174 
(other than real property and other than personal 
property of a kind held for investment) or services 
which are offered for sale to customers in the ordi-
nary course of the line of business of the employer 
in which the employee is performing services. 
‘‘(c) DE MINIMIS FRINGE DEFINED.— 
‘‘(1) IN GENERAL.—‘De minimis fringe’ means 
any property or service the value of which is (after 
taking into account the frequency with which similar 
fringes are provided by the employer to the employ-
er’s employees) so small as to make accounting for 
it unreasonable or administratively impracticable. 
‘‘(2) TREATMENT OF CERTAIN EATING FACILI-
TIES.—The operation by an employer of any eating 
facility for employees shall be treated as a de mini-
mis fringe if— 
‘‘(A) such facility is located on or near the 
business premises of the employer, and 
‘‘(B) revenue derived from such facility 
normally equals or exceeds the direct operating 
costs of such facility. 
The preceding sentence shall apply with respect to 
any highly compensated employee only if access to 
the facility is available on substantially the same 
terms to each member of a group of employees 
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which is defined under a reasonable classification set 
up by the employer which does not discriminate in 
favor of highly compensated employees. 
‘‘(3) ON-PREMISES GYMS AND OTHER ATHLETIC 
FACILITIES.— 
‘‘(A) IN
GENERAL.—De minimis fringe 
benefits include the provision of on-premises 
athletic facility by an employer to its employees. 
‘‘(B) ON-PREMISES ATHLETIC FACILITY.— 
For purposes of this paragraph, ‘on-premises 
athletic facility’ means any gym or other ath-
letic facility— 
‘‘(i) which is located on the premises 
of the employer, 
‘‘(ii) which is operated by the em-
ployer, and 
‘‘(iii) substantially all the use of which 
is by employees of the employer, their 
spouses, and their dependent children. 
‘‘(d) CERTAIN
EDUCATIONAL
TRAINING
BENE-
FITS.—Amounts paid or expenses incurred by the em-
ployer for education or training provided to the employee 
shall be excluded from gross income under section 4 if 
(and only if) such amounts or expenses are ordinary and 
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176 
necessary business expenses and are not for an advanced 
degree or to qualify an employee for a new line of work. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
regulations under this section, including regulations that 
continue certain rules contained in section 132 to the In-
ternal Revenue Code of 1986 related to the fringe benefits 
described in this section. 
‘‘Subchapter E—Rules Relating to Deductions 
‘‘Sec. 101. Charitable, etc. organizations. 
‘‘Sec. 102. Private foundations. 
‘‘SEC. 101. CHARITABLE, ETC. ORGANIZATIONS. 
‘‘(a) PURPOSE.—This section provides definitions for 
purposes of determining the philanthropic transfer deduc-
tion and for other purposes of this chapter and chapter 
2. 
‘‘(b) REGULAR CHARITY.— 
‘‘(1) IN GENERAL.— 
‘‘(A) REGULAR CHARITY.—‘Regular char-
ity’ means— 
‘‘(i) a church or a convention or asso-
ciation of churches, 
‘‘(ii) 
an 
educational 
organization 
which normally maintains a regular faculty 
and curriculum and normally has a regu-
larly enrolled body of pupils or students in 
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attendance at the place where its edu-
cational activities are regularly carried on, 
‘‘(iii) an organization the principal 
purpose or functions of which are the pro-
viding of medical or hospital care or med-
ical education or medical research, if the 
organization is a hospital, or if the organi-
zation is a medical research organization 
directly engaged in the continuous active 
conduct of medical research in conjunction 
with a hospital, 
‘‘(iv) an organization which normally 
receives a substantial part of its support 
(exclusive of income received in the exer-
cise or performance by such organization 
of its charitable, educational, or other pur-
pose or function constituting the basis for 
its exemption under section 253(a)) from 
the United States or any State or political 
subdivision thereof or from direct or indi-
rect contributions from the general public, 
and which is organized and operated exclu-
sively to receive, hold, invest, and admin-
ister property and to make expenditures to 
or for the benefit of a college or university 
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178 
which is an organization referred to in 
clause (ii) of this subparagraph and which 
is an agency or instrumentality of a State 
or political subdivision thereof, or which is 
owned or operated by a State or political 
subdivision thereof or by an agency or in-
strumentality of one or more States or po-
litical subdivisions, 
‘‘(v) a governmental unit referred to 
in subsection (c)(1), 
‘‘(vi) an organization referred to in 
subsection (c)(2) which normally receives a 
substantial part of its support (exclusive of 
income received in the exercise or perform-
ance by such organization of its charitable, 
educational, or other purpose or function 
constituting the basis for its exemption 
under section 253(a)) from a governmental 
unit referred to in subsection (c)(1) or 
from direct or indirect contributions from 
the general public, 
‘‘(vii) a private foundation described 
in subparagraph (C), or 
‘‘(viii) an organization described in 
section 102(a) (2) or (3). 
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179 
‘‘(B) SPECIAL
RULE
FOR
MEDICAL
RE-
SEARCH ORGANIZATIONS.—For purposes of de-
termining whether a contribution is to a regular 
charity, a medical research organization shall 
not be treated as described in clause (iii) of 
paragraph (2) unless during the calendar year 
in which the contribution is made such organi-
zation is committed to spend such contributions 
for such research before January 1 of the fifth 
calendar year which begins after the date such 
contribution is made, 
‘‘(C) CERTAIN PRIVATE FOUNDATIONS.— 
The private foundations referred to in subpara-
graph (A)(vii) and subsection (e)(1)(B) are— 
‘‘(i) a private operating foundation (as 
defined in section 4942(j)(3)), 
‘‘(ii) any other private foundation (as 
defined in section 102(a)) which, not later 
than the 15th day of the third month after 
the close of the foundation’s taxable year 
in which contributions are received, makes 
qualifying distributions (as defined in sec-
tion 4942(g), without regard to paragraph 
(3) thereof), which are treated, after the 
application of section 4942(g)(3), as dis-
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tributions out of corpus (in accordance 
with section 4942(h)) in an amount equal 
to 100 percent of such contributions, and 
with respect to which the taxpayer obtains 
adequate records or other sufficient evi-
dence from the foundation showing that 
the foundation made such qualifying dis-
tributions, and 
‘‘(iii) a private foundation all of the 
contributions to which are pooled in a com-
mon fund and which would be described in 
section 102(a)(3) but for the right of any 
substantial contributor (hereafter in this 
clause called ‘donor’) or his spouse to des-
ignate annually the recipients, from among 
organizations described in paragraph (1) of 
section 102(a), of the income attributable 
to the donor’s contribution to the fund and 
to direct (by deed or by will) the payment, 
to an organization described in such para-
graph (1), of the corpus in the common 
fund attributable to the donor’s contribu-
tion; but this clause shall apply only if all 
of the income of the common fund is re-
quired to be (and is) distributed to one or 
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181 
more organizations described in such para-
graph (1) not later than the 15th day of 
the third month after the close of the tax-
able year in which the income is realized 
by the fund and only if all of the corpus 
attributable to any donor’s contribution to 
the fund is required to be (and is) distrib-
uted to one or more of such organizations 
not later than one year after his death or 
after the death of his surviving spouse if 
she has the right to designate the recipi-
ents of such corpus. 
‘‘(2) REFERENCES.—Any reference in other law 
or in legal documents to an organization described 
in a clause of section 170(b)(1)(A) of the Internal 
Revenue Code of 1986 shall constitute a reference to 
an organization described in the same clause of sec-
tion 101(b)(1)(A). 
‘‘(c) CHARITY.—For purposes of determining the de-
ductibility of a philanthropic transfer, ‘charitable contribu-
tion’ means a contribution or gift for the use of— 
‘‘(1) A State, a possession of the United States, 
or any political subdivision of any of the foregoing, 
or the United States or the District of Columbia, 
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182 
but only if the contribution or gift is made for exclu-
sively public purposes. 
‘‘(2) A corporation, trust, or community chest, 
fund, or foundation— 
‘‘(A) created or organized in the United 
States or in any possession thereof, or under 
the law of the United States, any State, the 
District of Columbia, or any possession of the 
United States, 
‘‘(B) organized and operated exclusively 
for religious, charitable, scientific, literary, or 
educational purposes (but only if no part of its 
activities involve the provision of athletic facili-
ties or equipment) or for the prevention of cru-
elty to children or animals, 
‘‘(C) no part of the net earnings of which 
inures to the benefit of any private shareholder 
or individual, and 
‘‘(D) which qualifies for exemption from 
the business tax under section 253(c) and is not 
disqualified for tax exemption by reason of at-
tempting to influence legislation, and which 
does not participate in, or intervene in (includ-
ing the publishing or distributing of state-
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183 
ments), any political campaign on behalf of (or 
in opposition to) any candidate for public office. 
‘‘(3) [intentionally deleted] 
‘‘(4) In the case of a contribution or gift by an 
individual, a domestic fraternal society, order, or as-
sociation, operating under the lodge system, but only 
if such contribution or gift is to be used exclusively 
for religious, charitable, scientific, literary, or edu-
cational purposes, or for the prevention of cruelty to 
children or animals. 
‘‘(5) A cemetery company owned and operated 
exclusively for the benefit of its members, or any 
corporation chartered solely for burial purposes as a 
cemetery corporation and not permitted by its char-
ter to engage in any business not necessarily inci-
dent to that purpose, if such company or corporation 
is not operated for profit and no part of the net 
earnings of such company or corporation inures to 
the benefit of any private shareholder or individual. 
‘‘(d) RULES FOR SUBSECTION (c).— 
‘‘(1) LIMITATIONS.—A contribution or gift by a 
corporation to a trust, chest, fund, or foundation 
shall be deductible by reason of subsection (c)(2)(B) 
only if it is to be used within the United States or 
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184 
any of its possessions exclusively for purposes speci-
fied in subparagraph (B). 
‘‘(2) REFERENCES.—Any reference in other law 
or in legal documents to an organization described 
in a paragraph of section 170(c) of the Internal Rev-
enue Code of 1986 shall constitute a reference to an 
organization described in the same paragraph num-
ber of section 101(c) if an organization is described 
in such paragraph. 
‘‘(e) QUALIFIED CONSERVATION CONTRIBUTION.— 
‘‘(1) IN GENERAL.—‘Qualified conservation con-
tribution’ means a contribution— 
‘‘(A) of a qualified real property interest, 
‘‘(B) to a qualified organization, 
‘‘(C) exclusively for conservation purposes. 
‘‘(2) QUALIFIED REAL PROPERTY INTEREST.— 
‘Qualified real property interest’ means any of the 
following interests in real property: 
‘‘(A) the entire interest of the donor other 
than a qualified mineral interest, 
‘‘(B) a remainder interest, and 
‘‘(C) a restriction (granted in perpetuity) 
on the use which may be made of the real prop-
erty. 
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185 
‘‘(3) QUALIFIED ORGANIZATION.—For purposes 
of paragraph (1), the term ‘qualified organization’ 
means an organization which— 
‘‘(A) is described in clause (v) or (vi) of 
subsection (b)(1)(A), or 
‘‘(B) is described in section 253(c)(3) 
and— 
‘‘(i) meets the requirements of section 
102(a)(2), or 
‘‘(ii) meets the requirements of sec-
tion 102(a)(3) and is controlled by an or-
ganization described in subparagraph (A) 
or in clause (i) of this subparagraph. 
‘‘(4) CONSERVATION PURPOSE DEFINED.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘conservation purpose’ 
means— 
‘‘(i) the preservation of land areas for 
outdoor recreation by, or the education of, 
the general public, 
‘‘(ii) the protection of a relatively nat-
ural habitat of fish, wildlife, or plants, or 
similar ecosystem, 
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‘‘(iii) the preservation of open space 
(including farmland and forest land) where 
such preservation is— 
‘‘(I) for the scenic enjoyment of 
the general public, or 
‘‘(II) pursuant to a clearly delin-
eated Federal, State, or local govern-
mental conservation policy, and will 
yield a significant public benefit, or 
‘‘(iv) the preservation of an histori-
cally important land area or a certified his-
toric structure. 
‘‘(B) CERTIFIED HISTORIC STRUCTURE.— 
For purposes of subparagraph (A)(iv), the term 
‘certified historic structure’ means any building, 
structure, or land area which— 
‘‘(i) is listed in the National Register, 
or 
‘‘(ii) is located in a registered historic 
district and is certified by the Secretary of 
the Interior to the Secretary as being of 
historic significance to the district. 
A building, structure, or land area satisfies the 
preceding sentence if it satisfies such sentence 
either at the time of the transfer or on the due 
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187 
date (including extensions) for filing the trans-
feror’s return under this chapter for the taxable 
year in which the transfer is made. 
‘‘(5) EXCLUSIVELY
FOR
CONSERVATION
PUR-
POSES.—For purposes of this subsection— 
‘‘(A) CONSERVATION
PURPOSE
MUST
BE 
PROTECTED.—A contribution shall not be treat-
ed as exclusively for conservation purposes un-
less the conservation purpose is protected in 
perpetuity. 
‘‘(B) NO SURFACE MINING PERMITTED.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), in the case of a con-
tribution of any interest where there is a 
retention of a qualified mineral interest, 
subparagraph (A) shall not be treated as 
met if at any time there may be extraction 
or removal of minerals by any surface min-
ing method. 
‘‘(ii) SPECIAL RULE.—With respect to 
any contribution of property in which the 
ownership of the surface estate and min-
eral interests were separated before June 
13, 1976, and remain so separated, sub-
paragraph (A) shall be treated as met if 
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the probability of surface mining occurring 
on such property is so remote as to be neg-
ligible. 
‘‘(6) QUALIFIED
MINERAL
INTEREST.—For 
purposes of this subsection, the term ‘qualified min-
eral interest’ means— 
‘‘(A) subsurface oil, gas, or other minerals, 
and 
‘‘(B) the right to access to such minerals. 
‘‘(f) DENIAL OF DEDUCTION FOR CERTAIN TRAVEL 
EXPENSES.—No deduction shall be allowed under section 
211 for traveling expenses (including amounts expended 
for meals and lodging) while away from home, whether 
paid directly or by reimbursement, unless there is no sig-
nificant element of personal pleasure, recreation, or vaca-
tion in such travel. 
‘‘(g) TREATMENT OF CERTAIN AMOUNTS PAID TO OR 
FOR THE BENEFIT OF INSTITUTIONS OF HIGHER EDU-
CATION.—For purposes of section 9, if as the result of 
a contribution to or for the benefit of an educational orga-
nization— 
‘‘(1) 
which 
is 
described 
in 
subsection 
(b)(1)(A)(ii), and 
‘‘(2) which is an institution of higher education 
(as defined in section 3304(f)) 
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189 
the taxpayer receives (directly or indirectly) as a result 
of paying such amount the right to purchase tickets for 
seating at an athletic event in an athletic stadium of such 
institution, 80 percent of such contribution shall be treat-
ed as a charitable contribution (but only if such amount 
would be allowable as a deduction but for the fact that 
the taxpayer received the right to purchase tickets). If any 
portion of a payment is for the purchase of such tickets, 
such portion and the remaining portion (if any) of such 
payment shall be treated as separate amounts for purposes 
of this subsection. 
‘‘Subchapter F—Special Business Activities 
‘‘Sec. 111. Rules for rental of real estate. 
‘‘SEC. 111. RULES FOR RENTAL OF REAL ESTATE. 
‘‘(a) IN GENERAL.—Except as provided in subsection 
(b)— 
‘‘(1) the activity of rental of real estate is a 
business activity to which the Simplified USA Tax 
for businesses under chapter 2 applies, 
‘‘(2) a taxpayer shall not be entitled to any de-
ductions under this chapter with respect to rental 
property, and 
‘‘(3) a taxpayer shall recognize gross income 
only with respect to distributions from the rental ac-
tivity. 
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‘‘(b) INSUBSTANTIAL RENTAL ACTIVITY.— 
‘‘(1) NOT RENTAL PROPERTY.—If an individual 
or individuals own property, such individual or indi-
viduals and their families use the property on more 
than 14 days during the taxable year for nonbusi-
ness purposes, the property is rented for no more 
than 14 days during the taxable year, and the total 
rental received by the individuals with respect to 
such property does not exceed $10,000, the property 
shall not be considered rental property or used in 
the activity of rental of real estate during the tax-
able year for purposes of subsection (a) and the 
Simplified USA Tax for businesses under chapter 2. 
‘‘(2) RENTS
FROM
NONRENTAL
PROPERTY.— 
Any rent from property described in paragraph (1) 
shall be included in gross income for purposes of the 
Simplified USA Income Tax. 
‘‘(c) USE FOR A NONBUSINESS PURPOSE.—For pur-
poses of this section, ‘use for a nonbusiness purpose’ 
means use other than— 
‘‘(1) use for which fair rent is paid, 
‘‘(2) use in connection with the preparation of 
the property for rental, or 
‘‘(3) use that serves a clear business purpose. 
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Use during any part of a day shall constitute use for that 
day. 
‘‘Subchapter G—Accounting Methods and 
Periods 
‘‘Sec. 121. Taxable year. 
‘‘Sec. 122. Cash method of accounting; installment sales. 
‘‘SEC. 121. TAXABLE YEAR. 
‘‘(a) IN GENERAL.—The taxable year for all individ-
uals subject to tax under this chapter shall be the calendar 
year except as provided in subsection (b). 
‘‘(b) SHORT TAXABLE YEARS.— 
‘‘(1) BIRTH.—An individual’s taxable year in 
the year of his birth shall begin on the date of his 
birth. 
‘‘(2) DEATH.—An individual’s taxable year in 
the year of his death shall end on the date of his 
death. 
‘‘SEC. 122. CASH METHOD OF ACCOUNTING; INSTALLMENT 
SALES. 
‘‘(a) IN GENERAL.—All individuals shall determine 
their income and deductions using the cash receipts and 
disbursement method. 
‘‘(b) OID RULES.— 
‘‘(1) IN
GENERAL.—Original issue discount 
shall not be included in gross income until received. 
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