Source: http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section3405&num=0&edition=prelim
Timestamp: 2019-04-24 20:36:01+00:00

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The payor of any periodic payment (as defined in subsection (e)(2)) shall withhold from such payment the amount which would be required to be withheld from such payment if such payment were a payment of wages by an employer to an employee for the appropriate payroll period.
An individual may elect to have paragraph (1) not apply with respect to periodic payments made to such individual. Such an election shall remain in effect until revoked by such individual.
Any election under this subsection (and any revocation of such an election) shall take effect as provided by subsection (f)(3) of section 3402 for withholding allowance certificates.
In the case of any payment with respect to which a withholding allowance certificate is not in effect, the amount withheld under paragraph (1) shall be determined under rules prescribed by the Secretary.
The payor of any nonperiodic distribution (as defined in subsection (e)(3)) shall withhold from such distribution an amount equal to 10 percent of such distribution.
An individual may elect not to have paragraph (1) apply with respect to any nonperiodic distribution.
(ii) to the extent provided in regulations, may apply to subsequent nonperiodic distributions made by the payor to the payee under the same arrangement.
(B) the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution.
Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan.
For purposes of this subsection, the term "eligible rollover distribution" has the meaning given such term by section 402(f)(2)(A).
Except as provided in paragraph (2), the payor of a designated distribution (as defined in subsection (e)(1)) shall withhold, and be liable for, payment of the tax required to be withheld under this section.
(ii) provides the payor with such information as the Secretary may require by regulations.
(iv) section 457(b) and which is maintained by an eligible employer described in section 457(e)(1)(A).
(iv) any distribution described in section 404(k)(2).
For purposes of clause (ii), any distribution or payment from or under an individual retirement plan (other than a Roth IRA) shall be treated as includible in gross income.
The term "periodic payment" means a designated distribution which is an annuity or similar periodic payment.
The term "nonperiodic distribution" means any designated distribution which is not a periodic payment.
The term "employer deferred compensation plan" means any pension, annuity, profit-sharing, or stock bonus plan or other plan deferring the receipt of compensation.
The term "commercial annuity" means an annuity, endowment, or life insurance contract issued by an insurance company licensed to do business under the laws of any State.
The term "plan administrator" has the meaning given such term by section 414(g).
The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than securities of the employer corporation) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of securities of the employer corporation and cash (not in excess of $200) in lieu of financial shares. For purposes of this paragraph, the term "securities of the employer corporation" has the meaning given such term by section 402(e)(4)(E).
If the payor has more than 1 arrangement under which designated distributions may be made to any individual, each such arrangement shall be treated separately.
Any election and any revocation under this section shall be made at such time and in such manner as the Secretary shall prescribe.
(III) shall transmit to payees, not less frequently than once each calendar year, notice of their rights to make elections under subsection (a) and to revoke such elections.
The payor of any nonperiodic distribution shall transmit to the payee notice of the right to make any election provided in subsection (b) at the time of the distribution (or at such earlier time as may be provided in regulations).
Any notice transmitted pursuant to this subparagraph shall be in such form and contain such information as the Secretary shall prescribe.
The terms "withholding", "withhold", and "withheld" include "deducting", "deduct", and "deducted".
no election under subsection (a)(2) or (b)(2) shall be treated as in effect and subsection (a)(4) shall not apply to such payee.
Except as provided in subparagraph (B), in the case of any periodic payment or nonperiodic distribution which is to be delivered outside of the United States and any possession of the United States, no election may be made under subsection (a)(2) or (b)(2) with respect to such payment.
(ii) an individual to whom section 877 applies.
(2) in the case of any designated distribution not subject to withholding under this section by reason of an election under this section, the amount withheld shall be treated as zero.
Section 301(d) of the Tax Reduction Act of 1975, referred to in subsec. (d)(2)(B)(iii), is section 301(d) of Pub. L. 94–12, Mar. 29, 1975, 89 Stat. 26 , relating to plan requirements for taxpayers electing additional credits, which was set out as a note under section 46 of this title and was repealed by Pub. L. 95–600, title I, §141(f)(1), Nov. 6, 1978, 92 Stat. 2795 .
2017-Subsec. (a)(3). Pub. L. 115–97, §11041(c)(2)(F), substituted "allowance" for "exemption".
Subsec. (a)(4). Pub. L. 115–97, in heading, substituted "allowance" for "exemption" and in text, substituted "allowance" for "exemption" and "shall be determined under rules prescribed by the Secretary" for "shall be determined by treating the payee as a married individual claiming 3 withholding exemptions".
2001-Subsec. (c)(3). Pub. L. 107–16, §641(a)(1)(D)(ii), reenacted heading without change and amended text of par. (3) generally. Prior to amendment, text read as follows: "For purposes of this subsection, the term 'eligible rollover distribution' has the meaning given such term by section 402(f)(2)(A) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A))."
Subsec. (d)(2)(B)(iv). Pub. L. 107–16, §641(a)(1)(D)(iii), added cl. (iv).
2000-Subsec. (e)(1)(B). Pub. L. 106–554 inserted "(other than a Roth IRA)" after "individual retirement plan" in concluding provisions.
1996-Subsec. (e)(12). Pub. L. 104–188 substituted "(b)(2)" for "(b)(3)" in closing provisions.
1992-Subsec. (a). Pub. L. 102–318, §521(b)(36), substituted "Periodic payments" for "Pensions, annuities, etc." in heading.
Subsec. (a)(1). Pub. L. 102–318, §522(b)(2)(A), substituted "subsection (e)(2)" for "subsection (d)(2)".
Subsec. (b)(1). Pub. L. 102–318, §§521(b)(37)(A), 522(b)(2)(B), substituted "subsection (e)(3)" for "subsection (d)(3)" and "an amount equal to 10 percent of such distribution" for "the amount determined under paragraph (2)".
Subsec. (b)(2), (3). Pub. L. 102–318, §521(b)(37)(B), redesignated par. (3) as (2) and struck out former par. (2) which related to amount of withholding.
Subsec. (c). Pub. L. 102–318, §522(b)(1), added subsec. (c). Former subsec. (c) redesignated (d).
Subsec. (d). Pub. L. 102–318, §522(b)(1), (2)(C), redesignated subsec. (c) as (d) and substituted "subsection (e)(1)" for "subsection (d)(1)" in par. (1). Former subsec. (d) redesignated (e).
Pub. L. 102–318, §521(b)(40), substituted "(b)(2)" for "(b)(3)" in par. (13)(A).
Pub. L. 102–318, §521(b)(39), amended par. (8) generally. Prior to amendment, par. (8) read as follows: "The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than employer securities of the employer corporation (within the meaning of section 402(a)(3))) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares."
Pub. L. 102–318, §521(b)(38), struck out par. (4) which defined "qualified total distribution" and provided special rule for accumulated deductible employee contributions in determining qualified total distribution.
Subsecs. (e), (f). Pub. L. 102–318, §522(b)(1), redesignated subsecs. (d) and (e) as (e) and (f), respectively.
1988-Subsec. (d)(13). Pub. L. 100–647, §1012(bb)(2)(C), substituted "United States or its possessions" for "United States" in heading.
Subsec. (d)(13)(A). Pub. L. 100–647, §1012(bb)(2)(A), substituted "the United States and any possession of the United States" for "the United States".
Subsec. (d)(13)(B)(i). Pub. L. 100–647, §1012(bb)(2)(B), amended cl. (i) generally, substituting "or a resident alien of the United States" for "who is a bona fide resident of a foreign country".
1986-Subsec. (d)(1)(B). Pub. L. 99–514, §1102(e)(1), inserted last sentence for "For purposes of clause (ii), any distribution or payment from or under an individual retirement plan shall be treated as includible in gross income."
Subsec. (d)(1)(B)(iii), (iv). Pub. L. 99–514, §1875(c)(10), reenacted cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3 as cl. (iii) and reenacted cl. (iii) relating to distribution described in section 404(k)(2) as cl. (iv).
Subsec. (d)(13). Pub. L. 99–514, §1234(b)(1), added par. (13).
1984-Subsec. (b)(2)(C). Pub. L. 98–369, §714(j)(1), substituted "nonperiodic distribution" for "distribution described in subparagraph (B)" and "subparagraph (A) or (B) (as the case may be) shall be applied by taking into account" for "the Secretary, in prescribing tables or procedures under paragraph (1), shall take into account", designated phrase "which is made by reason of a participant's death" as cl. (i) and added cl. (ii).
Subsec. (d)(1)(B)(iii). Pub. L. 98–369, §714(j)(4), added cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3.
Pub. L. 98–369, §542(c), added cl. (iii) relating to distributions described in section 404(k)(2). Directory language that section (d)(1)(B) be amended by striking out "and" at end of cl. (i) and substituting ", or" for the period at end of cl. (ii) could not be executed in view of prior amendment by section 714(j)(4) of Pub. L. 98–369, which struck out "and" at end of cl. (i) and substituted ", and" for the period at end of cl. (ii).
Subsec. (d)(8). Pub. L. 98–369, §714(j)(5), freed from withholding requirement any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares.
Subsec. (d)(12). Pub. L. 98–369, §722(h)(4), added par. (12).
Amendment by section 521(b)(36)–(40) of Pub. L. 102–318 applicable to distributions after Dec. 31, 1992, see section 521(e) of Pub. L. 102–318, set out as a note under section 402 of this title.
Amendment by section 522(b)(1)–(2)(C) of Pub. L. 102–318 applicable, except as otherwise provided, to distributions after Dec. 31, 1992, see section 522(d) of Pub. L. 102–318, set out as a note under section 401 of this title.
Pub. L. 100–647, title I, §1012(bb)(2)(D), Nov. 10, 1988, 102 Stat. 3534 , provided that: "The amendments made by this paragraph [amending this section] shall apply to distributions made after the date of the enactment of this Act [Nov. 10, 1988]."
Amendment by section 1102(e)(1) of Pub. L. 99–514 applicable to contributions and distributions for taxable years beginning after Dec. 31, 1986, see section 1102(g) of Pub. L. 99–514, set out as a note under section 219 of this title.
Pub. L. 99–514, title XII, §1234(b)(2), Oct. 22, 1986, 100 Stat. 2566 , provided that: "The amendment made by this subsection [amending this section] shall apply to payments after December 31, 1986."
Amendment by section 1875(c)(10) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Amendment by section 542(c) of Pub. L. 98–369 applicable to taxable years beginning after July 18, 1984, see section 542(d) of Pub. L. 98–369, set out as a note under section 404 of this title.
Amendment by section 714(j)(1), (4), (5) of Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.
Amendment by section 722(h)(4)(A) of Pub. L. 98–369 applicable to payments or distributions after Dec. 31, 1984, unless the payor elects to have such amendment apply to payments or distributions before Jan. 1, 1985, see section 722(h)(5)(B) of Pub. L. 98–369, set out as a note under section 643 of this title.
"(1) Amendment made by subsections (a) and (d).-Except as provided in paragraph (4), the amendment made by subsections (a) [enacting this section] and (d) [amending section 3402 of this title] shall apply to payments or other distributions made after December 31, 1982.
"(2) Amendments made by subsection (b).-Except as provided in paragraph (4), the amendments made by subsection (b) [amending section 6047 of this title] shall take effect on January 1, 1983.
"(3) Amendments made by subsection (c).-The amendments made by subsection (c) [enacting section 6704 of this title] shall take effect on January 1, 1985.
"(4) Periodic payments beginning before january 1, 1983.-For purposes of section 3405(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], in the case of periodic payments beginning before January 1, 1983, the first periodic payment after December 31, 1982, shall be treated as the first such periodic payment.
"(5) Delay in application.-The Secretary of the Treasury shall prescribe such regulations which delay (but not beyond June 30, 1983) the application of some or all of the amendments made by this section with respect to any payor until such time as such payor is able to comply without undue hardship with the requirements of such provisions.
"(6) Waiver of penalty.-No penalty shall be assessed under section 6672 with respect to any failure to withhold as required by the amendments made by this section if such failure was before July 1, 1983, and if the person made a good faith effort to comply with such withholding requirements."

References: §141
 §11041
 §641
 §641
 §521
 §522
 §521
 §522
 §522
 §521
 §521
 §521
 §522
 §1012
 §1012
 §1012
 §1102
 §1875
 §1234
 §714
 §714
 §542
 §714
 §722
 §1012
 §1234