Source: https://www.law.cornell.edu/uscode/text/26/460?qt-us_code_tabs=2
Timestamp: 2016-02-14 13:39:15
Document Index: 30653432

Matched Legal Cases: ['§ 460', '§\u202f460', '§\u202f804', '§\u202f10203', '§\u202f1008', '§\u202f5041', '§\u202f7621', '§\u202f11812', '§\u202f1702', '§\u202f1211', '§\u202f2023', '§\u202f331', '§\u202f125', '§\u202f1211', '§\u202f1211', '§\u202f1211', '§\u202f1704', '§\u202f1702', '§\u202f7621', '§\u202f7811', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7811', '§\u202f7811', '§\u202f7621', '§\u202f7811', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7621', '§\u202f7811', '§\u202f7621', '§\u202f7815', '§\u202f7815', '§\u202f5041', '§\u202f5041', '§\u202f5041', '§\u202f1008', '§\u202f1008', '§\u202f1008', '§\u202f1008', '§\u202f1008', '§\u202f1008', '§\u202f1008', '§\u202f5041', '§\u202f5041', '§\u202f5041', '§\u202f5041', '§\u202f5041', '§\u202f2023', '§\u202f1211', '§\u202f7621', '§\u202f5041', '§\u202f7815', '§\u202f10203', '§\u202f804', '§\u202f1008', '§\u202f804', '§\u202f708', '§\u202f403']

26 U.S. Code § 460 - Special rules for long-term contracts | US Law | LII / Legal Information Institute
§ 460.
(1) Requirements of percentage of completion methodExcept as provided in paragraph (3), in the case of any long-term contract with respect to which the percentage of completion method is used—
(2) Look-back methodThe interest computed under the look-back method of this paragraph shall be determined by—
first [1] allocating income under the contract among taxable years before the year in which the contract is completed on the basis of the actual contract price and costs instead of the estimated contract price and costs,
(B) Look-back method not to apply to certain contractsParagraph (1)(B) shall not apply to any contract—
(A) In generalIn the case of a pass-thru entity—
(C) Other definitionsFor purposes of this paragraph—
(i) Highest rateThe term “highest rate” means—
(ii) Pass-thru entityThe term “pass-thru entity” means any—
(B) 10-percent methodFor purposes of this paragraph—
(A) Amounts taken into account after completion of contractParagraph (1)(B) shall not apply with respect to any taxable year (beginning after the taxable year in which the contract is completed) if—
(B) De minimis discrepanciesParagraph (1)(B) shall not apply in any case to which it would otherwise apply if—
(B) Interest accrual periodFor purposes of subparagraph (A), the term “interest accrual period” means the period—
(B) Production periodIn applying section 263A(f) for purposes of subparagraph (A), the production period shall be the period—
(4) Certain costs not includedThis subsection shall not apply to any—
(5) Independent research and development expensesFor purposes of paragraph (4), the term “independent research and development expenses” means any expenses incurred in the performance of research or development, except that such term shall not include—
(B) Qualified propertyFor purposes of this paragraph, the term “qualified property” means property described in section 168(k)(2) which—
is placed in service after December 31, 2009, and before January 1, 2011 (January 1, 2012, in the case of property described in section 168(k)(2)(B)), or after December 31, 2012, and before January 1, 2015 (January 1, 2016, in the case of property described in section 168(k)(2)(B)).
(d) Federal long-term contractFor purposes of this section—
(1) In generalThe term “Federal long-term contract” means any long-term contract—
(1) In generalSubsections (a), (b), and (c)(1) and (2) shall not apply to—
(2) Determination of taxpayer’s gross receiptsFor purposes of paragraph (1), the gross receipts of—
(3) Controlled group of corporationsFor purposes of this subsection, the term “controlled group of corporations” has the meaning given to such term by section 1563(a), except that—
“more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a)(1), and
(5) Special rule for residential construction contracts which are not home construction contractsIn the case of any residential construction contract which is not a home construction contract, subsection (a) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1989) shall apply except that such subsection shall be applied—
(6) Definitions relating to residential construction contractsFor purposes of this subsection—
(A) Home construction contractThe term “home construction contract” means any construction contract if 80 percent or more of the estimated total contract costs (as of the close of the taxable year in which the contract was entered into) are reasonably expected to be attributable to activities referred to in paragraph (4) with respect to—
(B) Residential construction contractThe term “residential construction contract” means any contract which would be described in subparagraph (A) if clause (i) of such subparagraph reads as follows:
dwelling units (as defined in section 168(e)(2)(A)(ii)), and”.
(f) Long-term contractFor purposes of this section—
(2) Special rule for manufacturing contractsA contract for the manufacture of property shall not be treated as a long-term contract unless such contract involves the manufacture of—
(3) Aggregation, etc.For purposes of this subsection, under regulations prescribed by the Secretary—
(Added Pub. L. 99–514, title VIII, § 804(a), Oct. 22, 1986, 100 Stat. 2358; amended Pub. L. 100–203, title X, § 10203(a), Dec. 22, 1987, 101 Stat. 1330–394; Pub. L. 100–647, title I, § 1008(c)(1), (2), (4), title V, § 5041(a)–(b)(3), (c), (d), Nov. 10, 1988, 102 Stat. 3438, 3439, 3673, 3674; Pub. L. 101–239, title VII, §§ 7621(a)–(c), 7811(e), 7815(e)(1), Dec. 19, 1989, 103 Stat. 2375, 2376, 2408, 2419; Pub. L. 101–508, title XI, § 11812(b)(8), Nov. 5, 1990, 104 Stat. 1388–535; Pub. L. 104–188, title I, §§ 1702(h)(15), 1704(t)(28), Aug. 20, 1996, 110 Stat. 1874, 1888; Pub. L. 105–34, title XII, § 1211(a), (b), Aug. 5, 1997, 111 Stat. 998, 999; Pub. L. 111–240, title II, § 2023(a), Sept. 27, 2010, 124 Stat. 2559; Pub. L. 112–240, title III, § 331(b), Jan. 2, 2013, 126 Stat. 2336; Pub. L. 113–295, div. A, title I, § 125(b), Dec. 19, 2014, 128 Stat. 4016.)
2014—Subsec. (c)(6)(B)(ii). Pub. L. 113–295 substituted “January 1, 2015 (January 1, 2016” for “January 1, 2014 (January 1, 2015”.
2013—Subsec. (c)(6)(B)(ii). Pub. L. 112–240 inserted “, or after December 31, 2012, and before January 1, 2014 (January 1, 2015, in the case of property described in section 168(k)(2)(B))” before period at end.
1997—Subsec. (b)(2)(C). Pub. L. 105–34, § 1211(b)(1), substituted “the adjusted overpayment rate (as defined in paragraph (7))” for “the overpayment rate established by section 6621”.
Subsec. (b)(6). Pub. L. 105–34, § 1211(a), added par. (6).
Subsec. (b)(7). Pub. L. 105–34, § 1211(b)(2), added par. (7).
1996—Subsec. (b)(1). Pub. L. 104–188, § 1704(t)(28), which directed that par. (1) be amended by substituting “the look-back method of paragraph (2)” for “the look-back method of paragraph (3)”, could not be executed, because that phrase does not appear in text. See 1989 Amendment note below.
Subsec. (e)(6)(B). Pub. L. 104–188, § 1702(h)(15), substituted “section 168(e)(2)(A)(ii)” for “section 167(k)”.
1989—Subsec. (a). Pub. L. 101–239, § 7621(a), substituted “Requirement that percentage of completion method be used” for “Percentage of completion-capitalized cost method” in heading and amended text generally. Prior to amendment, text read as follows:
Subsec. (a)(2). Pub. L. 101–239, § 7811(e)(1), inserted “(or, with respect to any amount properly taken into account after completion of the contract, when such amount is so properly taken into account)” after “any long-term contract”.
Subsec. (b)(1). Pub. L. 101–239, § 7621(c)(2)(A), substituted “paragraph (3)” for “paragraph (4)”.
Pub. L. 101–239, § 7621(c)(2)(B), which directed the amendment of par. (1) by substituting “paragraph (2)” for “paragraph (3)”, was executed by making the substitution in subpar. (B) and concluding provisions to reflect the probable intent of Congress.
Pub. L. 101–239, § 7621(c)(1), redesignated par. (2) as (1) and struck out former par. (1) which read as follows: “Subsection (a) not to apply where percentage of completion method used.—Subsection (a) shall not apply to any long-term contract with respect to which amounts includible in gross income are determined under the percentage of completion method.”
Subsec. (b)(2). Pub. L. 101–239, § 7621(c)(1), redesignated par. (3) as (2). Former par. (2) redesignated (1).
Pub. L. 101–239, § 7811(e)(4), (6), inserted two sentences at end.
Subsec. (b)(2)(B). Pub. L. 101–239, § 7811(e)(2), substituted “any amount properly taken into account” for “any amount received or accrued” and “is so properly taken into account” for “is so received or accrued”.
Subsec. (b)(3). Pub. L. 101–239, § 7621(c)(1), redesignated par. (4) as (3). Former par. (3) redesignated (2).
Pub. L. 101–239, § 7811(e)(3), in concluding provisions, substituted “any amount properly taken into account” for “any amount received or accrued” and “such amount was properly taken into account” for “such amount was received or accrued”.
Subsec. (b)(3)(B). Pub. L. 101–239, § 7621(c)(3), substituted “Paragraph (1)(B)” for “Paragraph (2)(B) and subsection (a)(2)” in introductory provisions.
Subsec. (b)(4). Pub. L. 101–239, § 7621(c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (3).
Subsec. (b)(4)(A)(i). Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)”.
Subsec. (b)(4)(A)(ii). Pub. L. 101–239, § 7621(c)(4)(B), substituted “paragraph (2)(B)” for “paragraph (3)(B)” in introductory provisions.
Subsec. (b)(4)(A)(ii)(I). Pub. L. 101–239, § 7621(c)(4)(C), substituted “paragraph (2)(A)” for “paragraph (3)(A)”.
Subsec. (b)(4)(A)(iii). Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)” in two places.
Subsec. (b)(5). Pub. L. 101–239, § 7621(b), added par. (5).
Pub. L. 101–239, § 7621(c)(1), redesignated former par. (5) as (4).
Subsec. (e)(2)(C). Pub. L. 101–239, § 7811(e)(5), added subpar. (C).
Subsec. (e)(5). Pub. L. 101–239, § 7621(c)(5), inserted introductory provisions and struck out former introductory provisions which read as follows: “In the case of any residential construction contract which is not a home construction contract, subsection (a) shall be applied—”.
Subsec. (e)(6)(A). Pub. L. 101–239, § 7815(e)(1)(A), substituted “activities referred to in paragraph (4) with respect to” for “the building, construction, reconstruction, or rehabilitation of”.
Subsec. (e)(6)(A)(i). Pub. L. 101–239, § 7815(e)(1)(B), added cl. (i) and struck out former cl. (i) which read as follows: “dwelling units contained in buildings containing 4 or fewer dwelling units, and”.
1988—Subsec. (a)(1)(A). Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70”.
Subsec. (a)(1)(B). Pub. L. 100–647, § 5041(a)(2), substituted “10” for “30”.
Subsec. (a)(2). Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70” in heading and in text.
Subsec. (b)(2). Pub. L. 100–647, § 1008(c)(2)(B), substituted “Except as provided in paragraph (4), in” for “In”.
Subsec. (b)(2)(B). Pub. L. 100–647, § 1008(c)(4)(B), inserted “(or, with respect to any amount received or accrued after completion of the contract, when such amount is so received or accrued)” after “contract”.
Subsec. (b)(3). Pub. L. 100–647, § 1008(c)(4)(A), inserted at end “For purposes of the preceding sentence, any amount received or accrued after completion of the contract shall be taken into account by discounting (using the Federal mid-term rate determined under section 1274(d) as of the time such amount was received or accrued) such amount to its value as of the completion of the contract. The taxpayer may elect with respect to any contract to have the preceding sentence not apply to such contract.”
Pub. L. 100–647, § 1008(c)(1)(A), substituted “paragraph” for “subparagraph”.
Subsec. (b)(3)(B). Pub. L. 100–647, § 1008(c)(1)(B), substituted “subparagraph (A)” for “paragraph (1)” in two places.
Subsec. (b)(3)(C). Pub. L. 100–647, § 1008(c)(1)(C), substituted “subparagraph (B)” for “paragraph (1)”.
Subsec. (b)(4). Pub. L. 100–647, § 1008(c)(2)(A), added par. (4).
Subsec. (b)(5). Pub. L. 100–647, § 5041(d), added par. (5).
Subsec. (e)(1). Pub. L. 100–647, § 5041(b)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Subsections (a), (b), and (c)(1) and (2) shall not apply to any construction contract entered into by a taxpayer—
Subsec. (e)(5). Pub. L. 100–647, § 5041(b)(2), added par. (5).
Subsec. (e)(6). Pub. L. 100–647, § 5041(b)(3), added par. (6).
Subsec. (h). Pub. L. 100–647, § 5041(c), added subsec. (h).
Pub. L. 111–240, title II, § 2023(b), Sept. 27, 2010, 124 Stat. 2559, provided that: “The amendment made by this section [amending this section] shall apply to property placed in service after December 31, 2009.”
Pub. L. 105–34, title XII, § 1211(c), Aug. 5, 1997, 111 Stat. 1000, provided that:
Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to contracts completed in taxable years ending after the date of the enactment of this Act [Aug. 5, 1997].
The amendments made by subsection (b) [amending this section] shall apply for purposes of section 167(g) of the Internal Revenue Code of 1986 to property placed in service after September 13, 1995.”
Pub. L. 101–239, title VII, § 7621(d), Dec. 19, 1989, 103 Stat. 2376, provided that:
Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to contracts entered into on or after July 11, 1989.
“(2)Binding bids.—
The amendments made by this section shall not apply to any contract resulting from the acceptance of a bid made before July 11, 1989. The preceding sentence shall apply only if the bid could not have been revoked or altered at any time on or after July 11, 1989.
“(3)Special rule for certain ship contracts.—
The amendments made by this section shall not apply in the case of a qualified ship contract (as defined in section 10203(b)(2)(B) of the Revenue Act of 1987 [Pub. L. 100–203, set out below]).”
Pub. L. 100–647, title V, § 5041(e), Nov. 10, 1988, 102 Stat. 3675, as amended by Pub. L. 101–239, title VII, § 7815(e)(3), Dec. 19, 1989, 103 Stat. 2419, provided that:
“(1)Subsections (a), (b), and (c).—
Except as otherwise provided in this paragraph, the amendments made by subsections (a), (b), and (c) [amending this section and section 56 of this title] shall apply to contracts entered into on or after June 21, 1988.
“(B)Binding bids.—
The amendments made by subsections (a), (b), and (c) shall not apply to any contract resulting from the acceptance of a bid made before June 21, 1988. The preceding sentence shall apply only if the bid could not have been revoked or altered at any time on or after June 21, 1988.
“(C)Special rule for certain ship contracts.—
The amendments made by subsections (a) and (b) [amending this section and section 56 of this title] shall not apply in the case of a qualified ship contract (as defined in section 10203(b)(2)(B) of the Revenue Act of 1987 [Pub. L. 100–203, set out below]).
“(2)Subsection (d).—
The amendment made by subsection (d) [amending this section] shall apply as if included in the amendments made by section 804 of the Reform Act [Pub. L. 99–514]; except that such amendment shall not apply to any contract completed in a taxable year ending before the date of the enactment of this Act [Nov. 10, 1988], if the due date (determined with regard to extensions) for the return for such year is before such date of enactment.”
Pub. L. 100–203, title X, § 10203(b), Dec. 22, 1987, 101 Stat. 1330–394, provided that:
Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to contracts entered into after October 13, 1987.
The amendments made by this section shall not apply in the case of a qualified ship contract.
“(B)Qualified ship contract.—For purposes of subparagraph (A), the term ‘qualified ship contract’ means any contract for the construction in the United States of not more than 5 ships if—
such ships will not be constructed (directly or indirectly) for the Federal Government, and
the taxpayer reasonably expects to complete such contract within 5 years of the contract commencement date (as defined in section 460(g) of the Internal Revenue Code of 1986).”
Pub. L. 99–514, title VIII, § 804(d), Oct. 22, 1986, 100 Stat. 2361, as amended by Pub. L. 100–647, title I, § 1008(c)(3), Nov. 10, 1988, 102 Stat. 3439, provided that:
The amendments made by this section [enacting this section] shall apply to any contract entered into after February 28, 1986.
“(A)In general.—For periods before, on, or after the date of enactment of this Act [Oct. 22, 1986]—
any independent research and development expenses taken into account in determining the total contract price shall not be severable from the contract, and
any independent research and development expenses shall not be treated as amounts chargeable to capital account.
“(B)Independent research and development expenses.—
For purposes of subparagraph (A), the term ‘independent research and development expenses’ has the meaning given to such term by section 460(c)(5) of the Internal Revenue Code of 1986, as added by this section.”
Pub. L. 99–514, title VIII, § 804(b), Oct. 22, 1986, 100 Stat. 2361, provided that: “The Secretary of the Treasury or his delegate shall modify the income tax regulations relating to accounting for long-term contracts to carry out the provisions of section 460 of the Internal Revenue Code of 1986 (as added by subsection (a)).”
Pub. L. 108–357, title VII, § 708, Oct. 22, 2004, 118 Stat. 1550, as amended by Pub. L. 109–135, title IV, § 403(s), Dec. 21, 2005, 119 Stat. 2628, provided that:
In the case of a qualified naval ship contract, the taxable income of such contract during the 5-taxable year period beginning with the taxable year in which the construction commencement date occurs shall be determined under a method identical to the method used in the case of a qualified ship contract (as defined in section 10203(b)(2)(B) of the Revenue Act of 1987 [Pub. L. 100–203, set out as an Effective Date of 1987 Amendment note above]).
“(b)Recapture of Tax Benefit.—In the case of a qualified naval ship contract to which subsection (a) applies, the taxpayer’s tax imposed by chapter 1 of the Internal Revenue Code of 1986 for the first taxable year following the 5-taxable year period described in subsection (a) shall be increased by the excess (if any) of—
the amount of tax which would have been imposed during such period if this section had not been enacted, over
the amount of tax so imposed during such period.
“(c)Qualified Naval Ship Contract.—For purposes of this section:
The term ‘qualified naval ship contract’ means any contract or portion thereof that is for the construction in the United States of 1 ship or submarine for the Federal Government if the taxpayer reasonably expects the acceptance date will occur no later than 9 years after the construction commencement date.
“(2)Acceptance date.—
The term ‘acceptance date’ means the date 1 year after the date on which the Federal Government issues a letter of acceptance or other similar document for the ship or submarine.
“(3)Construction commencement date.—
The term ‘construction commencement date’ means the date on which the physical fabrication of any section or component of the ship or submarine begins in the taxpayer’s shipyard.
“(d)Certain Adjustments Not to Apply.—
Section 481 of the Internal Revenue Code of 1986 shall not apply with respect to any change in the method of accounting which is required by this section.
This section shall apply to contracts for ships or submarines with respect to which the construction commencement date occurs after the date of the enactment of this Act [Oct. 22, 2004].”