26 U.S.C. § 36 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 36: First-time homebuyer credit
First-time homebuyer credit
Status: in_force

(a) Allowance of credit

In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence.

(b) Limitations

(1) Dollar limitation

(A) In general

Except as otherwise provided in this paragraph, the credit allowed under subsection (a) shall not exceed $8,000.

(B) Married individuals filing separately

In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting "$4,000" for "$8,000".

(C) Other individuals

If two or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $8,000.

(D) Special rule for long-time residents of same principal residence

In the case of a taxpayer to whom a credit under subsection (a) is allowed by reason of subsection (c)(6), subparagraphs (A), (B), and (C) shall be applied by substituting "$6,500" for "$8,000" and "$3,250" for "$4,000".

(2) Limitation based on modified adjusted gross income

(A) In general

The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—

(i) the excess (if any) of—

(I) the taxpayer's modified adjusted gross income for such taxable year, over

(II) $125,000 ($225,000 in the case of a joint return), bears to

(ii) $20,000.

(B) Modified adjusted gross income

For purposes of subparagraph (A), the term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

(3) Limitation based on purchase price

No credit shall be allowed under subsection (a) for the purchase of any residence if the purchase price of such residence exceeds $800,000.

(4) Age limitation

No credit shall be allowed under subsection (a) with respect to the purchase of any residence unless the taxpayer has attained age 18 as of the date of such purchase. In the case of any taxpayer who is married (within the meaning of section 7703), the taxpayer shall be treated as meeting the age requirement of the preceding sentence if the taxpayer or the taxpayer's spouse meets such age requirement.

(c) Definitions

For purposes of this section—

(1) First-time homebuyer

The term "first-time homebuyer" means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies.

(2) Principal residence

The term "principal residence" has the same meaning as when used in section 121.

(3) Purchase

(A) In general

The term "purchase" means any acquisition, but only if—

(i) the property is not acquired from a person related to the person acquiring such property (or, if married, such individual's spouse), and

(ii) the basis of the property in the hands of the person acquiring such property is not determined—

(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or

(II) under section 1014(a) (relating to property acquired from a decedent).

(B) Construction

A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.

(4) Purchase price

The term "purchase price" means the adjusted basis of the principal residence on the date such residence is purchased.

(5) Related persons

A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants).

(6) Exception for long-time residents of same principal residence

In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.

(d) Exceptions

No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if—

(1) the taxpayer is a nonresident alien,

(2) the taxpayer disposes of such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of such taxable year,

(3) a deduction under section 151 with respect to such taxpayer is allowable to another taxpayer for such taxable year, or

(4) the taxpayer fails to attach to the return of tax for such taxable year a properly executed copy of the settlement statement used to complete such purchase.

(e) Reporting

If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e) shall not apply.

(f) Recapture of credit

(1) In general

Except as otherwise provided in this subsection, if a credit under subsection (a) is allowed to a taxpayer, the tax imposed by this chapter shall be increased by 62/3 percent of the amount of such credit for each taxable year in the recapture period.

(2) Acceleration of recapture

If a taxpayer disposes of the principal residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the end of the recapture period—

(A) the tax imposed by this chapter for the taxable year of such disposition or cessation shall be increased by the excess of the amount of the credit allowed over the amounts of tax imposed by paragraph (1) for preceding taxable years, and

(B) paragraph (1) shall not apply with respect to such credit for such taxable year or any subsequent taxable year.

(3) Limitation based on gain

In the case of the sale of the principal residence to a person who is not related to the taxpayer, the increase in tax determined under paragraph (2) shall not exceed the amount of gain (if any) on such sale. Solely for purposes of the preceding sentence, the adjusted basis of such residence shall be reduced by the amount of the credit allowed under subsection (a) to the extent not previously recaptured under paragraph (1).

(4) Exceptions

(A) Death of taxpayer

Paragraphs (1) and (2) shall not apply to any taxable year ending after the date of the taxpayer's death.

(B) Involuntary conversion

Paragraph (2) shall not apply in the case of a residence which is compulsorily or involuntarily converted (within the meaning of section 1033(a)) if the taxpayer acquires a new principal residence during the 2-year period beginning on the date of the disposition or cessation referred to in paragraph (2). Paragraph (2) shall apply to such new principal residence during the recapture period in the same manner as if such new principal residence were the converted residence.

(C) Transfers between spouses or incident to divorce

In the case of a transfer of a residence to which section 1041(a) applies—

(i) paragraph (2) shall not apply to such transfer, and

(ii) in the case of taxable years ending after such transfer, paragraphs (1) and (2) shall apply to the transferee in the same manner as if such transferee were the transferor (and shall not apply to the transferor).

(D) Waiver of recapture for purchases in 2009 and 2010

In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008—

(i) paragraph (1) shall not apply, and

(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.

(E) Special rule for members of the armed forces, etc.

(i) In general

In the case of the disposition of a principal residence by an individual (or a cessation referred to in paragraph (2)) after December 31, 2008, in connection with Government orders received by such individual, or such individual's spouse, for qualified official extended duty service—

(I) paragraph (2) and subsection (d)(2) shall not apply to such disposition (or cessation), and

(II) if such residence was acquired before January 1, 2009, paragraph (1) shall not apply to the taxable year in which such disposition (or cessation) occurs or any subsequent taxable year.

(ii) Qualified official extended duty service

For purposes of this section, the term "qualified official extended duty service" means service on qualified official extended duty as—

(I) a member of the uniformed services,

(II) a member of the Foreign Service of the United States, or

(III) an employee of the intelligence community.

(iii) Definitions

Any term used in this subparagraph which is also used in paragraph (9) of section 121(d) shall have the same meaning as when used in such paragraph.

(5) Joint returns

In the case of a credit allowed under subsection (a) with respect to a joint return, half of such credit shall be treated as having been allowed to each individual filing such return for purposes of this subsection.

(6) Return requirement

If the tax imposed by this chapter for the taxable year is increased under this subsection, the taxpayer shall, notwithstanding section 6012, be required to file a return with respect to the taxes imposed under this subtitle.

(7) Recapture period

For purposes of this subsection, the term "recapture period" means the 15 taxable years beginning with the second taxable year following the taxable year in which the purchase of the principal residence for which a credit is allowed under subsection (a) was made.

(g) Election to treat purchase in prior year

In the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat such purchase as made on December 31 of the calendar year preceding such purchase for purposes of this section (other than subsections (b)(4), (c), (f)(4)(D), and (h)).

(h) Application of section

(1) In general

This section shall only apply to a principal residence purchased by the taxpayer on or after April 9, 2008, and before May 1, 2010.

(2) Exception in case of binding contract

In the case of any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010, and who purchases such residence before October 1, 2010, paragraph (1) shall be applied by substituting "October 1, 2010" for "May 1, 2010".

(3) Special rule for individuals on qualified official extended duty outside the United States

In the case of any individual who serves on qualified official extended duty service (as defined in section 121(d)(9)(C)(i)) outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, and, if married, such individual's spouse—

(A) paragraphs (1) and (2) shall each be applied by substituting "May 1, 2011" for "May 1, 2010", and

(B) paragraph (2) shall be applied by substituting "July 1, 2011" for "July 1, 2010", and for "October 1, 2010".

(Added Pub. L. 110–289, div. C, title I, §3011(a), July 30, 2008, 122 Stat. 2888; amended Pub. L. 111–5, div. B, title I, §1006(a)–(c), (d)(2), (e), Feb. 17, 2009, 123 Stat. 316, 317; Pub. L. 111–92, §§11(a)–(g), 12(a)–(c), Nov. 6, 2009, 123 Stat. 2989–2992; Pub. L. 111–198, §2(a), (b), July 2, 2010, 124 Stat. 1356.)

Editorial Notes

Prior Provisions

A prior section 36 was renumbered section 37 of this title.

Another prior section 36, acts Aug. 16, 1954, ch. 736, 68A Stat. 15; Oct. 4, 1976, Pub. L. 94–455, title V, §501(b)(2), title X, §1011(c), title XIX, §1901(b)(1)(A), 90 Stat. 1558, 1611, 1790, directed that credits provided by section 32 not be allowed if an individual elects under section 144 to take standard deduction, prior to repeal by Pub. L. 95–30, title I, §§101(d)(3), 106(a), May 23, 1977, 91 Stat. 133, 141, applicable to taxable years beginning after Dec. 31, 1976.

Amendments

2010—Subsec. (h)(2). Pub. L. 111–198, §2(a), substituted "and who purchases such residence before October 1, 2010, paragraph (1) shall be applied by substituting 'October 1, 2010' " for "paragraph (1) shall be applied by substituting 'July 1, 2010' ".

Subsec. (h)(3)(B). Pub. L. 111–198, §2(b), inserted ", and for 'October 1, 2010' " after "for 'July 1, 2010' ".

2009—Subsec. (b)(1)(A). Pub. L. 111–5, §1006(b)(1), substituted "$8,000" for "$7,500".

Subsec. (b)(1)(B). Pub. L. 111–5, §1006(b), substituted "$4,000" for "$3,750" and "$8,000" for "$7,500".

Subsec. (b)(1)(C). Pub. L. 111–5, §1006(b)(1), substituted "$8,000" for "$7,500".

Subsec. (b)(1)(D). Pub. L. 111–92, §11(c)(1), added subpar. (D).

Subsec. (b)(2)(A)(i)(II). Pub. L. 111–92, §11(c)(2), substituted "$125,000 ($225,000" for "$75,000 ($150,000".

Subsec. (b)(3). Pub. L. 111–92, §11(d), added par. (3).

Subsec. (b)(4). Pub. L. 111–92, §12(a)(1), added par. (4).

Subsec. (c)(3)(A)(i). Pub. L. 111–92, §12(c), inserted "(or, if married, such individual's spouse)" after "person acquiring such property".

Subsec. (c)(6). Pub. L. 111–92, §11(b), added par. (6).

Subsec. (d). Pub. L. 111–5, §1006(d)(2), (e), redesignated pars. (3) and (4) as (1) and (2), respectively, and struck out former pars. (1) and (2) which read as follows:

"(1) a credit under section 1400C (relating to first-time homebuyer in the District of Columbia) is allowable to the taxpayer (or the taxpayer's spouse) for such taxable year or any prior taxable year,

"(2) the residence is financed by the proceeds of a qualified mortgage issue the interest on which is exempt from tax under section 103,".

Subsec. (d)(3). Pub. L. 111–92, §11(g), added par. (3).

Subsec. (d)(4). Pub. L. 111–92, §12(b), added par. (4).

Subsec. (f)(4)(D). Pub. L. 111–92, §11(a)(2), inserted "and 2010" after "2009" in heading and struck out ", and before December 1, 2009" after "December 31, 2008" in introductory provisions.

Pub. L. 111–5, §1006(c)(1), added subpar. (D).

Subsec. (f)(4)(E). Pub. L. 111–92, §11(e), added subpar. (E).

Subsec. (g). Pub. L. 111–92, §12(a)(2), inserted "(b)(4)," before "(c)".

Pub. L. 111–92, §11(a)(3), amended subsec. (g) generally. Prior to amendment, text read as follows: "In the case of a purchase of a principal residence after December 31, 2008, and before December 1, 2009, a taxpayer may elect to treat such purchase as made on December 31, 2008, for purposes of this section (other than subsections (c) and (f)(4)(D))."

Pub. L. 111–5, §1006(a)(2), (c)(2), substituted "December 1, 2009" for "July 1, 2009" and "subsections (c) and (f)(4)(D)" for "subsection (c)".

Subsec. (h). Pub. L. 111–92, §11(a)(1), substituted "May 1, 2010" for "December 1, 2009", designated existing provisions as par. (1), inserted heading, and added par. (2).

Pub. L. 111–5, §1006(a)(1), substituted "December 1, 2009" for "July 1, 2009".

Subsec. (h)(3). Pub. L. 111–92, §11(f), added par. (3).

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Pub. L. 111–198, §2(c), July 2, 2010, 124 Stat. 1356, provided that: "The amendments made by this section [amending this section] shall apply to residences purchased after June 30, 2010."

Effective Date of 2009 Amendment

Pub. L. 111–92, §11(j)(1)–(3), Nov. 6, 2009, 123 Stat. 2991, provided that:

"(1) In general.—The amendments made by subsections (b), (c), (d), and (g) [amending this section] shall apply to residences purchased after the date of the enactment of this Act [Nov. 6, 2009].

"(2) Extensions.—The amendments made by subsections (a) [amending this section], (f) [amending this section], and (i) [amending section 1400C of this title] shall apply to residences purchased after November 30, 2009.

"(3) Waiver of recapture.—The amendment made by subsection (e) [amending this section] shall apply to dispositions and cessations after December 31, 2008."

Pub. L. 111–92, §12(e), Nov. 6, 2009, 123 Stat. 2992, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 6213 of this title] shall apply to purchases after the date of the enactment of this Act [Nov. 6, 2009].

"(2) Documentation requirement.—The amendments made by subsection (b) [amending this section] shall apply to returns for taxable years ending after the date of the enactment of this Act [Nov. 6, 2009].

"(3) Treatment as mathematical and clerical errors.—The amendments made by subsection (d) [amending section 6213 of this title] shall apply to returns for taxable years ending on or after April 9, 2008."

Pub. L. 111–5, div. B, title I, §1006(f), Feb. 17, 2009, 123 Stat. 317, provided that: "The amendments made by this section [amending this section and section 1400C of this title] shall apply to residences purchased after December 31, 2008."

Effective Date

Section applicable to residences purchased on or after Apr. 9, 2008, in taxable years ending on or after such date, see section 3011(c) of Pub. L. 110–289, set out as an Effective Date of 2008 Amendment note under section 26 of this title.
26 U.S.C. § 402A (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Subchapter D / Section 402A: Optional treatment of elective deferrals as Roth contributions
Optional treatment of elective deferrals as Roth contributions
Status: in_force

(a) General rule

If an applicable retirement plan includes a qualified Roth contribution program—

(1) any designated Roth contribution made by an employee pursuant to the program shall be treated as an elective deferral for purposes of this chapter, except that such contribution shall not be excludable from gross income,

(2) any designated Roth contribution which pursuant to the program is made by the employer on the employee's behalf on account of the employee's contribution, elective deferral, or (subject to the requirements of section 401(m)(13)) qualified student loan payment shall be treated as a matching contribution for purposes of this chapter, except that such contribution shall not be excludable from gross income,

(3) any designated Roth contribution which pursuant to the program is made by the employer on the employee's behalf and which is a nonelective contribution shall be nonforfeitable and shall not be excludable from gross income, and

(4) such plan (and any arrangement which is part of such plan) shall not be treated as failing to meet any requirement of this chapter solely by reason of including such program.

(b) Qualified Roth contribution program

For purposes of this section—

(1) In general

The term "qualified Roth contribution program" means a program under which an employee may elect to make, or to have made on the employee's behalf, designated Roth contributions in lieu of all or a portion of elective deferrals the employee is otherwise eligible to make, or of matching contributions or nonelective contributions which may otherwise be made on the employee's behalf, under the applicable retirement plan.

(2) Separate accounting required

A program shall not be treated as a qualified Roth contribution program unless the applicable retirement plan—

(A) establishes separate accounts ("designated Roth accounts") for the designated Roth contributions of each employee and any earnings properly allocable to the contributions, and

(B) maintains separate recordkeeping with respect to each account.

(c) Definitions and rules relating to designated Roth contributions

For purposes of this section—

(1) Designated Roth contribution

The term "designated Roth contribution" means any elective deferral, matching contribution, or nonelective contribution which—

(A) is excludable from gross income of an employee without regard to this section, and

(B) the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable.

(2) Designation limits

The amount of elective deferrals which an employee may designate under paragraph (1) shall not exceed the excess (if any) of—

(A) the maximum amount of elective deferrals excludable from gross income of the employee for the taxable year (without regard to this section), over

(B) the aggregate amount of elective deferrals of the employee for the taxable year which the employee does not designate under paragraph (1).

(3) Rollover contributions

(A) In general

A rollover contribution of any payment or distribution from a designated Roth account which is otherwise allowable under this chapter may be made only if the contribution is to—

(i) another designated Roth account of the individual from whose account the payment or distribution was made, or

(ii) a Roth IRA of such individual.

(B) Coordination with limit

Any rollover contribution to a designated Roth account under subparagraph (A) shall not be taken into account for purposes of paragraph (1).

(4) Taxable rollovers to designated Roth accounts

(A) In general

Notwithstanding sections 402(c), 403(b)(8), and 457(e)(16), in the case of any distribution to which this paragraph applies—

(i) there shall be included in gross income any amount which would be includible were it not part of a qualified rollover contribution,

(ii) section 72(t) shall not apply, and

(iii) unless the taxpayer elects not to have this clause apply, any amount required to be included in gross income for any taxable year beginning in 2010 by reason of this paragraph shall be so included ratably over the 2-taxable-year period beginning with the first taxable year beginning in 2011.

Any election under clause (iii) for any distributions during a taxable year may not be changed after the due date for such taxable year.

(B) Distributions to which paragraph applies

In the case of an applicable retirement plan which includes a qualified Roth contribution program, this paragraph shall apply to a distribution from such plan other than from a designated Roth account which is contributed in a qualified rollover contribution (within the meaning of section 408A(e)) to the designated Roth account maintained under such plan for the benefit of the individual to whom the distribution is made.

(C) Coordination with limit

Any distribution to which this paragraph applies shall not be taken into account for purposes of paragraph (1).

(D) Other rules

The rules of subparagraphs (D), (E), and (F) of section 408A(d)(3) (as in effect for taxable years beginning after 2009) shall apply for purposes of this paragraph.

(E) Special rule for certain transfers

In the case of an applicable retirement plan which includes a qualified Roth contribution program—

(i) the plan may allow an individual to elect to have the plan transfer any amount not otherwise distributable under the plan to a designated Roth account maintained for the benefit of the individual,

(ii) such transfer shall be treated as a distribution to which this paragraph applies which was contributed in a qualified rollover contribution (within the meaning of section 408A(e)) to such account, and

(iii) the plan shall not be treated as violating the provisions of section 401(k)(2)(B)(i), 403(b)(7)(A)(ii),1 403(b)(11), or 457(d)(1)(A), or of section 8433 of title 5, United States Code, solely by reason of such transfer.

(d) Distribution rules

For purposes of this title—

(1) Exclusion

Any qualified distribution from a designated Roth account shall not be includible in gross income.

(2) Qualified distribution

For purposes of this subsection—

(A) In general

The term "qualified distribution" has the meaning given such term by section 408A(d)(2)(A) (without regard to clause (iv) thereof).

(B) Distributions within nonexclusion period

A payment or distribution from a designated Roth account shall not be treated as a qualified distribution if such payment or distribution is made within the 5-taxable-year period beginning with the earlier of—

(i) the first taxable year for which the individual made a designated Roth contribution to any designated Roth account established for such individual under the same applicable retirement plan, or

(ii) if a rollover contribution was made to such designated Roth account from a designated Roth account previously established for such individual under another applicable retirement plan, the first taxable year for which the individual made a designated Roth contribution to such previously established account.

(C) Distributions of excess deferrals and contributions and earnings thereon

The term "qualified distribution" shall not include any distribution of any excess deferral under section 402(g)(2) or any excess contribution under section 401(k)(8), and any income on the excess deferral or contribution.

(3) Treatment of distributions of certain excess deferrals

Notwithstanding section 72, if any excess deferral under section 402(g)(2) attributable to a designated Roth contribution is not distributed on or before the 1st April 15 following the close of the taxable year in which such excess deferral is made, the amount of such excess deferral shall—

(A) not be treated as investment in the contract, and

(B) be included in gross income for the taxable year in which such excess is distributed.

(4) Aggregation rules

Section 72 shall be applied separately with respect to distributions and payments from a designated Roth account and other distributions and payments from the plan.

(5) Mandatory distribution rules not to apply before death

Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account:

(A) Section 401(a)(9)(A).

(B) The incidental death benefit requirements of section 401(a).

(e) Pension-linked emergency savings accounts

(1) In general

An applicable retirement plan—

(A) may—

(i) include a pension-linked emergency savings account established pursuant to section 801 of the Employee Retirement Income Security Act of 1974, which, except as otherwise provided in this subsection, shall be treated for purposes of this title as a designated Roth account, and

(ii) either—

(I) offer to enroll an eligible participant in such pension-linked emergency savings account, or

(II) automatically enroll an eligible participant in such account pursuant to an automatic contribution arrangement described in paragraph (4), and

(B) shall—

(i) separately account for contributions to such account and any earnings properly allocable to the contributions,

(ii) maintain separate recordkeeping with respect to each such account, and

(iii) allow withdrawals from such account in accordance with paragraph (7).

(2) Eligible participant

(A) In general

For purposes of this subsection, the term "eligible participant", with regard to a defined contribution plan, means an individual, without regard to whether the individual is otherwise a participant in such plan, who—

(i) meets any age, service, and other eligibility requirements of the plan, and

(ii) is not a highly compensated employee (as defined in section 414(q)).

(B) Eligible participant who becomes a highly compensated employee

Notwithstanding subparagraph (A)(ii), an individual on whose behalf a pension-linked emergency savings account is established who thereafter becomes a highly compensated employee (as so defined) may not make further contributions to such account, but retains the right to withdraw any account balance of such account in accordance with paragraphs (7) and (8).

(3) Contribution limitation

(A) In general

Subject to subparagraph (B), no contribution shall be accepted to a pension-linked emergency savings account to the extent such contribution would cause the portion of the account balance attributable to participant contributions to exceed the lesser of—

(i) $2,500; or

(ii) an amount determined by the plan sponsor of the pension-linked emergency savings account.

In the case of contributions made in taxable years beginning after December 31, 2024, the Secretary shall adjust the amount under clause (i) at the same time and in the same manner as the adjustment made under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2023. Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the next lowest multiple of $100.

(B) Excess contributions

To the extent any contribution to the pension-linked emergency savings account of a participant for a taxable year would exceed the limitation of subparagraph (A)—

(i) in the case of an eligible participant with another designated Roth account under the defined contribution plan, the plan may provide that—

(I) the participant may elect to increase the participant's contribution to such other account, and

(II) in the absence of such a participant election, the participant is deemed to have elected to increase the participant's contributions to such account at the rate at which contributions were being made to the pension-linked emergency savings account, and

(ii) in any other case, such plan shall provide that such excess contributions will not be accepted.

(4) Automatic contribution arrangement

For purposes of this section—

(A) In general

An automatic contribution arrangement described in this paragraph is an arrangement under which an eligible participant is treated as having elected to have the plan sponsor make elective contributions to a pension-linked emergency savings account at a participant contribution rate that is not more than 3 percent of the compensation of the eligible participant, unless the eligible participant, at any time (subject to such reasonable advance notice as is required by the plan administrator), affirmatively elects to—

(i) make contributions at a different rate, or

(ii) opt out of such contributions.

(B) Participant contribution rate

For purposes of an automatic contribution arrangement described in subparagraph (A), the plan sponsor—

(i) shall select a participant contribution rate under such automatic contribution arrangement which meets the requirements of subparagraph (A), and

(ii) may amend such rate (prior to the plan year for which such amendment would take effect) not more than once annually.

(5) Disclosure by plan sponsor

(A) In general

With respect to a defined contribution plan which includes a pension-linked emergency savings account, the administrator of the plan shall, not less than 30 days and not more than 90 days prior to the date of the first contribution to the pension-linked emergency savings account, including any contribution under an automatic contribution arrangement described in section 801(d)(2) of the Employee Retirement Income Security Act of 1974, or the date of any adjustment to the participant contribution rate under section 801(d)(2)(B)(ii) of such Act, and not less than annually thereafter, shall furnish to the participant a notice describing—

(i) the purpose of the account, which is for short-term, emergency savings;

(ii) the limits on, and tax treatment of, contributions to the pension-linked emergency savings account of the participant;

(iii) any fees, expenses, restrictions, or charges associated with such pension-linked emergency savings account;

(iv) procedures for electing to make contributions or opting out of the pension-linked emergency savings account, changing participant contribution rates for such account, and making participant withdrawals from such pension-linked emergency savings account, including any limits on frequency;

(v) the amount of the intended contribution or the change in the percentage of the compensation of the participant of such contribution, if applicable;

(vi) the amount in the pension-linked emergency savings account and the amount or percentage of compensation that a participant has contributed to such account;

(vii) the designated investment option under section 801(c)(1)(A)(iii) of the Employee Retirement Income Security Act of 1974 for amounts contributed to the pension-linked emergency savings account;

(viii) the options under section 801(e) of such Act for the account balance of the pension-linked emergency savings account after termination of the employment of the participant; and

(ix) the ability of a participant who becomes a highly compensated employee (as such term is defined in section 414(q)) to, as described in section 801(b)(2) of the Employee Retirement Income Security Act of 1974, withdraw any account balance from a pension-linked emergency savings account and the restriction on the ability of such a participant to make further contributions to the pension-linked emergency savings account.

(B) Notice requirements

A notice furnished to a participant under subparagraph (A) shall be—

(i) sufficiently accurate and comprehensive to apprise the participant of the rights and obligations of the participant with regard to the pension-linked emergency savings account of the participant; and

(ii) written in a manner calculated to be understood by the average participant.

(C) Consolidated notices

The required notices under subparagraph (A) may be included with any other notice under the Employee Retirement Income Security Act of 1974, including under section 404(c)(5)(B) or 514(e)(3) of such Act, or under section 401(k)(13)(E) or 414(w)(4), if such other notice is provided to the participant at the time required for such notice.

(6) Employer matching contributions to a defined contribution plan for employee contributions to a pension-linked emergency savings account

(A) In general

If an employer makes any matching contributions to a defined contribution plan of which a pension-linked emergency savings account is part, subject to the limitations of paragraph (3), the employer shall make matching contributions on behalf of an eligible participant on account of the participant's contributions to the pension-linked emergency savings account at the same rate as any other matching contribution on account of an elective contribution by such participant. The matching contributions shall be made to the participant's account under the defined contribution plan which is not the pension-linked emergency savings account. Such matching contributions on account of contributions to the pension-linked emergency savings account shall not exceed the maximum account balance under paragraph (3)(A) for such plan year.

(B) Coordination rule

For purposes of any applicable limitation on matching contributions, any matching contributions made under the plan shall be treated first as attributable to the elective deferrals of the participant other than contributions to a pension-linked emergency savings account.

(C) Matching contributions

For purposes of subparagraph (A), the term "matching contribution" has the meaning given such term in section 401(m)(4).

(7) Distributions

(A) In general

A pension-linked emergency savings account shall allow for withdrawal by the participant on whose behalf the account is established of the account balance, in whole or in part at the discretion of the participant, at least once per calendar month and for distribution of such withdrawal to the participant as soon as practicable after the date on which the participant elects to make such withdrawal.

(B) Treatment of distributions

Any distribution from a pension-linked emergency savings account in accordance with subparagraph (A)—

(i) shall be treated as a qualified distribution for purposes of subsection (d), and

(ii) shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A).

(8) Account balance after termination

(A) In general

Upon termination of employment of the participant, or termination by the plan sponsor of the pension-linked emergency savings account, the pension-linked emergency savings account of such participant in a defined contribution plan shall—

(i) allow, at the election of the participant, for transfer by the participant of the account balance of such account, in whole or in part, into another designated Roth account of the participant under the defined contribution plan; and

(ii) for any amounts in such account not transferred under paragraph (1), make such amounts available within a reasonable time to the participant.

(B) Prohibition of certain transfers

No amounts shall be transferred by the participant from another account of the participant under any plan of the employer into the pension-linked emergency savings account of the participant.

(C) Coordination with section 72

Subparagraph (F) of section 408A(d)(3) shall not apply (including by reason of subsection (c)(4)(D) of this section) to any rollover contribution of amounts in a pension-linked emergency savings account under subparagraph (A).

(9) Coordination with distribution of excess deferrals

If any excess deferrals are distributed under section 402(g)(2)(A) to a participant, such amounts shall be distributed first from any pension-linked emergency savings account of the participant to the extent contributions were made to such account for the taxable year.

(10) Treatment of account balances

(A) In general

Except as provided in subparagraph (B), a distribution from a pension-linked emergency savings account shall not be treated as an eligible rollover distribution for purposes of sections 401(a)(31), 402(f), and 3405.

(B) Termination

In the case of termination of employment of the participant, or termination by the plan sponsor of the pension-linked emergency savings account, except for purposes of 401(a)(31)(B), a distribution from a pension-linked emergency savings account which is contributed as provided in paragraph (8)(A)(i) shall be treated as an eligible rollover distribution.

(11) Exception to plan amendment rules

Notwithstanding section 411(d)(6), a plan which includes a pension-linked emergency savings account may cease to offer such accounts at any time.

(12) Anti-abuse rules

A plan of which a pension-linked emergency savings account is part—

(A) may employ reasonable procedures to limit the frequency or amount of matching contributions with respect to contributions to such account, solely to the extent necessary to prevent manipulation of the rules of the plan to cause matching contributions to exceed the intended amounts or frequency, and

(B) shall not be required to suspend matching contributions following any participant withdrawal of contributions, including elective deferrals and employee contributions, whether or not matched and whether or not made pursuant to an automatic contribution arrangement described in paragraph (4).

The Secretary, in consultation with the Secretary of Labor, shall issue regulations or other guidance not later than 12 months after the date of the enactment of the SECURE 2.0 Act of 2022 with respect to the anti-abuse rules described in the preceding sentence.

(f) Other definitions

For purposes of this section—

(1) Applicable retirement plan

The term "applicable retirement plan" means—

(A) an employees' trust described in section 401(a) which is exempt from tax under section 501(a),

(B) a plan under which amounts are contributed by an individual's employer for an annuity contract described in section 403(b), and

(C) an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).

(2) Elective deferral

The term "elective deferral" means—

(A) any elective deferral described in subparagraph (A) or (C) of section 402(g)(3), and

(B) any elective deferral of compensation by an individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).

(3) Matching contribution

The term "matching contribution" means—

(A) any matching contribution described in section 401(m)(4)(A), and

(B) any contribution to an eligible deferred compensation plan (as defined in section 457(b)) by an eligible employer described in section 457(e)(1)(A) on behalf of an employee and on account of such employee's elective deferral under such plan,

but only if such contribution is nonforfeitable at the time received.

(Added Pub. L. 107–16, title VI, §617(a), June 7, 2001, 115 Stat. 103; amended Pub. L. 111–240, title II, §§2111(a), (b), 2112(a), Sept. 27, 2010, 124 Stat. 2565, 2566; Pub. L. 112–240, title IX, §902(a), Jan. 2, 2013, 126 Stat. 2371; Pub. L. 113–295, div. A, title II, §220(k), Dec. 19, 2014, 128 Stat. 4036; Pub. L. 117–328, div. T, title I, §127(e)(1), title III, §325(a), title VI, §604(a)–(d), Dec. 29, 2022, 136 Stat. 5324, 5359, 5392.)

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

Section 403(b)(7)(A)(ii), referred to in subsec. (c)(4)(E)(iii), probably means section 403(b)(7)(A)(ii) of this title prior to amendment by Pub. L. 116–94, div. O, title I, §109(c)(2), Dec. 20, 2019, 133 Stat. 3151.

The Employee Retirement Income Security Act of 1974, referred to in subsec. (e)(1)(A)(i), (5)(A), (C), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829. Sections 404, 514, and 801 of the Act are classifed to sections 1104, 1144, and 1193, respectively, of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 29 and Tables.

The date of the enactment of the SECURE 2.0 Act of 2022, referred to in subsec. (e)(12), is the date of enactment of div. T of Pub. L. 117–328, which was approved Dec. 29, 2022.

Amendments

2022—Subsec. (a). Pub. L. 117–328, §604(a), added pars. (2) and (3) and redesignated former par. (2) as (4).

Subsec. (b)(1). Pub. L. 117–328, §604(b), inserted ", or to have made on the employee's behalf," after "elect to make" and ", or of matching contributions or nonelective contributions which may otherwise be made on the employee's behalf," after "otherwise eligible to make".

Subsec. (c)(1). Pub. L. 117–328, §604(c), inserted ", matching contribution, or nonelective contribution" after "elective deferral" in introductory provisions.

Subsec. (d)(5). Pub. L. 117–328, §325(a), added par. (5).

Subsec. (e). Pub. L. 117–328, §127(e)(1), added subsec. (e). Former subsec. (e) redesignated (f).

Subsec. (f). Pub. L. 117–328, §127(e)(1), redesignated subsec. (e) as (f).

Subsec. (f)(3). Pub. L. 117–328, §604(d), added par. (3).

2014—Subsec. (c)(4)(E)(iii). Pub. L. 113–295 substituted "403(b)(7)(A)(ii)" for "403(b)(7)(A)(i)".

2013—Subsec. (c)(4)(E). Pub. L. 112–240 added subpar. (E).

2010—Subsec. (c)(4). Pub. L. 111–240, §2112(a), added par. (4).

Subsec. (e)(1)(C). Pub. L. 111–240, §2111(a), added subpar. (C).

Subsec. (e)(2). Pub. L. 111–240, §2111(b), amended par. (2) generally. Prior to amendment, text read as follows: "The term 'elective deferral' means any elective deferral described in subparagraph (A) or (C) of section 402(g)(3)."

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Amendment by section 127 of Pub. L. 117–328 applicable to plan years beginning after Dec. 31, 2023, see section 127(g) of Pub. L. 117–328, set out as a note under section 72 of this title.

Pub. L. 117–328, div. T, title III, §325(b), Dec. 29, 2022, 136 Stat. 5359, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2023.

"(2) Special rule.—The amendment made by this section shall not apply to distributions which are required with respect to years beginning before January 1, 2024, but are permitted to be paid on or after such date."

Pub. L. 117–328, div. T, title VI, §604(e), Dec. 29, 2022, 136 Stat. 5393, provided that: "The amendments made by this section [amending this section] shall apply to contributions made after the date of the enactment of this Act [Dec. 29, 2022]."

Effective Date of 2013 Amendment

Pub. L. 112–240, title IX, §902(b), Jan. 2, 2013, 126 Stat. 2371, provided that: "The amendment made by this section [amending this section] shall apply to transfers after December 31, 2012, in taxable years ending after such date."

Effective Date of 2010 Amendment

Pub. L. 111–240, title II, §2111(c), Sept. 27, 2010, 124 Stat. 2566, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2010."

Pub. L. 111–240, title II, §2112(b), Sept. 27, 2010, 124 Stat. 2566, provided that: "The amendments made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [Sept. 27, 2010]."

Effective Date

Section applicable to taxable years beginning after Dec. 31, 2005, see section 617(f) of Pub. L. 107–16, set out as an Effective Date of 2001 Amendment note under section 402 of this title.

Regulatory Authority

Pub. L. 117–328, div. T, title I, §127(f), Dec. 29, 2022, 136 Stat. 5329, provided that: "The Secretary of Labor and the Secretary of the Treasury (or a delegate of either such Secretary) shall have authority to issue regulations or other guidance, and to coordinate in developing regulations or other guidance, to carry out the purposes of this Act [div. T of Pub. L. 117–328, see Tables for classification], including—

"(1) adjustment of the limitation under section 801(d)(1) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1193(d)(1)] and section 402A(e)(3) of the Internal Revenue Code of 1986, as added by this Act, to account for inflation;

"(2) expansion of corrections programs, if necessary;

"(3) model plan language and notices relating to pension-linked emergency savings accounts; and

"(4) with regard to interactions with section 401(k)(13) of the Internal Revenue Code of 1986."

1 See References in Text note below.
26 U.S.C. § 4611 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 38 / Section 4611: Imposition of tax
Imposition of tax
Status: in_force

(a) General Rule

There is hereby imposed a tax at the rate specified in subsection (c) on—

(1) crude oil received at a United States refinery, and

(2) petroleum products entered into the United States for consumption, use, or warehousing.

(b) Tax on certain uses and exportation

(1) In general

If—

(A) any domestic crude oil is used in or exported from the United States, and

(B) before such use or exportation, no tax was imposed on such crude oil under subsection (a),

then a tax at the rate specified in subsection (c) is hereby imposed on such crude oil.

(2) Exception for use on premises where produced

Paragraph (1) shall not apply to any use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced.

(c) Rate of tax

(1) In general

The rate of the taxes imposed by this section is the sum of—

(A) the Hazardous Substance Superfund financing rate, and

(B) the Oil Spill Liability Trust Fund financing rate.

(2) Rates

For purposes of paragraph (1)—

(A) the Hazardous Substance Superfund financing rate is 16.4 cents a barrel, and

(B) the Oil Spill Liability Trust Fund financing rate is—

(i) in the case of crude oil received or petroleum products entered before January 1, 2017, 8 cents a barrel, and

(ii) in the case of crude oil received or petroleum products entered after December 31, 2016, 9 cents a barrel.

(3) Adjustment for inflation

(A) In general

In the case of a year beginning after 2023, the amount in paragraph (2)(A) shall be increased by an amount equal to—

(i) such amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting "calendar year 2022" for "calendar year 2016" in subparagraph (A)(ii) thereof.

(B) Rounding

If any amount as adjusted under subparagraph (A) is not a multiple of $0.01, such amount shall be rounded to the next lowest multiple of $0.01.

(d) Persons liable for tax

(1) Crude oil received at refinery

The tax imposed by subsection (a)(1) shall be paid by the operator of the United States refinery.

(2) Imported petroleum product

The tax imposed by subsection (a)(2) shall be paid by the person entering the product for consumption, use, or warehousing.

(3) Tax on certain uses or exports

The tax imposed by subsection (b) shall be paid by the person using or exporting the crude oil, as the case may be.

[(e) Repealed. Pub. L. 117–169, title I, §13601(a)(1), Aug. 16, 2022, 136 Stat. 1981]

(f) Application of Oil Spill Liability Trust Fund financing rate

(1) In general

Except as provided in paragraph (2), the Oil Spill Liability Trust Fund financing rate under subsection (c) shall apply on and after April 1, 2006, or if later, the date which is 30 days after the last day of any calendar quarter for which the Secretary estimates that, as of the close of that quarter, the unobligated balance in the Oil Spill Liability Trust Fund is less than $2,000,000,000.

(2) Termination

The Oil Spill Liability Trust Fund financing rate shall not apply after December 31, 2025.

(Added Pub. L. 96–510, title II, §211(a), Dec. 11, 1980, 94 Stat. 2797; amended Pub. L. 99–499, title V, §§511(a), 512(a), (b), Oct. 17, 1986, 100 Stat. 1760, 1761; Pub. L. 99–509, title VIII, §8032(a), (c)(1), (2), Oct. 21, 1986, 100 Stat. 1957, 1958; Pub. L. 100–647, title VI, §6108, Nov. 10, 1988, 102 Stat. 3712; Pub. L. 101–221, §8(a), Dec. 12, 1989, 103 Stat. 1891; Pub. L. 101–239, title VII, §7505(a), (b), Dec. 19, 1989, 103 Stat. 2363; Pub. L. 101–508, title XI, §11231(a)(1)(B), (2), (b), Nov. 5, 1990, 104 Stat. 1388–445; Pub. L. 109–58, title XIII, §1361, Aug. 8, 2005, 119 Stat. 1058; Pub. L. 110–343, div. B, title IV, §405(a)(1), (b)(1), (2), Oct. 3, 2008, 122 Stat. 3860, 3861; Pub. L. 113–295, div. A, title II, §221(a)(12)(I), Dec. 19, 2014, 128 Stat. 4039; Pub. L. 115–123, div. D, title I, §40416(a), Feb. 9, 2018, 132 Stat. 152; Pub. L. 116–94, div. Q, title I, §134(a), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, §117(a), Dec. 27, 2020, 134 Stat. 3051; Pub. L. 117–169, title I, §13601(a), Aug. 16, 2022, 136 Stat. 1981.)

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

Codification

Amendments by Pub. L. 99–509, title VIII, §8031(a), (b), and (d)(1), Oct. 21, 1986, 100 Stat. 1955, to subsecs. (a) to (e) of this section were not executed to text pursuant to Pub. L. 99–509, title VIII, §8031(e)(2), which provided that the amendments made by section 8031 shall not take effect if the Superfund Amendments and Reauthorization Act of 1986 is enacted. The Superfund Amendments and Reauthorization Act of 1986 was enacted as Pub. L. 99–499, approved Oct. 17, 1986.

Amendments

2022—Subsec. (c)(2)(A). Pub. L. 117–169, §13601(a)(2)(A), substituted "16.4 cents" for "9.7 cents".

Subsec. (c)(3). Pub. L. 117–169, §13601(a)(2)(B), added par. (3).

Subsec. (e). Pub. L. 117–169, §13601(a)(1), struck out subsec. (e) which related to application of Hazardous Substance Superfund financing rate.

2020—Subsec. (f)(2). Pub. L. 116–260 substituted "December 31, 2025" for "December 31, 2020".

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

2018—Subsec. (f)(2). Pub. L. 115–123 substituted "December 31, 2018" for "December 31, 2017".

2014—Subsec. (e)(2)(B). Pub. L. 113–295, §221(a)(12)(I)(i), substituted "this section" for "section 59A, this section,".

Subsec. (e)(3)(A). Pub. L. 113–295, §221(a)(12)(I)(ii), struck out "section 59A," after "collected under" and comma after "rate)".

2008—Subsec. (c)(2)(B). Pub. L. 110–343, §405(a)(1), substituted "is—" for "is 5 cents a barrel." and added cls. (i) and (ii).

Subsec. (f)(1). Pub. L. 110–343, §405(b)(2), substituted "paragraph (2)" for "paragraphs (2) and (3)".

Subsec. (f)(2), (3). Pub. L. 110–343, §405(b)(1), added par. (2) and struck out former pars. (2) and (3), which provided that the Oil Spill Liability Trust Fund financing rate would not apply if the unobligated balance in the Fund exceeded $2,700,000,000 and that the Fund financing rate would not apply after Dec. 31, 2014.

2005—Subsec. (f). Pub. L. 109–58 reenacted heading without change and amended text generally. Prior to amendment, text read as follows:

"(1) In general.—Except as provided in paragraph (2), the Oil Spill Liability Trust Fund financing rate under subsection (c) shall apply after December 31, 1989, and before January 1, 1995.

"(2) No tax if unobligated balance in fund exceeds $1,000,000,000.—The Oil Spill Liability Trust Fund financing rate shall not apply during any calendar quarter if the Secretary estimates that as of the close of the preceding calendar quarter the unobligated balance in the Oil Spill Liability Trust Fund exceeds $1,000,000,000."

1990—Subsec. (e)(1). Pub. L. 101–508, §11231(a)(1)(B), substituted "January 1, 1996" for "January 1, 1992".

Subsec. (e)(2). Pub. L. 101–508, §11231(a)(2), substituted "1993" for "1989" and "1994" for "1990" in introductory provisions and "1994" for "1990" and "1995" for "1991" in subpar. (B) and concluding provisions.

Subsec. (e)(3). Pub. L. 101–508, §11231(b), substituted "$11,970,000,000" for "$6,650,000,000" in heading.

Subsec. (e)(3)(A). Pub. L. 101–508, §11231(b), substituted "December 31, 1995" for "December 31, 1991".

Subsec. (e)(3)(B). Pub. L. 101–508, §11231(a)(1)(B), (b), substituted "January 1, 1996" for "January 1, 1992" in heading and text and "$11,970,000,000" for "$6,650,000,000" in heading and twice in text.

1989—Subsec. (c)(2)(A). Pub. L. 101–221 amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "the Hazardous Substance Superfund financing rate is—

"(i) except as provided in clause (ii), 8.2 cents a barrel, and

"(ii) 11.7 cents a barrel in the case of the tax imposed by subsection (a)(2), and".

Subsec. (c)(2)(B). Pub. L. 101–239, §7505(b), substituted "5 cents" for "1.3 cents".

Subsec. (f). Pub. L. 101–239, §7505(a)(1), amended subsec. (f) generally, substituting pars. (1) and (2) for former pars. (1) general applicability, (2) commencement date, and (3) limit on tax of $300,000,000.

1988—Subsec. (f)(2)(B). Pub. L. 100–647 substituted "December 31, 1990" for "September 1, 1987".

1986—Subsecs. (a), (b)(1). Pub. L. 99–499, §512(a), substituted "at the rate specified in subsection (c)" for "of 0.79 cent a barrel".

Subsec. (c). Pub. L. 99–509, §8032(a), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows:

"(1) In general.—Except as provided in paragraph (2), the rate of the taxes imposed by this section is 8.2 cents a barrel.

"(2) Imported petroleum products.—The rate of the tax imposed by subsection (a)(2) shall be 11.7 cents a barrel."

Pub. L. 99–499, §512(b), added subsec. (c) and redesignated former subsec. (c) as (d).

Subsec. (d). Pub. L. 99–499, §512(b), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e).

Subsec. (e). Pub. L. 99–509, §8032(c)(1), substituted "Hazardous Substance Superfund financing rate" for "taxes" in heading, substituted "the Hazardous Substance Superfund financing rate under this section" for "the taxes imposed by this section" in par. (1), inserted "(to the extent attributable to the Hazardous Substance Superfund financing rate)" after "this section" in pars. (2) and (3)(A), and substituted "the Hazardous Substance Superfund financing rate under this section shall not apply" for "no tax shall be imposed under this section" in par. (3)(B).

Pub. L. 99–499, §§511(a), 512(b), amended subsec. (d) generally and redesignated it as (e). Prior to amendment and redesignation, subsec. (d), termination, read as follows: "The taxes imposed by this section shall not apply after September 30, 1985, except that if on September 30, 1983, or September 30, 1984—

"(1) the unobligated balance in the Hazardous Substance Response Trust Fund as of such date exceeds $900,000,000, and

"(2) the Secretary, after consultation with the Administrator of the Environmental Protection Agency, determines that such unobligated balance will exceed $500,000,000 on September 30 of the following year if no tax is imposed under section 4611 or 4661 during the calendar year following the date referred to above,

then no tax shall be imposed by this section during the first calendar year beginning after the date referred to in paragraph (1)."

Subsec. (f). Pub. L. 99–509, §8032(c)(2), added subsec. (f).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–169, title I, §13601(c), Aug. 16, 2022, 136 Stat. 1982, provided that: "The amendments made by this section [amending this section and section 9507 of this title] shall take effect on January 1, 2023."

Effective Date of 2020 Amendment

Pub. L. 116–260, div. EE, title I, §117(b), Dec. 27, 2020, 134 Stat. 3051, provided that: "The amendment made by this section [amending this section] shall apply on and after January 1, 2021."

Effective Date of 2019 Amendment

Pub. L. 116–94, div. Q, title I, §134(b), Dec. 20, 2019, 133 Stat. 3234, provided that: "The amendment made by this section [amending this section] shall apply on and after the first day of the first calendar month beginning after the date of the enactment of this Act [Dec. 20, 2019]."

Effective Date of 2018 Amendment

Pub. L. 115–123, div. D, title I, §40416(b), Feb. 9, 2018, 132 Stat. 152, provided that: "The amendment made by this section [amending this section] shall apply on and after the first day of the first calendar month beginning after the date of the enactment of this Act [Feb. 9, 2018]."

Effective Date of 2014 Amendment

Amendment by 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 2008 Amendment

Pub. L. 110–343, div. B, title IV, §405(a)(2), Oct. 3, 2008, 122 Stat. 3860, provided that: "The amendment made by this subsection [amending this section] shall apply on and after the first day of the first calendar quarter beginning more than 60 days after the date of the enactment of this Act [Oct. 3, 2008]."

Pub. L. 110–343, div. B, title IV, §405(b)(3), Oct. 3, 2008, 122 Stat. 3861, provided that: "The amendments made by this subsection [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008]."

Effective Date of 1989 Amendment

Pub. L. 101–221, §8(b), Dec. 12, 1989, 103 Stat. 1891, provided that: "The amendment made by subsection (a) [amending this section] shall take effect on the date of enactment of this Act [Dec. 12, 1989]."

Effective Date of 1986 Amendments

Pub. L. 99–509, title VIII, §8032(d), Oct. 21, 1986, 100 Stat. 1959, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 4612, 4661, 4671, and 9507 of this title] shall take effect on the commencement date (as defined in [former] section 4611(f)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as added by this section).

"(2) Coordination with superfund reauthorization.—The amendments made by this section shall take effect only if the Superfund Amendments and Reauthorization Act of 1986 [Pub. L. 99–499, approved Oct. 17, 1986] is enacted."

[Pub. L. 101–239, title VII, §7505(d)(1), Dec. 19, 1989, 103 Stat. 2363, provided that: "For purposes of sections 8032(d) and 8033(c) of the Omnibus Budget Reconciliation Act of 1986 [Pub. L. 99–509, set out as notes above and under section 9509 of this title], the commencement date is January 1, 1990."]

Pub. L. 99–499, title V, §511(c), Oct. 17, 1986, 100 Stat. 1761, provided that: "The amendments made by this section [amending this section and repealing section 9653 of Title 42, The Public Health and Welfare] shall take effect on January 1, 1987."

Pub. L. 99–499, title V, §512(d), Oct. 17, 1986, 100 Stat. 1761, provided that: "The amendments made by this section [amending this section and section 4612 of this title] shall take effect on January 1, 1987."

Effective Date

Pub. L. 96–510, title II, §211(c), Dec. 11, 1980, 94 Stat. 2801, provided that: "The amendments made by this section [enacting subchapters A and B of this chapter] shall take effect on April 1, 1981."

Short Title

For short title of title II of Pub. L. 96–510 as the "Hazardous Substance Response Revenue Act of 1980", see Short Title of 1980 Amendment note, set out under section 1 of this title.
26 U.S.C. § 45Q (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 45Q: Credit for carbon oxide sequestration
Credit for carbon oxide sequestration
Status: in_force

(a) General rule

For purposes of section 38, the carbon oxide sequestration credit for any taxable year is an amount equal to the sum of—

(1) $20 per metric ton of qualified carbon oxide which is—

(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and

(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (2)(B),

(2) $10 per metric ton of qualified carbon oxide which is—

(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and

(B)(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or

(ii) utilized by the taxpayer in a manner described in subsection (f)(5),

(3) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—

(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and

(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (4)(B), and

(4) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—

(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and

(B)(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or

(ii) utilized by the taxpayer in a manner described in subsection (f)(5).

(b) Applicable dollar amount; additional equipment; election

(1) Applicable dollar amount

(A) In general

Except as provided in subparagraph (B) or (C), the applicable dollar amount shall be an amount equal to—

(i) for any taxable year beginning in a calendar year after 2016 and before 2027—

(I) for purposes of paragraph (3) of subsection (a), $17, and

(II) for purposes of paragraph (4) of such subsection, $12, and

(ii) for any taxable year beginning in a calendar year after 2026—

(I) for purposes of paragraph (3) of subsection (a), an amount equal to the product of $17 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2025" for "1990", and

(II) for purposes of paragraph (4) of such subsection, an amount equal to the product of $12 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2025" for "1990".

(B) Special rule for direct air capture facilities

In the case of any qualified facility described in subsection (d)(2)(A) which is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined with respect to such qualified facility under subparagraph (A), except that such subparagraph shall be applied—

(i) by substituting "$36" for "$17" each place it appears, and

(ii) by substituting "$26" for "$12" each place it appears.

(C) Applicable dollar amount for additional carbon capture equipment

In the case of any qualified facility which is placed in service before January 1, 2023, if any additional carbon capture equipment is installed at such facility and such equipment is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined under this paragraph, except that subparagraph (B) shall be applied—

(i) by substituting "before January 1, 2023" for "after December 31, 2022", and

(ii) by substituting "the additional carbon capture equipment installed at such qualified facility" for "such qualified facility".

(D) Rounding

The applicable dollar amount determined under subparagraph (A), (B), or (C) shall be rounded to the nearest cent.

(2) Installation of additional carbon capture equipment on existing qualified facility

In the case of a qualified facility placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, for which additional carbon capture equipment is placed in service on or after the date of the enactment of such Act, the amount of qualified carbon oxide which is captured by the taxpayer shall be equal to—

(A) for purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the lesser of—

(i) the total amount of qualified carbon oxide captured at such facility for the taxable year, or

(ii) the total amount of the carbon dioxide capture capacity of the carbon capture equipment in service at such facility on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and

(B) for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount (not less than zero) equal to the excess of—

(i) the amount described in clause (i) of subparagraph (A), over

(ii) the amount described in clause (ii) of such subparagraph.

(3) Election

For purposes of determining the carbon oxide sequestration credit under this section, a taxpayer may elect to have the dollar amounts applicable under paragraph (1) or (2) of subsection (a) apply in lieu of the dollar amounts applicable under paragraph (3) or (4) of such subsection for each metric ton of qualified carbon oxide which is captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018.

(c) Qualified carbon oxide

For purposes of this section—

(1) In general

The term "qualified carbon oxide" means—

(A) any carbon dioxide which—

(i) is captured from an industrial source by carbon capture equipment which is originally placed in service before the date of the enactment of the Bipartisan Budget Act of 2018,

(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and

(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization,

(B) any carbon dioxide or other carbon oxide which—

(i) is captured from an industrial source by carbon capture equipment which is originally placed in service on or after the date of the enactment of the Bipartisan Budget Act of 2018,

(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and

(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization, or

(C) in the case of a direct air capture facility, any carbon dioxide which—

(i) is captured directly from the ambient air, and

(ii) is measured at the source of capture and verified at the point of disposal, injection, or utilization.

(2) Recycled carbon oxide

The term "qualified carbon oxide" includes the initial deposit of captured carbon oxide used as a tertiary injectant. Such term does not include carbon oxide that is recaptured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.

(d) Qualified facility

For purposes of this section, the term "qualified facility" means any industrial facility or direct air capture facility—

(1) the construction of which begins before January 1, 2033, and either—

(A) construction of carbon capture equipment begins before such date, or

(B) the original planning and design for such facility includes installation of carbon capture equipment, and

(2) which—

(A) in the case of a direct air capture facility, captures not less than 1,000 metric tons of qualified carbon oxide during the taxable year,

(B) in the case of an electricity generating facility—

(i) captures not less than 18,750 metric tons of qualified carbon oxide during the taxable year, and

(ii) with respect to any carbon capture equipment for the applicable electric generating unit at such facility, has a capture design capacity of not less than 75 percent of the baseline carbon oxide production of such unit, or

(C) in the case of any other facility, captures not less than 12,500 metric tons of qualified carbon oxide during the taxable year.

(e) Definitions

For purposes of this section—

(1) Applicable electric generating unit

The term "applicable electric generating unit" means the principal electric generating unit for which the carbon capture equipment is originally planned and designed.

(2) Baseline carbon oxide production

(A) In general

The term "baseline carbon oxide production" means either of the following:

(i) In the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins, the average annual carbon oxide production, by mass, from such unit during—

(I) in the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins and on or after the date which is 3 years prior to the date on which construction of such equipment begins, the period beginning on the date such unit was placed in service and ending on the date on which construction of such equipment began, and

(II) in the case of an applicable electric generating unit which was originally placed in service more than 3 years prior to the date on which construction of the carbon capture equipment begins, the 3 years with the highest annual carbon oxide production during the 12-year period preceding the date on which construction of such equipment began.

(ii) In the case of an applicable electric generating unit which—

(I) as of the date on which construction of the carbon capture equipment begins, is not yet placed in service, or

(II) was placed in service during the 1-year period prior to the date on which construction of the carbon capture equipment begins,

 the designed annual carbon oxide production, by mass, as determined based on an assumed capacity factor of 60 percent.

(B) Capacity factor

The term "capacity factor" means the ratio (expressed as a percentage) of the actual electric output from the applicable electric generating unit to the potential electric output from such unit.

(3) Direct air capture facility

(A) In general

Subject to subparagraph (B), the term "direct air capture facility" means any facility which uses carbon capture equipment to capture carbon dioxide directly from the ambient air.

(B) Exception

The term "direct air capture facility" shall not include any facility which captures carbon dioxide—

(i) which is deliberately released from naturally occurring subsurface springs, or

(ii) using natural photosynthesis.

(4) Qualified enhanced oil or natural gas recovery project

The term "qualified enhanced oil or natural gas recovery project" has the meaning given the term "qualified enhanced oil recovery project" by section 43(c)(2), by substituting "crude oil or natural gas" for "crude oil" in subparagraph (A)(i) thereof.

(5) Tertiary injectant

The term "tertiary injectant" has the same meaning as when used within section 193(b)(1).

(f) Special rules

(1) Only qualified carbon oxide captured and disposed of or used within the united states taken into account

The credit under this section shall apply only with respect to qualified carbon oxide the capture and disposal, use, or utilization of which is within—

(A) the United States (within the meaning of section 638(1)), or

(B) a possession of the United States (within the meaning of section 638(2)).

(2) Secure geological storage

The Secretary, in consultation with the Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish regulations for determining adequate security measures for the geological storage of qualified carbon oxide under subsection (a) such that the qualified carbon oxide does not escape into the atmosphere. Such term shall include storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under such regulations.

(3) Credit attributable to taxpayer

(A) In general

Except as provided in subparagraph (B) or in any regulations prescribed by the Secretary, any credit under this section shall be attributable to—

(i) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide, and

(ii) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, the person that owns the carbon capture equipment and physically or contractually ensures the capture and disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide.

(B) Election

If the person described in subparagraph (A) makes an election under this subparagraph in such time and manner as the Secretary may prescribe by regulations, the credit under this section—

(i) shall be allowable to the person that disposes of the qualified carbon oxide, utilizes the qualified carbon oxide, or uses the qualified carbon oxide as a tertiary injectant, and

(ii) shall not be allowable to the person described in subparagraph (A).

(4) Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon oxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.

(5) Utilization of qualified carbon oxide

(A) In general

For purposes of this section, utilization of qualified carbon oxide means—

(i) the fixation of such qualified carbon oxide through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,

(ii) the chemical conversion of such qualified carbon oxide to a material or chemical compound in which such qualified carbon oxide is securely stored, or

(iii) the use of such qualified carbon oxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary.

(B) Measurement

(i) In general

For purposes of determining the amount of qualified carbon oxide utilized by the taxpayer under paragraph (2)(B)(ii) or (4)(B)(ii) of subsection (a), such amount shall be equal to the metric tons of qualified carbon oxide which the taxpayer demonstrates, based upon an analysis of lifecycle greenhouse gas emissions and subject to such requirements as the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, determines appropriate, were—

(I) captured and permanently isolated from the atmosphere, or

(II) displaced from being emitted into the atmosphere,

 through use of a process described in subparagraph (A).

(ii) Lifecycle greenhouse gas emissions

For purposes of clause (i), the term "lifecycle greenhouse gas emissions" has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (42 U.S.C. 7545(o)(1)), as in effect on the date of the enactment of the Bipartisan Budget Act of 2018, except that "product" shall be substituted for "fuel" each place it appears in such subparagraph.

(6) Election for applicable facilities

(A) In general

For purposes of this section, in the case of an applicable facility, for any taxable year in which such facility captures not less than 500,000 metric tons of qualified carbon oxide during the taxable year, the person described in paragraph (3)(A)(ii) may elect to have such facility, and any carbon capture equipment placed in service at such facility, deemed as having been placed in service on the date of the enactment of the Bipartisan Budget Act of 2018.

(B) Applicable facility

For purposes of this paragraph, the term "applicable facility" means a qualified facility—

(i) which was placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, and

(ii) for which no taxpayer claimed a credit under this section in regards to such facility for any taxable year ending before the date of the enactment of such Act.

(7) Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each dollar amount contained in paragraphs (1) and (2) of subsection (a) an amount equal to the product of—

(A) such dollar amount, multiplied by

(B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2008" for "1990".

(8) Credit reduced for tax-exempt bonds

Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.

(9) Election

For purposes of paragraphs (3) and (4) of subsection (a), a person described in paragraph (3)(A)(ii) may elect, at such time and in such manner as the Secretary may prescribe, to have the 12–year period begin on the first day of the first taxable year in which a credit under this section is claimed with respect to carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018 (after application of paragraph (6), where applicable) if—

(A) no taxpayer claimed a credit under this section with respect to such carbon capture equipment for any prior taxable year,

(B) the qualified facility at which such carbon capture equipment is placed in service is located in an area affected by a federally-declared disaster (as defined by section 165(i)(5)(A)) after the carbon capture equipment is originally placed in service, and

(C) such federally-declared disaster results in a cessation of the operation of the qualified facility or the carbon capture equipment after such equipment is originally placed in service.

(g) Application of section for certain carbon capture equipment

In the case of any carbon capture equipment placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, the credit under this section shall apply with respect to qualified carbon oxide captured using such equipment before the earlier of January 1, 2023, and the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that, during the period beginning after October 3, 2008, a total of 75,000,000 metric tons of qualified carbon oxide have been taken into account in accordance with—

(1) subsection (a) of this section, as in effect on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and

(2) paragraphs (1) and (2) of subsection (a) of this section.

(h) Increased credit amount for qualified facilities and carbon capture equipment

(1) In general

In the case of any qualified facility or any carbon capture equipment which satisfy the requirements of paragraph (2), the amount of the credit determined under subsection (a) shall be equal to such amount (determined without regard to this sentence) multiplied by 5.

(2) Requirements

The requirements described in this paragraph are that—

(A) with respect to any qualified facility the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), as well as any carbon capture equipment placed in service at such facility—

(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such facility and equipment, and

(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such facility and equipment,

(B) with respect to any carbon capture equipment the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and which is installed at a qualified facility the construction of which began prior to such date—

(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such equipment, and

(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such equipment, or

(C) the construction of carbon capture equipment begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and such equipment is installed at a qualified facility the construction of which begins prior to such date.

(3) Prevailing wage requirements

(A) In general

The requirements described in this subparagraph with respect to any qualified facility and any carbon capture equipment placed in service at such facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—

(i) the construction of such facility or equipment, and

(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in paragraph (3)(A) or (4)(A) of subsection (a), the alteration or repair of such facility or such equipment,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility and equipment are located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (1) for a taxable year, the requirement under clause (ii) of this subparagraph is applied to such taxable year in which the alteration or repair of qualified facility occurs.

(B) Correction and penalty related to failure to satisfy wage requirements

Rules similar to the rules of section 45(b)(7)(B) shall apply.

(4) Apprenticeship requirements

Rules similar to the rules of section 45(b)(8) shall apply.

(5) Regulations and guidance

The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.

(i) Regulations

The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, including regulations or other guidance to—

(1) ensure proper allocation under subsection (a) for qualified carbon oxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Bipartisan Budget Act of 2018,

(2) determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year, and

(3) for purposes of subsection (d)(2)(B)(ii), adjust the baseline carbon oxide production with respect to any applicable electric generating unit at any electricity generating facility if, after the date on which the carbon capture equipment is placed in service, modifications which are chargeable to capital account are made to such unit which result in a significant increase or decrease in carbon oxide production.

(Added Pub. L. 110–343, div. B, title I, §115(a), Oct. 3, 2008, 122 Stat. 3829; amended Pub. L. 111–5, div. B, title I, §1131(a), (b), Feb. 17, 2009, 123 Stat. 325; Pub. L. 113–295, div. A, title II, §209(j)(1), Dec. 19, 2014, 128 Stat. 4030; Pub. L. 115–123, div. D, title II, §41119(a), Feb. 9, 2018, 132 Stat. 162; Pub. L. 116–260, div. EE, title I, §121, Dec. 27, 2020, 134 Stat. 3051; Pub. L. 117–58, div. H, title IV, §80402(e), Nov. 15, 2021, 135 Stat. 1334; Pub. L. 117–169, title I, §13104(a)(1), (2)(A), (b)–(h), Aug. 16, 2022, 136 Stat. 1924–1928.)

Inflation Adjusted Items for Certain Tax Years

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

Editorial Notes

References in Text

The date of the enactment of the Bipartisan Budget Act of 2018 and the date of the enactment of such Act, referred to in text, is the date of enactment of Pub. L. 115–123, which was approved Feb. 9, 2018.

Amendments

2022—Subsec. (b)(1)(A). Pub. L. 117–169, §13104(c)(2)(A), substituted "Except as provided in subparagraph (B) or (C), the applicable dollar amount" for "The applicable dollar amount" in introductory provisions.

Subsec. (b)(1)(A)(i)(I). Pub. L. 117–169, §13104(b)(1)(A), substituted "$17" for "the dollar amount established by linear interpolation between $22.66 and $50 for each calendar year during such period".

Subsec. (b)(1)(A)(i)(II). Pub. L. 117–169, §13104(b)(1)(B), substituted "$12" for "the dollar amount established by linear interpolation between $12.83 and $35 for each calendar year during such period".

Subsec. (b)(1)(A)(ii)(I). Pub. L. 117–169, §13104(b)(2)(A), substituted "$17" for "$50".

Subsec. (b)(1)(A)(ii)(II). Pub. L. 117–169, §13104(b)(2)(B), substituted "$12" for "$35".

Subsec. (b)(1)(B), (C). Pub. L. 117–169, §13104(c)(1)(B), added subpars. (B) and (C). Former subpar. (B) redesignated (D).

Subsec. (b)(1)(D). Pub. L. 117–169, §13104(c)(2)(B), substituted "subparagraph (A), (B), or (C)" for "subparagraph (A)".

Pub. L. 117–169, §13104(c)(1)(A), redesignated subpar. (B) as (D).

Subsec. (d). Pub. L. 117–169, §13104(a)(1), amended subsec. (d) generally. Prior to amendment, subsec. (d) defined qualified facility.

Subsec. (e). Pub. L. 117–169, §13104(a)(2)(A), added pars. (1) and (2) and redesignated former pars. (1) to (3) as (3) to (5), respectively.

Subsec. (f)(3). Pub. L. 117–169, §13104(e)(1), struck out par. (3) which had appeared after par. (7) and related to credit reduced for certain tax-exempt bonds.

Subsec. (f)(8). Pub. L. 117–169, §13104(e)(2), added par. (8).

Subsec. (f)(9). Pub. L. 117–169, §13104(g), added par. (9).

Subsec. (g). Pub. L. 117–169, §13104(f), inserted "the earlier of January 1, 2023, and" before "the end of the calendar year" in introductory provisions.

Subsecs. (h), (i). Pub. L. 117–169, §13104(d), added subsec. (h) and redesignated former subsec. (h) as (i).

Subsec. (i)(3). Pub. L. 117–169, §13104(h), added par. (3).

2021—Subsec. (f)(3). Pub. L. 117–58 added par. (3) relating to credit reduced for certain tax-exempt bonds at end of subsec. (f).

2020—Subsec. (d)(1). Pub. L. 116–260 substituted "January 1, 2026" for "January 1, 2024" in introductory provisions.

2018—Pub. L. 115–123 amended section generally. Prior to amendment, section related to credit for carbon dioxide sequestration.

2014—Subsec. (d)(2). Pub. L. 113–295 substituted "Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish" for "Administrator of the Environmental Protection Agency the Secretary of Energy, and the Secretary of the Interior,, shall establish".

2009—Subsec. (a)(1)(B). Pub. L. 111–5, §1131(b)(2), inserted "and not used by the taxpayer as described in paragraph (2)(B)" after "storage".

Subsec. (a)(2)(C). Pub. L. 111–5, §1131(a), added subpar. (C).

Subsec. (d)(2). Pub. L. 111–5, §1131(b)(1), inserted "the Secretary of Energy, and the Secretary of the Interior," after "Environmental Protection Agency" and substituted "paragraph (1)(B) or (2)(C) of subsection (a)" for "subsection (a)(1)(B)" and ", oil and gas reservoirs, and unminable coal seams" for "and unminable coal seems".

Subsec. (e). Pub. L. 111–5, §1131(b)(3), substituted "taken into account in accordance with subsection (a)" for "captured and disposed of or used as a tertiary injectant".

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–169, title I, §13104(i), Aug. 16, 2022, 136 Stat. 1929, provided that:

"(1) In general.—Except as provided in paragraphs (2), (3), and (4), the amendments made by this section [amending this section and section 142 of this title] shall apply to facilities or equipment placed in service after December 31, 2022.

"(2) Modification of carbon oxide capture requirements.—The amendments made by subsection (a) [amending this section and section 142 of this title] shall apply to facilities or equipment the construction of which begins after the date of enactment of this Act [Aug. 16, 2022].

"(3) Application of section for certain carbon capture equipment.—The amendments made by subsection (f) [amending this section] shall take effect on the date of enactment of this Act.

"(4) Election.—The amendments made by subsection (g) [amending this section] shall apply to carbon oxide captured and disposed of after December 31, 2021."

Effective Date of 2021 Amendment

Pub. L. 117–58, div. H, title IV, §80402(f), Nov. 15, 2021, 135 Stat. 1334, provided that: "The amendments made by this section [amending this section and sections 141, 142, and 146 of this title] shall apply to obligations issued after December 31, 2021."

Effective Date of 2018 Amendment

Pub. L. 115–123, div. D, title II, §41119(b), Feb. 9, 2018, 132 Stat. 168, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017."

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective as if included in the provisions of the American Recovery and Reinvestment Tax Act of 2009, Pub. L. 111–5, div. B, title I, to which such amendment relates, see section 209(k) of Pub. L. 113–295, set out as a note under section 24 of this title.

Effective Date of 2009 Amendment

Pub. L. 111–5, div. B, title I, §1131(c), Feb. 17, 2009, 123 Stat. 325, provided that: "The amendments made by this section [amending this section] shall apply to carbon dioxide captured after the date of the enactment of this Act [Feb. 17, 2009]."

Effective Date

Section applicable to carbon dioxide captured after Oct. 3, 2008, see section 115(d) of Pub. L. 110–343, set out as an Effective Date of 2008 Amendment note under section 38 of this title.

Inflation Adjusted Items for Certain Years

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

2024—Internal Revenue Notice 2024–39.

2023—Internal Revenue Notice 2023–46.

2022—Internal Revenue Notice 2022–38.

2021—Internal Revenue Notice 2021–35.

2020—Internal Revenue Notice 2020–40.

2019—Internal Revenue Notice 2019–31.

2018—Internal Revenue Notice 2018–40.

2017—Internal Revenue Notice 2017–32.

2016—Internal Revenue Notice 2016–53.

2015—Internal Revenue Notice 2015–44.

2014—Internal Revenue Notice 2014–40.

2013—Internal Revenue Notice 2013–34.

2012—Internal Revenue Notice 2012—42.

2011—Internal Revenue Notice 2011–50.

2010—Internal Revenue Notice 2010–75.
26 U.S.C. § 465 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 465: Deductions limited to amount at risk
Deductions limited to amount at risk
Status: in_force

(a) Limitation to amount at risk

(1) In general

In the case of—

(A) an individual, and

(B) a C corporation with respect to which the stock ownership requirement of paragraph (2) of section 542(a) is met,

engaged in an activity to which this section applies, any loss from such activity for the taxable year shall be allowed only to the extent of the aggregate amount with respect to which the taxpayer is at risk (within the meaning of subsection (b)) for such activity at the close of the taxable year.

(2) Deduction in succeeding year

Any loss from an activity to which this section applies not allowed under this section for the taxable year shall be treated as a deduction allocable to such activity in the first succeeding taxable year.

(3) Special rules for applying paragraph (1)(B)

For purposes of paragraph (1)(B)—

(A) section 544(a)(2) shall be applied as if such section did not contain the phrase "or by or for his partner"; and

(B) sections 544(a)(4)(A) and 544(b)(1) shall be applied by substituting "the corporation meet the stock ownership requirements of section 542(a)(2)" for "the corporation a personal holding company".

(b) Amounts considered at risk

(1) In general

For purposes of this section, a taxpayer shall be considered at risk for an activity with respect to amounts including—

(A) the amount of money and the adjusted basis of other property contributed by the taxpayer to the activity, and

(B) amounts borrowed with respect to such activity (as determined under paragraph (2)).

(2) Borrowed amounts

For purposes of this section, a taxpayer shall be considered at risk with respect to amounts borrowed for use in an activity to the extent that he—

(A) is personally liable for the repayment of such amounts, or

(B) has pledged property, other than property used in such activity, as security for such borrowed amount (to the extent of the net fair market value of the taxpayer's interest in such property).

No property shall be taken into account as security if such property is directly or indirectly financed by indebtedness which is secured by property described in paragraph (1).

(3) Certain borrowed amounts excluded

(A) In general

Except to the extent provided in regulations, for purposes of paragraph (1)(B), amounts borrowed shall not be considered to be at risk with respect to an activity if such amounts are borrowed from any person who has an interest in such activity or from a related person to a person (other than the taxpayer) having such an interest.

(B) Exceptions

(i) Interest as creditor

Subparagraph (A) shall not apply to an interest as a creditor in the activity.

(ii) Interest as shareholder with respect to amounts borrowed by corporation

In the case of amounts borrowed by a corporation from a shareholder, subparagraph (A) shall not apply to an interest as a shareholder.

(C) Related person

For purposes of this subsection, a person (hereinafter in this paragraph referred to as the "related person") is related to any person if—

(i) the related person bears a relationship to such person specified in section 267(b) or section 707(b)(1), or

(ii) the related person and such person are engaged in trades or business under common control (within the meaning of subsections (a) and (b) of section 52).

For purposes of clause (i), in applying section 267(b) or 707(b)(1), "10 percent" shall be substituted for "50 percent".

(4) Exception

Notwithstanding any other provision of this section, a taxpayer shall not be considered at risk with respect to amounts protected against loss through nonrecourse financing, guarantees, stop loss agreements, or other similar arrangements.

(5) Amounts at risk in subsequent years

If in any taxable year the taxpayer has a loss from an activity to which subsection (a) applies, the amount with respect to which a taxpayer is considered to be at risk (within the meaning of subsection (b)) in subsequent taxable years with respect to that activity shall be reduced by that portion of the loss which (after the application of subsection (a)) is allowable as a deduction.

(6) Qualified nonrecourse financing treated as amount at risk

For purposes of this section—

(A) In general

Notwithstanding any other provision of this subsection, in the case of an activity of holding real property, a taxpayer shall be considered at risk with respect to the taxpayer's share of any qualified nonrecourse financing which is secured by real property used in such activity.

(B) Qualified nonrecourse financing

For purposes of this paragraph, the term "qualified nonrecourse financing" means any financing—

(i) which is borrowed by the taxpayer with respect to the activity of holding real property,

(ii) which is borrowed by the taxpayer from a qualified person or represents a loan from any Federal, State, or local government or instrumentality thereof, or is guaranteed by any Federal, State, or local government,

(iii) except to the extent provided in regulations, with respect to which no person is personally liable for repayment, and

(iv) which is not convertible debt.

(C) Special rule for partnerships

In the case of a partnership, a partner's share of any qualified nonrecourse financing of such partnership shall be determined on the basis of the partner's share of liabilities of such partnership incurred in connection with such financing (within the meaning of section 752).

(D) Qualified person defined

For purposes of this paragraph—

(i) In general

The term "qualified person" has the meaning given such term by section 49(a)(1)(D)(iv).

(ii) Certain commercially reasonable financing from related persons

For purposes of clause (i), section 49(a)(1)(D)(iv) shall be applied without regard to subclause (I) thereof (relating to financing from related persons) if the financing from the related person is commercially reasonable and on substantially the same terms as loans involving unrelated persons.

(E) Activity of holding real property

For purposes of this paragraph—

(i) Incidental personal property and services

The activity of holding real property includes the holding of personal property and the providing of services which are incidental to making real property available as living accommodations.

(ii) Mineral property

The activity of holding real property shall not include the holding of mineral property.

(c) Activities to which section applies

(1) Types of activities

This section applies to any taxpayer engaged in the activity of—

(A) holding, producing, or distributing motion picture films or video tapes,

(B) farming (as defined in section 464(e)),

(C) leasing any section 1245 property (as defined in section 1245(a)(3)),

(D) exploring for, or exploiting, oil and gas resources, or

(E) exploring for, or exploiting, geothermal deposits (as defined in section 613(e)(2)) 1

as a trade or business or for the production of income.

(2) Separate activities

For purposes of this section—

(A) In general

Except as provided in subparagraph (B), a taxpayer's activity with respect to each—

(i) film or video tape,

(ii) section 1245 property which is leased or held for leasing,

(iii) farm,

(iv) oil and gas property (as defined under section 614), or

(v) geothermal property (as defined under section 614),

shall be treated as a separate activity.

(B) Aggregation rules

(i) Special rule for leases of section 1245 property by partnerships or S corporations

In the case of any partnership or S corporation, all activities with respect to section 1245 properties which—

(I) are leased or held for lease, and

(II) are placed in service in any taxable year of the partnership or S corporation,

 shall be treated as a single activity.

(ii) Other aggregation rules

Rules similar to the rules of subparagraphs (B) and (C) of paragraph (3) shall apply for purposes of this paragraph.

(3) Extension to other activities

(A) In general

This section also applies to each activity—

(i) engaged in by the taxpayer in carrying on a trade or business or for the production of income, and

(ii) which is not described in paragraph (1).

(B) Aggregation of activities where taxpayer actively participates in management of trade or business

Except as provided in subparagraph (C), for purposes of this section, activities described in subparagraph (A) which constitute a trade or business shall be treated as one activity if—

(i) the taxpayer actively participates in the management of such trade or business, or

(ii) such trade or business is carried on by a partnership or an S corporation and 65 percent or more of the losses for the taxable year is allocable to persons who actively participate in the management of the trade or business.

(C) Aggregation or separation of activities under regulations

The Secretary shall prescribe regulations under which activities described in subparagraph (A) shall be aggregated or treated as separate activities.

(D) Application of subsection (b)(3)

In the case of an activity described in subparagraph (A), subsection (b)(3) shall apply only to the extent provided in regulations prescribed by the Secretary.

(4) Exclusion for certain equipment leasing by closely-held corporations

(A) In general

In the case of a corporation described in subsection (a)(1)(B) actively engaged in equipment leasing—

(i) the activity of equipment leasing shall be treated as a separate activity, and

(ii) subsection (a) shall not apply to losses from such activity.

(B) 50-percent gross receipts test

For purposes of subparagraph (A), a corporation shall not be considered to be actively engaged in equipment leasing unless 50 percent or more of the gross receipts of the corporation for the taxable year is attributable, under regulations prescribed by the Secretary, to equipment leasing.

(C) Component members of controlled group treated as a single corporation

For purposes of subparagraph (A), the component members of a controlled group of corporations shall be treated as a single corporation.

(5) Waiver of controlled group rule where there is substantial leasing activity

(A) In general

In the case of the component members of a qualified leasing group, paragraph (4) shall be applied—

(i) by substituting "80 percent" for "50 percent" in subparagraph (B) thereof, and

(ii) as if paragraph (4) did not include subparagraph (C) thereof.

(B) Qualified leasing group

For purposes of this paragraph, the term "qualified leasing group" means a controlled group of corporations which, for the taxable year and each of the 2 immediately preceding taxable years, satisfied each of the following 3 requirements:

(i) At least 3 employees

During the entire year, the group had at least 3 full-time employees substantially all of the services of whom were services directly related to the equipment leasing activity of the qualified leasing members.

(ii) At least 5 separate leasing transactions

During the year, the qualified leasing members in the aggregate entered into at least 5 separate equipment leasing transactions.

(iii) At least $1,000,000 equipment leasing receipts

During the year, the qualified leasing members in the aggregate had at least $1,000,000 in gross receipts from equipment leasing.

The term "qualified leasing group" does not include any controlled group of corporations to which, without regard to this paragraph, paragraph (4) applies.

(C) Qualified leasing member

For purposes of this paragraph, a corporation shall be treated as a qualified leasing member for the taxable year only if for each of the taxable years referred to in subparagraph (B)—

(i) it is a component member of the controlled group of corporations, and

(ii) it meets the requirements of paragraph (4)(B) (as modified by subparagraph (A)(i) of this paragraph).

(6) Definitions relating to paragraphs (4) and (5)

For purposes of paragraphs (4) and (5)—

(A) Equipment leasing

The term "equipment leasing" means—

(i) the leasing of equipment which is section 1245 property, and

(ii) the purchasing, servicing, and selling of such equipment.

(B) Leasing of master sound recordings, etc., excluded

The term "equipment leasing" does not include the leasing of master sound recordings, and other similar contractual arrangements with respect to tangible or intangible assets associated with literary, artistic, or musical properties.

(C) Controlled group of corporations; component member

The terms "controlled group of corporations" and "component member" have the same meanings as when used in section 1563. The determination of the taxable years taken into account with respect to any controlled group of corporations shall be made in a manner consistent with the manner set forth in section 1563.

(7) Exclusion of active businesses of qualified C corporations

(A) In general

In the case of a taxpayer which is a qualified C corporation—

(i) each qualifying business carried on by such taxpayer shall be treated as a separate activity, and

(ii) subsection (a) shall not apply to losses from such business.

(B) Qualified C corporation

For purposes of subparagraph (A), the term "qualified C corporation" means any corporation described in subparagraph (B) of subsection (a)(1) which is not—

(i) a personal holding company (as defined in section 542(a)), or

(ii) a personal service corporation (as defined in section 269A(b) but determined by substituting "5 percent" for "10 percent" in section 269A(b)(2)).

(C) Qualifying business

For purposes of this paragraph, the term "qualifying business" means any active business if—

(i) during the entire 12-month period ending on the last day of the taxable year, such corporation had at least 1 full-time employee substantially all the services of whom were in the active management of such business,

(ii) during the entire 12-month period ending on the last day of the taxable year, such corporation had at least 3 full-time, nonowner employees substantially all of the services of whom were services directly related to such business,

(iii) the amount of the deductions attributable to such business which are allowable to the taxpayer solely by reason of sections 162 and 404 for the taxable year exceeds 15 percent of the gross income from such business for such year, and

(iv) such business is not an excluded business.

(D) Special rules for application of subparagraph (C)

(i) Partnerships in which taxpayer is a qualified corporate partner

In the case of an active business of a partnership, if—

(I) the taxpayer is a qualified corporate partner in the partnership, and

(II) during the entire 12-month period ending on the last day of the partnership's taxable year, there was at least 1 full-time employee of the partnership (or of a qualified corporate partner) substantially all the services of whom were in the active management of such business,

 then the taxpayer's proportionate share (determined on the basis of its profits interest) of the activities of the partnership in such business shall be treated as activities of the taxpayer (and clause (i) of subparagraph (C) shall not apply in determining whether such business is a qualifying business of the taxpayer).

(ii) Qualified corporate partner

For purposes of clause (i), the term "qualified corporate partner" means any corporation if—

(I) such corporation is a general partner in the partnership,

(II) such corporation has an interest of 10 percent or more in the profits and losses of the partnership, and

(III) such corporation has contributed property to the partnership in an amount not less than the lesser of $500,000 or 10 percent of the net worth of the corporation.

 For purposes of subclause (III), any contribution of property other than money shall be taken into account at its fair market value.

(iii) Deduction for owner employee compensation not taken into account

For purposes of clause (iii) of subparagraph (C), there shall not be taken into account any deduction in respect of compensation for personal services rendered by any employee (other than a non-owner employee) of the taxpayer or any member of such employee's family (within the meaning of section 318(a)(1)).

(iv) Special rule for banks

For purposes of clause (iii) of subparagraph (C), in the case of a bank (as defined in section 581) or a financial institution to which section 591 applies—

(I) gross income shall be determined without regard to the exclusion of interest from gross income under section 103, and

(II) in addition to the deductions described in such clause, there shall also be taken into account the amount of the deductions which are allowable for amounts paid or credited to the accounts of depositors or holders of accounts as dividends or interest on their deposits or withdrawable accounts under section 163 or 591.

(v) Special rule for life insurance companies

(I) In general

Clause (iii) of subparagraph (C) shall not apply to any insurance business of a qualified life insurance company.

(II) Insurance business

For purposes of subclause (I), the term "insurance business" means any business which is not a noninsurance business (within the meaning of section 453B(e)(3)).

(III) Qualified life insurance company

For purposes of subclause (I), the term "qualified life insurance company" means any company which would be a life insurance company as defined in section 816 if unearned premiums were not taken into account under subsections (a)(2) and (c)(2) of section 816.

(E) Definitions

For purposes of this paragraph—

(i) Non-owner employee

The term "non-owner employee" means any employee who does not own, at any time during the taxable year, more than 5 percent in value of the outstanding stock of the taxpayer. For purposes of the preceding sentence, section 318 shall apply, except that "5 percent" shall be substituted for "50 percent" in section 318(a)(2)(C).

(ii) Excluded business

The term "excluded business" means—

(I) equipment leasing (as defined in paragraph (6)), and

(II) any business involving the use, exploitation, sale, lease, or other disposition of master sound recordings, motion picture films, video tapes, or tangible or intangible assets associated with literary, artistic, musical, or similar properties.

(iii) Special rules relating to communications industry, etc.

(I) Business not excluded where taxpayer not completely at risk

A business involving the use, exploitation, sale, lease, or other disposition of property described in subclause (II) of clause (ii) shall not constitute an excluded business by reason of such subclause if the taxpayer is at risk with respect to all amounts paid or incurred (or chargeable to capital account) in such business.

(II) Certain licensed businesses not excluded

For purposes of subclause (II) of clause (ii), the provision of radio, television, cable television, or similar services pursuant to a license or franchise granted by the Federal Communications Commission or any other Federal, State, or local authority shall not constitute an excluded business by reason of such subclause.

(F) Affiliated group treated as 1 taxpayer

For purposes of this paragraph—

(i) In general

Except as provided in subparagraph (G), the component members of an affiliated group of corporations shall be treated as a single taxpayer.

(ii) Affiliated group of corporations

The term "affiliated group of corporations" means an affiliated group (as defined in section 1504(a)) which files or is required to file consolidated income tax returns.

(iii) Component member

The term "component member" means an includible corporation (as defined in section 1504) which is a member of the affiliated group.

(G) Loss of 1 member of affiliated group may not offset income of personal holding company or personal service corporation

Nothing in this paragraph shall permit any loss of a member of an affiliated group to be used as an offset against the income of any other member of such group which is a personal holding company (as defined in section 542(a)) or a personal service corporation (as defined in section 269A(b) but determined by substituting "5 percent" for "10 percent" in section 269A(b)(2)).

(d) Definition of loss

For purposes of this section, the term "loss" means the excess of the deductions allowable under this chapter for the taxable year (determined without regard to the first sentence of subsection (a)) and allocable to an activity to which this section applies over the income received or accrued by the taxpayer during the taxable year from such activity (determined without regard to subsection (e)(1)(A)).

(e) Recapture of losses where amount at risk is less than zero

(1) In general

If zero exceeds the amount for which the taxpayer is at risk in any activity at the close of any taxable year—

(A) the taxpayer shall include in his gross income for such taxable year (as income from such activity) an amount equal to such excess, and

(B) an amount equal to the amount so included in gross income shall be treated as a deduction allocable to such activity for the first succeeding taxable year.

(2) Limitation

The excess referred to in paragraph (1) shall not exceed—

(A) the aggregate amount of the reductions required by subsection (b)(5) with respect to the activity by reason of losses for all prior taxable years beginning after December 31, 1978, reduced by

(B) the amounts previously included in gross income with respect to such activity under this subsection.

(Added Pub. L. 94–455, title II, §204(a), Oct. 4, 1976, 90 Stat. 1531; amended Pub. L. 95–600, title II, §§201(a), (c)(1), 202, 203, title VII, §701(k)(2), Nov. 6, 1978, 92 Stat. 2814, 2816, 2906; Pub. L. 95–618, title IV, §402(d), Nov. 9, 1978, 92 Stat. 3202; Pub. L. 96–222, title I, §102(a)(1)(A)–(D), Apr. 1, 1980, 94 Stat. 206; Pub. L. 97–354, §5(a)(31), Oct. 19, 1982, 96 Stat. 1695; Pub. L. 98–369, div. A, title IV, §432(a)–(c), title VII, §721(x)(2), July 18, 1984, 98 Stat. 811–814, 971; Pub. L. 99–514, title II, §201(d)(7)(A), title V, §503(a), (b), title X, §1011(b)(1), Oct. 22, 1986, 100 Stat. 2141, 2243, 2389; Pub. L. 101–508, title XI, §§11813(b)(15), 11815(b)(3), Nov. 5, 1990, 104 Stat. 1388–555, 1388–558; Pub. L. 108–357, title IV, §413(c)(7), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 113–295, div. A, title II, §221(a)(59), Dec. 19, 2014, 128 Stat. 4047; Pub. L. 115–97, title I, §13512(b)(2), Dec. 22, 2017, 131 Stat. 2143.)

Editorial Notes

Amendments

2017—Subsec. (c)(7)(D)(v)(II). Pub. L. 115–97 substituted "section 453B(e)(3)" for "section 806(b)(3)".

2014—Subsec. (c)(3)(A). Pub. L. 113–295 substituted "This" for "In the case of taxable years beginning after December 31, 1978, this".

2004—Subsec. (c)(7)(B). Pub. L. 108–357 inserted "or" at end of cl. (i), redesignated cl. (iii) as (ii), and struck out former cl. (ii) which read as follows: "a foreign personal holding company (as defined in section 552(a)), or".

1990—Subsec. (b)(6)(D). Pub. L. 101–508, §11813(b)(15), substituted "49(a)(1)(D)(iv)" for "46(c)(8)(D)(iv)" wherever appearing.

Subsec. (c)(1)(E). Pub. L. 101–508, §11815(b)(3), substituted "section 613(e)(2)" for "section 613(e)(3)".

1986—Subsec. (b)(3)(C). Pub. L. 99–514, §201(d)(7)(A), struck out "defined" after "person" in heading and amended text generally. Prior to amendment, text read as follows: "For purposes of subparagraph (A), the term 'related person' has the meaning given such term by section 168(e)(4)."

Subsec. (b)(6). Pub. L. 99–514, §503(b), added par. (6).

Subsec. (c)(3)(D), (E). Pub. L. 99–514, §503(a), redesignated subpar. (E) as (D) and struck out former subpar. (D) which read as follows: "In the case of activities described in subparagraph (A), the holding of real property (other than mineral property) shall be treated as a separate activity, and subsection (a) shall not apply to losses from such activity. For purposes of the preceding sentence, personal property and services which are incidental to making real property available as living accommodations shall be treated as part of the activity of holding such real property."

Subsec. (c)(7)(D)(v)(II). Pub. L. 99–514, §1011(b)(1), substituted "section 806(b)(3)" for "section 806(c)(3)".

1984—Subsec. (a)(1)(B). Pub. L. 98–369, §721(x)(2), substituted "a C corporation" for "a corporation".

Subsec. (b)(3). Pub. L. 98–369, §432(c), designated existing provisions as subpar. (A), in subpar. (A) as so designated struck out subpar. designations "(A)" and "(B)" and substituted provisions that, except as provided by regulation, amounts borrowed shall not be considered to be at risk if such amounts are borrowed from any person who has an interest in the activity or from a related person to a person (other than the taxpayer) having such an interest for provision that such amounts would not be considered to be at risk if borrowed from a person who had an interest (other than as a creditor) in such activity or who had a relationship to the taxpayer specified in section 267(b) of this title, and added subpars. (B) and (C).

Subsec. (c)(2). Pub. L. 98–369, §432(b), designated existing provisions as subpar. (A), in subpar. (A) as so designated, redesignated former subpars. (A) to (E) as cls. (i) to (v), respectively, struck out provision that a partner's interest in a partnership or a shareholder's interest in an S corporation had to be treated as a single activity to the extent that the partnership or the S corporation was engaged in activities described in any subparagraph of this paragraph, and added subpar. (B).

Subsec. (c)(7). Pub. L. 98–369, §432(a), added par. (7).

1982—Subsec. (a)(1). Pub. L. 97–354, §5(a)(31)(A), redesignated subpar. (C) as (B). Former subpar. (B), relating to an electing small business corporation, was struck out.

Subsec. (a)(3). Pub. L. 97–354, §5(a)(31)(B), substituted "paragraph (1)(B)" for "paragraph (1)(C)" in heading and text.

Subsec. (c)(2). Pub. L. 97–354, §5(a)(31)(C), substituted "an S corporation" for "an electing small business corporation" the first place appearing and "the S corporation" for "an electing small business corporation" the second place appearing.

Subsec. (c)(3)(B)(ii). Pub. L. 97–354, §5(a)(31)(D), substituted "an S corporation" for "electing small business corporation (as defined in section 1371(b))".

Subsec. (c)(4)(A). Pub. L. 97–354, §5(a)(31)(E), substituted "subsection (a)(1)(B)" for "subsection (a)(1)(C)".

1980—Subsec. (a)(1)(C), (3). Pub. L. 96–222, §102(a)(1)(A), struck out in par. (1)(C) "(determined by reference to the rules contained in section 318 rather than under section 544)" after "of section 542(a)" and added par. (3).

Subsec. (b)(5). Pub. L. 96–222, §102(a)(1)(D)(iii), substituted "to which subsection (a) applies" for "to which this section applies".

Subsec. (c)(3)(D). Pub. L. 96–222, §102(a)(1)(D)(ii), struck out provisions relating to equipment leasing by closely-held corporations.

Subsec. (c)(4) to (6). Pub. L. 96–222, §102(a)(1)(D)(i), added pars. (4) to (6).

Subsec. (d). Pub. L. 96–222, §102(a)(1)(B), inserted "(determined without regard to subsection (e)(1)(A)" after "from such activity".

Subsec. (e)(2)(A). Pub. L. 96–222, §102(a)(1)(C), inserted "by reason of losses" after "with respect to the activity".

1978—Pub. L. 95–600, §201(c)(1), substituted "Deductions limited to amount at risk" for "Deductions limited to amount at risk in case of certain activities" in section catchline.

Subsec. (a). Pub. L. 95–600, §202, redesignated existing provisions as par. (1), substituted provisions relating to limitations with respect to an individual, an electing small business corporation defined under section 1371(b) of this title, and a corporation meeting the stock ownership requirements of section 542(a)(2) of this title and the rules of section 318 of this title, for provisions relating to limitations with respect to a taxpayer other than a corporation which is neither an electing small business corporation defined under section 1371(b) of this title, nor a personal holding company defined under section 542 of this title, and added par. (2).

Subsec. (c)(1)(E). Pub. L. 95–618, §402(d)(1), added subpar. (E).

Subsec. (c)(2)(E). Pub. L. 95–618, §402(d)(2), added subpar. (E).

Subsec. (c)(3). Pub. L. 95–600, §201(a), added par. (3).

Subsec. (d). Pub. L. 95–600, §701(k)(2), substituted "(determined without regard to the first sentence of subsection (a))" for "(determined without regard to this section)".

Subsec. (e). Pub. L. 95–600, §203, added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13512(c) of Pub. L. 115–97, set out as a note under section 453B of this title.

Effective Date of 2014 Amendment

Amendment by 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 2004 Amendment

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

Effective Date of 1990 Amendment

Amendment by section 11813(b)(15) of Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K of this title.

Effective Date of 1986 Amendment

Amendment by section 201(d)(7)(A) of Pub. L. 99–514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Pub. L. 99–514, set out as a note under section 168 of this title.

Amendment by section 201(d)(7)(A) of Pub. L. 99–514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Pub. L. 99–514, set out as a note under section 46 of this title.

Pub. L. 99–514, title V, §503(c), Oct. 22, 1986, 100 Stat. 2244, provided that:

"(1) In general.—Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to losses incurred after December 31, 1986, with respect to property placed in service by the taxpayer after December 31, 1986.

"(2) Special rule for losses of s corporation, partnership, or pass-thru entity.—In the case of an interest in an S corporation, a partnership, or other pass-thru entity acquired after December 31, 1986, the amendments made by this section shall apply to losses after December 31, 1986, which are attributable to property placed in service by the S corporation, partnership, or pass-thru entity on, before, or after January 1, 1986.

"(3) Special rule for athletic stadium.—The amendments made by this section shall not apply to any losses incurred by a taxpayer with respect to the holding of a multi-use athletic stadium in Pittsburgh, Pennsylvania, which the taxpayer acquired in a sale for which a letter of understanding was entered into before April 16, 1986."

Amendment by section 1011(b)(1) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1011(c)(1) of Pub. L. 99–514, set out as a note under section 453B of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title IV, §432(d), July 18, 1984, 98 Stat. 815, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1983; except that any loss from an activity described in section 465(c)(7)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this section) which (but for the amendments made by this section) would have been treated as a deduction for the taxpayer's first taxable year beginning after December 31, 1983, under section 465(a)(2) of such Code shall be allowed as a deduction for such first taxable year notwithstanding such amendments."

Amendment by section 721(x)(2) of Pub. L. 98–369 effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) of Pub. L. 98–369, set out as a note under section 1361 of this title.

Effective Date of 1982 Amendment

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

Effective Date of 1980 Amendment

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

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–618 applicable with respect to wells commenced on or after Oct. 1, 1978, in taxable years ending on or after such date, see section 402(e) of Pub. L. 95–618, set out as a note under section 263 of this title.

Pub. L. 95–600, title II, §204(a), Nov. 6, 1978, 92 Stat. 2817, provided that: "The amendments made by this subtitle [amending this section and section 704 of this title and enacting provisions set out as notes under this section and section 704 of this title] shall apply to taxable years beginning after December 31, 1978."

Pub. L. 95–600, title VII, §701(k)(3), Nov. 6, 1978, 92 Stat. 2906, provided that: "The amendments made by this subsection [amending this section and provisions set out below] shall take effect on October 4, 1976."

Effective Date and Transitional Rules

Pub. L. 94–455, title II, §204(c), Oct. 4, 1976, 90 Stat. 1532, as amended by Pub. L. 95–600, title VII, §701(k)(1), Nov. 6, 1978, 92 Stat. 2906; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [enacting this section] shall apply to losses attributable to amounts paid or incurred in taxable years beginning after December 31, 1975. For purposes of this subsection, any amount allowed or allowable for depreciation or amortization for any period shall be treated as an amount paid or incurred in such period.

"(2) Special transitional rules for movies and video tapes.—

"(A) In general.—In the case of any activity described in section 465(c)(1)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the amendments made by this section shall not apply to—

"(i) deductions for depreciation or amortization with respect to property the principal production of which began before September 11, 1975, and for the purchase of which there was on September 11, 1975, and at all times thereafter a binding contract, and

"(ii) deductions attributable to producing or distributing property the principal production of which began before September 11, 1975.

"(B) Exception for certain agreements where principal photography begin before 1976.—In the case of any activity described in section 465(c)(1)(A) of the Internal Revenue Code of 1986, the amendments made by this section shall not apply to deductions attributable to the producing of a film the principal photography of which began on or before December 31, 1975, if—

"(i) on September 10, 1975, there was an agreement with the director or a principal motion picture star, or on or before September 10, 1975, there had been expended (or committed to the production) an amount not less than the lower of $100,000 or 10 percent of the estimated costs of producing the film, and

"(ii) the production takes place in the United States.

Subparagraph (A) shall apply only to taxpayers who held their interests on September 10, 1975. Subparagraph (B) shall apply only to taxpayers who held their interests on December 31, 1975.

"(3) Special transitional rules for leasing activities.—

"(A) Rule for leases other than operating leases.—In the case of any activity described in section 465(c)(1)(C) of the Internal Revenue Code of 1986, the amendments made by this section shall not apply with respect to—

"(i) leases entered into before January 1, 1976, and

"(ii) leases where the property was ordered by the lessor or lessee before January 1, 1976.

"(B) Holding of interests for purposes of subparagraph (a).—Subparagraph (A) shall apply only to taxpayers who held their interests in the property on December 31, 1975.

"(C) Special rule for operating leases.—In the case of a lease described in section 46(e)(3)(B) of the Internal Revenue Code of 1986—

"(i) subparagraph (A) shall be applied by substituting 'May 1, 1976' for 'January 1, 1976' each place it appears therein, and

"(ii) subparagraph (B) shall be applied by substituting 'April 30, 1976' for 'December 31, 1975'."

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.

Transitional Rules for Recapture Provisions and Leasing Activities

Pub. L. 95–600, title II, §204(b), Nov. 6, 1978, 92 Stat. 2817, as amended by Pub. L. 96–222, title I, §102(a)(1)(E), Apr. 1, 1980, 94 Stat. 208; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1) Recapture provisions.—If the amount for which the taxpayer is at risk in any activity as of the close of the taxpayer's last taxable year beginning before January 1, 1979, is less than zero, section 465(e)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by section 203 of this Act) shall be applied with respect to such activity of the taxpayer by substituting such negative amount for zero.

"(2) Special transitional rules for leasing activities.—

"(A) Rule for leases.—In the case of any activity described in section 465(c)(1)(C) of such Code in which a corporation described in section 465(a)(1)(C) of such Code is engaged, the amendments made by this subtitle [amending sections 465 and 704 of this title and enacting provisions set out as notes under sections 465 and 704 of this title] shall not apply with respect to—

"(i) leases entered into before November 1, 1978, and

"(ii) leases where the property was ordered by the lessor or lessee before November 1, 1978.

"(B) Holding of interests for purposes of subparagraph (a).—Subparagraph (A) shall apply only to taxpayers who held their interests in the property on October 31, 1978."

1 So in original. Probably should be followed by a comma.
26 U.S.C. § 7612 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 78 / Section 7612: Special procedures for summonses for computer software
Special procedures for summonses for computer software
Status: in_force

(a) General rule

For purposes of this title—

(1) except as provided in subsection (b), no summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons to produce or analyze any tax-related computer software source code; and

(2) any software and related materials which are provided to the Secretary under this title shall be subject to the safeguards under subsection (c).

(b) Circumstances under which computer software source code may be provided

(1) In general

Subsection (a)(1) shall not apply to any portion, item, or component of tax-related computer software source code if—

(A) the Secretary is unable to otherwise reasonably ascertain the correctness of any item on a return from—

(i) the taxpayer's books, papers, records, or other data; or

(ii) the computer software executable code (and any modifications thereof) to which such source code relates and any associated data which, when executed, produces the output to ascertain the correctness of the item;

(B) the Secretary identifies with reasonable specificity the portion, item, or component of such source code needed to verify the correctness of such item on the return; and

(C) the Secretary determines that the need for the portion, item, or component of such source code with respect to such item outweighs the risks of unauthorized disclosure of trade secrets.

(2) Exceptions

Subsection (a)(1) shall not apply to—

(A) any inquiry into any offense connected with the administration or enforcement of the internal revenue laws;

(B) any tax-related computer software source code acquired or developed by the taxpayer or a related person primarily for internal use by the taxpayer or such person rather than for commercial distribution;

(C) any communications between the owner of the tax-related computer software source code and the taxpayer or related persons; or

(D) any tax-related computer software source code which is required to be provided or made available pursuant to any other provision of this title.

(3) Cooperation required

For purposes of paragraph (1), the Secretary shall be treated as meeting the requirements of subparagraphs (A) and (B) of such paragraph if—

(A) the Secretary determines that it is not feasible to determine the correctness of an item without access to the computer software executable code and associated data described in paragraph (1)(A)(ii);

(B) the Secretary makes a formal request to the taxpayer for such code and data and to the owner of the computer software source code for such executable code; and

(C) such code and data is not provided within 180 days of such request.

(4) Right to contest summons

In any proceeding brought under section 7604 to enforce a summons issued under the authority of this subsection, the court shall, at the request of any party, hold a hearing to determine whether the applicable requirements of this subsection have been met.

(c) Safeguards to ensure protection of trade secrets and other confidential information

(1) Entry of protective order

In any court proceeding to enforce a summons for any portion of software, the court may receive evidence and issue any order necessary to prevent the disclosure of trade secrets or other confidential information with respect to such software, including requiring that any information be placed under seal to be opened only as directed by the court.

(2) Protection of software

Notwithstanding any other provision of this section, and in addition to any protections ordered pursuant to paragraph (1), in the case of software that comes into the possession or control of the Secretary in the course of any examination with respect to any taxpayer—

(A) the software may be used only in connection with the examination of such taxpayer's return, any appeal by the taxpayer to the Internal Revenue Service Independent Office of Appeals, any judicial proceeding (and any appeals therefrom), and any inquiry into any offense connected with the administration or enforcement of the internal revenue laws;

(B) the Secretary shall provide, in advance, to the taxpayer and the owner of the software a written list of the names of all individuals who will analyze or otherwise have access to the software;

(C) the software shall be maintained in a secure area or place, and, in the case of computer software source code, shall not be removed from the owner's place of business unless the owner permits, or a court orders, such removal;

(D) the software may not be copied except as necessary to perform such analysis, and the Secretary shall number all copies made and certify in writing that no other copies have been (or will be) made;

(E) at the end of the period during which the software may be used under subparagraph (A)—

(i) the software and all copies thereof shall be returned to the person from whom they were obtained and any copies thereof made under subparagraph (D) on the hard drive of a machine or other mass storage device shall be permanently deleted; and

(ii) the Secretary shall obtain from any person who analyzes or otherwise had access to such software a written certification under penalty of perjury that all copies and related materials have been returned and that no copies were made of them;

(F) the software may not be decompiled or disassembled;

(G) the Secretary shall provide to the taxpayer and the owner of any interest in such software, as the case may be, a written agreement, between the Secretary and any person who is not an officer or employee of the United States and who will analyze or otherwise have access to such software, which provides that such person agrees not to—

(i) disclose such software to any person other than persons to whom such information could be disclosed for tax administration purposes under section 6103; or

(ii) participate for 2 years in the development of software which is intended for a similar purpose as the software examined; and

(H) the software shall be treated as return information for purposes of section 6103.

For purposes of subparagraph (C), the owner shall make available any necessary equipment or materials for analysis of computer software source code required to be conducted on the owner's premises. The owner of any interest in the software shall be considered a party to any agreement described in subparagraph (G).

(d) Definitions

For purposes of this section—

(1) Software

The term "software" includes computer software source code and computer software executable code.

(2) Computer software source code

The term "computer software source code" means—

(A) the code written by a programmer using a programming language which is comprehensible to appropriately trained persons and is not capable of directly being used to give instructions to a computer;

(B) related programmers' notes, design documents, memoranda, and similar documentation; and

(C) related customer communications.

(3) Computer software executable code

The term "computer software executable code" means—

(A) any object code, machine code, or other code readable by a computer when loaded into its memory and used directly by such computer to execute instructions; and

(B) any related user manuals.

(4) Owner

The term "owner" shall, with respect to any software, include the developer of the software.

(5) Related person

A person shall be treated as related to another person if such persons are related persons under section 267 or 707(b).

(6) Tax-related computer software source code

The term "tax-related computer software source code" means the computer source code for any computer software program intended for accounting, tax return preparation or compliance, or tax planning.

(Added Pub. L. 105–206, title III, §3413(a), July 22, 1998, 112 Stat. 751; amended Pub. L. 116–25, title I, §1001(b)(1)(J), July 1, 2019, 133 Stat. 985.)

Editorial Notes

Prior Provisions

A prior section 7612 was renumbered section 7613 of this title.

Amendments

2019—Subsec. (c)(2)(A). Pub. L. 116–25 substituted "Internal Revenue Service Independent Office of Appeals" for "Internal Revenue Service Office of Appeals".

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 105–206, title III, §3413(e), July 22, 1998, 112 Stat. 754, provided that:

"(1) In general.—The amendments made by this section [enacting this section, amending sections 7213 and 7603 of this title, and renumbering former section 7612 of this title as 7613] shall apply to summonses issued, and software acquired, after the date of the enactment of this Act [July 22, 1998].

"(2) Software protection.—In the case of any software acquired on or before such date of enactment, the requirements of section 7612(a)(2) of the Internal Revenue Code of 1986 (as added by such amendments) shall apply after the 90th day after such date. The preceding sentence shall not apply to the requirement under section 7612(c)(2)(G)(ii) of such Code (as so added)."
26 U.S.C. § 9704 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 99 / Section 9704: Liability of assigned operators
Liability of assigned operators
Status: in_force

(a) Annual premiums

Each assigned operator shall pay to the Combined Fund for each plan year beginning on or after February 1, 1993, an annual premium equal to the sum of the following three premiums—

(1) the health benefit premium determined under subsection (b) for such plan year, plus

(2) the death benefit premium determined under subsection (c) for such plan year, plus

(3) the unassigned beneficiaries premium determined under subsection (d) for such plan year.

Any related person with respect to an assigned operator shall be jointly and severally liable for any premium required to be paid by such operator.

(b) Health benefit premium

For purposes of this chapter—

(1) In general

The health benefit premium for any plan year for any assigned operator shall be an amount equal to the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries assigned to such operator under section 9706.

(2) Per beneficiary premium

The Commissioner of Social Security shall calculate a per beneficiary premium for each plan year beginning on or after February 1, 1993, which is equal to the sum of—

(A) the amount determined by dividing—

(i) the aggregate amount of payments from the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for health benefits (less reimbursements but including administrative costs) for the plan year beginning July 1, 1991, for all individuals covered under such plans for such plan year, by

(ii) the number of such individuals, plus

(B) the amount determined under subparagraph (A) multiplied by the percentage (if any) by which the medical component of the Consumer Price Index for the calendar year in which the plan year begins exceeds such component for 1992.

(3) Adjustments for medicare reductions

If, by reason of a reduction in benefits under title XVIII of the Social Security Act, the level of health benefits under the Combined Fund would be reduced, the trustees of the Combined Fund shall increase the per beneficiary premium for the plan year in which the reduction occurs and each subsequent plan year by the amount necessary to maintain the level of health benefits which would have been provided without such reduction.

(c) Death benefit premium

The death benefit premium for any plan year for any assigned operator shall be equal to the applicable percentage of the amount, actuarially determined, which the Combined Fund will be required to pay during the plan year for death benefits coverage described in section 9703(c).

(d) Unassigned beneficiaries premium

(1) Plan years ending on or before September 30, 2006

For plan years ending on or before September 30, 2006, the unassigned beneficiaries premium for any assigned operator shall be equal to the applicable percentage of the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under section 9706 to any person for such plan year.

(2) Plan years beginning on or after October 1, 2006

(A) In general

For plan years beginning on or after October 1, 2006, subject to subparagraph (B), there shall be no unassigned beneficiaries premium, and benefit costs with respect to eligible beneficiaries who are not assigned under section 9706 to any person for any such plan year shall be paid from amounts transferred under section 9705(b).

(B) Inadequate transfers

If, for any plan year beginning on or after October 1, 2006, the amounts transferred under section 9705(b) are less than the amounts required to be transferred to the Combined Fund under subsection (h)(2)(A) or (i) of section 402 of the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1232), then the unassigned beneficiaries premium for any assigned operator shall be equal to the operator's applicable percentage of the amount required to be so transferred which was not so transferred.

(e) Premium accounts; adjustments

(1) Accounts

The trustees of the Combined Fund shall establish and maintain 3 separate accounts for each of the premiums described in subsections (b), (c), and (d). Such accounts shall be credited with the premiums received and amounts transferred under section 9705(b) and debited with expenditures allocable to such premiums.

(2) Allocations

(A) Administrative expenses

Administrative costs for any plan year shall be allocated to premium accounts under paragraph (1) on the basis of expenditures (other than administrative costs) from such accounts during the preceding plan year.

(B) Interest

Interest shall be allocated to the account established for health benefit premiums.

(3) Shortfalls and surpluses

(A) In general

Except as provided in subparagraph (B), if, for any plan year, there is a shortfall or surplus in any premium account, the premium for the following plan year for each assigned operator shall be proportionately reduced or increased, whichever is applicable, by the amount of such shortfall or surplus. Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in determining whether there is a surplus in the account for purposes of this paragraph.

(B) Exception

Subparagraph (A) shall not apply to any surplus in the health benefit premium account or the unassigned beneficiaries premium account which is attributable to—

(i) the excess of the premiums credited to such account for a plan year over the benefits (and administrative costs) debited to such account for the plan year, but such excess shall only be available for purposes of the carryover described in section 9703(b)(2)(C)(ii) (relating to carryovers of premiums not used to provide benefits), or

(ii) interest credited under paragraph (2)(B) for the plan year or any preceding plan year.

(C) No authority for increased payments

Nothing in this paragraph shall be construed to allow expenditures for health care benefits for any plan year in excess of the limit under section 9703(b)(2).

(f) Applicable percentage

For purposes of this section—

(1) In general

The term "applicable percentage" means, with respect to any assigned operator, the percentage determined by dividing the number of eligible beneficiaries assigned under section 9706 to such operator by the total number of eligible beneficiaries assigned under section 9706 to all such operators (determined on the basis of assignments as of October 1, 1993).

(2) Annual adjustments

In the case of any plan year beginning on or after October 1, 1994, the applicable percentage for any assigned operator shall be redetermined under paragraph (1) by making the following changes to the assignments as of October 1, 1993:

(A) Such assignments shall be modified to reflect any changes during the period beginning October 1, 1993, and ending on the last day of the preceding plan year pursuant to the appeals process under section 9706(f).

(B) The total number of assigned eligible beneficiaries shall be reduced by the eligible beneficiaries of assigned operators which (and all related persons with respect to which) had ceased business (within the meaning of section 9701(c)(6)) during the period described in subparagraph (A).

(C) In the case of plan years beginning on or after October 1, 2007, the total number of assigned eligible beneficiaries shall be reduced by the eligible beneficiaries whose assignments have been revoked under section 9706(h).

(g) Payment of premiums

(1) In general

The annual premium under subsection (a) for any plan year shall be payable in 12 equal monthly installments, due on the twenty-fifth day of each calendar month in the plan year. In the case of the plan year beginning February 1, 1993, the annual premium under subsection (a) shall be added to such premium for the plan year beginning October 1, 1993.

(2) Deductibility

Any premium required by this section shall be deductible without regard to any limitation on deductibility based on the prefunding of health benefits.

(h) Information

The trustees of the Combined Fund shall, not later than 60 days after the enactment date, furnish to the Commissioner of Social Security information as to the benefits and covered beneficiaries under the fund, and such other information as the Secretary 1 may require to compute any premium under this section.

(i) Transition rules

(1) 1988 agreement operators

(A) 1st year costs

During the plan year of the Combined Fund beginning February 1, 1993, the 1988 agreement operators shall make contributions to the Combined Fund in amounts necessary to pay benefits and administrative costs of the Combined Fund incurred during such year, reduced by the amount transferred to the Combined Fund under section 9705(a) on February 1, 1993.

(B) Deficits from merged plans

During the period beginning February 1, 1993, and ending September 30, 1994, the 1988 agreement operators shall make contributions to the Combined Fund as are necessary to pay off the expenses accrued (and remaining unpaid) by the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of February 1, 1993, reduced by the assets of such plans as of such date.

(C) Failure

If any 1988 agreement operator fails to meet any obligation under this paragraph, any contributions of such operator to the Combined Fund or any other plan described in section 404(c) shall not be deductible under this title until such time as the failure is corrected.

(D) Premium reductions

(i) 1st year payments

In the case of a 1988 agreement operator making contributions under subparagraph (A), the premium of such operator under subsection (a) shall be reduced by the amount paid under subparagraph (A) by such operator for the plan year beginning February 1, 1993.

(ii) Deficit payments

In the case a 1988 agreement operator making contributions under subparagraph (B), the premium of such operator under subsection (a) shall be reduced by the amounts which are paid to the Combined Fund by reason of claims arising in connection with the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of February 1, 1993, including claims based on the "evergreen clause" found in the language of the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan, and which are allocated to such operator under subparagraph (E).

(iii) Limitation

Clause (ii) shall not apply to the extent the amounts paid exceed the contributions.

(iv) Plan years

Premiums under subsection (a) shall be reduced for the first plan year for which amounts described in clause (i) or (ii) are available and for any succeeding plan year until such amounts are exhausted.

(E) Allocations of contributions and refunds

Contributions under subparagraphs (A) and (B), and premium reductions under subparagraph (D)(ii), shall be made ratably on the basis of aggregate contributions made by such operators under the applicable 1988 coal wage agreements as of January 31, 1993.

(2) 1st plan year

In the case of the plan year of the Combined Fund beginning February 1, 1993—

(A) the premiums under subsections (a)(1) and (a)(3) shall be 67 percent of such premiums without regard to this paragraph, and

(B) the premiums under subsection (a) shall be paid as provided in subsection (g).

(3) Startup costs

The 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan shall pay the costs of the Combined Fund incurred before February 1, 1993. For purposes of this section, such costs shall be treated as administrative expenses incurred for the plan year beginning February 1, 1993.

(j) Prepayment of premium liability

(1) In general

If—

(A) a payment meeting the requirements of paragraph (3) is made to the Combined Fund by or on behalf of—

(i) any assigned operator to which this subsection applies, or

(ii) any related person to any assigned operator described in clause (i), and

(B) the common parent of the controlled group of corporations described in paragraph (2)(B) is jointly and severally liable for any premium under this section which (but for this subsection) would be required to be paid by the assigned operator or related person,

then such common parent (and no other person) shall be liable for such premium.

(2) Assigned operators to which subsection applies

(A) In general

This subsection shall apply to any assigned operator if—

(i) the assigned operator (or a related person to the assigned operator)—

(I) made contributions to the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for employment during the period covered by the 1988 agreement; and

(II) is not a 1988 agreement operator,

(ii) the assigned operator (and all related persons to the assigned operator) are not actively engaged in the production of coal as of July 1, 2005, and

(iii) the assigned operator was, as of July 20, 1992, a member of a controlled group of corporations described in subparagraph (B).

(B) Controlled group of corporations

A controlled group of corporations is described in this subparagraph if the common parent of such group is a corporation the shares of which are publicly traded on a United States exchange.

(C) Coordination with repeal of assignments

A person shall not fail to be treated as an assigned operator to which this subsection applies solely because the person ceases to be an assigned operator by reason of section 9706(h)(1) if the person otherwise meets the requirements of this subsection and is liable for the payment of premiums under section 9706(h)(3).

(D) Controlled group

For purposes of this subsection, the term "controlled group of corporations" has the meaning given such term by section 52(a).

(3) Requirements

A payment meets the requirements of this paragraph if—

(A) the amount of the payment is not less than the present value of the total premium liability under this chapter with respect to the Combined Fund of the assigned operators or related persons described in paragraph (1) or their assignees, as determined by the operator's or related person's enrolled actuary (as defined in section 7701(a)(35)) using actuarial methods and assumptions each of which is reasonable and which are reasonable in the aggregate, as determined by such enrolled actuary;

(B) such enrolled actuary files with the Secretary of Labor a signed actuarial report containing—

(i) the date of the actuarial valuation applicable to the report; and

(ii) a statement by the enrolled actuary signing the report that, to the best of the actuary's knowledge, the report is complete and accurate and that in the actuary's opinion the actuarial assumptions used are in the aggregate reasonably related to the experience of the operator and to reasonable expectations; and

(C) 90 calendar days have elapsed after the report required by subparagraph (B) is filed with the Secretary of Labor, and the Secretary of Labor has not notified the assigned operator in writing that the requirements of this paragraph have not been satisfied.

(4) Use of prepayment

The Combined Fund shall—

(A) establish and maintain an account for each assigned operator or related person by, or on whose behalf, a payment described in paragraph (3) was made,

(B) credit such account with such payment (and any earnings thereon), and

(C) use all amounts in such account exclusively to pay premiums that would (but for this subsection) be required to be paid by the assigned operator.

Upon termination of the obligations for the premium liability of any assigned operator or related person for which such account is maintained, all funds remaining in such account (and earnings thereon) shall be refunded to such person as may be designated by the common parent described in paragraph (1)(B).

(Added Pub. L. 102–486, title XIX, §19143(a), Oct. 24, 1992, 106 Stat. 3042; amended Pub. L. 103–296, title I, §108(h)(9)(A), Aug. 15, 1994, 108 Stat. 1487; Pub. L. 109–432, div. C, title II, §§211(a), 212(a)(2), Dec. 20, 2006, 120 Stat. 3020, 3024; Pub. L. 115–141, div. U, title IV, §401(a)(344), Mar. 23, 2018, 132 Stat. 1200.)

Editorial Notes

References in Text

The Social Security Act, referred to in subsec. (b)(3), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is classified generally to subchapter XVIII (§1395 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

2018—Subsec. (d)(2)(B). Pub. L. 115–141 substituted "1232)," for "1232)),".

2006—Subsec. (d). Pub. L. 109–432, §212(a)(2)(A), reenacted heading without change and amended text of subsec. (d) generally. Prior to amendment, text read as follows: "The unassigned beneficiaries premium for any plan year for any assigned operator shall be equal to the applicable percentage of the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under section 9706 to any person for such plan year."

Subsec. (e)(1). Pub. L. 109–432, §212(a)(2)(B)(i), inserted "and amounts transferred under section 9705(b)" after "premiums received".

Subsec. (e)(3)(A). Pub. L. 109–432, §212(a)(2)(B)(ii), inserted at end "Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in determining whether there is a surplus in the account for purposes of this paragraph."

Subsec. (f)(2)(C). Pub. L. 109–432, §212(a)(2)(C), added subpar. (C).

Subsec. (j). Pub. L. 109–432, §211(a), added subsec. (j).

1994—Subsecs. (b)(2), (h). Pub. L. 103–296 substituted "Commissioner of Social Security" for "Secretary of Health and Human Services".

Statutory Notes and Related Subsidiaries

Effective Date of 2006 Amendment

Pub. L. 109–432, div. C, title II, §212(a)(4), Dec. 20, 2006, 120 Stat. 3025, provided that: "The amendments made by this subsection [amending this section and sections 9705 and 9706 of this title] shall apply to plan years of the Combined Fund beginning after September 30, 2006."

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–296 effective Mar. 31, 1995, see section 110(a) of Pub. L. 103–296, set out as a note under section 401 of Title 42, The Public Health and Welfare.

1 So in original. Probably should be "Commissioner".
26 U.S.C. § 1245 (2024) — Title 26: INTERNAL REVENUE CODE / Chapter 1 / Section 1245: Gain from dispositions of certain depreciable property
Gain from dispositions of certain depreciable property
Status: in_force

(a) General rule

(1) Ordinary income

Except as otherwise provided in this section, if section 1245 property is disposed of the amount by which the lower of—

(A) the recomputed basis of the property, or

(B)(i) in the case of a sale, exchange, or involuntary conversion, the amount realized, or

(ii) in the case of any other disposition, the fair market value of such property,

exceeds the adjusted basis of such property shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.

(2) Recomputed basis

For purposes of this section—

(A) In general

The term "recomputed basis" means, with respect to any property, its adjusted basis recomputed by adding thereto all adjustments reflected in such adjusted basis on account of deductions (whether in respect of the same or other property) allowed or allowable to the taxpayer or to any other person for depreciation or amortization.

(B) Taxpayer may establish amount allowed

For purposes of subparagraph (A), if the taxpayer can establish by adequate records or other sufficient evidence that the amount allowed for depreciation or amortization for any period was less than the amount allowable, the amount added for such period shall be the amount allowed.

(C) Certain deductions treated as amortization

Any deduction allowable under section 179, 179B, 179C, 179D, 179E, 181, 190, 193, or 194 shall be treated as if it were a deduction allowable for amortization.

(3) Section 1245 property

For purposes of this section, the term "section 1245 property" means any property which is or has been property of a character subject to the allowance for depreciation provided in section 167 and is either—

(A) personal property,

(B) other property (not including a building or its structural components) but only if such other property is tangible and has an adjusted basis in which there are reflected adjustments described in paragraph (2) for a period in which such property (or other property)—

(i) was used as an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services,

(ii) constituted a research facility used in connection with any of the activities referred to in clause (i), or

(iii) constituted a facility used in connection with any of the activities referred to in clause (i) for the bulk storage of fungible commodities (including commodities in a liquid or gaseous state),

(C) so much of any real property (other than any property described in subparagraph (B)) which has an adjusted basis in which there are reflected adjustments for amortization under section 169, 179, 179B, 179C, 179D, 179E, 188 (as in effect before its repeal by the Revenue Reconciliation Act of 1990), 190, 193, or 194 1

(D) a single purpose agricultural or horticultural structure (as defined in section 168(i)(13)),

(E) a storage facility (not including a building or its structural components) used in connection with the distribution of petroleum or any primary product of petroleum, or

(F) any railroad grading or tunnel bore (as defined in section 168(e)(4)).

(b) Exceptions and limitations

(1) Gifts

Subsection (a) shall not apply to a disposition by gift.

(2) Transfers at death

Except as provided in section 691 (relating to income in respect of a decedent), subsection (a) shall not apply to a transfer at death.

(3) Certain tax-free transactions

If the basis of property in the hands of a transferee is determined by reference to its basis in the hands of the transferor by reason of the application of section 332, 351, 361, 721, or 731, then the amount of gain taken into account by the transferor under subsection (a)(1) shall not exceed the amount of gain recognized to the transferor on the transfer of such property (determined without regard to this section). Except as provided in paragraph (6), this paragraph shall not apply to a disposition to an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by this chapter.

(4) Like kind exchanges; involuntary conversions, etc.

If property is disposed of and gain (determined without regard to this section) is not recognized in whole or in part under section 1031 or 1033, then the amount of gain taken into account by the transferor under subsection (a)(1) shall not exceed the sum of—

(A) the amount of gain recognized on such disposition (determined without regard to this section), plus

(B) the fair market value of property acquired which is not section 1245 property and which is not taken into account under subparagraph (A).

(5) Property distributed by a partnership to a partner

(A) In general

For purposes of this section, the basis of section 1245 property distributed by a partnership to a partner shall be deemed to be determined by reference to the adjusted basis of such property to the partnership.

(B) Adjustments added back

In the case of any property described in subparagraph (A), for purposes of computing the recomputed basis of such property the amount of the adjustments added back for periods before the distribution by the partnership shall be—

(i) the amount of the gain to which subsection (a) would have applied if such property had been sold by the partnership immediately before the distribution at its fair market value at such time, reduced by

(ii) the amount of such gain to which section 751(b) applied.

(6) Transfers to tax-exempt organization where property will be used in unrelated business

(A) In general

The second sentence of paragraph (3) shall not apply to a disposition of section 1245 property to an organization described in section 511(a)(2) or 511(b)(2) if, immediately after such disposition, such organization uses such property in an unrelated trade or business (as defined in section 513).

(B) Later change in use

If any property with respect to the disposition of which gain is not recognized by reason of subparagraph (A) ceases to be used in an unrelated trade or business of the organization acquiring such property, such organization shall be treated for purposes of this section as having disposed of such property on the date of such cessation.

(7) Timber property

In determining, under subsection (a)(2), the recomputed basis of property with respect to which a deduction under section 194 was allowed for any taxable year, the taxpayer shall not take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired before the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized.

(8) Disposition of amortizable section 197 intangibles

(A) In general

If a taxpayer disposes of more than 1 amortizable section 197 intangible (as defined in section 197(c)) in a transaction or a series of related transactions, all such amortizable 197 intangibles shall be treated as 1 section 1245 property for purposes of this section.

(B) Exception

Subparagraph (A) shall not apply to any amortizable section 197 intangible (as so defined) with respect to which the adjusted basis exceeds the fair market value.

(c) Adjustments to basis

The Secretary shall prescribe such regulations as he may deem necessary to provide for adjustments to the basis of property to reflect gain recognized under subsection (a).

(d) Application of section

This section shall apply notwithstanding any other provision of this subtitle.

(Added Pub. L. 87–834, §13(a)(1), Oct. 16, 1962, 76 Stat. 1032; amended Pub. L. 88–272, title II, §203(d), Feb. 26, 1964, 78 Stat. 35; Pub. L. 91–172, title II, §212(a)(1), (2), title VII, §704(b)(4), Dec. 30, 1969, 83 Stat. 571, 670; Pub. L. 92–178, title I, §104(a)(2), title III, §303(c)(1), (2), Dec. 10, 1971, 85 Stat. 501, 522; Pub. L. 94–81, §2(a), Aug. 9, 1975, 89 Stat. 417; Pub. L. 94–455, title II, §212(b)(1), title XIX, §§1901(a)(140), (b)(3)(K), (11)(D), 1906(b) (13)(A), 1951(c)(2)(C), title XXI, §§2122(b)(3), 2124(a)(2), Oct. 4, 1976, 90 Stat. 1546, 1787, 1793, 1795, 1834, 1840, 1915, 1917; Pub. L. 95–600, title VII, §701(f)(3)(A), (B), (w)(1), (2), Nov. 6, 1978, 92 Stat. 2901, 2920; Pub. L. 96–223, title II, §251(a)(2)(C), Apr. 2, 1980, 94 Stat. 287; Pub. L. 96–451, title III, §301(c)(1), Oct. 14, 1980, 94 Stat. 1990; Pub. L. 97–34, title II, §§201(b), 202(b), 204(a)–(d), 212(d)(2)(F), Aug. 13, 1981, 95 Stat. 218, 220, 222, 223, 239; Pub. L. 97–448, title I, §102(e)(2)(B), Jan. 12, 1983, 96 Stat. 2371; Pub. L. 98–369, div. A, title I, §111(e)(5), (10), July 18, 1984, 98 Stat. 633; Pub. L. 99–121, title I, §103(b)(1)(D), Oct. 11, 1985, 99 Stat. 509; Pub. L. 99–514, title II, §201(d)(11), Oct. 22, 1986, 100 Stat. 2141; Pub. L. 100–647, title I, §1002(i)(2)(I), Nov. 10, 1988, 102 Stat. 3371; Pub. L. 101–239, title VII, §7622(b)(2)[(d)(2)], Dec. 19, 1989, 103 Stat. 2378; Pub. L. 101–508, title XI, §§11704(a)(13), 11801(c)(6)(E), (8)(H), 11813(b)(21), Nov. 5, 1990, 104 Stat. 1388–518, 1388–524, 1388–555; Pub. L. 103–66, title XIII, §13261(f)(4), (5), Aug. 10, 1993, 107 Stat. 539; Pub. L. 104–7, §2(b), Apr. 11, 1995, 109 Stat. 93; Pub. L. 104–188, title I, §1703(n)(6), Aug. 20, 1996, 110 Stat. 1877; Pub. L. 105–34, title XVI, §1604(a)(3), Aug. 5, 1997, 111 Stat. 1097; Pub. L. 108–357, title III, §338(b)(5), title VIII, §886(b)(2), Oct. 22, 2004, 118 Stat. 1481, 1641; Pub. L. 109–58, title XIII, §§1323(b)(1), 1331(b)(2), 1363(a), Aug. 8, 2005, 119 Stat. 1014, 1024, 1060; Pub. L. 109–135, title IV, §§402(a)(6), 403(e)(2), (i)(2), Dec. 21, 2005, 119 Stat. 2610, 2623, 2625; Pub. L. 109–432, div. A, title IV, §404(b)(3), Dec. 20, 2006, 120 Stat. 2956; Pub. L. 113–295, div. A, title II, §221(a)(34)(H), Dec. 19, 2014, 128 Stat. 4042; Pub. L. 115–141, div. U, title IV, §401(b)(31), Mar. 23, 2018, 132 Stat. 1203.)

Editorial Notes

References in Text

The Revenue Reconciliation Act of 1990, referred to in subsec. (a)(3)(C), is title XI of Pub. L. 101–508, Nov. 5, 1990, 104 Stat. 1388–400. Section 11801(a)(13) of the Act repealed section 188 of this title. For complete classification of this Act to the Code, see Short Title note set out under section 1 of this title and Tables.

Amendments

2018—Subsec. (a)(3)(C). Pub. L. 115–141 struck out ", 185" after "179E".

2014—Subsec. (a)(2)(C), (3)(C). Pub. L. 113–295 struck out "179A," after "179,".

2006—Subsec. (a)(2)(C), (3)(C). Pub. L. 109–432 inserted "179E," after "179D,".

2005—Subsec. (a)(2)(C). Pub. L. 109–135, §403(e)(2), (i)(2), inserted "181," after "179B," and substituted "193, or 194" for "or 193".

Pub. L. 109–58, §1331(b)(2), inserted "179D," after "179C,".

Pub. L. 109–58, §1323(b)(1), inserted "179C," after "179B,".

Subsec. (a)(3)(C). Pub. L. 109–58, §1331(b)(2), inserted "179D," after "179C,".

Pub. L. 109–58, §1323(b)(1), inserted "179C," after "179B,".

Subsec. (b)(3). Pub. L. 109–135, §402(a)(6)(B), substituted "paragraph (6)" for "paragraph (7)".

Subsec. (b)(5) to (8). Pub. L. 109–135, §402(a)(6)(A), redesignated pars. (6) to (9) as (5) to (8), respectively, and struck out heading and text of former par. (5). Text read as follows: "Under regulations prescribed by the Secretary, rules consistent with paragraphs (3) and (4) of this subsection shall apply in the case of transactions described in section 1081 (relating to exchanges in obedience to SEC orders)."

Subsec. (b)(9). Pub. L. 109–135, §402(a)(6)(A), redesignated par. (9) as (8).

Pub. L. 109–58, §1363(a), added par. (9).

2004—Subsec. (a)(2)(C), (3)(C). Pub. L. 108–357, §338(b)(5), inserted "179B," after "179A,".

Subsec. (a)(4). Pub. L. 108–357, §886(b)(2), struck out par. (4) which related to special rule for player contracts if a franchise to conduct any sports enterprise is sold or exchanged.

1997—Subsec. (a)(2)(C), (3)(C). Pub. L. 105–34 inserted "179A," after "179,".

1996—Subsec. (a)(3). Pub. L. 104–188 reenacted heading without change and amended introductory provisions generally. Prior to amendment, introductory provisions read as follows: "For purposes of this section, the term 'section 1245 property' means any property which is or has been property of a character subject to the allowance for depreciation provided in section 167 (or subject to the allowance of amortization provided in)) and is either—".

1995—Subsec. (b)(5). Pub. L. 104–7 struck out "1071 and" before "1081 transactions" in heading and "section 1071 (relating to gain from sale or exchange to effectuate policies of FCC) or" before "section 1081" in text.

1993—Subsec. (a)(2)(C). Pub. L. 103–66, §13261(f)(4), substituted "or 193" for "193, or 1253(d)(2) or (3)".

Subsec. (a)(3). Pub. L. 103–66, §13261(f)(5), struck out "section 185 or 1253(d)(2) or (3)" after "amortization provided in" in introductory provisions.

1990—Subsec. (a)(3). Pub. L. 101–508, §11704(a)(13), substituted "or (3))" for "or (3)" in introductory provisions.

Subsec. (a)(3)(C). Pub. L. 101–508, §11801(c)(6)(E), substituted "188 (as in effect before its repeal by the Revenue Reconciliation Act of 1990)," for "188,".

Subsec. (a)(3)(D). Pub. L. 101–508, §11813(b)(21), substituted "section 168(i)(13)" for "section 48(p)".

Subsec. (b)(3). Pub. L. 101–508, §11801(c)(8)(H), struck out "371(a), 374(a)," after "332, 351, 361,".

1989—Subsec. (a)(2)(C). Pub. L. 101–239, §7622(b)(2)(A)[(d)(2)(A)], substituted "193, or 1253(d)(2) or (3)" for "or 193".

Subsec. (a)(3). Pub. L. 101–239, §7622(b)(2)(B)[(d)(2)(B)], substituted "section 185 or 1253(d)(2) or (3)" for "section 185" in introductory provisions.

1988—Subsec. (a)(3)(F). Pub. L. 100–647 added subpar. (F).

1986—Subsec. (a)(1). Pub. L. 99–514, §201(d)(11)(A), struck out "during a taxable year beginning after December 31, 1962, or section 1245 recovery property is disposed of after December 31, 1980," after "if section 1245 property is disposed of".

Subsec. (a)(2). Pub. L. 99–514, §201(d)(11)(B), amended par. (2) generally, restating former subpars. (A) to (E) and concluding provisions as subpars. (A) to (C).

Subsec. (a)(3). Pub. L. 99–514, §201(d)(11)(C), redesignated subpars. (D), (E), and (F) as (C), (D), and (E), respectively, and struck out former subpar. (C) which read as follows: "an elevator or an escalator".

Subsec. (a)(5), (6). Pub. L. 99–514, §201(d)(11)(D), struck out par. (5) which defined "section 1245 recovery property" and par. (6) which provided special rule for qualified leased property.

1985—Subsec. (a)(5)(A) to (C). Pub. L. 99–121 substituted "19-year real property" for "18-year real property".

1984—Subsec. (a)(5)(A) to (C). Pub. L. 98–369, §111(e)(5), substituted "18-year real property and low-income housing" for "15-year real property".

Subsec. (d)(5)(D). Pub. L. 98–369, §111(e)(10), substituted "low-income housing (within the meaning of section 168(c)(2)(F))" for "15-year real property which is described in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)".

1983—Subsec. (a)(3)(F). Pub. L. 97–448 inserted "(not including a building or its structural components)" after "a storage facility".

1981—Subsec. (a)(1). Pub. L. 97–34, §204(a), inserted reference to section 1245 recovery property disposed of after Dec. 31, 1980, in introductory provisions.

Subsec. (a)(2). Pub. L. 97–34, §§202(b)(1)–(3), 204(b), inserted reference to section 179 in subpar. (D), added subpar. (E), and, in provisions following subpar. (E), and inserted references to section 179 in three places. Pub. L. 97–34, §212(d)(2)(F), in provisions following subpar. (E), substituted "191 (as in effect before its repeal by the Economic Recovery Tax Act of 1981)" for "191" in two places.

Subsec. (a)(3)(D). Pub. L. 97–34, §202(b)(3), inserted reference to section 179.

Subsec. (a)(3)(E), (F). Pub. L. 97–34, §201(b), added subpars. (E) and (F).

Subsec. (a)(5). Pub. L. 97–34, §204(c), added par. (5).

Subsec. (a)(6). Pub. L. 97–34, §204(d), added par. (6).

1980—Subsec. (a)(2). Pub. L. 96–451, §301(c)(1)(A), (B), inserted references to section 194 in subpar. (D) and text following subpar. (D).

Pub. L. 96–223, §251(a)(2)(C)(i)–(iii), inserted references to section 193 in subpar. (D) and text following subpar. (D).

Subsec. (a)(3)(D). Pub. L. 96–451, §301(c)(1)(B), inserted reference to section 194.

Pub. L. 96–223, §251(a)(2)(C)(i), inserted reference to section 193.

Subsec. (b)(8). Pub. L. 96–451, §301(c)(1)(C), added par. (8).

1978—Subsec. (a)(2). Pub. L. 95–600, §701(f)(3)(A), struck out from the listed sections in subpar. (D) reference to 191 and inserted "(in the case of property described in paragraph (3)(C))" before "191" in two places in next to last sentence.

Subsec. (a)(3)(D). Pub. L. 95–600, §701(f)(3)(B), struck out reference to section 191.

Subsec. (a)(4)(B). Pub. L. 95–600, §701(w)(2), inserted "attributable to periods after December 31, 1975," after "for the depreciation", "incurred after December 31, 1975," after "allowable for losses", and "described in clause (i)" after "of the amounts".

Subsec. (a)(4)(C). Pub. L. 95–600, §701(w)(1), struck out provisions relating to the aggregate of the amounts treated as ordinary income.

1976—Subsec. (a)(1). Pub. L. 94–455, §1901(b)(3)(K), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231".

Subsec. (a)(2)(D). Pub. L. 94–455, §§2122(b)(3)(B), 2124(a)(2), inserted reference to sections 190 and 191.

Subsec. (a)(2) foll. (D). Pub. L. 94–455, §§1901(b)(11)(D), 1951(c)(2)(C), 2122(b)(3)(A), (C), 2124(a)(2), in text following subpar. (D): struck out reference to section 187 in two places; inserted "(as in effect before its repeal by the Tax Reform Act of 1976)," after "section 168," in two places; inserted provision for treatment for purposes of this section of any deduction allowable under section 190 as if it were a deduction allowable for amortization; and inserted reference to section 191 in two places, respectively.

Subsec. (a)(3)(D). Pub. L. 94–455, §§2122(b)(3)(A), 2124(a)(2), inserted reference to sections 190 and 191.

Subsec. (a)(4). Pub. L. 94–455, §212(b)(1), added par. (4).

Subsec. (b)(5). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (b)(7)(B). Pub. L. 94–455, §1901(a)(140), struck out "such organization acquiring such property," before "such organization".

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

1975—Subsec. (b)(3), (7). Pub. L. 94–81, §2(a)(1), (2), inserted reference to par. (7) in par. (3), and added par. (7).

1971—Subsec. (a)(2). Pub. L. 92–178, §303(c)(1), inserted reference to section 188 in two places in text following subpar. (D).

Subsec. (a)(3)(B)(ii), (iii). Pub. L. 92–178, §104(a)(2), substituted "research facility" for "research or storage facility" in cl. (ii) and added cl. (iii).

Subsec. (a)(3)(D). Pub. L. 92–178, §303(c)(2), inserted reference to section 188.

1969—Subsec. (a)(2). Pub. L. 91–172, §§212(a)(1), 704(b)(4)(A), (B), added subpar. (C) and inserted references to sections 169, 185, and 187, and added subpar. (D).

Subsec. (a)(3). Pub. L. 91–172, §§212(a)(2), 704(b)(4)(C)–(F), struck out "(other than livestock)" after "means any property" and substituted "section 167 (or subject to the allowance of amortization provided in section 185)" for "section 167" and added subpar. (D).

1964—Subsec. (a)(2), (3)(C). Pub. L. 88–272 redefined "recomputed basis" with respect to elevators or escalators in par. (2), and inserted subpar. (C) in par. (3).

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by 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 2006 Amendment

Amendment by Pub. L. 109–432 applicable to costs paid or incurred after Dec. 20, 2006, see section 404(c) of Pub. L. 109–432, set out as an Effective Date note under section 179E of this title.

Effective Date of 2005 Amendment

Amendment by section 402(a)(6) of Pub. L. 109–135 effective as if included in the provisions of the Energy Policy Act of 2005, Pub. L. 109–58, to which it relates, but not applicable with respect to any transaction ordered in compliance with the Public Utility Holding Company Act of 1935 (15 U.S.C. 79 et seq.) before its repeal, see section 402(m) of Pub. L. 109–135, set out as an Effective and Termination Dates of 2005 Amendments note under section 23 of this title.

Amendments by section 403(e)(2), (i)(2) of Pub. L. 109–135 effective as if included in the provisions of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which they relate, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Amendment by section 1323(b)(1) of Pub. L. 109–58 applicable to properties placed in service after Aug. 8, 2005, see section 1323(c) of Pub. L. 109–58, set out as an Effective Date note under section 179C of this title.

Amendment by section 1331(b)(2) of Pub. L. 109–58 applicable to property placed in service after Dec. 31, 2005, see section 1331(d) of Pub. L. 109–58, set out as an Effective Date note under section 179D of this title.

Pub. L. 109–58, title XIII, §1363(b), Aug. 8, 2005, 119 Stat. 1060, provided that: "The amendment made by this section [amending this section] shall apply to dispositions of property after the date of the enactment of this Act [Aug. 8, 2005]."

Effective Date of 2004 Amendment

Amendment by section 338(b)(5) of Pub. L. 108–357 applicable to expenses paid or incurred after Dec. 31, 2002, in taxable years ending after such date, see section 338(c) of Pub. L. 108–357, set out as an Effective Date note under section 179B of this title.

Amendment by section 886(b)(2) of Pub. L. 108–357 applicable to franchises acquired after Oct. 22, 2004, see section 886(c)(2) of Pub. L. 108–357, set out as a note under section 197 of this title.

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 effective as if included in the amendments made by section 1913 of the Energy Policy Act of 1992, Pub. L. 102–486, see section 1604(a)(4) of Pub. L. 105–34, set out as a note under section 263 of this title.

Effective Date of 1996 Amendment

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

Effective Date of 1995 Amendment

Amendment by Pub. L. 104–7 applicable to sales and exchanges on or after January 17, 1995, and to sales and exchanges before such date if FCC tax certificate with respect to such sale or exchange was issued on or after such date, but not applicable with respect to certain binding contracts, see section 2(d) of Pub. L. 104–7, set out as an Effective Date of Repeal note under section 1071 of this title.

Effective Date of 1993 Amendment

Amendment by Pub. L. 103–66 applicable, except as otherwise provided, with respect to property acquired after Aug. 10, 1993, see section 13261(g) of Pub. L. 103–66, set out as an Effective Date note under section 197 of this title.

Effective Date of 1990 Amendment

Amendment by section 11813(b)(21) of Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 applicable to transfers after Oct. 2, 1989, but not applicable to any transfer pursuant to a written binding contract in effect on Oct. 2, 1989, and at all times thereafter before the transfer, see section 7622(c)[(e)] of Pub. L. 101–239, set out as a note under section 167 of this title.

Effective Date of 1988 Amendment

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

Effective Date of 1986 Amendment

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

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

Effective Date of 1985 Amendment

Amendment by Pub. L. 99–121 applicable with respect to property placed in service by the taxpayer after May 8, 1985, with specified exceptions, see section 105(b) of Pub. L. 99–121, set out as a note under section 168 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable with respect to property placed in service by the taxpayer after Mar. 15, 1984, subject to certain exceptions, see section 111(g) of Pub. L. 98–369, set out as a note under section 168 of this title.

Effective Date of 1983 Amendment

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

Effective Date of 1981 Amendment

Amendment by sections 201(b), 202(b), and 204(a)–(d) of Pub. L. 97–34 applicable to property placed in service after Dec. 31, 1980, in taxable years ending after that date, see section 209(a) of Pub. L. 97–34, set out as an Effective Date note under section 168 of this title.

Amendment by section 212(d)(2)(F) of Pub. L. 97–34 applicable to expenditures incurred after Dec. 31, 1981, in taxable years ending after such date, see section 212(e) of Pub. L. 97–34, set out as a note under section 46 of this title.

Effective Date of 1980 Amendment

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.

Amendment by Pub. L. 96–223 applicable to taxable years beginning after Dec. 31, 1979, see section 251(b) of Pub. L. 96–223, set out as an Effective Date note under section 193 of this title.

Effective Date of 1978 Amendment

Amendment by section 701(f)(3)(A), (B) of Pub. L. 95–600 effective as if included within the amendment of subsec. (a)(2), (3)(D) by section 2124 of Pub. L. 94–455, see section 701(f)(8) of Pub. L. 95–600, set out as an Effective and Termination Dates of 1978 Amendments note under section 167 of this title.

Pub. L. 95–600, title VII, §701(w)(3), Nov. 6, 1978, 92 Stat. 2920, provided that: "The amendments made by this subsection [amending this section] shall apply to transfers of player contracts in connection with any sale or exchange of a franchise after December 31, 1975."

Effective Date of 1976 Amendment

Pub. L. 94–455, title II, §212(b)(2), Oct. 4, 1976, 90 Stat. 1547, provided that: "The amendment made by this subsection [amending this section] applies to transfers of player contracts in connection with any sale or exchange of a franchise after December 31, 1975."

Amendment by section 1901(a)(140), (b)(3)(K), (11)(D) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Amendment by section 1951(c)(2)(C) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1976, see section 1951(d) of Pub. L. 94–455, set out as a note under section 72 of this title.

Amendment by section 2122(b)(3) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1976, see section 2122(c) of Pub. L. 94–455, as amended, set out as an Effective Date note under section 190 of this title.

Amendment by section 2124(a)(2) of Pub. L. 94–455 applicable with respect to additions to capital account made after June 14, 1976 and before June 15, 1981, see section 2124(a)(4) of Pub. L. 94–455, set out as an Effective Date note under section 642 of this title.

Effective Date of 1975 Amendment

Amendment by Pub. L. 94–81 applicable to dispositions after Dec. 31, 1969, in taxable years ending after such date, with special provision for an election in the case of dispositions occurring before Aug. 9, 1975, see section 2(c) of Pub. L. 94–81, set out as a note under section 1250 of this title.

Effective Date of 1971 Amendment

Amendment by section 104(a)(2) of Pub. L. 92–178 applicable to property described in section 50 of this title relating to restoration of credit, see section 104(h) of Pub. L. 92–178, set out as a note under section 48 of this title.

Amendment by section 303(c)(1), (2) of Pub. L. 92–178 applicable to taxable years ending after Dec. 31, 1971, see section 303(d) of Pub. L. 92–178, set out as a note under section 642 of this title.

Effective Date of 1969 Amendment

Pub. L. 91–172, title II, §212(a)(3), Dec. 30, 1969, 83 Stat. 571, provided that: "The amendments made by paragraphs (1) and (2) [amending this section] shall apply with respect to taxable years beginning after December 31, 1969."

Amendment by section 704(b)(4) of Pub. L. 91–172 applicable to taxable years ending after Dec. 31, 1968, see section 704(c) of Pub. L. 91–172, set out as a note under section 169 of this title.

Effective Date of 1964 Amendment

Amendment by Pub. L. 88–272 applicable with respect to dispositions after Dec. 31, 1963, in taxable years ending after such date, see section 203(f)(3) of Pub. L. 88–272, set out as a note under section 48 of this title.

Effective Date

Pub. L. 87–834, §13(g), Oct. 16, 1962, 76 Stat. 1035, provided that: "The amendments made by this section [enacting this section and amending sections 167, 170, 301, 312, 341, 453, 613, and 751 of this title] (other than the amendments made by subsection (c) [amending sections 167, 179, and 642 of this title]) shall apply to taxable years beginning after December 31, 1962. The amendments made by subsection (c) shall apply to taxable years beginning after December 31, 1961, and ending after the date of the enactment of this Act [Oct. 16, 1962]."

Savings Provision

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

For provisions that nothing in amendment by sections 11801 and 11813 of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

1 So in original. Probably should be followed by a comma.