)" for "section 422(a)(2)".

1996—Subsec. (c)(3)(B). Pub. L. 104–188 substituted "an incentive stock option or an option granted under an employee stock purchase plan" for "a qualified stock option, an incentive stock option, an option granted under an employee stock purchase plan, or a restricted stock option".

1990—Pub. L. 101–508, §11801(c)(9)(A)(i), renumbered section 425 of this title as this section.

Subsec. (a). Pub. L. 101–508, §11801(c)(9)(F)(i), substituted "424(a)" for "425(a)".

Subsec. (c)(3)(A)(ii). Pub. L. 101–508, §11801(c)(9)(F)(ii), substituted "422(a)(1) or 423(a)(1)" for "422(a)(1), 422A(a)(1), 423(a)(1), or 424(a)(1)".

Subsec. (d). Pub. L. 101–508, §11801(c)(9)(F)(iii), substituted "422(b)(6) and 423(b)(3)" for "422(b)(7), 422A(b)(6), 423(b)(3), and 424(b)(3)".

Subsec. (g). Pub. L. 101–508, §11801(c)(9)(F)(iv), substituted "422(a)(2) and 423(a)(2)" for "422(a)(2), 422A(a)(2), 423(a)(2), and 424(a)(2)" and "424(a)" for "425(a)".

Subsec. (h)(2). Pub. L. 101–508, §11801(c)(9)(F)(v)(I), added par. (2) and struck out former par. (2) which related to special rules for sections 423 and 424 options and to an exception that such rules would not apply with respect to a modification, extension or renewal of a restricted stock option before Jan. 1, 1964, if the aggregate of the monthly fair market value for 12 consecutive months before date of modification, etc., divided by 12 is an amount less than 80% of the fair market value of such stock on the date of original granting or the date of modification, etc., whichever is higher.

Subsec. (h)(3). Pub. L. 101–508, §11801(c)(9)(F)(v)(III), struck out at end "If a restricted stock option is exercisable after the expiration of 10 years from the date such option is granted, subparagraph (B) shall not apply unless the terms of the option are also changed to make it not exercisable after the expiration of such period."

Subsec. (h)(3)(B). Pub. L. 101–508, §11801(c)(9)(F)(v)(II), substituted "section 423(b)(9)" for "sections 422(b)(6), 423(b)(9), and 424(b)(2)".

1989—Subsec. (c)(1). Pub. L. 101–239 made technical correction to Pub. L. 100–647, §1018(l)(2), see 1988 Amendment note below.

1988—Subsec. (c)(1). Pub. L. 100–647, §1018(l)(2), as amended by Pub. L. 101–239, substituted "paragraphs (2), (3), and (4)" for "paragraphs (2) and (3)".

Subsec. (c)(4). Pub. L. 100–647, §1018(l)(1), added par. (4).

1984—Subsec. (h)(3)(B). Pub. L. 98–369 struck out reference to section 422A(b)(5).

1983—Subsec. (c)(1). Pub. L. 97–448, §102(j)(6)(B), substituted "paragraphs (2) and (3)" for "paragraph (2)".

Subsec. (c)(3). Pub. L. 97–448, §102(j)(6)(A), added par. (3).

Subsec. (j). Pub. L. 97–448, §102(j)(5), inserted reference to an incentive stock option.

1981—Subsec. (d). Pub. L. 97–34, §251(b)(2), inserted reference to section 422A(b)(6).

Subsec. (g). Pub. L. 97–34, §251(b)(3), inserted reference to section 422A(a)(2).

Subsec. (h)(3)(B). Pub. L. 97–34, §251(b)(4), inserted reference to section 422A(b)(5).

Statutory Notes and Related Subsidiaries

Effective Date of 1996 Amendment

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

Effective Date of 1989 Amendment

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

Effective Date of 1988 Amendment

Amendment by 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 1984 Amendment

Pub. L. 98–369, div. A, title V, §555(c)(3), July 18, 1984, 98 Stat. 898, as amended by Pub. L. 99–514, title XVIII, §1855(a)(4), Oct. 22, 1986, 100 Stat. 2882, provided that: "The amendment made by subsection (b) [amending this section] shall apply with respect to modifications of options after March 20, 1984."

Effective Date of 1983 Amendment

Pub. L. 97–448, title I, §102(j)(6), Jan. 12, 1983, 96 Stat. 2373, provided that the amendment made by that section is effective only with respect to transfers after March 15, 1982.

Amendment by section 102(j)(5) of title I of Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable with respect to options granted on or after Jan. 1, 1976, and exercised on or after Jan. 1, 1981, or outstanding on Jan. 1, 1981, or granted on or after Jan. 1, 1976, and outstanding Aug. 13, 1981, see section 251(c) of Pub. L. 97–34, set out as an Effective Date note under section 422 of this title.

Effective Date

Section applicable to taxable years ending after Dec. 31, 1963, except in cases of options granted after Dec. 31, 1963, and before Jan. 1, 1965, in which case par. (1) of subsec. (h) shall not apply to any change in the terms of such option made before Jan. 1, 1965, to permit such option to qualify under pars. (3), (4), and (5) of section 422(b), see section 221(e) of Pub. L. 88–272, set out as an Effective Date of 1964 Amendment note under section 421 of this title.

Savings Provision

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
26 U.S.C. § 280F (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 280F: Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes
Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes
Status: in_force

(a) Limitation on amount of depreciation for luxury automobiles

(1) Depreciation

(A) Limitation

The amount of the depreciation deduction for any taxable year for any passenger automobile shall not exceed—

(i) $10,000 for the 1st taxable year in the recovery period,

(ii) $16,000 for the 2nd taxable year in the recovery period,

(iii) $9,600 for the 3rd taxable year in the recovery period, and

(iv) $5,760 for each succeeding taxable year in the recovery period.

(B) Disallowed deductions allowed for years after recovery period

(i) In general

Except as provided in clause (ii), the unrecovered basis of any passenger automobile shall be treated as an expense for the 1st taxable year after the recovery period. Any excess of the unrecovered basis over the limitation of clause (ii) shall be treated as an expense in the succeeding taxable year.

(ii) $5,760 limitation

The amount treated as an expense under clause (i) for any taxable year shall not exceed $5,760.

(iii) Property must be depreciable

No amount shall be allowable as a deduction by reason of this subparagraph with respect to any property for any taxable year unless a depreciation deduction would be allowable with respect to such property for such taxable year.

(iv) Amount treated as depreciation deduction

For purposes of this subtitle, any amount allowable as a deduction by reason of this subparagraph shall be treated as a depreciation deduction allowable under section 168.

(2) Coordination with reductions in amount allowable by reason of personal use, etc.

This subsection shall be applied before—

(A) the application of subsection (b), and

(B) the application of any other reduction in the amount of any depreciation deduction allowable under section 168 by reason of any use not qualifying the property for such credit or depreciation deduction.

(b) Limitation where business use of listed property not greater than 50 percent

(1) Depreciation

If any listed property is not predominantly used in a qualified business use for any taxable year, the deduction allowed under section 168 with respect to such property for such taxable year and any subsequent taxable year shall be determined under section 168(g) (relating to alternative depreciation system).

(2) Recapture

(A) Where business use percentage does not exceed 50 percent

If—

(i) property is predominantly used in a qualified business use in a taxable year in which it is placed in service, and

(ii) such property is not predominantly used in a qualified business use for any subsequent taxable year,

then any excess depreciation shall be included in gross income for the taxable year referred to in clause (ii), and the depreciation deduction for the taxable year referred to in clause (ii) and any subsequent taxable years shall be determined under section 168(g) (relating to alternative depreciation system).

(B) Excess depreciation

For purposes of subparagraph (A), the term "excess depreciation" means the excess (if any) of—

(i) the amount of the depreciation deductions allowable with respect to the property for taxable years before the 1st taxable year in which the property was not predominantly used in a qualified business use, over

(ii) the amount which would have been so allowable if the property had not been predominantly used in a qualified business use for the taxable year in which it was placed in service.

(3) Property predominantly used in qualified business use

For purposes of this subsection, property shall be treated as predominantly used in a qualified business use for any taxable year if the business use percentage for such taxable year exceeds 50 percent.

(c) Treatment of leases

(1) Lessor's deductions not affected

This section shall not apply to any listed property leased or held for leasing by any person regularly engaged in the business of leasing such property.

(2) Lessee's deductions reduced

For purposes of determining the amount allowable as a deduction under this chapter for rentals or other payments under a lease for a period of 30 days or more of listed property, only the allowable percentage of such payments shall be taken into account.

(3) Allowable percentage

For purposes of paragraph (2), the allowable percentage shall be determined under tables prescribed by the Secretary. Such tables shall be prescribed so that the reduction in the deduction under paragraph (2) is substantially equivalent to the applicable restrictions contained in subsections (a) and (b).

(4) Lease term

In determining the term of any lease for purposes of paragraph (2), the rules of section 168(i)(3)(A) shall apply.

(5) Lessee recapture

Under regulations prescribed by the Secretary, rules similar to the rules of subsection (b)(3) shall apply to any lessee to which paragraph (2) applies.

(d) Definitions and special rules

For purposes of this section—

(1) Coordination with section 179

Any deduction allowable under section 179 with respect to any listed property shall be subject to the limitations of subsections (a) and (b), and the limitation of paragraph (3) of this subsection, in the same manner as if it were a depreciation deduction allowable under section 168.

(2) Subsequent depreciation deductions reduced for deductions allocable to personal use

Solely for purposes of determining the amount of the depreciation deduction for subsequent taxable years, if less than 100 percent of the use of any listed property during any taxable year is use in a trade or business (including the holding for the production of income), all of the use of such property during such taxable year shall be treated as use so described.

(3) Deductions of employee

(A) In general

Any employee use of listed property shall not be treated as use in a trade or business for purposes of determining the amount of any depreciation deduction allowable to the employee (or the amount of any deduction allowable to the employee for rentals or other payments under a lease of listed property) unless such use is for the convenience of the employer and required as a condition of employment.

(B) Employee use

For purposes of subparagraph (A), the term "employee use" means any use in connection with the performance of services as an employee.

(4) Listed property

(A) In general

Except as provided in subparagraph (B), the term "listed property" means—

(i) any passenger automobile,

(ii) any other property used as a means of transportation,

(iii) any property of a type generally used for purposes of entertainment, recreation, or amusement, and

(iv) any other property of a type specified by the Secretary by regulations.

(B) Exception for property used in business of transporting persons or property

Except to the extent provided in regulations, clause (ii) of subparagraph (A) shall not apply to any property substantially all of the use of which is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.

(5) Passenger automobile

(A) In general

Except as provided in subparagraph (B), the term "passenger automobile" means any 4-wheeled vehicle—

(i) which is manufactured primarily for use on public streets, roads, and highways, and

(ii) which is rated at 6,000 pounds unloaded gross vehicle weight or less.

In the case of a truck or van, clause (ii) shall be applied by substituting "gross vehicle weight" for "unloaded gross vehicle weight".

(B) Exception for certain vehicles

The term "passenger automobile" shall not include—

(i) any ambulance, hearse, or combination ambulance-hearse used by the taxpayer directly in a trade or business,

(ii) any vehicle used by the taxpayer directly in the trade or business of transporting persons or property for compensation or hire, and

(iii) under regulations, any truck or van.

(6) Business use percentage

(A) In general

The term "business use percentage" means the percentage of the use of any listed property during any taxable year which is a qualified business use.

(B) Qualified business use

Except as provided in subparagraph (C), the term "qualified business use" means any use in a trade or business of the taxpayer.

(C) Exception for certain use by 5-percent owners and related persons

(i) In general

The term "qualified business use" shall not include—

(I) leasing property to any 5-percent owner or related person,

(II) use of property provided as compensation for the performance of services by a 5-percent owner or related person, or

(III) use of property provided as compensation for the performance of services by any person not described in subclause (II) unless an amount is included in the gross income of such person with respect to such use, and, where required, there was withholding under chapter 24.

(ii) Special rule for aircraft

Clause (i) shall not apply with respect to any aircraft if at least 25 percent of the total use of the aircraft during the taxable year consists of qualified business use not described in clause (i).

(D) Definitions

For purposes of this paragraph—

(i) 5-percent owner

The term "5-percent owner" means any person who is a 5-percent owner with respect to the taxpayer (as defined in section 416(i)(1)(B)(i)).

(ii) Related person

The term "related person" means any person related to the taxpayer (within the meaning of section 267(b)).

(7) Automobile price inflation adjustment

(A) In general

In the case of any passenger automobile placed in service after 2018, subsection (a) shall be applied by increasing each dollar amount contained in such subsection by the automobile price inflation adjustment for the calendar year in which such automobile is placed in service. Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or if the increase is a multiple of $50, such increase shall be increased to the next higher multiple of $100).

(B) Automobile price inflation adjustment

For purposes of this paragraph—

(i) In general

The automobile price inflation adjustment for any calendar year is the percentage (if any) by which—

(I) the C-CPI-U automobile component for October of the preceding calendar year, exceeds

(II) the automobile component of the CPI (as defined in section 1(f)(4)) for October of 2017, multiplied by the amount determined under 1(f)(3)(B).

(ii) C-CPI-U automobile component

The term "C-CPI-U automobile component" means the automobile component of the Chained Consumer Price Index for All Urban Consumers (as described in section 1(f)(6)).

(8) Unrecovered basis

For purposes of subsection (a)(1), the term "unrecovered basis" means the adjusted basis of the passenger automobile determined after the application of subsection (a) and as if all use during the recovery period were use in a trade or business (including the holding of property for the production of income).

(9) All taxpayers holding interests in passenger automobile treated as 1 taxpayer

All taxpayers holding interests in any passenger automobile shall be treated as 1 taxpayer for purposes of applying subsection (a) to such automobile, and the limitations of subsection (a) shall be allocated among such taxpayers in proportion to their interests in such automobile.

(10) Special rule for property acquired in nonrecognition transactions

For purposes of subsection (a)(1) any property acquired in a nonrecognition transaction shall be treated as a single property originally placed in service in the taxable year in which it was placed in service after being so acquired.

(e) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations with respect to items properly included in, or excluded from, the adjusted basis of any listed property.

(Added Pub. L. 98–369, div. A, title I, §179(a), July 18, 1984, 98 Stat. 713; amended Pub. L. 99–44, §4, May 24, 1985, 99 Stat. 78; Pub. L. 99–514, title II, §201(d)(4), title XVIII, §1812(e)(1)(A), (C), (2)–(5), Oct. 22, 1986, 100 Stat. 2139, 2836, 2837; Pub. L. 100–647, title I, §§1002(a)(10), (b)(2), 1018(u)(3), Nov. 10, 1988, 102 Stat. 3354, 3357, 3590; Pub. L. 101–239, title VII, §7643(a), Dec. 19, 1989, 103 Stat. 2381; Pub. L. 101–508, title XI, §11813(b)(13)(A)–(E), Nov. 5, 1990, 104 Stat. 1388–554, 1388–555; Pub. L. 104–188, title I, §1702(h)(5), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 105–34, title IX, §971(a), Aug. 5, 1997, 111 Stat. 897; Pub. L. 105–206, title VI, §6009(c), July 22, 1998, 112 Stat. 812; Pub. L. 107–147, title VI, §602(b)(1), Mar. 9, 2002, 116 Stat. 59; Pub. L. 111–240, title II, §2043(a), Sept. 27, 2010, 124 Stat. 2560; Pub. L. 113–295, div. A, title II, §§220(j), 221(a)(34)(E), Dec. 19, 2014, 128 Stat. 4036, 4042; Pub. L. 115–97, title I, §§11002(d)(8), 13202(a), (b), Dec. 22, 2017, 131 Stat. 2061, 2108, 2109.)

Inflation Adjusted Items for Certain Calendar Years

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

Editorial Notes

Amendments

2017—Subsec. (a)(1)(A)(i). Pub. L. 115–97, §13202(a)(1)(A), substituted "$10,000" for "$2,560".

Subsec. (a)(1)(A)(ii). Pub. L. 115–97, §13202(a)(1)(B), substituted "$16,000" for "$4,100".

Subsec. (a)(1)(A)(iii). Pub. L. 115–97, §13202(a)(1)(C), substituted "$9,600" for "$2,450".

Subsec. (a)(1)(A)(iv). Pub. L. 115–97, §13202(a)(1)(D), substituted "$5,760" for "$1,475".

Subsec. (a)(1)(B)(ii). Pub. L. 115–97, §13202(a)(2)(A), substituted "$5,760" for "$1,475" in heading and text.

Subsec. (d)(4)(A)(iv), (v). Pub. L. 115–97, §13202(b)(1), redesignated cl. (v) as (iv) and struck out former cl. (iv) which read as follows: "any computer or peripheral equipment (as defined in section 168(i)(2)(B)), 'and' ".

Subsec. (d)(4)(B), (C). Pub. L. 115–97, §13202(b)(2), redesignated subpar. (C) as (B) and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: "The term 'listed property' shall not include any computer or peripheral equipment (as so defined) used exclusively at a regular business establishment and owned or leased by the person operating such establishment. For purposes of the preceding sentence, any portion of a dwelling unit shall be treated as a regular business establishment if (and only if) the requirements of section 280A(c)(1) are met with respect to such portion."

Subsec. (d)(7)(A). Pub. L. 115–97, §13202(a)(2)(B)(i), substituted "2018" for "1988".

Subsec. (d)(7)(B). Pub. L. 115–97, §11002(d)(8), amended subpar. (B) generally. Prior to amendment, subpar. (B) related to automobile price inflation adjustment.

Subsec. (d)(7)(B)(i)(II). Pub. L. 115–97, §13202(a)(2)(B)(ii), substituted "2017" for "1987".

2014—Subsec. (a)(1)(C). Pub. L. 113–295, §221(a)(34)(E), struck out subpar. (C) which related to special rules for certain automobiles modified to be propelled by a clean burning fuel and for purpose built passenger vehicles that were placed in service between Aug. 5, 1997, and Jan. 1, 2007.

Subsec. (d)(8), (10). Pub. L. 113–295, §220(j), substituted "subsection (a)(1)" for "subsection (a)(2)".

2010—Subsec. (d)(4)(A). Pub. L. 111–240 inserted " 'and' " at end of clause (iv), redesignated clause (vi) as (v), and struck out former cl. (v) which read as follows: "any cellular telephone (or other similar telecommunications equipment), and".

2002—Subsec. (a)(1)(C)(iii). Pub. L. 107–147 added cl. (iii).

1998—Subsec. (a)(1)(C)(ii). Pub. L. 105–206 substituted "subparagraphs (A) and (B)" for "subparagraph (A)".

1997—Subsec. (a)(1)(C). Pub. L. 105–34 added subpar. (C).

1996—Subsec. (a). Pub. L. 104–188 struck out "investment tax credit and" after "amount of" in heading.

1990—Pub. L. 101–508, §11813(b)(13)(E), struck out "investment tax credit and" after "Limitation on" in section catchline.

Subsec. (a)(1). Pub. L. 101–508, §11813(b)(13)(A)(i), redesignated par. (2) as (1) and struck out former par. (1) "Investment tax credit" which read as follows: "The amount of the credit determined under section 46(a) for any passenger automobile shall not exceed $675."

Subsec. (a)(2). Pub. L. 101–508, §11813(b)(13)(A)(i), redesignated par. (3) as (2). Former par. (2) redesignated (1).

Subsec. (a)(2)(B). Pub. L. 101–508, §11813(b)(13)(A)(ii), struck out "the credit determined under section 46(a) or" after "the amount of".

Subsec. (a)(3). Pub. L. 101–508, §11813(b)(13)(A)(i), redesignated par. (3) as (2).

Subsec. (a)(4). Pub. L. 101–508, §11813(b)(13)(A)(i), struck out par. (4) "Special rule where election of reduced credit in lieu of the basis adjustment" which read as follows: "In the case of any election under section 48(q)(4) with respect to any passenger automobile, the limitation of paragraph (1) applicable to such passenger automobile shall be 2/3 of the amount which would be so applicable but for this paragraph."

Subsec. (b). Pub. L. 101–508, §11813(b)(13)(B), redesignated pars. (2) to (4) as (1) to (3), respectively, and struck out former par. (1) "Investment tax credit" which read as follows: "For purposes of this subtitle, any listed property shall not be treated as section 38 property for any taxable year unless such property is predominantly used in a qualified business use for such taxable year."

Subsec. (c)(1). Pub. L. 101–508, §11813(b)(13)(C), struck out "credits and" after "Lessor's" in heading.

Subsec. (d)(3)(A). Pub. L. 101–508, §11813(b)(13)(D), struck out "the amount of any credit allowable under section 38 to the employee or" after "of determining".

1989—Subsec. (d)(4)(A)(v), (vi). Pub. L. 101–239 added cl. (v) and redesignated former cl. (v) as (vi).

1988—Subsec. (b)(3)(B)(i). Pub. L. 100–647, §1018(u)(3), substituted "depreciation deductions" for "recovery deductions".

Subsec. (d)(1). Pub. L. 100–647, §1002(b)(2), substituted "subsections (a) and (b), and the limitation of paragraph (3) of this subsection," for "subsections (a) and (b)".

Subsec. (d)(3)(A). Pub. L. 100–647, §1002(a)(10), substituted "depreciation deduction" for "recovery deduction".

1986—Subsec. (a)(2)(A). Pub. L. 99–514, §201(d)(4)(A)(i), (K), substituted "depreciation deduction" for "recovery deduction" in introductory provisions and substituted cls. (i) to (iv) for former cls. (i) and (ii) which read as follows:

"(i) $3,200 for the first taxable year in the recovery period, and

"(ii) $4,800 for each succeeding taxable year in the recovery period."

Subsec. (a)(2)(B). Pub. L. 99–514, §201(d)(4)(A)(ii), (K), substituted "$1,475" for "$4,800" in heading and text of cl. (ii), and "depreciation deduction" for "recovery deduction" in heading and text of cl. (iv).

Subsec. (a)(3)(B). Pub. L. 99–514, §201(d)(4)(K), substituted "depreciation deduction" for "recovery deduction" in two places.

Subsec. (b)(2). Pub. L. 99–514, §201(d)(4)(J), substituted "section 168(g) (relating to alternative depreciation system)" for "the straight line method over the earnings and profits life for such property".

Subsec. (b)(3)(A). Pub. L. 99–514, §201(d)(4)(B), (K), substituted "depreciation deduction" for "recovery deduction" and "section 168(g) (relating to alternative depreciation system)" for "the straight line method over the earnings and profits life" in closing provisions.

Subsec. (b)(4). Pub. L. 99–514, §201(d)(4)(C), in amending par. (4) generally, struck out heading "Definitions", redesignated as par. (4) former subpar. (A) heading and text, substituted "For purposes of this section, property" for "Property", and struck out former subpar. (B) definition of straight line method over earnings and profits life.

Subsec. (c)(4). Pub. L. 99–514, §201(d)(4)(D), substituted "section 168(i)(3)(A)" for "section 168(j)(6)(B)".

Subsec. (d)(1). Pub. L. 99–514, §201(d)(4)(E), substituted "depreciation deduction" for "recovery deduction".

Subsec. (d)(2). Pub. L. 99–514, §1812(e)(5), substituted "is use described in" for "is not use described in".

Pub. L. 99–514, §201(d)(4)(F), substituted "depreciation deduction" for "recovery deduction" and "use in a trade or business (including the holding for the production of income)" for "use described in section 168(c)(1) (defining recovery property)".

Subsec. (d)(3)(A). Pub. L. 99–514, §1812(e)(2), inserted "(or the amount of any deduction allowable to the employee for rentals or other payments under a lease of listed property)".

Subsec. (d)(4)(A)(iv). Pub. L. 99–514, §201(d)(4)(G), substituted "section 168(i)(2)(B)" for "section 168(j)(5)(D)".

Subsec. (d)(4)(B). Pub. L. 99–514, §1812(e)(3), inserted "and owned or leased by the person operating such establishment".

Subsec. (d)(4)(C). Pub. L. 99–514, §1812(e)(4), added subpar. (C).

Subsec. (d)(5)(A). Pub. L. 99–514, §1812(e)(1)(A), (C), substituted "unloaded gross vehicle weight" for "gross vehicle weight" in cl. (ii) and inserted at end "In the case of a truck or van, clause (ii) shall be applied by substituting 'gross vehicle weight' for 'unloaded gross vehicle weight'."

Subsec. (d)(8). Pub. L. 99–514, §201(d)(4)(H), amended par. (8) generally. Prior to amendment, par. (8) read as follows: "For purposes of subsection (a)(2), the term 'unrecovered basis' means the excess (if any) of—

"(A) the unadjusted basis (as defined in section 168(d)(1)(A)) of the passenger automobile, over

"(B) the amount of the recovery deductions which would have been allowable for taxable years in the recovery period determined after the application of subsection (a) and as if all use during the recovery period were use described in section 168(c)(1)."

Subsec. (d)(10). Pub. L. 99–514, §201(d)(4)(I), struck out ", notwithstanding any regulations prescribed under section 168(f)(7)," after "For purposes of subsection (a)(2)".

1985—Subsec. (a)(1). Pub. L. 99–44, §4(a)(1), substituted "$675" for "$1,000".

Subsec. (a)(2)(A)(i). Pub. L. 99–44, §4(a)(2)(A), substituted "$3,200" for "$4,000".

Subsec. (a)(2)(A)(ii), (B)(ii). Pub. L. 99–44, §4(a)(2)(B), substituted "$4,800" for "$6,000" wherever appearing in text and heading.

Subsec. (d)(7)(A). Pub. L. 99–44, §4(b)(1), inserted "placed in service after 1988" after "passenger automobile".

Subsec. (d)(7)(B)(i). Pub. L. 99–44, §4(b)(3), struck out last sentence which directed that in the case of calendar year 1984, the automobile price inflation adjustment would be zero.

Subsec. (d)(7)(B)(i)(II). Pub. L. 99–44, §4(b)(2), substituted "1987" for "1983".

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by section 11002(d)(8) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title.

Pub. L. 115–97, title I, §13202(c), Dec. 22, 2017, 131 Stat. 2109, provided that: "The amendments made by this section [amending this section] shall apply to property placed in service after December 31, 2017, in taxable years ending after such date."

Effective Date of 2014 Amendment

Amendment by section 221(a)(34)(E) of Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2010 Amendment

Pub. L. 111–240, title II, §2043(b), Sept. 27, 2010, 124 Stat. 2560, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009."

Effective Date of 2002 Amendment

Pub. L. 107–147, title VI, §602(c), Mar. 9, 2002, 116 Stat. 59, provided that: "The amendments made by this section [amending this section, section 30 of this title, and provisions set out as a note under this section] shall apply to property placed in service after December 31, 2001."

Effective Date of 1998 Amendment

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

Effective Date of 1997 Amendment

Pub. L. 105–34, title IX, §971(b), Aug. 5, 1997, 111 Stat. 897, as amended by Pub. L. 107–147, title VI, §602(b)(2), Mar. 9, 2002, 116 Stat. 59, provided that: "The amendments made by this section [amending this section] shall apply to property placed in service after the date of enactment of this Act [Aug. 5, 1997]."

Effective Date of 1996 Amendment

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

Effective Date of 1990 Amendment

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

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, §7643(b), Dec. 19, 1989, 103 Stat. 2381, provided that: "The amendment made by subsection (a) [amending this section] shall apply to property placed in service or leased in taxable years beginning after December 31, 1989."

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 201(d)(4) of Pub. L. 99–514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Pub. L. 99–514, set out as a note under section 168 of this title.

Amendment by section 201(d)(4) of Pub. L. 99–514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Pub. L. 99–514, set out as a note under section 46 of this title.

Amendment by section 1812(e)(1)(A), (C), (2)–(5) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1985 Amendment

Pub. L. 99–44, §6(e), May 24, 1985, 99 Stat. 79, provided that:

"(1) Except as provided in paragraph (2), the amendments made by section 4 [amending this section] shall apply to—

"(A) property placed in service after April 2, 1985, in taxable years ending after such date, and

"(B) property leased after April 2, 1985, in taxable years ending after such date.

"(2) The amendments made by section 4 [amending this section] shall not apply to any property—

"(A) acquired by the taxpayer pursuant to a binding contract in effect on April 1, 1985, and at all times thereafter, but only if the property is placed in service before August 1, 1985, or

"(B) of which the taxpayer is the lessee, but only if the lease is pursuant to a binding contract in effect on April 1, 1985, and at all times thereafter, and only if the taxpayer first uses such property under the lease before August 1, 1985."

Effective Date

Pub. L. 98–369, div. A, title I, §179(d), July 18, 1984, 98 Stat. 719, provided that:

"(1) In general.—

"(A) Except as provided in subparagraph (B), the amendments made by subsections (a) and (c) [enacting this section] shall apply to—

"(i) property placed in service after June 18, 1984, in taxable years ending after such date, and

"(ii) property leased after June 18, 1984, in taxable years ending after such date.

"(B) The amendments made by subsections (a) and (c) shall not apply to any property—

"(i) acquired by the taxpayer pursuant to a binding contract in effect on June 18, 1984, and at all times thereafter (or under construction on such date) but only if the property is placed in service before January 1, 1985 (January 1, 1987, in the case of 15-year real property), or

"(ii) of which the taxpayer is the lessee but only if the lease is pursuant to a binding contract in effect on June 18, 1984, and at all times thereafter and only if the taxpayer first uses such property under the lease before January 1, 1985 (January 1, 1987, in the case of 15-year real property).

For purposes of the preceding sentence, the term '15-year real property' includes 18-year real property.

"(2) Compliance provisions.—The amendments made by subsection (b) [amending sections 274, 6653, and 6695 of this title] shall apply to taxable years beginning after December 31, 1984."

Savings Provision

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

Plan Amendments Not Required Until January 1, 1989

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

Inflation Adjusted Items for Certain Years

Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:

2024—Revenue Procedure 2024–13.

2023—Revenue Procedure 2023–14.

2022—Revenue Procedure 2022–17.

2021—Revenue Procedure 2021–31.

2020—Revenue Procedure 2020–37.

2019—Revenue Procedure 2019–26.

2018—Revenue Procedure 2018–25.

2017—Revenue Procedure 2017–29.

2016—Revenue Procedure 2016–23.

2015—Revenue Procedure 2015–19.

2014—Revenue Procedure 2014–21.

2013—Revenue Procedure 2013–21.

2012—Revenue Procedure 2012–23.

2011—Revenue Procedure 2011–21.

2010—Revenue Procedure 2010–18.

2009—Revenue Procedure 2009–24.

2008—Revenue Procedure 2008–22.

2007—Revenue Procedure 2007–30.

2006—Revenue Procedure 2006–18.

2005—Revenue Procedure 2005–13.

2004—Revenue Procedure 2004–20.

2003—Revenue Procedure 2003–75.

2002—Revenue Procedure 2002–14.

2001—Revenue Procedure 2001–19.

2000—Revenue Procedure 2000–18.

1999—Revenue Procedure 99–14.

1998—Revenue Procedures 98–24 and 98–30.

1997—Revenue Procedure 97–20.

1996—Revenue Procedure 96–25.