26 U.S.C. § 6428A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 65 / Section 6428A: Additional 2020 recovery rebates for individuals
Additional 2020 recovery rebates for individuals
Status: in_force

(a) In general

In addition to the credit allowed under section 6428, in the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the sum of—

(1) $600 ($1,200 in the case of eligible individuals filing a joint return), plus

(2) an amount equal to the product of $600 multiplied by the number of qualifying children (within the meaning of section 24(c)) of the taxpayer.

(b) Treatment of credit

The credit allowed by subsection (a) shall be treated as allowed by subpart C of part IV of subchapter A of chapter 1.

(c) Limitation based on adjusted gross income

The amount of the credit allowed by subsection (a) (determined without regard to this subsection and subsection (e)) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer's adjusted gross income as exceeds—

(1) $150,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),

(2) $112,500 in the case of a head of household (as defined in section 2(b)), and

(3) $75,000 in the case of a taxpayer not described in paragraph (1) or (2).

(d) Eligible individual

For purposes of this section, the term "eligible individual" means any individual other than—

(1) any nonresident alien individual,

(2) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, and

(3) an estate or trust.

(e) Coordination with advance refunds of credit

(1) In general

The amount of the credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (f). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).

(2) Joint returns

Except as otherwise provided by the Secretary, in the case of a refund or credit made or allowed under subsection (f) with respect to a joint return, half of such refund or credit shall be treated as having been made or allowed to each individual filing such return.

(f) Advance refunds and credits

(1) In general

Each individual who was an eligible individual for such individual's first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.

(2) Advance refund amount

For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such taxable year if this section (other than subsection (e) and this subsection) had applied to such taxable year. For purposes of determining the advance refund amount with respect to such taxable year—

(A) any individual who was deceased before January 1, 2020, shall be treated for purposes of applying subsection (g) in the same manner as if the valid identification number of such person was not included on the return of tax for such taxable year, and

(B) no amount shall be determined under this subsection with respect to any qualifying child of the taxpayer if—

(i) the taxpayer was deceased before January 1, 2020, or

(ii) in the case of a joint return, both taxpayers were deceased before January 1, 2020.

(3) Timing and manner of payments

(A) Timing

(i) In general

The Secretary shall, subject to the provisions of this title, refund or credit any overpayment attributable to this subsection as rapidly as possible.

(ii) Deadline

(I) In general

Except as provided in subclause (II), no refund or credit shall be made or allowed under this subsection after January 15, 2021.

(II) Exception for mirror code possessions

In the case of a possession of the United States which has a mirror code tax system (as such terms are defined in section 272(c) of the COVID-related Tax Relief Act of 2020), no refund or credit shall be made or allowed under this subsection after the earlier of—

(aa) such date as is determined appropriate by the Secretary, or

(bb) September 30, 2021.

(B) Delivery of payments

Notwithstanding any other provision of law, the Secretary may certify and disburse refunds payable under this subsection electronically to—

(i) any account to which the payee authorized, on or after January 1, 2019, the delivery of a refund of taxes under this title or of a Federal payment (as defined in section 3332 of title 31, United States Code),

(ii) any account belonging to a payee from which that individual, on or after January 1, 2019, made a payment of taxes under this title, or

(iii) any Treasury-sponsored account (as defined in section 208.2 of title 31, Code of Federal Regulations).

(C) Waiver of certain rules

Notwithstanding section 3325 of title 31, United States Code, or any other provision of law, with respect to any payment of a refund under this subsection, a disbursing official in the executive branch of the United States Government may modify payment information received from an officer or employee described in section 3325(a)(1)(B) of such title for the purpose of facilitating the accurate and efficient delivery of such payment. Except in cases of fraud or reckless neglect, no liability under sections 3325, 3527, 3528, or 3529 of title 31, United States Code, shall be imposed with respect to payments made under this subparagraph.

(4) No interest

No interest shall be allowed on any overpayment attributable to this subsection.

(5) Application to certain individuals who do not file a return of tax for 2019

(A) In general

In the case of a specified individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may use information with respect to such individual which is provided by—

(i) in the case of a specified social security beneficiary or a specified supplemental security income recipient, the Commissioner of Social Security,

(ii) in the case of a specified railroad retirement beneficiary, the Railroad Retirement Board, and

(iii) in the case of a specified veterans beneficiary, the Secretary of Veterans Affairs (in coordination with, and with the assistance of, the Commissioner of Social Security if appropriate).

(B) Specified individual

For purposes of this paragraph, the term "specified individual" means any individual who is—

(i) a specified social security beneficiary,

(ii) a specified supplemental security income recipient,

(iii) a specified railroad retirement beneficiary, or

(iv) a specified veterans beneficiary.

(C) Specified social security beneficiary

(i) In general

For purposes of this paragraph, the term "specified social security beneficiary" means any individual who, for the last month for which the Secretary has available information as of the date of enactment of this section, is entitled to any monthly insurance benefit payable under title II of the Social Security Act (42 U.S.C. 401 et seq.), including payments made pursuant to sections 202(d), 223(g), and 223(i)(7) of such Act.

(ii) Exception

For purposes of this paragraph, the term "specified social security beneficiary" shall not include any individual if such benefit is not payable for such month by reason of section 202(x)(1)(A) of the Social Security Act (42 U.S.C. 402(x)(1)(A)) or section 1129A of such Act (42 U.S.C. 1320a–8a).

(D) Specified supplemental security income recipient

(i) In general

For purposes of this paragraph, the term "specified supplemental security income recipient" means any individual who, for the last month for which the Secretary has available information as of the date of enactment of this section, is eligible for a monthly benefit payable under title XVI of the Social Security Act (42 U.S.C. 1381 et seq.), including—

(I) payments made pursuant to section 1614(a)(3)(C) of such Act (42 U.S.C. 1382c(a)(3)(C)),

(II) payments made pursuant to section 1619(a) (42 U.S.C. 1382h(a)) or subsections (a)(4), (a)(7), or (p)(7) of section 1631 (42 U.S.C. 1383) of such Act, and

(III) State supplementary payments of the type referred to in section 1616(a) of such Act (42 U.S.C. 1382e(a)) (or payments of the type described in section 212(a) of Public Law 93–66) which are paid by the Commissioner under an agreement referred to in such section 1616(a) (or section 212(a) of Public Law 93–66).

(ii) Exception

For purposes of this paragraph, the term "specified supplemental security income recipient" shall not include any individual if such monthly benefit is not payable for such month by reason of section 1611(e)(1)(A) of the Social Security Act (42 U.S.C. 1382(e)(1)(A)) or section 1129A of such Act (42 U.S.C. 1320a–8a).

(E) Specified railroad retirement beneficiary

For purposes of this paragraph, the term "specified railroad retirement beneficiary" means any individual who, for the last month for which the Secretary has available information as of the date of enactment of this section, is entitled to a monthly annuity or pension payment payable (without regard to section 5(a)(ii) of the Railroad Retirement Act of 1974 (45 U.S.C. 231d(a)(ii))) under—

(i) section 2(a)(1) of such Act (45 U.S.C. 231a(a)(1)),

(ii) section 2(c) of such Act (45 U.S.C. 231a(c)),

(iii) section 2(d)(1) of such Act (45 U.S.C. 231a(d)(1)), or

(iv) section 7(b)(2) of such Act (45 U.S.C. 231f(b)(2)) with respect to any of the benefit payments described in subparagraph (C)(i).

(F) Specified veterans beneficiary

(i) In general

For purposes of this paragraph, the term "specified veterans beneficiary" means any individual who, for the last month for which the Secretary has available information as of the date of enactment of this section, is entitled to a compensation or pension payment payable under—

(I) section 1110, 1117, 1121, 1131, 1141, or 1151 of title 38, United States Code,

(II) section 1310, 1312, 1313, 1315, 1316, or 1318 of title 38, United States Code,

(III) section 1513, 1521, 1533, 1536, 1537, 1541, 1542, or 1562 of title 38, United States Code, or

(IV) section 1805, 1815, or 1821 of title 38, United States Code,

 to a veteran, surviving spouse, child, or parent as described in paragraph (2), (3), (4)(A)(ii), or (5) of section 101, title 38, United States Code.

(ii) Exception

For purposes of this paragraph, the term "specified veterans beneficiary" shall not include any individual if such compensation or pension payment is not payable, or was reduced, for such month by reason of section 1505 or 5313 of title 38, United States Code.

(G) Subsequent determinations and redeterminations not taken into account

For purposes of this section, any individual's status as a specified social security beneficiary, a specified supplemental security income recipient, a specified railroad retirement beneficiary, or a specified veterans beneficiary shall be unaffected by any determination or redetermination of any entitlement to, or eligibility for, any benefit, payment, or compensation, if such determination or redetermination occurs after the last month for which the Secretary has available information as of the date of enactment of this section.

(H) Payment to representative payees and fiduciaries

(i) In general

If the benefit, payment, or compensation referred to in subparagraph (C)(i), (D)(i), (E), or (F)(i) with respect to any specified individual is paid to a representative payee or fiduciary, payment by the Secretary under paragraph (3) with respect to such specified individual shall be made to such individual's representative payee or fiduciary and the entire payment shall be used only for the benefit of the individual who is entitled to the payment.

(ii) Application of enforcement provisions

(I) In the case of a payment described in clause (i) which is made with respect to a specified social security beneficiary or a specified supplemental security income recipient, section 1129(a)(3) of the Social Security Act (42 U.S.C. 1320a–8(a)(3)) shall apply to such payment in the same manner as such section applies to a payment under title II or XVI of such Act.

(II) In the case of a payment described in clause (i) which is made with respect to a specified railroad retirement beneficiary, section 13 of the Railroad Retirement Act (45 U.S.C. 231l) shall apply to such payment in the same manner as such section applies to a payment under such Act.

(III) In the case of a payment described in clause (i) which is made with respect to a specified veterans beneficiary, sections 5502, 6106, and 6108 of title 38, United States Code, shall apply to such payment in the same manner as such sections apply to a payment under such title.

(I) Ineligibility for special rule not to be interpreted as general ineligibility

An individual shall not fail to be treated as an eligible individual for purposes of this subsection or subsection (a) merely because such individual is not a specified individual (including by reason of subparagraph (C)(ii), (D)(ii), or (F)(ii)).

(6) Notice to taxpayer

As soon as practicable after the date on which the Secretary distributed any payment to an eligible taxpayer pursuant to this subsection, the Secretary shall send notice by mail to such taxpayer's last known address. Such notice shall indicate the method by which such payment was made, the amount of such payment, and a phone number for the appropriate point of contact at the Internal Revenue Service to report any failure to receive such payment.

(g) Identification number requirement

(1) In general

In the case of a return other than a joint return, the $600 amount in subsection (a)(1) shall be treated as being zero unless the taxpayer includes the valid identification number of the taxpayer on the return of tax for the taxable year.

(2) Joint returns

In the case of a joint return, the $1,200 amount in subsection (a)(1) shall be treated as being—

(A) $600 if the valid identification number of only 1 spouse is included on the return of tax for the taxable year, and

(B) zero if the valid identification number of neither spouse is so included.

(3) Qualifying child

A qualifying child of a taxpayer shall not be taken into account under subsection (a)(2) unless—

(A) the taxpayer includes the valid identification number of such taxpayer (or, in the case of a joint return, the valid identification number of at least 1 spouse) on the return of tax for the taxable year, and

(B) the valid identification number of such qualifying child is included on the return of tax for the taxable year.

(4) Valid identification number

(A) In general

For purposes of this subsection, the term "valid identification number" means a social security number (as such term is defined in section 24(h)(7)).

(B) Adoption taxpayer identification number

For purposes of paragraph (3)(B), in the case of a qualifying child who is adopted or placed for adoption, the term "valid identification number" shall include the adoption taxpayer identification number of such child.

(5) Special rule for members of the Armed Forces

Paragraph (2) shall not apply in the case where at least 1 spouse was a member of the Armed Forces of the United States at any time during the taxable year and the valid identification number of at least 1 spouse is included on the return of tax for the taxable year.

(6) Coordination with certain advance payments

In the case of any payment under subsection (f) which is based on information provided under paragraph (5) of such subsection, a valid identification number shall be treated for purposes of this subsection as included on the taxpayer's return of tax if such valid identification number is provided pursuant to subsection (f)(5).

(7) Mathematical or clerical error authority

Any omission of a correct valid identification number required under this subsection shall be treated as a mathematical or clerical error for purposes of applying section 6213(g)(2) to such omission.

(h) Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including any such measures as are deemed appropriate to avoid allowing multiple credits or rebates to a taxpayer.

(Added Pub. L. 116–260, div. N, title II, §272(a), Dec. 27, 2020, 134 Stat. 1965.)

Editorial Notes

References in Text

Section 272(c) of the COVID-related Tax Relief Act of 2020, referred to in subsec. (f)(3)(A)(ii)(II), is section 272(c) of title II of div. N of Pub. L. 116–260, which is set out as a note under this section.

The date of enactment of this section, referred to in subsec. (f)(5)(C) to (G), means the date of enactment of Pub. L. 116–260, which was approved Dec. 27, 2020.

The Social Security Act, referred to in subsec. (f)(5)(C), (D), (H)(ii)(I), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Titles II and XVI of the Act are classified generally to subchapters II (§401 et seq.) and XVI (§1381 et seq.), respectively, of chapter 7 of Title 42, The Public Health and Welfare. Sections 202 and 223 of the Act are classified to sections 402 and 423, respectively, of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.

Section 212(a) of Public Law 93–66, referred to in subsec. (f)(5)(D)(i)(III), is section 212(a) of title II of Pub. L. 93–66, July 9, 1973, 87 Stat. 155, which is set out as a note under section 1382 of Title 42.

The Railroad Retirement Act, referred to in subsec. (f)(5)(H)(ii)(II), probably means the Railroad Retirement Act of 1974, act Aug. 29, 1935, ch. 812, as amended generally by Pub. L. 93–445, title I, §101, Oct. 16, 1974, 88 Stat. 1305, which is classified generally to subchapter IV (§231 et seq.) of chapter 9 of Title 45, Railroads. For further details and complete classification of this Act to the Code, see Codification note set out preceding section 231 of Title 45, section 231t of Title 45, and Tables.

Statutory Notes and Related Subsidiaries

Treatment of United States Possessions

Pub. L. 116–260, div. N, title II, §272(c), Dec. 27, 2020, 134 Stat. 1971, provided that:

"(1) Payments to possessions.—

"(A) Mirror code possession.—The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the amendments made by this section [enacting this section and amending sections 6211 and 6213 of this title and section 1324 of Title 31, Money and Finance]. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.

"(B) Other possessions.—The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents.

"(2) Coordination with credit allowed against united states income taxes.—No credit shall be allowed against United States income taxes under section 6428A of the Internal Revenue Code of 1986 (as added by this section) to any person—

"(A) to whom a credit is allowed against taxes imposed by the possession by reason of the amendments made by this section, or

"(B) who is eligible for a payment under a plan described in paragraph (1)(B).

"(3) Definitions and special rules.—

"(A) Possession of the united states.—For purposes of this subsection, the term 'possession of the United States' includes the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.

"(B) Mirror code tax system.—For purposes of this subsection, the term 'mirror code tax system' means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

"(C) Treatment of payments.—For purposes of section 1324 of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section."

Administrative Provisions

Pub. L. 116–260, div. N, title II, §272(d), Dec. 27, 2020, 134 Stat. 1972, provided that:

"(1) Exception from reduction or offset.—Any refund payable by reason of section 6428A(f) of the Internal Revenue Code of 1986 (as added by this section), or any such refund payable by reason of subsection (c) of this section [set out above], shall not be—

"(A) subject to reduction or offset pursuant to section 3716 or 3720A of title 31, United States Code,

"(B) subject to reduction or offset pursuant to subsection (c), (d), (e), or (f) of section 6402 of the Internal Revenue Code of 1986, or

"(C) reduced or offset by other assessed Federal taxes that would otherwise be subject to levy or collection.

"(2) Assignment of benefits.—

"(A) In general.—The right of any person to any applicable payment shall not be transferable or assignable, at law or in equity, and no applicable payment shall be subject to, execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.

"(B) Encoding of payments.—In the case of an applicable payment described in subparagraph (E)(iii)(I) that is paid electronically by direct deposit through the Automated Clearing House (ACH) network, the Secretary of the Treasury (or the Secretary's delegate) shall—

"(i) issue the payment using a unique identifier that is reasonably sufficient to allow a financial institution to identify the payment as an applicable payment, and

"(ii) further encode the payment pursuant to the same specifications as required for a benefit payment defined in section 212.3 of title 31, Code of Federal Regulations.

"(C) Garnishment.—

"(i) Encoded payments.—In the case of a garnishment order that applies to an account that has received an applicable payment that is encoded as provided in subparagraph (B), a financial institution shall follow the requirements and procedures set forth in part 212 of title 31, Code of Federal Regulations, except—

"(I) notwithstanding section 212.4 of title 31, Code of Federal Regulations (and except as provided in subclause (II)), a financial institution shall not fail to follow the procedures of sections 212.5 and 212.6 of such title with respect to a garnishment order merely because such order has attached, or includes, a notice of right to garnish federal benefits issued by a State child support enforcement agency, and

"(II) a financial institution shall not, with regard to any applicable payment, be required to provide the notice referenced in sections 212.6 and 212.7 of title 31, Code of Federal Regulations.

"(ii) Other payments.—In the case of a garnishment order (other than an order that has been served by the United States) that has been received by a financial institution and that applies to an account into which an applicable payment that has not been encoded as provided in subparagraph (B) has been deposited electronically on any date during the lookback period or into which an applicable payment that has been deposited by check on any date in the lookback period, the financial institution, upon the request of the account holder, shall treat the amount of the funds in the account at the time of the request, up to the amount of the applicable payment (in addition to any amounts otherwise protected under part 212 of title 31, Code of Federal Regulations), as exempt from a garnishment order without requiring the consent of the party serving the garnishment order or the judgment creditor.

"(iii) Liability.—A financial institution that acts in good faith in reliance on clauses (i) or (ii) shall not be subject to liability or regulatory action under any Federal or State law, regulation, court or other order, or regulatory interpretation for actions concerning any applicable payments.

"(D) No reclamation rights.—This paragraph shall not alter the status of applicable payments as tax refunds or other nonbenefit payments for purpose of any reclamation rights of the Department of the Treasury or the Internal Revenue Service as per part 210 of title 31, Code of Federal Regulations.

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

"(i) Account holder.—The term 'account holder' means a natural person whose name appears in a financial institution's records as the direct or beneficial owner of an account.

"(ii) Account review.—The term 'account review' means the process of examining deposits in an account to determine if an applicable payment has been deposited into the account during the lookback period. The financial institution shall perform the account review following the procedures outlined in section 212.5 of title 31, Code of Federal Regulations and in accordance with the requirements of section 212.6 of title 31, Code of Federal Regulations.

"(iii) Applicable payment.—The term 'applicable payment' means—

"(I) any advance refund amount paid pursuant to section 6428A(f) of Internal Revenue Code of 1986 (as added by this section),

"(II) any payment made by a possession of the United States with a mirror code tax system (as defined in subsection (c) of this section) pursuant to such subsection which corresponds to a payment described in subclause (I), and

"(III) any payment made by a possession of the United States without a mirror code tax system (as so defined) pursuant to subsection (c) of this section.

"(iv) Garnishment.—The term 'garnishment' means execution, levy, attachment, garnishment, or other legal process.

"(v) Garnishment order.—The term 'garnishment order' means a writ, order, notice, summons, judgment, levy, or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.

"(vi) Lookback period.—The term 'lookback period' means the two month period that begins on the date preceding the date of account review and ends on the corresponding date of the month two months earlier, or on the last date of the month two months earlier if the corresponding date does not exist.

"(3) Agency information sharing and assistance.—

"(A) In general.—The Commissioner of Social Security, the Railroad Retirement Board, and the Secretary of Veterans Affairs shall each provide the Secretary of the Treasury (or the Secretary's delegate) such information and assistance as the Secretary of the Treasury (or the Secretary's delegate) may require for purposes of—

"(i) making payments under section 6428A(f) of the Internal Revenue Code of 1986 to individuals described in paragraph (5)(A) thereof, or

"(ii) providing administrative assistance to a possession of the United States (as defined in subsection (c)(3)(A)[set out above]) to allow such possession to promptly distribute payments under subsection (c) to its residents.

"(B) Exchange of information with possessions.—Any information provided to the Secretary of the Treasury (or the Secretary's delegate) pursuant to subparagraph (A)(ii) may be exchanged with a possession of the United States in accordance with the applicable tax coordination agreement for information exchange and administrative assistance that the Internal Revenue Service has agreed to with such possession."

Public Awareness Campaign

Pub. L. 116–260, div. N, title II, §272(e), Dec. 27, 2020, 134 Stat. 1975, provided that: "The Secretary of the Treasury (or the Secretary's delegate) shall conduct a public awareness campaign, in coordination with the Commissioner of Social Security and the heads of other relevant Federal agencies, to provide information regarding the availability of the credit and rebate allowed under section 6428A of the Internal Revenue Code of 1986 (as added by this section), including information with respect to individuals who may not have filed a tax return for taxable year 2019."
26 U.S.C. § 217 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 217: Moving expenses
Moving expenses
Status: in_force

(a) Deduction allowed

There shall be allowed as a deduction moving expenses paid or incurred during the taxable year in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of work.

(b) Definition of moving expenses

(1) In general

For purposes of this section, the term "moving expenses" means only the reasonable expenses—

(A) of moving household goods and personal effects from the former residence to the new residence, and

(B) of traveling (including lodging) from the former residence to the new place of residence.

Such term shall not include any expenses for meals.

(2) Individuals other than taxpayer

In the case of any individual other than the taxpayer, expenses referred to in paragraph (1) shall be taken into account only if such individual has both the former residence and the new residence as his principal place of abode and is a member of the taxpayer's household.

(c) Conditions for allowance

No deduction shall be allowed under this section unless—

(1) the taxpayer's new principal place of work—

(A) is at least 50 miles farther from his former residence than was his former principal place of work, or

(B) if he had no former principal place of work, is at least 50 miles from his former residence, and

(2) either—

(A) during the 12-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer is a full-time employee, in such general location, during at least 39 weeks, or

(B) during the 24-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer is a full-time employee or performs services as a self-employed individual on a full-time basis, in such general location, during at least 78 weeks, of which not less than 39 weeks are during the 12-month period referred to in subparagraph (A).

For purposes of paragraph (1), the distance between two points shall be the shortest of the more commonly traveled routes between such two points.

(d) Rules for application of subsection (c)(2)

(1) The condition of subsection (c)(2) shall not apply if the taxpayer is unable to satisfy such condition by reason of—

(A) death or disability, or

(B) involuntary separation (other than for willful misconduct) from the service of, or transfer for the benefit of, an employer after obtaining full-time employment in which the taxpayer could reasonably have been expected to satisfy such condition.

(2) If a taxpayer has not satisfied the condition of subsection (c)(2) before the time prescribed by law (including extensions thereof) for filing the return for the taxable year during which he paid or incurred moving expenses which would otherwise be deductible under this section, but may still satisfy such condition, then such expenses may (at the election of the taxpayer) be deducted for such taxable year notwithstanding subsection (c)(2).

(3) If—

(A) for any taxable year moving expenses have been deducted in accordance with the rule provided in paragraph (2), and

(B) the condition of subsection (c)(2) cannot be satisfied at the close of a subsequent taxable year,

then an amount equal to the expenses which were so deducted shall be included in gross income for the first such subsequent taxable year.

[(e) Repealed. Pub. L. 103–66, title XIII, §13213(a)(2)(A), Aug. 10, 1993, 107 Stat. 473]

(f) Self-employed individual

For purposes of this section, the term "self-employed individual" means an individual who performs personal services—

(1) as the owner of the entire interest in an unincorporated trade or business, or

(2) as a partner in a partnership carrying on a trade or business.

(g) Rules for members of the Armed Forces of the United States

In the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order and incident to a permanent change of station—

(1) the limitations under subsection (c) shall not apply;

(2) any moving and storage expenses which are furnished in kind (or for which reimbursement or an allowance is provided, but only to the extent of the expenses paid or incurred) to such member, his spouse, or his dependents, shall not be includible in gross income, and no reporting with respect to such expenses shall be required by the Secretary of Defense or the Secretary of Transportation, as the case may be; and

(3) if moving and storage expenses are furnished in kind (or if reimbursement or an allowance for such expenses is provided) to such member's spouse and his dependents with regard to moving to a location other than the one to which such member moves (or from a location other than the one from which such member moves), this section shall apply with respect to the moving expenses of his spouse and dependents—

(A) as if his spouse commenced work as an employee at a new principal place of work at such location; and

(B) without regard to the limitations under subsection (c).

(h) Special rules for foreign moves

(1) Allowance of certain storage fees

In the case of a foreign move, for purposes of this section, the moving expenses described in subsection (b)(1)(A) include the reasonable expenses—

(A) of moving household goods and personal effects to and from storage, and

(B) of storing such goods and effects for part or all of the period during which the new place of work continues to be the taxpayer's principal place of work.

(2) Foreign move

For purposes of this subsection, the term "foreign move" means the commencement of work by the taxpayer at a new principal place of work located outside the United States.

(3) United States defined

For purposes of this subsection and subsection (i), the term "United States" includes the possessions of the United States.

(i) Allowance of deductions in case of retirees or decedents who were working abroad

(1) In general

In the case of any qualified retiree moving expenses or qualified survivor moving expenses—

(A) this section (other than subsection (h)) shall be applied with respect to such expenses as if they were incurred in connection with the commencement of work by the taxpayer as an employee at a new principal place of work located within the United States, and

(B) the limitations of subsection (c)(2) shall not apply.

(2) Qualified retiree moving expenses

For purposes of paragraph (1), the term "qualified retiree moving expenses" means any moving expenses—

(A) which are incurred by an individual whose former principal place of work and former residence were outside the United States, and

(B) which are incurred for a move to a new residence in the United States in connection with the bona fide retirement of the individual.

(3) Qualified survivor moving expenses

For purposes of paragraph (1), the term "qualified survivor moving expenses" means moving expenses—

(A) which are paid or incurred by the spouse or any dependent of any decedent who (as of the time of his death) had a principal place of work outside the United States, and

(B) which are incurred for a move which begins within 6 months after the death of such decedent and which is to a residence in the United States from a former residence outside the United States which (as of the time of the decedent's death) was the residence of such decedent and the individual paying or incurring the expense.

(j) Regulations

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

(k) Suspension of deduction for taxable years 2018 through 2025

Except in the case of an individual to whom subsection (g) applies, this section shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

(Added Pub. L. 88–272, title II, §213(a)(1), Feb. 26, 1964, 78 Stat. 50; amended Pub. L. 91–172, title II, §231(a), Dec. 30, 1969, 83 Stat. 577; Pub. L. 94–455, title V, §506 (a)–(c), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1568, 1834; Pub. L. 95–615, title II, §204, Nov. 8, 1978, 92 Stat. 3106; Pub. L. 103–66, title XIII, §13213(a)(1)–(2)(D), (b), Aug. 10, 1993, 107 Stat. 473, 474; Pub. L. 115–97, title I, §11049(a), Dec. 22, 2017, 131 Stat. 2088.)

Editorial Notes

Prior Provisions

A prior section 217 was renumbered section 224 of this title.

Amendments

Subsec. (k). Pub. L. 115–97 added subsec. (k).

1993—Subsec. (b). Pub. L. 103–66, §13213(a)(1), amended subsec. (b) generally, restating former par. (1)(A) and (B) as par. (1) and former par. (3)(C) as par. (2) and striking out former par. (1)(C) to (E) which included certain traveling, meals, lodging, and residence sale, purchase, and lease expenses in the term "moving expenses", par. (2) which defined "qualified residence sale, purchase, or lease expenses", and par. (3)(A) and (B) which placed dollar limits on the amount allowed to be deducted as moving expenses.

Subsec. (c)(1). Pub. L. 103–66, §13213(b), substituted "50 miles" for "35 miles" in subpars. (A) and (B).

Subsec. (e). Pub. L. 103–66, §13213(a)(2)(A), struck out heading and text of subsec. (e). Text read as follows: "The amount realized on the sale of the residence described in subparagraph (A) of subsection (b)(2) shall not be decreased by the amount of any expenses described in such subparagraph which are allowed as a deduction under subsection (a), and the basis of a residence described in subparagraph (B) of subsection (b)(2) shall not be increased by the amount of any expenses described in such subparagraph which are allowed as a deduction under subsection (a). This subsection shall not apply to any expenses with respect to which an amount is included in gross income under subsection (d)(3)."

Subsec. (f). Pub. L. 103–66, §13213(a)(2)(B), amended heading and text of subsec. (f) generally. Prior to amendment, text read as follows:

"(1) Definition.—For purposes of this section, the term 'self-employed individual' means an individual who performs personal services—

"(A) as the owner of the entire interest in an unincorporated trade or business, or

"(B) as a partner in a partnership carrying on a trade or business.

"(2) Rule for application of subsections (b)(1)(c) and (d).—For purposes of subparagraphs (C) and (D) of subsection (b)(1), an individual who commences work at a new principal place of work as a self-employed individual shall be treated as having obtained employment when he has made substantial arrangements to commence such work."

Subsec. (g)(3). Pub. L. 103–66, §13213(a)(2)(C), inserted "and" at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: "for purposes of subsection (b)(3), as if such place of work was within the same general location as the member's new principal place of work, and".

Subsec. (h). Pub. L. 103–66, §13213(a)(2)(D), redesignated pars. (2) to (4) as (1) to (3), respectively, and struck out heading and text of former par. (1). Text read as follows: "In the case of a foreign move—

"(A) subsection (b)(1)(D) shall be applied by substituting '90 consecutive days' for '30 consecutive days',

"(B) subsection (b)(3)(A) shall be applied by substituting '$4,500' for '$1,500' and by substituting '$6,000' for '$3,000', and

"(C) subsection (b)(3)(B) shall be applied as if the last sentence of such subsection read as follows: 'In the case of a husband and wife filing separate returns, subparagraph (A) shall be applied by substituting "$2,250" for "$4,500", and by substituting "$3,000" for "$6,000".' "

1978—Subsecs. (h) to (j). Pub. L. 95–615 added subsecs. (h) and (i) and redesignated former subsec. (h) as (j).

1976—Subsec. (b)(3)(A). Pub. L. 94–455, §506(b)(1), (2), substituted "$1,500" for "$1,000" after "(1) shall not exceed" and "$3,000" for "$2,500" after "lease expenses shall not exceed".

Subsec. (b)(3)(B). Pub. L. 94–455, §506(b)(3), substituted " '$750' for '$1,500' " for " '$500' for '$1,000' " after "applied by substituting" and " '$1,500' for '$3,000' " for " '$1,250' for '$2,500' " after "and by substituting".

Subsec. (c)(1)(A), (B). Pub. L. 94–455, §506(a), substituted "35" for "50" after "at least".

Subsecs. (g), (h). Pub. L. 94–455, §§506(c), 1906(b)(13)(A), added subsec. (g), redesignated former subsec. (g) as (h) and struck out "or his delegate" after "Secretary".

1969—Pub. L. 91–172 substantially reenacted existing provisions and extended the coverage to self-employed persons working at the new location for 78 weeks, made it a requirement that the new principal place of work be located 50 miles from the former residence, and redefined the deduction to include costs of house-hunting trips, temporary living expenses prior to locating a new home, and expenses of selling an old home or buying a new one.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §11049(b), Dec. 22, 2017, 131 Stat. 2089, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable to expenses incurred after Dec. 31, 1993, see section 13213(e) of Pub. L. 103–66 set out as a note under section 62 of this title.

Effective Date of 1978 Amendment; Election of Prior Law

Amendment by Pub. L. 95–615 applicable to taxable years beginning after Dec. 31, 1977, with provision for election of prior law, see section 209 of Pub. L. 95–615, set out as an Effective Date of 1978 Amendment note under section 911 of this title.

Effective Date of 1976 Amendment

Pub. L. 94–455, title V, §506(d), Oct. 4, 1976, 90 Stat. 1569, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall apply to taxable years beginning after December 31, 1976."

Effective Date of 1969 Amendment

Pub. L. 91–172, title II, §231(d), Dec. 30, 1969, 83 Stat. 580, as amended by Pub. L. 91–642, §2, Dec. 31, 1970, 84 Stat. 1880; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by this section [enacting section 82 of this title and amending this section and sections 1001 and 1016 of this title] shall apply to taxable years beginning after December 31, 1969, except that—

"(1) section 217 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)) shall not apply to any item to the extent that the taxpayer received or accrued reimbursement or other expense allowance for such item in a taxable year beginning on or before December 31, 1969, which was not included in his gross income; and

"(2) the amendments made by this section shall not apply (at the election of the taxpayer made at such time and manner as the Secretary of the Treasury or his delegate prescribes) with respect to moving expenses paid or incurred before January 1, 1971, in connection with the commencement of work by the taxpayer as an employee at a new principal place of work of which the taxpayer had been notified by his employer on or before December 19, 1969."

Effective Date

Section applicable to expenses incurred after Dec. 31, 1963, in taxable years ending after such date, see section 213(d) of Pub. L. 88–272, set out as an Effective Date of 1964 Amendment note under section 62 of this title.

Moving Expenses of Members of the Uniformed Services

Pub. L. 93–490, §2, Oct. 26, 1974, 88 Stat. 1466, authorized the Secretary of the Treasury, applicable with respect to taxable years ending before January 1, 1976, to:

(1) enter into an agreement with the Secretary concerned under which the Secretary concerned would not be required to withhold tax on, or to report, moving expense reimbursements made to members of the armed forces;

(2) permit any taxpayer who was a member of the armed forces not to include in adjusted gross income the amount of any reimbursement in kind of moving expenses made by the Secretary concerned; and

(3) permit any taxpayer who was a member of the armed forces to deduct any amount paid by him as moving expenses in connection with any move required by the Secretary concerned, in excess of any reimbursement received for such expenses, without regard to the provisions of subsec. (c) of this section, to the extent it was otherwise deductible under this section.
26 U.S.C. § 62 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 62: Adjusted gross income defined
Adjusted gross income defined
Status: in_force

(a) General rule

For purposes of this subtitle, the term "adjusted gross income" means, in the case of an individual, gross income minus the following deductions:

(1) Trade and business deductions

The deductions allowed by this chapter (other than by part VII of this subchapter) which are attributable to a trade or business carried on by the taxpayer, if such trade or business does not consist of the performance of services by the taxpayer as an employee.

(2) Certain trade and business deductions of employees

(A) Reimbursed expenses of employees

The deductions allowed by part VI (section 161 and following) which consist of expenses paid or incurred by the taxpayer, in connection with the performance by him of services as an employee, under a reimbursement or other expense allowance arrangement with his employer. The fact that the reimbursement may be provided by a third party shall not be determinative of whether or not the preceding sentence applies.

(B) Certain expenses of performing artists

The deductions allowed by section 162 which consist of expenses paid or incurred by a qualified performing artist in connection with the performances by him of services in the performing arts as an employee.

(C) Certain expenses of officials

The deductions allowed by section 162 which consist of expenses paid or incurred with respect to services performed by an official as an employee of a State or a political subdivision thereof in a position compensated in whole or in part on a fee basis.

(D) Certain expenses of elementary and secondary school teachers

The deductions allowed by section 162 which consist of expenses, not in excess of $250, paid or incurred by an eligible educator—

(i) by reason of the participation of the educator in professional development courses related to the curriculum in which the educator provides instruction or to the students for which the educator provides instruction, and

(ii) in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom.

(E) Certain expenses of members of reserve components of the Armed Forces of the United States

The deductions allowed by section 162 which consist of expenses, determined at a rate not in excess of the rates for travel expenses (including per diem in lieu of subsistence) authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, paid or incurred by the taxpayer in connection with the performance of services by such taxpayer as a member of a reserve component of the Armed Forces of the United States for any period during which such individual is more than 100 miles away from home in connection with such services.

(3) Losses from sale or exchange of property

The deductions allowed by part VI (sec. 161 and following) as losses from the sale or exchange of property.

(4) Deductions attributable to rents and royalties

The deductions allowed by part VI (sec. 161 and following), by section 212 (relating to expenses for production of income), and by section 611 (relating to depletion) which are attributable to property held for the production of rents or royalties.

(5) Certain deductions of life tenants and income beneficiaries of property

In the case of a life tenant of property, or an income beneficiary of property held in trust, or an heir, legatee, or devisee of an estate, the deduction for depreciation allowed by section 167 and the deduction allowed by section 611.

(6) Pension, profit-sharing, and annuity plans of self-employed individuals

In the case of an individual who is an employee within the meaning of section 401(c)(1), the deduction allowed by section 404.

(7) Retirement savings

The deduction allowed by section 219 (relating to deduction of certain retirement savings).

[(8) Repealed. Pub. L. 104–188, title I, §1401(b)(4), Aug. 20, 1996, 110 Stat. 1788]

(9) Penalties forfeited because of premature withdrawal of funds from time savings accounts or deposits

The deductions allowed by section 165 for losses incurred in any transaction entered into for profit, though not connected with a trade or business, to the extent that such losses include amounts forfeited to a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank or homestead association as a penalty for premature withdrawal of funds from a time savings account, certificate of deposit, or similar class of deposit.

[(10) Repealed. Pub. L. 115–97, title I, §11051(b)(2)(A), Dec. 22, 2017, 131 Stat. 2089]

(11) Reforestation expenses

The deduction allowed by section 194.

(12) Certain required repayments of supplemental unemployment compensation benefits

The deduction allowed by section 165 for the repayment to a trust described in paragraph (9) or (17) of section 501(c) of supplemental unemployment compensation benefits received from such trust if such repayment is required because of the receipt of trade readjustment allowances under section 231 or 232 of the Trade Act of 1974 (19 U.S.C. 2291 and 2292).

(13) Jury duty pay remitted to employer

Any deduction allowable under this chapter by reason of an individual remitting any portion of any jury pay to such individual's employer in exchange for payment by the employer of compensation for the period such individual was performing jury duty. For purposes of the preceding sentence, the term "jury pay" means any payment received by the individual for the discharge of jury duty.

[(14) Repealed. Pub. L. 113–295, div. A, title II, §221(a)(34)(C), Dec. 19, 2014, 128 Stat. 4042]

(15) Moving expenses

The deduction allowed by section 217.

(16) Archer MSAs

The deduction allowed by section 220.

(17) Interest on education loans

The deduction allowed by section 221.

[(18) Repealed. Pub. L. 116–260, div. EE, title I, §104(b)(2)(A), Dec. 27, 2020, 134 Stat. 3041]

(19) Health savings accounts

The deduction allowed by section 223.

(20) Costs involving discrimination suits, etc.

Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination (as defined in subsection (e)) or a claim of a violation of subchapter III of chapter 37 of title 31, United States Code, or a claim made under section 1862(b)(3)(A) of the Social Security Act (42 U.S.C. 1395y(b)(3)(A)). The preceding sentence shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of a judgment or settlement (whether by suit or agreement and whether as lump sum or periodic payments) resulting from such claim.

(21) Attorneys' fees relating to awards to whistleblowers

(A) In general

Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under—

(i) section 7623(b), or

(ii) in the case of taxable years beginning after December 31, 2017, any action brought under—

(I) section 21F of the Securities Exchange Act of 1934 (15 U.S.C. 78u–6),

(II) a State false claims act, including a State false claims act with qui tam provisions, or

(III) section 23 of the Commodity Exchange Act (7 U.S.C. 26).

(B) May not exceed award

Subparagraph (A) shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award.

Nothing in this section shall permit the same item to be deducted more than once. Any deduction allowed by section 199A shall not be treated as a deduction described in any of the preceding paragraphs of this subsection.

(b) Qualified performing artist

(1) In general

For purposes of subsection (a)(2)(B), the term "qualified performing artist" means, with respect to any taxable year, any individual if—

(A) such individual performed services in the performing arts as an employee during the taxable year for at least 2 employers,

(B) the aggregate amount allowable as a deduction under section 162 in connection with the performance of such services exceeds 10 percent of such individual's gross income attributable to the performance of such services, and

(C) the adjusted gross income of such individual for the taxable year (determined without regard to subsection (a)(2)(B)) does not exceed $16,000.

(2) Nominal employer not taken into account

An individual shall not be treated as performing services in the performing arts as an employee for any employer during any taxable year unless the amount received by such individual from such employer for the performance of such services during the taxable year equals or exceeds $200.

(3) Special rules for married couples

(A) In general

Except in the case of a husband and wife who lived apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, subsection (a)(2)(B) shall apply only if the taxpayer and his spouse file a joint return for the taxable year.

(B) Application of paragraph (1)

In the case of a joint return—

(i) paragraph (1) (other than subparagraph (C) thereof) shall be applied separately with respect to each spouse, but

(ii) paragraph (1)(C) shall be applied with respect to their combined adjusted gross income.

(C) Determination of marital status

For purposes of this subsection, marital status shall be determined under section 7703(a).

(D) Joint return

For purposes of this subsection, the term "joint return" means the joint return of a husband and wife made under section 6013.

(c) Certain arrangements not treated as reimbursement arrangements

For purposes of subsection (a)(2)(A), an arrangement shall in no event be treated as a reimbursement or other expense allowance arrangement if—

(1) such arrangement does not require the employee to substantiate the expenses covered by the arrangement to the person providing the reimbursement, or

(2) such arrangement provides the employee the right to retain any amount in excess of the substantiated expenses covered under the arrangement.

The substantiation requirements of the preceding sentence shall not apply to any expense to the extent that substantiation is not required under section 274(d) for such expense by reason of the regulations prescribed under the 2nd sentence thereof.

(d) Definition; special rules

(1) Eligible educator

(A) In general

For purposes of subsection (a)(2)(D), the term "eligible educator" means, with respect to any taxable year, an individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

(B) School

The term "school" means any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law.

(2) Coordination with exclusions

A deduction shall be allowed under subsection (a)(2)(D) for expenses only to the extent the amount of such expenses exceeds the amount excludable under section 135, 529(c)(1), or 530(d)(2) for the taxable year.

(3) Inflation adjustment

In the case of any taxable year beginning after 2015, the $250 amount in subsection (a)(2)(D) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2014" for "calendar year 2016" in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.

(e) Unlawful discrimination defined

For purposes of subsection (a)(20), the term "unlawful discrimination" means an act that is unlawful under any of the following:

(1) Section 302 of the Civil Rights Act of 1991 (42 U.S.C. 2000e–16b).

(2) Section 201, 202, 203, 204, 205, 206, 207, or 208 of the Congressional Accountability Act of 1995 (2 U.S.C. 1311, 1312, 1313, 1314, 1315, 1316, or 1317).1

(3) The National Labor Relations Act (29 U.S.C. 151 et seq.).

(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.).

(5) Section 4 or 15 of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623 or 633a).

(6) Section 501 or 504 of the Rehabilitation Act of 1973 (29 U.S.C. 791 or 794).

(7) Section 510 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1140).

(8) Title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.).

(9) The Employee Polygraph Protection Act of 1988 (29 U.S.C. 2001 et seq.).

(10) The Worker Adjustment and Retraining Notification Act (29 U.S.C. 2102 et seq.).

(11) Section 105 of the Family and Medical Leave Act of 1993 (29 U.S.C. 2615).

(12) Chapter 43 of title 38, United States Code (relating to employment and reemployment rights of members of the uniformed services).

(13) Section 1977, 1979, or 1980 of the Revised Statutes (42 U.S.C. 1981, 1983, or 1985).

(14) Section 703, 704, or 717 of the Civil Rights Act of 1964 (42 U.S.C. 2000e–2, 2000e–3, or 2000e–16).

(15) Section 804, 805, 806, 808, or 818 of the Fair Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or 3617).

(16) Section 102, 202, 302, or 503 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12112, 12132, 12182, or 12203).

(17) Any provision of Federal law (popularly known as whistleblower protection provisions) prohibiting the discharge of an employee, the discrimination against an employee, or any other form of retaliation or reprisal against an employee for asserting rights or taking other actions permitted under Federal law.

(18) Any provision of Federal, State, or local law, or common law claims permitted under Federal, State, or local law—

(i) providing for the enforcement of civil rights, or

(ii) regulating any aspect of the employment relationship, including claims for wages, compensation, or benefits, or prohibiting the discharge of an employee, the discrimination against an employee, or any other form of retaliation or reprisal against an employee for asserting rights or taking other actions permitted by law.

(Aug. 16, 1954, ch. 736, 68A Stat. 17; Pub. L. 87–792, §7(b), Oct. 10, 1962, 76 Stat. 828; Pub. L. 88–272, title II, §213(b), Feb. 26, 1964, 78 Stat. 52; Pub. L. 91–172, title V, §531(b), Dec. 30, 1969, 83 Stat. 655; Pub. L. 93–406, title II, §§2002(a)(2), 2005(c)(9), Sept. 2, 1974, 88 Stat. 959, 992; Pub. L. 93–483, §6(a), Oct. 26, 1974, 88 Stat. 1458; Pub. L. 94–455, title V, §502(a), title XV, §1501(b)(1), title XIX, §1901(a)(8), (9), Oct. 4, 1976, 90 Stat. 1559, 1735, 1765; Pub. L. 95–615, §203(b), Nov. 8, 1978, 92 Stat. 3106; Pub. L. 96–451, title III, §301(b), Oct. 14, 1980, 94 Stat. 1990; Pub. L. 96–608, §3(a), Dec. 28, 1980, 94 Stat. 3551; Pub. L. 97–34, title I, §§103(b), 112(b)(2), title III, §311(h)(1), Aug. 13, 1981, 95 Stat. 187, 195, 282; Pub. L. 97–354, §5(a)(17), Oct. 19, 1982, 96 Stat. 1693; Pub. L. 98–369, div. A, title IV, §491(d)(2), July 18, 1984, 98 Stat. 849; Pub. L. 99–514, title I, §§131(b)(1), 132(b), (c), title III, §301(b)(1), title XVIII, §1875(c)(3), Oct. 22, 1986, 100 Stat. 2113, 2115, 2116, 2217, 2894; Pub. L. 100–485, title VII, §702(a), Oct. 13, 1988, 102 Stat. 2426; Pub. L. 100–647, title I, §1001(b)(3)(A), title VI, §6007(b), Nov. 10, 1988, 102 Stat. 3349, 3687; Pub. L. 101–508, title XI, §11802(e)(1), Nov. 5, 1990, 104 Stat. 1388–530; Pub. L. 102–318, title V, §521(b)(2), July 3, 1992, 106 Stat. 310; Pub. L. 102–486, title XIX, §1913(a)(2), Oct. 24, 1992, 106 Stat. 3019; Pub. L. 103–66, title XIII, §13213(c)(1), Aug. 10, 1993, 107 Stat. 474; Pub. L. 104–188, title I, §1401(b)(4), Aug. 20, 1996, 110 Stat. 1788; Pub. L. 104–191, title III, §301(b), Aug. 21, 1996, 110 Stat. 2048; Pub. L. 105–34, title II, §202(b), title IX, §975(a), Aug. 5, 1997, 111 Stat. 808, 898; Pub. L. 106–554, §1(a)(7) [title II, §202(b)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–629; Pub. L. 107–16, title IV, §431(b), June 7, 2001, 115 Stat. 68; Pub. L. 107–147, title IV, §406(a), (b), Mar. 9, 2002, 116 Stat. 43; Pub. L. 108–121, title I, §109(b), Nov. 11, 2003, 117 Stat. 1341; Pub. L. 108–173, title XII, §1201(b), Dec. 8, 2003, 117 Stat. 2476; Pub. L. 108–311, title III, §307(a), Oct. 4, 2004, 118 Stat. 1179; Pub. L. 108–357, title VII, §703(a), (b), Oct. 22, 2004, 118 Stat. 1546, 1547; Pub. L. 109–135, title IV, §412(q), Dec. 21, 2005, 119 Stat. 2638; Pub. L. 109–432, div. A, title I, §108(a), title IV, §406(a)(3), Dec. 20, 2006, 120 Stat. 2939, 2959; Pub. L. 110–343, div. C, title II, §203(a), Oct. 3, 2008, 122 Stat. 3864; Pub. L. 111–312, title VII, §721(a), Dec. 17, 2010, 124 Stat. 3316; Pub. L. 112–240, title II, §201(a), Jan. 2, 2013, 126 Stat. 2323; Pub. L. 113–295, div. A, title I, §101(a), title II, §221(a)(34)(C), Dec. 19, 2014, 128 Stat. 4012, 4042; Pub. L. 114–113, div. Q, title I, §104(a)–(c), Dec. 18, 2015, 129 Stat. 3045; Pub. L. 115–97, title I, §§11002(d)(1)(J), 11011(b)(1), 11051(b)(2)(A), Dec. 22, 2017, 131 Stat. 2060, 2070, 2089; Pub. L. 115–123, div. D, title II, §41107(a), Feb. 9, 2018, 132 Stat. 158; Pub. L. 115–141, div. T, §101(a)(2)(B), div. U, title IV, §401(a)(31), (32), Mar. 23, 2018, 132 Stat. 1155, 1185, 1186; Pub. L. 116–92, div. A, title XI, §1122(d)(2)(B), Dec. 20, 2019, 133 Stat. 1609; Pub. L. 116–136, div. A, title II, §2204(a), (b), Mar. 27, 2020, 134 Stat. 345; Pub. L. 116–260, div. EE, title I, §104(b)(2)(A), title II, §212(c), Dec. 27, 2020, 134 Stat. 3041, 3068.)

Inflation Adjusted Items for Certain Years

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

Editorial Notes

References in Text

Section 208 of the Congressional Accountability Act of 1995, referred to in subsec. (e)(2), was formerly section 207 of the Act prior to renumbering by Pub. L. 116–92, and is classified to section 1317 of Title 2, The Congress. A new section 207 of the Act was enacted by Pub. L. 116–92 and is classified to section 1316b of Title 2. Pub. L. 116–92 amended list of Act sections in subsec. (e)(2) of this section without corresponding amendment of Code citations, see 2019 Amendment note below.

The National Labor Relations Act, referred to in subsec. (e)(3), is act July 5, 1935, ch. 372, 49 Stat. 449, which is classified generally to subchapter II (§151 et seq.) of chapter 7 of Title 29, Labor. For complete classification of this Act to the Code, see section 167 of Title 29 and Tables.

The Fair Labor Standards Act of 1938, referred to in subsec. (e)(4), is act June 25, 1938, ch. 676, 52 Stat. 1060, which is classified generally to chapter 8 (§201 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see section 201 of Title 29 and Tables.

The Education Amendments of 1972, referred to in subsec. (e)(8), is Pub. L. 92–318, June 23, 1972, 86 Stat. 235. Title IX of the Act, known as the Patsy Takemoto Mink Equal Opportunity in Education Act, is classified principally to chapter 38 (§1681 et seq.) of Title 20, Education. For complete classification of title IX to the Code, see Short Title note set out under section 1681 of Title 20 and Tables.

The Employee Polygraph Protection Act of 1988, referred to in subsec. (e)(9), is Pub. L. 100–347, June 27, 1988, 102 Stat. 646, which is classified generally to chapter 22 (§2001 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 2001 of Title 29 and Tables.

The Worker Adjustment and Retraining Notification Act, referred to in subsec. (e)(10), is Pub. L. 100–379, Aug. 4, 1988, 102 Stat. 890, which is classified generally to chapter 23 (§2101 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 2101 of Title 29 and Tables.

Amendments

2020—Subsec. (a)(18). Pub. L. 116–260, §104(b)(2)(A), struck out par. (18). Text read as follows: "The deduction allowed by section 222."

Subsec. (a)(22). Pub. L. 116–260, §212(c)(1), struck out par. (22). Text read as follows: "In the case of taxable years beginning in 2020, the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the taxable year."

Pub. L. 116–136, §2204(a), added par. (22).

Subsec. (f). Pub. L. 116–260, §212(c)(2), struck out subsec. (f) which defined terms relating to qualified charitable contributions.

Pub. L. 116–136, §2204(b), added subsec. (f).

2019—Subsec. (e)(2). Pub. L. 116–92 substituted "207, or 208" for "or 207".

2018—Subsec. (a). Pub. L. 115–141, §101(a)(2)(B), substituted "Any deduction" for "The deduction" in concluding provisions.

Subsec. (a)(20). Pub. L. 115–141, §401(a)(31), inserted comma after "United States Code".

Subsec. (a)(21). Pub. L. 115–123 amended par. (21) generally. Prior to amendment, text read as follows: "Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under section 7623(b) (relating to awards to whistleblowers). The preceding sentence shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award."

Subsec. (e)(1). Pub. L. 115–141, §401(a)(32), substituted "(42 U.S.C. 2000e–16b)" for "(2 U.S.C. 1202)".

2017—Subsec. (a). Pub. L. 115–97, §11011(b)(1), inserted at end of concluding provisions "The deduction allowed by section 199A shall not be treated as a deduction described in any of the preceding paragraphs of this subsection."

Subsec. (a)(10). Pub. L. 115–97, §11051(b)(2)(A), struck out par. (10). Text read as follows: "The deduction allowed by section 215."

Subsec. (d)(3)(B). Pub. L. 115–97, §11002(d)(1)(J), substituted "for 'calendar year 2016' in subparagraph (A)(ii)" for "for 'calendar year 1992' in subparagraph (B)".

2015—Subsec. (a)(2)(D). Pub. L. 114–113, §104(c), substituted "educator—" for "educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom." and added cls. (i) and (ii).

Pub. L. 114–113, §104(a), substituted "The deductions" for "In the case of taxable years beginning during 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, or 2014, the deductions".

Subsec. (d)(3). Pub. L. 114–113, §104(b), added par. (3).

2014—Subsec. (a)(2)(D). Pub. L. 113–295, §101(a), substituted "2013, or 2014" for "or 2013".

Subsec. (a)(14). Pub. L. 113–295, §221(a)(34)(C), struck out par. (14). Text read as follows: "The deduction allowed by section 179A."

2013—Subsec. (a)(2)(D). Pub. L. 112–240 substituted "2011, 2012, or 2013" for "or 2011".

2010—Subsec. (a)(2)(D). Pub. L. 111–312 substituted "2009, 2010, or 2011" for "or 2009".

2008—Subsec. (a)(2)(D). Pub. L. 110–343 substituted "2007, 2008, or 2009" for "or 2007".

2006—Subsec. (a)(2)(D). Pub. L. 109–432, §108(a), substituted "2005, 2006, or 2007" for "or 2005".

Subsec. (a)(21). Pub. L. 109–432, §406(a)(3), added par. (21).

2005—Subsec. (a)(19), (20). Pub. L. 109–135, §412(q)(1), redesignated par. (19) relating to costs involving discrimination suits, etc., as par. (20) and moved to follow par. (19) relating to health savings accounts.

Subsec. (e). Pub. L. 109–135, §412(q)(2), substituted "subsection (a)(20)" for "subsection (a)(19)" in introductory provisions.

2004—Subsec. (a)(2)(D). Pub. L. 108–311 substituted ", 2003, 2004, or 2005" for "or 2003".

Subsec. (a)(19). Pub. L. 108–357, §703(a), added par. (19) relating to costs involving discrimination suits, etc.

Subsec. (e). Pub. L. 108–357, §703(b), added subsec. (e).

2003—Subsec. (a)(2)(E). Pub. L. 108–121 added subpar. (E).

Subsec. (a)(19). Pub. L. 108–173 added par. (19).

2002—Subsec. (a)(2)(D). Pub. L. 107–147, §406(a), added subpar. (D).

Subsec. (d). Pub. L. 107–147, §406(b), added subsec. (d).

2001—Subsec. (a)(18). Pub. L. 107–16 added par. (18).

2000—Subsec. (a)(16). Pub. L. 106–554 amended heading and text of par. (16) generally. Prior to amendment, text read as follows: "The deduction allowed by section 220."

1997—Subsec. (a)(2)(C). Pub. L. 105–34, §975(a), added subpar. (C).

Subsec. (a)(17). Pub. L. 105–34, §202(b), added par. (17).

1996—Subsec. (a)(8). Pub. L. 104–188 struck out par. (8) which read as follows: "Certain portion of lump-sum distributions from pension plans taxed under section 402(d).—The deduction allowed by section 402(d)(3)."

Subsec. (a)(16). Pub. L. 104–191 added par. (16).

1993—Subsec. (a)(15). Pub. L. 103–66 added par. (15).

1992—Subsec. (a)(8). Pub. L. 102–318 substituted "402(d)" for "402(e)" in heading and in text.

Subsec. (a)(14). Pub. L. 102–486 added par. (14).

1990—Subsec. (a)(13). Pub. L. 101–508, §11802(e)(1), amended par. (13) generally. Prior to amendment, par. (13) read as follows: "The deduction allowed by section 220."

1988—Subsec. (a)(2)(A). Pub. L. 100–647, §1001(b)(3)(A), inserted at end "The fact that the reimbursement may be provided by a third party shall not be determinative of whether or not the preceding sentence applies."

Subsec. (a)(13). Pub. L. 100–647, §6007(b), added par. (13).

Subsec. (c). Pub. L. 100–485 added subsec. (c).

1986—Subsec. (a). Pub. L. 99–514, §132(b)(2)(A), designated existing provisions as subsec. (a) and added heading.

Subsec. (a)(2). Pub. L. 99–514, §132(b)(1), amended par. (2) generally, substituting "Certain trade" for "Trade" in heading and inserting "of employees" in subpar. (A) heading, substituting provision relating to deduction of certain expenses of performing artists for provision relating to deduction of expenses for travel away from home in subpar. (B), and striking out subpar. (C) relating to deduction of travel expenses and subpar. (D) relating to deduction of expenses of outside salesmen.

Subsec. (a)(3) to (5). Pub. L. 99–514, §301(b)(1), redesignated pars. (4) to (6) as (3) to (5), respectively, and struck out former par. (3) which related to long-term capital gains and read as follows: "The deduction allowed by section 1202."

Subsec. (a)(6). Pub. L. 99–514, §301(b)(1), redesignated par. (7) as (6). Former par. (6) redesignated (5).

Pub. L. 99–514, §1875(c)(3), struck out "to the extent attributable to contributions made on behalf of such individual" after "section 404".

Subsec. (a)(7). Pub. L. 99–514, §301(b)(1), redesignated par. (10) as (7). Former par. (7) redesignated (6).

Subsec. (a)(8). Pub. L. 99–514, §301(b)(1), redesignated par. (11) as (8). Former par. (8) struck out.

Pub. L. 99–514, §132(c), struck out par. (8) which related to moving expense deduction and read as follows: "The deduction allowed by section 217."

Subsec. (a)(9) to (15). Pub. L. 99–514, §301(b)(1), redesignated pars. (12) to (15) as (9) to (12), respectively. Former pars. (10) and (11) redesignated (7) and (8), respectively.

Subsec. (a)(16). Pub. L. 99–514, §131(b)(1), struck out par. (16) which related to deduction for two-earner married couples and read as follows: "The deduction allowed by section 221."

Subsec. (b). Pub. L. 99–514, §132(b)(2)(B), added subsec. (b).

1984—Par. (7). Pub. L. 98–369, §491(d)(2), substituted "and annuity" for "annuity, and bond purchase" in heading, and substituted "the deduction allowed by section 404" for "the deductions allowed by section 404 and section 405(c)" in text.

1983—Par. (9). Pub. L. 97–354 repealed par. (9) relating to the deduction allowed by section 1379(b)(3).

1981—Par. (10). Pub. L. 97–34, §311(h)(1), struck out "and the deduction allowed by section 220 (relating to retirement savings for certain married individuals)" after "retirement savings".

Par. (14). Pub. L. 97–34, §112(b)(2), redesignated par. (15) as (14). Former par. (14), relating to deduction for certain expenses of living abroad, was struck out.

Par. (15). Pub. L. 97–34, §112(b)(2), redesignated par. (16) as (15). Former par. (15) redesignated (14).

Par. (16). Pub. L. 97–34, §§103(b), 112(b)(2), added par. (16). Former par. (16) redesignated (15).

1980—Par. (15). Pub. L. 96–451 added par. (15).

Par. (16). Pub. L. 96–608 added par. (16).

1978—Par. (14). Pub. L. 95–615 added par. (14).

1976—Par. (10). Pub. L. 94–455, §1501(b)(1), inserted reference to the deduction allowed by section 220 (relating to retirement savings for certain married individuals).

Pars. (11), (12). Pub. L. 94–455, §1901(a)(8), (9), redesignated par. (11) relating to penalties forfeited because of premature withdrawal of funds from time savings accounts or deposits, as par. (12), and substituted "trade or business, to the extent" for "trade or business to the extent".

Par. (13). Pub. L. 94–455, §502(a), added par. (13).

1974—Par. (10). Pub. L. 93–406, §2002(a)(2), added par. (10).

Par. (11). Pub. L. 93–483 added par. (11) relating to penalties forfeited because of premature withdrawal of funds from time savings accounts or deposits. Another par. (11) relating to certain portions of lump-sum distributions from pension plans taxed under section 402(e) of this title, was added by Pub. L. 93–406, §2005(c)(9).

1969—Par. (9). Pub. L. 91–172 added par. (9).

1964—Par. (8). Pub. L. 88–272 added par. (8).

1962—Par. (7). Pub. L. 87–792 added par. (7).

Statutory Notes and Related Subsidiaries

Effective Date of 2020 Amendment

Amendment by section 104(b)(2)(A) of Pub. L. 116–260 applicable to taxable years beginning after Dec. 31, 2020, see section 104(c) of div. EE of Pub. L. 116–260, set out as a note under section 25A of this title.

Pub. L. 116–260, div. EE, title II, §212(d), Dec. 27, 2020, 134 Stat. 3068, provided that: "The amendments made by this section [amending this section and sections 63, 170, 6662, and 6751 of this title] shall apply to taxable years beginning after December 31, 2020."

Pub. L. 116–136, div. A, title II, §2204(c), Mar. 27, 2020, 134 Stat. 345, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2019."

Effective Date of 2018 Amendment

Pub. L. 115–141, div. T, §101(d), Mar. 23, 2018, 132 Stat. 1157, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section, sections 63, 172, 199A, 613, and 6662 of this title, and provisions set out as a note under section 74 of this title] shall take effect as if included in section 11011 of Public Law 115–97.

"(2) Application of section 199 to certain qualified payments paid after 2017.—The amendment made by subsection (c) [amending provisions set out as a note under section 74 of this title] shall take effect as if included in section 13305 of Public Law 115–97."

Pub. L. 115–123, div. D, title II, §41107(b), Feb. 9, 2018, 132 Stat. 158, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 2017 Amendment

Amendment by section 11002(d)(1)(J) 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, §11011(e), Dec. 22, 2017, 131 Stat. 2071, provided that: "The amendments made by this section [enacting section 199A of this title and amending this section and sections 63, 170, 172, 246, 613, 613A, 3402, and 6662 of this title] shall apply to taxable years beginning after December 31, 2017."

Amendment by section 11051(b)(2)(A) of Pub. L. 115–97 applicable to any divorce or separation instrument (as defined in former section 71(b)(2) of this title as in effect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modification expressly provides that the amendment made by section 11051 of Pub. L. 115–97 applies to such modification, see section 11051(c) of Pub. L. 115–97, set out as a note under section 61 of this title.

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, §104(d), Dec. 18, 2015, 129 Stat. 3046, provided that:

"(1) Extension.—The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 2014.

"(2) Modifications.—The amendments made by subsections (b) and (c) [amending this section] shall apply to taxable years beginning after December 31, 2015."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, §101(b), Dec. 19, 2014, 128 Stat. 4013, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2013."

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

Effective Date of 2013 Amendment

Pub. L. 112–240, title II, §201(b), Jan. 2, 2013, 126 Stat. 2323, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2011."

Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, §721(b), Dec. 17, 2010, 124 Stat. 3316, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009."

Effective Date of 2008 Amendment

Pub. L. 110–343, div. C, title II, §203(b), Oct. 3, 2008, 122 Stat. 3864, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 2007."

Effective Date of 2006 Amendment

Pub. L. 109–432, div. A, title I, §108(b), Dec. 20, 2006, 120 Stat. 2939, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2005."

Pub. L. 109–432, div. A, title IV, §406(d), Dec. 20, 2006, 120 Stat. 2960, provided that: "The amendments made by subsection (a) [amending this section and sections 7443A and 7623 of this title] shall apply to information provided on or after the date of the enactment of this Act [Dec. 20, 2006]."

Effective Date of 2004 Amendment

Pub. L. 108–357, title VII, §703(c), Oct. 22, 2004, 118 Stat. 1548, provided that: "The amendments made by this section [amending this section] shall apply to fees and costs paid after the date of the enactment of this Act [Oct. 22, 2004] with respect to any judgment or settlement occurring after such date."

Pub. L. 108–311, title III, §307(b), Oct. 4, 2004, 118 Stat. 1179, provided that: "The amendment made by subsection (a) [amending this section] shall apply to expenses paid or incurred in taxable years beginning after December 31, 2003."

Effective Date of 2003 Amendment

Pub. L. 108–173, title XII, §1201(k), Dec. 8, 2003, 117 Stat. 2479, provided that: "The amendments made by this section [enacting sections 223 and 4980G of this title, amending this section and sections 106, 125, 220, 848, 3231, 3306, 3401, 4973, 4975, 6051, and 6693 of this title, and renumbering former section 223 of this title as section 224] shall apply to taxable years beginning after December 31, 2003."

Pub. L. 108–121, title I, §109(c), Nov. 11, 2003, 117 Stat. 1342, provided that: "The amendments made by this section [amending this section and section 162 of this title] shall apply to amounts paid or incurred in taxable years beginning after December 31, 2002."

Effective Date of 2002 Amendment

Pub. L. 107–147, title IV, §406(c), Mar. 9, 2002, 116 Stat. 44, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2001."

Effective Date of 2001 Amendment

Pub. L. 107–16, title IV, §431(d), June 7, 2001, 115 Stat. 69, provided that: "The amendments made by this section [enacting section 222 of this title, amending this section and sections 86, 135, 137, 219, 221, and 469 of this title, and renumbering former section 222 of this title as section 223] shall apply to payments made in taxable years beginning after December 31, 2001."

Effective Date of 1997 Amendment

Pub. L. 105–34, title II, §202(e), Aug. 5, 1997, 111 Stat. 809, provided that: "The amendments made by this section [enacting section 221 of this title, amending this section and section 6050S of this title, and renumbering former section 221 of this title as section 222] shall apply to any qualified education loan (as defined in section 221(e)(1) of the Internal Revenue Code of 1986, as added by this section) incurred on, before, or after the date of the enactment of this Act [Aug. 5, 1997], but only with respect to—

"(1) any loan interest payment due and paid after December 31, 1997, and

"(2) the portion of the 60-month period referred to in section 221(d) of the Internal Revenue Code of 1986 (as added by this section) after December 31, 1997."

Pub. L. 105–34, title IX, §975(b), Aug. 5, 1997, 111 Stat. 898, provided that: "The amendment made by this section [amending this section] shall apply to expenses paid or incurred in taxable years beginning after December 31, 1986."

Effective Date of 1996 Amendment

Pub. L. 104–191, title III, §301(j), Aug. 21, 1996, 110 Stat. 2052, provided that: "The amendments made by this section [enacting sections 220 and 4980E of this title, amending this section and sections 106, 125, 848, 3231, 3306, 3401, 4973, 4975, 6051, and 6693 of this title, and renumbering former section 220 of this title as section 221] shall apply to taxable years beginning after December 31, 1996."

Amendment by Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1999, with retention of certain transition rules, see section 1401(c) of Pub. L. 104–188, set out as a note under section 402 of this title.

Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, §13213(e), Aug. 10, 1993, 107 Stat. 475, provided that: "The amendments made by this section [amending this section and sections 67, 82, 132, 217, 1001, 1016, and 4977 of this title] shall apply to expenses incurred after December 31, 1993; except that the amendments made by subsection (d) [amending sections 82, 132, and 4977 of this title] shall apply to reimbursements or other payments in respect of expenses incurred after such date."

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–486 applicable to property placed in service after June 30, 1993, see section 1913(c) of Pub. L. 102–486, set out as a note under section 53 of this title.

Amendment by Pub. L. 102–318 applicable to distributions after Dec. 31, 1992, see section 521(e) of Pub. L. 102–318, set out as a note under section 402 of this title.

Effective Date of 1988 Amendment

Amendment by section 1001(b)(3)(A) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title VI, §6007(d), Nov. 10, 1988, 102 Stat. 3687, provided that: "The amendments made by this section [enacting section 220 of this title, amending this section, and renumbering former section 220 of this title as section 221] shall apply as if included in the amendments made by section 132 of the Tax Reform Act of 1986 [Pub. L. 99–514]."

Pub. L. 100–485, title VII, §702(b), Oct. 13, 1988, 102 Stat. 2426, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1988."

Effective Date of 1986 Amendment

Amendment by sections 131(b)(1) and 132(b), (c) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title.

Pub. L. 99–514, title III, §301(c), Oct. 22, 1986, 100 Stat. 2218, provided that: "The amendments made by this section [amending this section and sections 170, 172, 219, 220, 223, 642, 643, 691, 871, 1211, 1212, and 1402 of this title and repealing section 1202 of this title] shall apply to taxable years beginning after December 31, 1986."

Pub. L. 99–514, title XVIII, §1875(c)(12), Oct. 22, 1986, 100 Stat. 2895, provided that: "The amendments made by paragraphs (3), (4), and (6) [amending this section and sections 219 and 408 of this title] shall take effect as if included in the amendments made by section 238 of the Tax Equity and Fiscal Responsibility Act of 1982 [section 238 of Pub. L. 97–248, see section 241 of Pub. L. 97–248, set out as an Effective Date note under section 416 of this title]."

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title IV, §491(f)(1), July 18, 1984, 98 Stat. 853, provided that: "The amendments and repeals made by subsections (a), (b), and (d) [amending this section, sections 55, 72, 172, 219, 402, 403, 406, 407, 408, 412, 414, 415, 457, 2039, 2517, 3121, 3306, 3401, 4972, 4973, 4975, 6047, 6058, 6104, 6652, 7207, 7476, and 7701 of this title, section 3107 of Title 31, Money and Finance, and section 409 of Title 42, The Public Health and Welfare, and repealing sections 405 and 409 of this title] shall apply to obligations issued after December 31, 1983."

Effective Date of 1983 Amendment

Par. (9) as in effect before date of repeal by Pub. L. 97–354 to remain in effect for years beginning before Jan. 1, 1984, see section 6(b)(1) of Pub. L. 97–354, set out as an Effective Date note under section 3761 of this title.

Effective Date of 1981 Amendment

Pub. L. 97–34, title I, §103(d), Aug. 13, 1981, 95 Stat. 188, provided that: "The amendments made by this section [enacting section 219 of this title and amending this section and sections 85 and 105 of this title] shall apply to taxable years beginning after December 31, 1981."

Amendment by sections 112(b)(2) and 311(h)(1) of Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see sections 115 and 311(i)(1) of Pub. L. 97–34, set out as notes under sections 911 and 219, respectively, of this title.

Effective Date of 1980 Amendment

Pub. L. 96–608, §3(b), Dec. 28, 1980, 94 Stat. 3551, provided that: "The amendment made by subsection (a) [amending this section] shall apply to repayments made in taxable years beginning after the date of the enactment of this Act [Dec. 28, 1980]."

Amendment by Pub. L. 96–451 applicable with respect to additions to capital account made after Dec. 31, 1979, see section 301(d) of Pub. L. 96–451, set out as an Effective Date note under section 194 of this title.

Effective Date of 1978 Amendment; Election of Prior Law

Amendment by Pub. L. 95–615 applicable to taxable years beginning after Dec. 31, 1977, with provision for election of prior law, see section 209 of Pub. L. 95–615, set out as a note under section 911 of this title.

Effective Date of 1976 Amendment

Pub. L. 94–455, title V, §502(c), Oct. 4, 1976, 90 Stat. 1559, provided that: "The amendments made by this section [amending this section and section 3402 of this title] shall apply to taxable years beginning after December 31, 1976."

Pub. L. 94–455, title XV, §1501(d), Oct. 4, 1976, 90 Stat. 1737, provided that: "The amendments made by this section [enacting section 220 of this title, amending this section and sections 219, 408, 409, 3401, 4973, and 6047 of this title, and renumbering former section 220 of this title as section 221], other than the amendment made by subsection (b)(3), shall apply to taxable years beginning after December 31, 1976. The amendment made by subsection (b)(3) [amending section 415 of this title] shall apply to years beginning after December 31, 1976."

Amendment by section 1901(a)(8), (9) of Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1974 Amendment

Pub. L. 93–483, §6(b), Oct. 26, 1974, 88 Stat. 1459, provided that: "The amendment made by this section [amending this section] applies to taxable years beginning after December 31, 1972."

Amendment by section 2002(a)(2) of Pub. L. 93–406 applicable to taxable years beginning after Dec. 31, 1974, see section 2002(i)(1) of Pub. L. 93–406, set out as an Effective Date note under section 219 of this title.

Amendment by section 2005(c)(9) of Pub. L. 93–406 applicable only with respect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93–406, set out as a note under section 402 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable with respect to taxable years of electing small business corporations beginning after Dec. 31, 1970, see section 531(d) of Pub. L. 91–172, set out as an Effective Date note under section 1379 of this title.

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, §213(d), Feb. 26, 1964, 78 Stat. 52, provided that: "The amendments made by subsections (a) [enacting section 217 of this title and renumbering former section 217 of this title as section 218] and (b) [amending this section] shall apply to expenses incurred after December 31, 1963, in taxable years ending after such date. The amendment made by subsection (c) [amending section 3401 of this title] shall apply with respect to remuneration paid after the seventh day following the date of the enactment of this Act [Feb. 26, 1964]."

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.

Regulations or Guidance Clarifying Application of Educator Expense Tax Deduction

Pub. L. 116–260, div. N, title II, §275, Dec. 27, 2020, 134 Stat. 1978, provided that: "Not later than February 28, 2021, the Secretary of the Treasury (or the Secretary's delegate) shall by regulation or other guidance clarify that personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID–19 are treated as described in section 62(a)(2)(D)(ii) of the Internal Revenue Code of 1986. Such regulations or other guidance shall apply to expenses paid or incurred after March 12, 2020."

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, 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.

Plan Amendments Not Required Until January 1, 1994

For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of Pub. L. 102–318 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, 1994, see section 523 of Pub. L. 102–318, set out as a note under section 401 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.

Commuting Expenses

Pub. L. 95–427, §2, Oct. 7, 1978, 92 Stat. 996, as amended by Pub. L. 96–167, §2, Dec. 29, 1979, 93 Stat. 1275, provided that with respect to transportation costs paid or incurred after December 31, 1976, and on or before May 31, 1981, the application of sections 62, 162, and 262 and of chapters 21, 23, and 24 of the Internal Revenue Code of 1954 [now 1986] to transportation expenses in traveling between a taxpayer's residence and place of work be determined without regard to Revenue Ruling 76–453 or any other regulation, ruling, or decision reaching the same or similar result, and with full regard to the rules in effect before that Revenue Ruling.

Pub. L. 95–615, §2, Nov. 8, 1978, 92 Stat. 3097, provided that with respect to transportation costs paid or incurred after Dec. 31, 1976, and before Apr. 30, 1978, the application of sections 62, 162, and 262 and chapters 21, 23, and 24 of the Internal Revenue Code of 1954 [now 1986] to transportation expenses in traveling between a taxpayer's residence and place of work be determined without regard to Revenue Ruling 76–453 or any other regulation, ruling or decision reaching the same or similar result, and with full regard to the rules in effect before that Revenue Ruling, and ceased to have effect on the day after Nov. 8, 1978 pursuant to section 210(a) of that Act.

1 See References in Text note below.
26 U.S.C. § 139B (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 139B: Benefits provided to volunteer firefighters and emergency medical responders
Benefits provided to volunteer firefighters and emergency medical responders
Status: in_force

(a) In general

In the case of any member of a qualified volunteer emergency response organization, gross income shall not include—

(1) any qualified State and local tax benefit, and

(2) any qualified payment.

(b) Denial of double benefits

In the case of any member of a qualified volunteer emergency response organization—

(1) the deduction under 164 shall be determined with regard to any qualified State and local tax benefit, and

(2) expenses paid or incurred by the taxpayer in connection with the performance of services as such a member shall be taken into account under section 170 only to the extent such expenses exceed the amount of any qualified payment excluded from gross income under subsection (a).

(c) Definitions

For purposes of this section—

(1) Qualified State and local tax benefit

The term "qualified state and local tax benefit" means any reduction or rebate of a tax described in paragraph (1), (2), or (3) of section 164(a) provided by a State or political division thereof on account of services performed as a member of a qualified volunteer emergency response organization.

(2) Qualified payment

(A) In general

The term "qualified payment" means any payment (whether reimbursement or otherwise) provided by a State or political division thereof on account of the performance of services as a member of a qualified volunteer emergency response organization.

(B) Applicable dollar limitation

The amount determined under subparagraph (A) for any taxable year shall not exceed $50 multiplied by the number of months during such year that the taxpayer performs such services.

(3) Qualified volunteer emergency response organization

The term "qualified volunteer emergency response organization" means any volunteer organization—

(A) which is organized and operated to provide firefighting or emergency medical services for persons in the State or political subdivision, as the case may be, and

(B) which is required (by written agreement) by the State or political subdivision to furnish firefighting or emergency medical services in such State or political subdivision.

(Added Pub. L. 110–142, §5(a), Dec. 20, 2007, 121 Stat. 1805; amended Pub. L. 116–94, div. O, title III, §301(a), (b), Dec. 20, 2019, 133 Stat. 3175; Pub. L. 116–260, div. EE, title I, §103(a), Dec. 27, 2020, 134 Stat. 3040.)

Editorial Notes

Amendments

2020—Subsec. (d). Pub. L. 116–260 struck out subsec. (d). Text read as follows: "This section shall not apply with respect to taxable years beginning—

"(1) after December 31, 2010, and before January 1, 2020, or

"(2) after December 31, 2020."

2019—Subsec. (c)(2). Pub. L. 116–94, §301(a), substituted "$50" for "$30".

Subsec. (d). Pub. L. 116–94, §301(b), substituted "beginning—" for "beginning after December 31, 2010." and added pars. (1) and (2).

Statutory Notes and Related Subsidiaries

Effective Date of 2020 Amendment

Pub. L. 116–260, div. EE, title I, §103(b), Dec. 27, 2020, 134 Stat. 3040, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2020."

Effective Date of 2019 Amendment

Pub. L. 116–94, div. O, title III, §301(d), Dec. 20, 2019, 133 Stat. 3175, provided that: "The amendments made by this section [amending this section and section 3121 of this title] shall apply to taxable years beginning after December 31, 2019."

Effective Date

Pub. L. 110–142, §5(c), Dec. 20, 2007, 121 Stat. 1806, provided that: "The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 2007."
26 U.S.C. § 6432 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 65 / Section 6432: Continuation coverage premium assistance
Continuation coverage premium assistance
Status: in_force

(a) In general

The person to whom premiums are payable for continuation coverage under section 9501(a)(1) of the American Rescue Plan Act of 2021 shall be allowed as a credit against the tax imposed by section 3111(b), or so much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b), for each calendar quarter an amount equal to the premiums not paid by assistance eligible individuals for such coverage by reason of such section 9501(a)(1) with respect to such calendar quarter.

(b) Person to whom premiums are payable

For purposes of subsection (a), except as otherwise provided by the Secretary, the person to whom premiums are payable under such continuation coverage shall be treated as being—

(1) in the case of any group health plan which is a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974), the plan,

(2) in the case of any group health plan not described in paragraph (1)—

(A) which is subject to the COBRA continuation provisions contained in—

(i) the Internal Revenue Code of 1986,

(ii) the Employee Retirement Income Security Act of 1974, or

(iii) the Public Health Service Act, or

(B) under which some or all of the coverage is not provided by insurance,

the employer maintaining the plan, and

(3) in the case of any group health plan not described in paragraph (1) or (2), the insurer providing the coverage under the group health plan.

(c) Limitations and refundability

(1) Credit limited to certain employment taxes

The credit allowed by subsection (a) with respect to any calendar quarter shall not exceed the tax imposed by section 3111(b), or so much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b), for such calendar quarter (reduced by any credits allowed against such taxes under sections 3131, 3132, and 3134) on the wages paid with respect to the employment of all employees of the employer.

(2) Refundability of excess credit

(A) Credit is refundable

If the amount of the credit under subsection (a) exceeds the limitation of paragraph (1) for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded under sections 6402(a) and 6413(b).

(B) Credit may be advanced

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

(C) Treatment of deposits

The Secretary shall waive any penalty under section 6656 for any failure to make a deposit of the tax imposed by section 3111(b), or so much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b), if the Secretary determines that such failure was due to the anticipation of the credit allowed under this section.

(D) Treatment of payments

For purposes of section 1324 of title 31, United States Code, any amounts due to an employer under this paragraph shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.

(3) Overstatements

Any overstatement of the credit to which a person is entitled under this section (and any amount paid by the Secretary as a result of such overstatement) shall be treated as an underpayment by such person of the taxes described in paragraph (1) and may be assessed and collected by the Secretary in the same manner as such taxes.

(d) Governmental entities

For purposes of this section, the term "person" includes the government of any State or political subdivision thereof, any Indian tribal government (as defined in section 139E(c)(1)), any agency or instrumentality of any of the foregoing, and any agency or instrumentality of the Government of the United States that is described in section 501(c)(1) and exempt from taxation under section 501(a).

(e) Denial of double benefit

For purposes of chapter 1, the gross income of any person allowed a credit under this section shall be increased for the taxable year which includes the last day of any calendar quarter with respect to which such credit is allowed by the amount of such credit. No credit shall be allowed under this section with respect to any amount which is taken into account as qualified wages under section 2301 of the CARES Act or section 3134 of this title or as qualified health plan expenses under section 7001(d) or 7003(d) of the Families First Coronavirus Response Act or section 3131 or 3132 of this title.

(f) Extension of limitation on assessment

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

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

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

(g) Regulations

The Secretary shall issue such regulations, or other guidance, forms, instructions, and publications, as may be necessary or appropriate to carry out this section, including—

(1) the requirement to report information or the establishment of other methods for verifying the correct amounts of reimbursements under this section,

(2) the application of this section to group health plans that are multiemployer plans (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974),

(3) to allow the advance payment of the credit determined under subsection (a), subject to the limitations provided in this section, based on such information as the Secretary shall require,

(4) to provide for the reconciliation of such advance payment with the amount of the credit at the time of filing the return of tax for the applicable quarter or taxable year, and

(5) allowing the credit to third party payors (including professional employer organizations, certified professional employer organizations, or agents under section 3504).

(Added Pub. L. 117–2, title IX, §9501(b)(1)(A), Mar. 11, 2021, 135 Stat. 134.)

Editorial Notes

References in Text

Section 9501(a)(1) of the American Rescue Plan Act of 2021, referred to in subsec. (a)(1), is section 9501(a)(1) of title IX of Pub. L. 117–2, Mar. 11, 2021, 135 Stat. 127, which is set out as a note under section 4980B of this title.

The Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(1), (2)(A)(ii) and (g)(2), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829, which is classified principally to chapter 18 (§1001 et seq.) of Title 29, Labor. Section 3(37) of the Act is classified to section 1002(37) of Title 29. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 29 and Tables.

The Public Health Service Act, referred to in subsec. (b)(2)(A)(iii), is act July 1, 1944, ch. 373, 58 Stat. 682, which is classified generally to chapter 6A (§201 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see Short Title note set out under section 201 of Title 42 and Tables.

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

Sections 7001(d) and 7003(d) of the Families First Coronavirus Response Act, referred to in subsec. (e), are sections 7001(d) and 7003(d) of div. G of Pub. L. 116–127, which are set out as notes under section 3111 of this title.

Prior Provisions

A prior section 6432, added Pub. L. 111–5, div. B, title III, §3001(a)(12)(A), Feb. 17, 2009, 123 Stat. 461; amended Pub. L. 111–144, §3(b)(5)(C), Mar. 2, 2010, 124 Stat. 45, related to COBRA premium assistance, prior to repeal by Pub. L. 115–141, div. U, title IV, §401(d)(7)(A), Mar. 23, 2018, 132 Stat. 1212.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 117–2, title IX, §9501(b)(1)(C), Mar. 11, 2021, 135 Stat. 136, provided that: "The amendments made by this paragraph [enacting this section] shall apply to premiums to which subsection (a)(1)(A) applies and wages paid on or after April 1, 2021."

Premium Assistance for COBRA Benefits

Pub. L. 111–5, div. B, title III, §3001, Feb. 17, 2009, 123 Stat. 455, as amended by Pub. L. 111–118, div. B, §1010(a)–(d), Dec. 19, 2009, 123 Stat. 3472, 3473; Pub. L. 111–144, §3(a), (b)(1)–(4), Mar. 2, 2010, 124 Stat. 43, 44; Pub. L. 111–157, §3(a), (b), Apr. 15, 2010, 124 Stat. 1117; Pub. L. 113–295, div. A, title II, §209(j)(3), Dec. 19, 2014, 128 Stat. 4031, related to premium assistance for COBRA continuation coverage.
26 U.S.C. § 416 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter D / Section 416: Special rules for top-heavy plans
Special rules for top-heavy plans
Status: in_force

(a) General rule

A trust shall not constitute a qualified trust under section 401(a) for any plan year if the plan of which it is a part is a top-heavy plan for such plan year unless such plan meets—

(1) the vesting requirements of subsection (b), and

(2) the minimum benefit requirements of subsection (c).

(b) Vesting requirements

(1) In general

A plan satisfies the requirements of this subsection if it satisfies the requirements of either of the following subparagraphs:

(A) 3-year vesting

A plan satisfies the requirements of this subparagraph if an employee who has completed at least 3 years of service with the employer or employers maintaining the plan has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions.

(B) 6-year graded vesting

A plan satisfies the requirements of this subparagraph if an employee has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table:

 

 Years of serviceThe nonforfeitable percentage is:

2 
20

3 
40

4 
60

5 
80

6 or more 
100

(2) Certain rules made applicable

Except to the extent inconsistent with the provisions of this subsection, the rules of section 411 shall apply for purposes of this subsection.

(c) Plan must provide minimum benefits

(1) Defined benefit plans

(A) In general

A defined benefit plan meets the requirements of this subsection if the accrued benefit derived from employer contributions of each participant who is a non-key employee, when expressed as an annual retirement benefit, is not less than the applicable percentage of the participant's average compensation for years in the testing period.

(B) Applicable percentage

For purposes of subparagraph (A), the term "applicable percentage" means the lesser of—

(i) 2 percent multiplied by the number of years of service with the employer, or

(ii) 20 percent.

(C) Years of service

For purposes of this paragraph—

(i) In general

Except as provided in clause (ii) or (iii), years of service shall be determined under the rules of paragraphs (4), (5), and (6) of section 411(a).

(ii) Exception for years during which plan was not top-heavy

A year of service with the employer shall not be taken into account under this paragraph if—

(I) the plan was not a top-heavy plan for any plan year ending during such year of service, or

(II) such year of service was completed in a plan year beginning before January 1, 1984.

(iii) Exception for plan under which no key employee (or former key employee) benefits for plan year

For purposes of determining an employee's years of service with the employer, any service with the employer shall be disregarded to the extent that such service occurs during a plan year when the plan benefits (within the meaning of section 410(b)) no key employee or former key employee.

(D) Average compensation for high 5 years

For purposes of this paragraph—

(i) In general

A participant's testing period shall be the period of consecutive years (not exceeding 5) during which the participant had the greatest aggregate compensation from the employer.

(ii) Year must be included in year of service

The years taken into account under clause (i) shall be properly adjusted for years not included in a year of service.

(iii) Certain years not taken into account

Except to the extent provided in the plan, a year shall not be taken into account under clause (i) if—

(I) such year ends in a plan year beginning before January 1, 1984, or

(II) such year begins after the close of the last year in which the plan was a top-heavy plan.

(E) Annual retirement benefit

For purposes of this paragraph, the term "annual retirement benefit" means a benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at the normal retirement age under the plan.

(2) Defined contribution plans

(A) In general

A defined contribution plan meets the requirements of the subsection if the employer contribution for the year for each participant who is a non-key employee is not less than 3 percent of such participant's compensation (within the meaning of section 415). Employer matching contributions (as defined in section 401(m)(4)(A)) shall be taken into account for purposes of this subparagraph (and any reduction under this sentence shall not be taken into account in determining whether section 401(k)(4)(A) applies).

(B) Special rule where maximum contribution less than 3 percent

(i) In general

The percentage referred to in subparagraph (A) for any year shall not exceed the percentage at which contributions are made (or required to be made) under the plan for the year for the key employee for whom such percentage is the highest for the year.

(ii) Treatment of aggregation groups

(I) For purposes of this subparagraph, all defined contribution plans required to be included in an aggregation group under subsection (g)(2)(A)(i) shall be treated as one plan.

(II) This subparagraph shall not apply to any plan required to be included in an aggregation group if such plan enables a defined benefit plan required to be included in such group to meet the requirements of section 401(a)(4) or 410.

(C) Application to employees not meeting age and service requirements

Any employees not meeting the age or service requirements of section 410(a)(1) (without regard to subparagraph (B) thereof) may be excluded from consideration in determining whether any plan of the employer meets the requirements of subparagraphs (A) and (B).

[(d) Repealed. Pub. L. 99–514, title XI, §1106(d)(3)(B)(i), Oct. 22, 1986, 100 Stat. 2424]

(e) Plan must meet requirements without taking into account social security and similar contributions and benefits

A top-heavy plan shall not be treated as meeting the requirement of subsection (b) or (c) unless such plan meets such requirement without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or State law.

(f) Coordination where employer has 2 or more plans

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section where the employer has 2 or more plans including (but not limited to) regulations to prevent inappropriate omissions or required duplication of minimum benefits or contributions.

(g) Top-heavy plan defined

For purposes of this section—

(1) In general

(A) Plans not required to be aggregated

Except as provided in subparagraph (B), the term "top-heavy plan" means, with respect to any plan year—

(i) any defined benefit plan if, as of the determination date, the present value of the cumulative accrued benefits under the plan for key employees exceeds 60 percent of the present value of the cumulative accrued benefits under the plan for all employees, and

(ii) any defined contribution plan if, as of the determination date, the aggregate of the accounts of key employees under the plan exceeds 60 percent of the aggregate of the accounts of all employees under such plan.

(B) Aggregated plans

Each plan of an employer required to be included in an aggregation group shall be treated as a top-heavy plan if such group is a top-heavy group.

(2) Aggregation

For purposes of this subsection—

(A) Aggregation group

(i) Required aggregation

The term "aggregation group" means—

(I) each plan of the employer in which a key employee is a participant, and

(II) each other plan of the employer which enables any plan described in subclause (I) to meet the requirements of section 401(a)(4) or 410.

(ii) Permissive aggregation

The employer may treat any plan not required to be included in an aggregation group under clause (i) as being part of such group if such group would continue to meet the requirements of sections 401(a)(4) and 410 with such plan being taken into account.

(B) Top-heavy group

The term "top-heavy group" means any aggregation group if—

(i) the sum (as of the determination date) of—

(I) the present value of the cumulative accrued benefits for key employees under all defined benefit plans included in such group, and

(II) the aggregate of the accounts of key employees under all defined contribution plans included in such group,

(ii) exceeds 60 percent of a similar sum determined for all employees.

(3) Distributions during last year before determination date taken into account

(A) In general

For purposes of determining—

(i) the present value of the cumulative accrued benefit for any employee, or

(ii) the amount of the account of any employee,

such present value or amount shall be increased by the aggregate distributions made with respect to such employee under the plan during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an aggregation group.

(B) 5-year period in case of in-service distribution

In the case of any distribution made for a reason other than severance from employment, death, or disability, subparagraph (A) shall be applied by substituting "5-year period" for "1-year period".

(4) Other special rules

For purposes of this subsection—

(A) Rollover contributions to plan not taken into account

Except to the extent provided in regulations, any rollover contribution (or similar transfer) initiated by the employee and made after December 31, 1983, to a plan shall not be taken into account with respect to the transferee plan for purposes of determining whether such plan is a top-heavy plan (or whether any aggregation group which includes such plan is a top-heavy group).

(B) Benefits not taken into account if employee ceases to be key employee

If any individual is a non-key employee with respect to any plan for any plan year, but such individual was a key employee with respect to such plan for any prior plan year, any accrued benefit for such employee (and the account of such employee) shall not be taken into account.

(C) Determination date

The term "determination date" means, with respect to any plan year—

(i) the last day of the preceding plan year, or

(ii) in the case of the first plan year of any plan, the last day of such plan year.

(D) Years

To the extent provided in regulations, this section shall be applied on the basis of any year specified in such regulations in lieu of plan years.

(E) Benefits not taken into account if employee not employed for last year before determination date

If any individual has not performed services for the employer maintaining the plan at any time during the 1-year period ending on the determination date, any accrued benefit for such individual (and the account of such individual) shall not be taken into account.

(F) Accrued benefits treated as accruing ratably

The accrued benefit of any employee (other than a key employee) shall be determined—

(i) under the method which is used for accrual purposes for all plans of the employer, or

(ii) if there is no method described in clause (i), as if such benefit accrued not more rapidly than the slowest accrual rate permitted under section 411(b)(1)(C).

(G) Simple retirement accounts

The term "top-heavy plan" shall not include a simple retirement account under section 408(p).

(H) Cash or deferred arrangements or plans using alternative methods of meeting nondiscrimination requirements

The term "top-heavy plan" shall not include a plan which consists solely of—

(i) a cash or deferred arrangement which meets the requirements of section 401(k)(12) or 401(k)(13) and matching contributions with respect to which the requirements of paragraph (11), (12), or (13) of section 401(m) are met, or

(ii) a starter 401(k) deferral-only arrangement described in section 401(k)(16)(B) or a safe harbor deferral-only plan described in section 403(b)(16).

Such term shall not include a plan solely because such plan does not provide nonelective or matching contributions to employees described in section 401(k)(15)(B)(i). If, but for this subparagraph, a plan would be treated as a top-heavy plan because it is a member of an aggregation group which is a top-heavy group, contributions under the plan may be taken into account in determining whether any other plan in the group meets the requirements of subsection (c)(2).

[(h) Repealed. Pub. L. 104–188, title I, §1452(c)(7), Aug. 20, 1996, 110 Stat. 1816]

(i) Definitions

For purposes of this section—

(1) Key employee

(A) In general

The term "key employee" means an employee who, at any time during the plan year, is—

(i) an officer of the employer having an annual compensation greater than $130,000,

(ii) a 5-percent owner of the employer, or

(iii) a 1-percent owner of the employer having an annual compensation from the employer of more than $150,000.

For purposes of clause (i), no more than 50 employees (or, if lesser, the greater of 3 or 10 percent of the employees) shall be treated as officers. In the case of plan years beginning after December 31, 2002, the $130,000 amount in clause (i) shall be adjusted at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000. Such term shall not include any officer or employee of an entity referred to in section 414(d) (relating to governmental plans). For purposes of determining the number of officers taken into account under clause (i), employees described in section 414(q)(5) shall be excluded.

(B) Percentage owners

(i) 5-percent owner

For purposes of this paragraph, the term "5-percent owner" means—

(I) if the employer is a corporation, any person who owns (or is considered as owning within the meaning of section 318) more than 5 percent of the outstanding stock of the corporation or stock possessing more than 5 percent of the total combined voting power of all stock of the corporation, or

(II) if the employer is not a corporation, any person who owns more than 5 percent of the capital or profits interest in the employer.

(ii) 1-percent owner

For purposes of this paragraph, the term "1-percent owner" means any person who would be described in clause (i) if "1 percent" were substituted for "5 percent" each place it appears in clause (i).

(iii) Constructive ownership rules

For purposes of this subparagraph—

(I) subparagraph (C) of section 318(a)(2) shall be applied by substituting "5 percent" for "50 percent", and

(II) in the case of any employer which is not a corporation, ownership in such employer shall be determined in accordance with regulations prescribed by the Secretary which shall be based on principles similar to the principles of section 318 (as modified by subclause (I)).

(C) Aggregation rules do not apply for purposes of determining ownership in the employer

The rules of subsections (b), (c), and (m) of section 414 shall not apply for purposes of determining ownership in the employer.

(D) Compensation

For purposes of this paragraph, the term "compensation" has the meaning given such term by section 414(q)(4).

(2) Non-key employee

The term "non-key employee" means any employee who is not a key employee.

(3) Self-employed individuals

In the case of a self-employed individual described in section 401(c)(1)—

(A) such individual shall be treated as an employee, and

(B) such individual's earned income (within the meaning of section 401(c)(2)) shall be treated as compensation.

(4) Treatment of employees covered by collective bargaining agreements

The requirements of subsections (b), (c), and (d) shall not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and 1 or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.

(5) Treatment of beneficiaries

The terms "employee" and "key employee" include their beneficiaries.

(6) Treatment of simplified employee pensions

(A) Treatment as defined contribution plans

A simplified employee pension shall be treated as a defined contribution plan.

(B) Election to have determinations based on employer contributions

In the case of a simplified employee pension, at the election of the employer, paragraphs (1)(A)(ii) and (2)(B) of subsection (g) shall be applied by taking into account aggregate employer contributions in lieu of the aggregate of the accounts of employees.

(Added Pub. L. 97–248, title II, §240(a), Sept. 3, 1982, 96 Stat. 514; amended Pub. L. 98–369, div. A, title V, §524(a)(1), (b)(1), (c)(1), title VII, §713(f)(1), (4), (5)(A), (6), July 18, 1984, 98 Stat. 872, 958–960; Pub. L. 99–514, title XI, §§1106(d)(3)(A), (B), 1118(a), title XVIII, §1852(d), Oct. 22, 1986, 100 Stat. 2424, 2463, 2867; Pub. L. 100–647, title I, §1011(d)(8), (i)(4)(B), (j)(3)(A), Nov. 10, 1988, 102 Stat. 3460, 3467, 3468; Pub. L. 104–188, title I, §§1421(b)(7), 1431(c)(1)(B), (C), 1452(c)(7), Aug. 20, 1996, 110 Stat. 1797, 1803, 1816; Pub. L. 107–16, title VI, §613(a)–(e), June 7, 2001, 115 Stat. 100–102; Pub. L. 107–147, title IV, §411(k), Mar. 9, 2002, 116 Stat. 47; Pub. L. 108–311, title IV, §408(a)(16), Oct. 4, 2004, 118 Stat. 1192; Pub. L. 109–280, title IX, §902(c), Aug. 17, 2006, 120 Stat. 1036; Pub. L. 117–328, div. T, title I, §§121(c), 125(e), title III, §310(a), Dec. 29, 2022, 136 Stat. 5311, 5315, 5346.)

Inflation Adjusted Items for Certain Years

For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.

Editorial Notes

References in Text

The Federal Insurance Contributions Act, referred to in subsec. (e), is act Aug. 16, 1954, ch. 736, §§3101, 3102, 3111, 3112, 3121 to 3128, 68A Stat. 415, which is classified generally to chapter 21 (§3101 et seq.) of this title. For complete classification of this Act to the Code, see section 3128 of this title and Tables.

The Social Security Act, referred to in subsec. (e), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title II of the Social Security Act is classified generally to subchapter II (§401 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.

Amendments

2022—Subsec. (c)(2)(C). Pub. L. 117–328, §310(a), added subpar. (C).

Subsec. (g)(4)(H). Pub. L. 117–328, §125(e), inserted "Such term shall not include a plan solely because such plan does not provide nonelective or matching contributions to employees described in section 401(k)(15)(B)(i)." before "If, but" in concluding provisions.

Pub. L. 117–328, §121(c), substituted "arrangements or plans" for "arrangements" in heading and "and matching contributions with respect to which the requirements of paragraph (11), (12), or (13) of section 401(m) are met, or" for ", and" in cl. (i), added cl. (ii), and struck out former cl. (ii) which read as follows: "matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met."

2006—Subsec. (g)(4)(H)(i). Pub. L. 109–280, §902(c)(1), inserted "or 401(k)(13)" after "401(k)(12)".

Subsec. (g)(4)(H)(ii). Pub. L. 109–280, §902(c)(2), inserted "or 401(m)(12)" after "401(m)(11)".

2004—Subsec. (i)(1)(A). Pub. L. 108–311 substituted "In the case of plan years" for "in the case of plan years" in concluding provisions.

2002—Subsec. (c)(1)(C)(iii). Pub. L. 107–147, §411(k)(1), substituted "Exception for plan under which no key employee (or former key employee) benefits for plan year" for "Exception for frozen plan" in heading.

Subsec. (g)(3)(B). Pub. L. 107–147, §411(k)(2), substituted "severance from employment" for "separation from service".

2001—Subsec. (c)(1)(C)(i). Pub. L. 107–16, §613(e)(A), substituted "clause (ii) or (iii)" for "clause (ii)".

Subsec. (c)(1)(C)(iii). Pub. L. 107–16, §613(e)(B), added cl. (iii).

Subsec. (c)(2)(A). Pub. L. 107–16, §613(b), inserted at end "Employer matching contributions (as defined in section 401(m)(4)(A)) shall be taken into account for purposes of this subparagraph (and any reduction under this sentence shall not be taken into account in determining whether section 401(k)(4)(A) applies)."

Subsec. (g)(3). Pub. L. 107–16, §613(c)(1), amended heading and text of par. (3) generally. Prior to amendment, text read as follows: "For purposes of determining—

"(A) the present value of the cumulative accrued benefit for any employee, or

"(B) the amount of the account of any employee,

such present value or amount shall be increased by the aggregate distributions made with respect to such employee under the plan during the 5-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an aggregation group."

Subsec. (g)(4)(E). Pub. L. 107–16, §613(c)(2), in heading substituted "last year before determination date" for "last 5 years" and in text substituted "1-year period" for "5-year period".

Subsec. (g)(4)(H). Pub. L. 107–16, §613(d), added subpar. (H).

Subsec. (i)(1)(A). Pub. L. 107–16, §613(a)(1)(D), in concluding provisions, substituted "in the case of plan years beginning after December 31, 2002, the $130,000 amount in clause (i) shall be adjusted at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000." for "For purposes of clause (ii), if 2 employees have the same interest in the employer, the employee having greater annual compensation from the employer shall be treated as having a larger interest."

Pub. L. 107–16, §613(a)(1)(A), struck out "or any of the 4 preceding plan years" after "plan year" in introductory provisions.

Subsec. (i)(1)(A)(i). Pub. L. 107–16, § 613(a)(1)(B), added cl. (i) and struck out former cl. (i) which read as follows: "an officer of the employer having an annual compensation greater than 50 percent of the amount in effect under section 415(b)(1)(A) for any such plan year,".

Subsec. (i)(1)(A)(ii)–(iv). Pub. L. 107–16, §613(a)(1)(C), redesignated cls. (iii) and (iv) as (ii) and (iii), respectively, and struck out former cl. (ii) which read as follows: "1 of the 10 employees having annual compensation from the employer of more than the limitation in effect under section 415(c)(1)(A) and owning (or considered as owning within the meaning of section 318) the largest interests in the employer,".

Subsec. (i)(1)(B)(iii). Pub. L. 107–16, §613(a)(2), struck out "and subparagraph (A)(ii)" after "this subparagraph" in introductory provisions.

1996—Subsec. (g)(4)(G). Pub. L. 104–188, §1421(b)(7), added subpar. (G).

Subsec. (h). Pub. L. 104–188, §1452(c)(7), struck out subsec. (h) which related to adjustments in section 415 limits for top-heavy plans.

Subsec. (i)(1)(A). Pub. L. 104–188, §1431(c)(1)(C), substituted "section 414(q)(5)" for "section 414(q)(8)" in closing provisions.

Subsec. (i)(1)(D). Pub. L. 104–188, §1431(c)(1)(B), substituted "section 414(q)(4)" for "section 414(q)(7)".

1988—Subsec. (i)(1)(A). Pub. L. 100–647, §1011(i)(4)(B), inserted at end "For purposes of determining the number of officers taken into account under clause (i), employees described in section 414(q)(8) shall be excluded."

Subsec. (i)(1)(A)(i). Pub. L. 100–647, §1011(d)(8), substituted "50" for "150" and "415(b)(1)(A)" for "415(c)(1)(A)".

Subsec. (i)(1)(D). Pub. L. 100–647, §1011(j)(3)(A), added subpar. (D).

1986—Subsec. (a)(3). Pub. L. 99–514, §1106(d)(3)(A), struck out par. (3) which read as follows: "the limitation on compensation requirement of subsection (d)."

Subsec. (c)(2)(B)(ii), (iii). Pub. L. 99–514, §1106(d)(3)(B)(ii), redesignated cl. (iii) as (ii) and struck out former cl. (ii) which read as follows: "Determination of percentage.—The determination referred to in clause (i) shall be determined for each key employee by dividing the contributions for such employee by so much of his total compensation for the year as does not exceed $200,000."

Subsec. (d). Pub. L. 99–514, §1106(d)(3)(B)(i), repealed subsec. (d) which provided for a $200,000 limitation on the amount of annual compensation of each employee taken into account.

Subsec. (g)(4)(E). Pub. L. 99–514, §1852(d)(2), amended subpar. (E) generally. Prior to amendment, subpar. (E) read as follows: "If any individual has not received any compensation from any employer maintaining the plan (other than benefits under the plan) at any time during the 5-year period ending on the determination date, any accrued benefit for such individual (and the account of such individual) shall not be taken into account."

Subsec. (g)(4)(F). Pub. L. 99–514, §1118(a), added subpar. (F).

Subsec. (i)(1)(A). Pub. L. 99–514, §1852(d)(1), inserted at end "Such term shall not include any officer or employee of an entity referred to in section 414(d) (relating to governmental plans)."

1984—Subsec. (c)(2)(C). Pub. L. 98–369, §524(c)(1), struck out subpar. (C) which provided that for purposes of this paragraph, any employer contribution attributable to a salary reduction or similar arrangement shall not be taken into account.

Subsec. (d)(2). Pub. L. 98–369, §713(f)(5)(A), inserted "at the same time and".

Subsec. (f). Pub. L. 98–369, §713(f)(6)(A), substituted "required" for "require".

Subsec. (g)(3). Pub. L. 98–369, §713(f)(4), inserted at end "The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an aggregation group."

Subsec. (g)(4)(E). Pub. L. 98–369, §524(b)(1), added subpar. (E).

Subsec. (i)(1)(A). Pub. L. 98–369, §713(f)(1)(A), (C), substituted in provisions preceding cl. (i) "an employee" for "any participant in an employer plan" and inserted at end thereof provision for treatment of an employee with the greater annual compensation as having a larger interest in the employer where, for purposes of cl. (ii), 2 employees have the same interest in the employer.

Subsec. (i)(1)(A)(i). Pub. L. 98–369, §524(a)(1), inserted "having an annual compensation greater than 150 percent of the amount in effect under section 415(c)(1)(A) for any plan year".

Subsec. (i)(1)(A)(ii). Pub. L. 98–369, §713(f)(1)(B), required a key employee to have annual compensation from the employer of more than the limitation in effect under section 415(c)(1)(A).

Subsec. (i)(1)(B)(iii). Pub. L. 98–369, §713(f)(6)(B), substituted subparagraph "(A)(ii)" for "(A)(ii)(II)".

Subsec. (i)(1)(C). Pub. L. 98–369, §713(f)(1)(A), substituted in heading "ownership in the employer" for "5-percent or 1-percent owners".

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Amendment by section 121(c) of Pub. L. 117–328 applicable to plan years beginning after Dec. 31, 2023, see section 121(d) of Pub. L. 117–328, set out as a note under section 401 of this title.

Amendment by section 125(e) of Pub. L. 117–328 effective as if included in the enactment of section 112 of div. O of Pub. L. 116–94, see section 125(f)(2) of Pub. L. 117–328, set out as a note under section 401 of this title.

Pub. L. 117–328, div. T, title III, §310(b), Dec. 29, 2022, 136 Stat. 5347, provided that: "The amendment made by subsection (a) [amending this section] shall apply to plan years beginning after December 31, 2023."

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to plan years beginning after Dec. 31, 2007, see section 902(g) of Pub. L. 109–280, set out as a note under section 401 of this title.

Effective Date of 2002 Amendment

Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title.

Effective Date of 2001 Amendment

Pub. L. 107–16, title VI, §613(f), June 7, 2001, 115 Stat. 102, provided that: "The amendments made by this section [amending this section] shall apply to years beginning after December 31, 2001."

Effective Date of 1996 Amendment

Amendment by section 1421(b)(7) 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 section 1431(c)(1)(B), (C) of Pub. L. 104–188 applicable to years beginning after Dec. 31, 1996, except that in determining whether an employee is a highly compensated employee for years beginning in 1997, such amendment to be treated as having been in effect for years beginning in 1996, see section 1431(d)(1) of Pub. L. 104–188, set out as a note under section 414 of this title.

Amendment by section 1452(c)(7) of Pub. L. 104–188 applicable to limitation years beginning after Dec. 31, 1999, see section 1452(d) of Pub. L. 104–188, set out as a note under section 415 of this title.

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, §1011(j)(3)(B), Nov. 10, 1988, 102 Stat. 3468, provided that: "The amendment made by this paragraph [amending this section] shall apply to years beginning after December 31, 1988."

Amendment by section 1011(d)(8), (i)(4)(B) 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.

Effective Date of 1986 Amendment

Amendment by section 1106(d)(3)(A), (B) of Pub. L. 99–514 applicable to benefits accruing in years beginning after Dec. 31, 1988, except as otherwise provided, see section 1106(i)(5) of Pub. L. 99–514, set out as a note under section 415 of this title.

Pub. L. 99–514, title XI, §1118(b), Oct. 22, 1986, 100 Stat. 2463, provided that: "The amendment made by subsection (a) [amending this section] shall apply to plan years beginning after December 31, 1986."

Amendment by section 1852(d) 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 1984 Amendment

Pub. L. 98–369, div. A, title V, §524(a)(2), July 18, 1984, 98 Stat. 872, provided that: "The amendment made by this subsection [amending this section] shall apply to plan years beginning after December 31, 1983."

Pub. L. 98–369, div. A, title V, §524(b)(2), July 18, 1984, 98 Stat. 872, provided that: "The amendment made by this subsection [amending this section] shall apply to plan years beginning after December 31, 1984."

Pub. L. 98–369, div. A, title V, §524(c)(2), July 18, 1984, 98 Stat. 872, provided that: "The amendment made by this subsection [amending this section] shall apply to plan years beginning after December 31, 1984."

Amendment by section 713 of Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.

Effective Date

Pub. L. 97–248, title II, §241, Sept. 3, 1982, 96 Stat. 520, provided that:

"(a) General Rule.—Except as provided in subsection (b), the amendments made by this part [part II (§§237–241) of subtitle C of title II of Pub. L. 97–248, enacting this section, amending sections 72, 401, 404, 408, 414, 415, and 1379 of this title, and repealing section 4972 of this title] shall apply to years beginning after December 31, 1983.

"(b) Allowance of Exclusion of Death Benefit for Self-Employed Individuals.—The amendment made by section 239 [amending section 101 of this title] shall apply with respect to decedents dying after December 31, 1983."

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.

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. § 267A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 267A: Certain related party amounts paid or accrued in hybrid transactions or with hybrid entities
Certain related party amounts paid or accrued in hybrid transactions or with hybrid entities
Status: in_force

(a) In general

No deduction shall be allowed under this chapter for any disqualified related party amount paid or accrued pursuant to a hybrid transaction or by, or to, a hybrid entity.

(b) Disqualified related party amount

For purposes of this section—

(1) Disqualified related party amount

The term "disqualified related party amount" means any interest or royalty paid or accrued to a related party to the extent that—

(A) such amount is not included in the income of such related party under the tax law of the country of which such related party is a resident for tax purposes or is subject to tax, or

(B) such related party is allowed a deduction with respect to such amount under the tax law of such country.

Such term shall not include any payment to the extent such payment is included in the gross income of a United States shareholder under section 951(a).

(2) Related party

The term "related party" means a related person as defined in section 954(d)(3), except that such section shall be applied with respect to the person making the payment described in paragraph (1) in lieu of the controlled foreign corporation otherwise referred to in such section.

(c) Hybrid transaction

For purposes of this section, the term "hybrid transaction" means any transaction, series of transactions, agreement, or instrument one or more payments with respect to which are treated as interest or royalties for purposes of this chapter and which are not so treated for purposes the tax law of the foreign country of which the recipient of such payment is resident for tax purposes or is subject to tax.

(d) Hybrid entity

For purposes of this section, the term "hybrid entity" means any entity which is either—

(1) treated as fiscally transparent for purposes of this chapter but not so treated for purposes of the tax law of the foreign country of which the entity is resident for tax purposes or is subject to tax, or

(2) treated as fiscally transparent for purposes of such tax law but not so treated for purposes of this chapter.

(e) Regulations

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

(1) rules for treating certain conduit arrangements which involve a hybrid transaction or a hybrid entity as subject to subsection (a),

(2) rules for the application of this section to branches or domestic entities,

(3) rules for treating certain structured transactions as subject to subsection (a),

(4) rules for treating a tax preference as an exclusion from income for purposes of applying subsection (b)(1) if such tax preference has the effect of reducing the generally applicable statutory rate by 25 percent or more,

(5) rules for treating the entire amount of interest or royalty paid or accrued to a related party as a disqualified related party amount if such amount is subject to a participation exemption system or other system which provides for the exclusion or deduction of a substantial portion of such amount,

(6) rules for determining the tax residence of a foreign entity if the entity is otherwise considered a resident of more than one country or of no country,

(7) exceptions from subsection (a) with respect to—

(A) cases in which the disqualified related party amount is taxed under the laws of a foreign country other than the country of which the related party is a resident for tax purposes, and

(B) other cases which the Secretary determines do not present a risk of eroding the Federal tax base,1

(8) requirements for record keeping and information reporting in addition to any requirements imposed by section 6038A.

(Added Pub. L. 115–97, title I, §14222(a), Dec. 22, 2017, 131 Stat. 2219.)

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 115–97, title I, §14222(c), Dec. 22, 2017, 131 Stat. 2220, provided that: "The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 2017."

1 So in original. Probably should be followed by "and".
26 U.S.C. § 199A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 199A: Qualified business income
Qualified business income
Status: in_force

(a) Allowance of deduction

In the case of a taxpayer other than a corporation, there shall be allowed as a deduction for any taxable year an amount equal to the lesser of—

(1) the combined qualified business income amount of the taxpayer, or

(2) an amount equal to 20 percent of the excess (if any) of—

(A) the taxable income of the taxpayer for the taxable year, over

(B) the net capital gain (as defined in section 1(h)) of the taxpayer for such taxable year.

(b) Combined qualified business income amount

For purposes of this section—

(1) In general

The term "combined qualified business income amount" means, with respect to any taxable year, an amount equal to—

(A) the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on by the taxpayer, plus

(B) 20 percent of the aggregate amount of the qualified REIT dividends and qualified publicly traded partnership income of the taxpayer for the taxable year.

(2) Determination of deductible amount for each trade or business

The amount determined under this paragraph with respect to any qualified trade or business is the lesser of—

(A) 20 percent of the taxpayer's qualified business income with respect to the qualified trade or business, or

(B) the greater of—

(i) 50 percent of the W–2 wages with respect to the qualified trade or business, or

(ii) the sum of 25 percent of the W–2 wages with respect to the qualified trade or business, plus 2.5 percent of the unadjusted basis immediately after acquisition of all qualified property.

(3) Modifications to limit based on taxable income

(A) Exception from limit

In the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount, paragraph (2) shall be applied without regard to subparagraph (B).

(B) Phase-in of limit for certain taxpayers

(i) In general

If—

(I) the taxable income of a taxpayer for any taxable year exceeds the threshold amount, but does not exceed the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), and

(II) the amount determined under paragraph (2)(B) (determined without regard to this subparagraph) with respect to any qualified trade or business carried on by the taxpayer is less than the amount determined under paragraph (2)(A) with respect such trade or business,

 then paragraph (2) shall be applied with respect to such trade or business without regard to subparagraph (B) thereof and by reducing the amount determined under subparagraph (A) thereof by the amount determined under clause (ii).

(ii) Amount of reduction

The amount determined under this subparagraph is the amount which bears the same ratio to the excess amount as—

(I) the amount by which the taxpayer's taxable income for the taxable year exceeds the threshold amount, bears to

(II) $50,000 ($100,000 in the case of a joint return).

(iii) Excess amount

For purposes of clause (ii), the excess amount is the excess of—

(I) the amount determined under paragraph (2)(A) (determined without regard to this paragraph), over

(II) the amount determined under paragraph (2)(B) (determined without regard to this paragraph).

(4) Wages, etc.

(A) In general

The term "W–2 wages" means, with respect to any person for any taxable year of such person, the amounts described in paragraphs (3) and (8) of section 6051(a) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year.

(B) Limitation to wages attributable to qualified business income

Such term shall not include any amount which is not properly allocable to qualified business income for purposes of subsection (c)(1).

(C) Return requirement

Such term shall not include any amount which is not properly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions) for such return.

(5) Acquisitions, dispositions, and short taxable years

The Secretary shall provide for the application of this subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year.

(6) Qualified property

For purposes of this section:

(A) In general

The term "qualified property" means, with respect to any qualified trade or business for a taxable year, tangible property of a character subject to the allowance for depreciation under section 167—

(i) which is held by, and available for use in, the qualified trade or business at the close of the taxable year,

(ii) which is used at any point during the taxable year in the production of qualified business income, and

(iii) the depreciable period for which has not ended before the close of the taxable year.

(B) Depreciable period

The term "depreciable period" means, with respect to qualified property of a taxpayer, the period beginning on the date the property was first placed in service by the taxpayer and ending on the later of—

(i) the date that is 10 years after such date, or

(ii) the last day of the last full year in the applicable recovery period that would apply to the property under section 168 (determined without regard to subsection (g) thereof).

(7) Special rule with respect to income received from cooperatives

In the case of any qualified trade or business of a patron of a specified agricultural or horticultural cooperative, the amount determined under paragraph (2) with respect to such trade or business shall be reduced by the lesser of—

(A) 9 percent of so much of the qualified business income with respect to such trade or business as is properly allocable to qualified payments received from such cooperative, or

(B) 50 percent of so much of the W–2 wages with respect to such trade or business as are so allocable.

(c) Qualified business income

For purposes of this section—

(1) In general

The term "qualified business income" means, for any taxable year, the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer. Such term shall not include any qualified REIT dividends or qualified publicly traded partnership income.

(2) Carryover of losses

If the net amount of qualified income, gain, deduction, and loss with respect to qualified trades or businesses of the taxpayer for any taxable year is less than zero, such amount shall be treated as a loss from a qualified trade or business in the succeeding taxable year.

(3) Qualified items of income, gain, deduction, and loss

For purposes of this subsection—

(A) In general

The term "qualified items of income, gain, deduction, and loss" means items of income, gain, deduction, and loss to the extent such items are—

(i) effectively connected with the conduct of a trade or business within the United States (within the meaning of section 864(c), determined by substituting "qualified trade or business (within the meaning of section 199A)" for "nonresident alien individual or a foreign corporation" or for "a 1 foreign corporation" each place it appears), and

(ii) included or allowed in determining taxable income for the taxable year.

(B) Exceptions

The following items shall not be taken into account as a qualified item of income, gain, deduction, or loss:

(i) Any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss.

(ii) Any dividend, income equivalent to a dividend, or payment in lieu of dividends described in section 954(c)(1)(G). Any amount described in section 1385(a)(1) shall not be treated as described in this clause.

(iii) Any interest income other than interest income which is properly allocable to a trade or business.

(iv) Any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting "qualified trade or business" for "controlled foreign corporation").

(v) Any item of income, gain, deduction, or loss taken into account under section 954(c)(1)(F) (determined without regard to clause (ii) thereof and other than items attributable to notional principal contracts entered into in transactions qualifying under section 1221(a)(7)).

(vi) Any amount received from an annuity which is not received in connection with the trade or business.

(vii) Any item of deduction or loss properly allocable to an amount described in any of the preceding clauses.

(4) Treatment of reasonable compensation and guaranteed payments

Qualified business income shall not include—

(A) reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business,

(B) any guaranteed payment described in section 707(c) paid to a partner for services rendered with respect to the trade or business, and

(C) to the extent provided in regulations, any payment described in section 707(a) to a partner for services rendered with respect to the trade or business.

(d) Qualified trade or business

For purposes of this section—

(1) In general

The term "qualified trade or business" means any trade or business other than—

(A) a specified service trade or business, or

(B) the trade or business of performing services as an employee.

(2) Specified service trade or business

The term "specified service trade or business" means any trade or business—

(A) which is described in section 1202(e)(3)(A) (applied without regard to the words "engineering, architecture,") or which would be so described if the term "employees or owners" were substituted for "employees" therein, or

(B) which involves the performance of services that consist of investing and investment management, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).

(3) Exception for specified service businesses based on taxpayer's income

(A) In general

If, for any taxable year, the taxable income of any taxpayer is less than the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), then—

(i) any specified service trade or business of the taxpayer shall not fail to be treated as a qualified trade or business due to paragraph (1)(A), but

(ii) only the applicable percentage of qualified items of income, gain, deduction, or loss, and the W–2 wages and the unadjusted basis immediately after acquisition of qualified property, of the taxpayer allocable to such specified service trade or business shall be taken into account in computing the qualified business income, W–2 wages, and the unadjusted basis immediately after acquisition of qualified property of the taxpayer for the taxable year for purposes of applying this section.

(B) Applicable percentage

For purposes of subparagraph (A), the term "applicable percentage" means, with respect to any taxable year, 100 percent reduced (not below zero) by the percentage equal to the ratio of—

(i) the taxable income of the taxpayer for the taxable year in excess of the threshold amount, bears to

(ii) $50,000 ($100,000 in the case of a joint return).

(e) Other definitions

For purposes of this section—

(1) Taxable income

Except as otherwise provided in subsection (g)(2)(B), taxable income shall be computed without regard to any deduction allowable under this section.

(2) Threshold amount

(A) In general

The term "threshold amount" means $157,500 (200 percent of such amount in the case of a joint return).

(B) Inflation adjustment

In the case of any taxable year beginning after 2018, the dollar amount in subparagraph (A) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

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

The amount of any increase under the preceding sentence shall be rounded as provided in section 1(f)(7).

(3) Qualified REIT dividend

The term "qualified REIT dividend" means any dividend from a real estate investment trust received during the taxable year which—

(A) is not a capital gain dividend, as defined in section 857(b)(3), and

(B) is not qualified dividend income, as defined in section 1(h)(11).

(4) Qualified publicly traded partnership income

The term "qualified publicly traded partnership income" means, with respect to any qualified trade or business of a taxpayer, the sum of—

(A) the net amount of such taxpayer's allocable share of each qualified item of income, gain, deduction, and loss (as defined in subsection (c)(3) and determined after the application of subsection (c)(4)) from a publicly traded partnership (as defined in section 7704(a)) 2 which is not treated as a corporation under section 7704(c), plus

(B) any gain recognized by such taxpayer upon disposition of its interest in such partnership to the extent such gain is treated as an amount realized from the sale or exchange of property other than a capital asset under section 751(a).

(f) Special rules

(1) Application to partnerships and S corporations

(A) In general

In the case of a partnership or S corporation—

(i) this section shall be applied at the partner or shareholder level,

(ii) each partner or shareholder shall take into account such person's allocable share of each qualified item of income, gain, deduction, and loss, and

(iii) each partner or shareholder shall be treated for purposes of subsection (b) as having W–2 wages and unadjusted basis immediately after acquisition of qualified property for the taxable year in an amount equal to such person's allocable share of the W–2 wages and the unadjusted basis immediately after acquisition of qualified property of the partnership or S corporation for the taxable year (as determined under regulations prescribed by the Secretary).

For purposes of clause (iii), a partner's or shareholder's allocable share of W–2 wages shall be determined in the same manner as the partner's or shareholder's allocable share of wage expenses. For purposes of such clause, partner's or shareholder's allocable share of the unadjusted basis immediately after acquisition of qualified property shall be determined in the same manner as the partner's or shareholder's allocable share of depreciation. For purposes of this subparagraph, in the case of an S corporation, an allocable share shall be the shareholder's pro rata share of an item.

(B) Application to trusts and estates

Rules similar to the rules under section 199(d)(1)(B)(i) (as in effect on December 1, 2017) for the apportionment of W–2 wages shall apply to the apportionment of W–2 wages and the apportionment of unadjusted basis immediately after acquisition of qualified property under this section.

(C) Treatment of trades or business in Puerto Rico

(i) In general

In the case of any taxpayer with qualified business income from sources within the commonwealth of Puerto Rico, if all such income is taxable under section 1 for such taxable year, then for purposes of determining the qualified business income of such taxpayer for such taxable year, the term "United States" shall include the Commonwealth of Puerto Rico.

(ii) Special rule for applying limit

In the case of any taxpayer described in clause (i), the determination of W–2 wages of such taxpayer with respect to any qualified trade or business conducted in Puerto Rico shall be made without regard to any exclusion under section 3401(a)(8) for remuneration paid for services in Puerto Rico.

(2) Coordination with minimum tax

For purposes of determining alternative minimum taxable income under section 55, qualified business income shall be determined without regard to any adjustments under sections 56 through 59.

(3) Deduction limited to income taxes

The deduction under subsection (a) shall only be allowed for purposes of this chapter.

(4) Regulations

The Secretary shall prescribe such regulations as are necessary to carry out the purposes of this section, including regulations—

(A) for requiring or restricting the allocation of items and wages under this section and such reporting requirements as the Secretary determines appropriate, and

(B) for the application of this section in the case of tiered entities.

(g) Deduction for income attributable to domestic production activities of specified agricultural or horticultural cooperatives

(1) Allowance of deduction

(A) In general

In the case of a taxpayer which is a specified agricultural or horticultural cooperative, there shall be allowed as a deduction an amount equal to 9 percent of the lesser of—

(i) the qualified production activities income of the taxpayer for the taxable year, or

(ii) the taxable income of the taxpayer for the taxable year.

(B) Limitation

(i) In general

The deduction allowable under subparagraph (A) for any taxable year shall not exceed 50 percent of the W–2 wages of the taxpayer for the taxable year.

(ii) W–2 wages

For purposes of this subparagraph, the W–2 wages of the taxpayer shall be determined in the same manner as under subsection (b)(4) (without regard to subparagraph (B) thereof and after application of subsection (b)(5)), except that such wages shall not include any amount which is not properly allocable to domestic production gross receipts for purposes of paragraph (3)(A).

(C) Taxable income of cooperatives determined without regard to certain deductions

For purposes of this subsection, the taxable income of a specified agricultural or horticultural cooperative shall be computed without regard to any deduction allowable under subsection (b) or (c) of section 1382 (relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions).

(2) Deduction allowed to patrons

(A) In general

In the case of any eligible taxpayer who receives a qualified payment from a specified agricultural or horticultural cooperative, there shall be allowed as a deduction for the taxable year in which such payment is received an amount equal to the portion of the deduction allowed under paragraph (1) to such cooperative which is—

(i) allowed with respect to the portion of the qualified production activities income to which such payment is attributable, and

(ii) identified by such cooperative in a written notice mailed to such taxpayer during the payment period described in section 1382(d).

(B) Limitation based on taxable income

The deduction allowed to any taxpayer under this paragraph shall not exceed the taxable income of the taxpayer determined without regard to the deduction allowed under this paragraph and after taking into account any deduction allowed to the taxpayer under subsection (a) for the taxable year.

(C) Cooperative denied deduction for portion of qualified payments

The taxable income of a specified agricultural or horticultural cooperative shall not be reduced under section 1382 by reason of that portion of any qualified payment as does not exceed the deduction allowable under subparagraph (A) with respect to such payment.

(D) Eligible taxpayer

For purposes of this paragraph, the term "eligible taxpayer" means—

(i) a taxpayer other than a corporation, or

(ii) a specified agricultural or horticultural cooperative.

(E) Qualified payment

For purposes of this section, the term "qualified payment" means, with respect to any eligible taxpayer, any amount which—

(i) is described in paragraph (1) or (3) of section 1385(a),

(ii) is received by such taxpayer from a specified agricultural or horticultural cooperative, and

(iii) is attributable to qualified production activities income with respect to which a deduction is allowed to such cooperative under paragraph (1).

(3) Qualified production activities income

For purposes of this subsection—

(A) In general

The term "qualified production activities income" for any taxable year means an amount equal to the excess (if any) of—

(i) the taxpayer's domestic production gross receipts for such taxable year, over

(ii) the sum of—

(I) the cost of goods sold that are allocable to such receipts, and

(II) other expenses, losses, or deductions (other than the deduction allowed under this subsection), which are properly allocable to such receipts.

(B) Allocation method

The Secretary shall prescribe rules for the proper allocation of items described in subparagraph (A) for purposes of determining qualified production activities income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic production gross receipts.

(C) Special rules for determining costs

(i) In general

For purposes of determining costs under subclause (I) of subparagraph (A)(ii), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. A similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic production gross receipts.

(ii) Exports for further manufacture

In the case of any property described in clause (i) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under clause (i) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture.

(D) Domestic production gross receipts

(i) In general

The term "domestic production gross receipts" means the gross receipts of the taxpayer which are derived from any lease, rental, license, sale, exchange, or other disposition of any agricultural or horticultural product which was manufactured, produced, grown, or extracted by the taxpayer (determined after the application of paragraph (4)(B)) in whole or significant part within the United States. Such term shall not include gross receipts of the taxpayer which are derived from the lease, rental, license, sale, exchange, or other disposition of land.

(ii) Related persons

(I) In general

The term "domestic production gross receipts" shall not include any gross receipts of the taxpayer derived from property leased, licensed, or rented by the taxpayer for use by any related person.

(II) Related person

For purposes of subclause (I), a person shall be treated as related to another person if such persons are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414, except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b).

(4) Specified agricultural or horticultural cooperative

For purposes of this section—

(A) In general

The term "specified agricultural or horticultural cooperative" means an organization to which part I of subchapter T applies which is engaged—

(i) in the manufacturing, production, growth, or extraction in whole or significant part of any agricultural or horticultural product, or

(ii) in the marketing of agricultural or horticultural products.

(B) Application to marketing cooperatives

A specified agricultural or horticultural cooperative described in subparagraph (A)(ii) shall be treated as having manufactured, produced, grown, or extracted in whole or significant part any agricultural or horticultural product marketed by the specified agricultural or horticultural cooperative which its patrons have so manufactured, produced, grown, or extracted.

(5) Definitions and special rules

(A) Special rule for affiliated groups

(i) In general

All members of an expanded affiliated group shall be treated as a single corporation for purposes of this subsection.

(ii) Partnerships owned by expanded affiliated groups

For purposes of paragraph (3)(D), if all of the interests in the capital and profits of a partnership are owned by members of a single expanded affiliated group at all times during the taxable year of such partnership, the partnership and all members of such group shall be treated as a single taxpayer during such period.

(iii) Expanded affiliated group

For purposes of this subsection, the term "expanded affiliated group" means an affiliated group as defined in section 1504(a), determined—

(I) by substituting "more than 50 percent" for "at least 80 percent" each place it appears, and

(II) without regard to paragraphs (2) and (4) of section 1504(b).

(iv) Allocation of deduction

Except as provided in regulations, the deduction under paragraph (1) shall be allocated among the members of the expanded affiliated group in proportion to each member's respective amount (if any) of qualified production activities income.

(B) Special rule for cooperative partners

In the case of a specified agricultural or horticultural cooperative which is a partner in a partnership, rules similar to the rules of subsection (f)(1) shall apply for purposes of this subsection.

(C) Trade or business requirement

This subsection shall be applied by only taking into account items which are attributable to the actual conduct of a trade or business.

(D) Unrelated business taxable income

For purposes of determining the tax imposed by section 511, this section shall be applied by substituting "unrelated business taxable income" for "taxable income" each place it appears in this section (other than this subparagraph).

(E) Special rule for cooperative with oil related qualified production activities income

(i) In general

If a specified agricultural or horticultural cooperative has oil related qualified production activities income for any taxable year, the amount otherwise allowable as a deduction under paragraph (1) shall be reduced by 3 percent of the least of—

(I) the oil related qualified production activities income of the cooperative for the taxable year,

(II) the qualified production activities income of the cooperative for the taxable year, or

(III) taxable income.

(ii) Oil related qualified production activities income

For purposes of this subparagraph, the term "oil related qualified production activities income" means for any taxable year the qualified production activities income which is attributable to the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof (within the meaning of section 927(a)(2)(C), as in effect before its repeal) during such taxable year.

(6) Regulations

The Secretary shall prescribe such regulations as are necessary to carry out the purposes of this subsection, including regulations which prevent more than 1 taxpayer from being allowed a deduction under this subsection with respect to any activity described in paragraph (3)(D)(i). Such regulations shall be based on the regulations applicable to cooperatives and their patrons under section 199 (as in effect before its repeal).

(h) Anti-abuse rules

The Secretary shall—

(1) apply rules similar to the rules under section 179(d)(2) in order to prevent the manipulation of the depreciable period of qualified property using transactions between related parties, and

(2) prescribe rules for determining the unadjusted basis immediately after acquisition of qualified property acquired in like-kind exchanges or involuntary conversions.

(i) Termination

This section shall not apply to taxable years beginning after December 31, 2025.

(Added Pub. L. 115–97, title I, §11011(a), Dec. 22, 2017, 131 Stat. 2063; amended Pub. L. 115–141, div. T, §101(a)(1), (2)(A), (C), (b), Mar. 23, 2018, 132 Stat. 1151, 1155.)

Inflation Adjusted Items for Certain Years

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

Editorial Notes

References in Text

Section 199(d)(1)(B)(i) (as in effect on December 1, 2017), referred to in subsec. (f)(1)(B), means section 199(d)(1)(B)(i) of this title prior to repeal of section 199 by Pub. L. 115–97, title I, §13305(a), Dec. 22, 2017, 131 Stat. 2126.

Amendments

2018—Subsec. (a). Pub. L. 115–141, §101(b)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) provided equation for allowed deduction for any taxable year, which included special deduction for qualified cooperative dividends.

Subsec. (b)(7). Pub. L. 115–141, §101(b)(3), added par. (7).

Subsec. (c)(1). Pub. L. 115–141, §101(b)(2)(A), struck out ", qualified cooperative dividends," after "qualified REIT dividends".

Subsec. (c)(3)(B). Pub. L. 115–141, §101(b)(2)(B)(i)(I), struck out "investment" before "items" in introductory provisions.

Subsec. (c)(3)(B)(ii). Pub. L. 115–141, §101(b)(2)(B)(i)(II), inserted at end "Any amount described in section 1385(a)(1) shall not be treated as described in this clause."

Subsec. (e)(1). Pub. L. 115–141, §101(a)(2)(C), substituted "Except as otherwise provided in subsection (g)(2)(B), taxable income" for "Taxable income".

Pub. L. 115–141, §101(a)(2)(A), substituted "any deduction" for "the deduction".

Subsec. (e)(4), (5). Pub. L. 115–141, §101(b)(2)(B)(ii), redesignated par. (5) as (4) and struck out former par. (4) which defined "qualified cooperative dividend".

Subsec. (g). Pub. L. 115–141, §101(a)(1), amended subsec. (g) generally. Prior to amendment, subsec. (g) related to deduction allowed to specified agricultural or horticultural cooperatives.

Statutory Notes and Related Subsidiaries

Effective Date of 2018 Amendment

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

Effective Date

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

1 So in original. The word "a" probably should not appear within the quoted text.

2 So in original. Probably should be "7704(b))".