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Timestamp: 2020-08-15 00:15:59
Document Index: 392209409

Matched Legal Cases: ['§ 404', '§404', '§2', '§1114', '§1851', '§1012', '§801', '§401', '§1851', '§1114', '§2', '§305', '§2', '§311']

[USC02] 26 USC 404A: Deduction for certain foreign deferred compensation plans
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26 USC 404A: Deduction for certain foreign deferred compensation plans Text contains those laws in effect on August 13, 2020
§404A. Deduction for certain foreign deferred compensation plans
Amounts paid or accrued by an employer under a qualified foreign plan-
(1) shall not be allowable as a deduction under this chapter, but
(2) if they would otherwise be deductible, shall be allowed as a deduction under this section for the taxable year for which such amounts are properly taken into account under this section.
(b) Rules for qualified funded plans
(2) Payment after close of taxable year
For purposes of paragraph (1), a payment made after the close of a taxable year shall be treated as made on the last day of such year if the payment is made-
(A) on account of such year, and
(B) not later than the time prescribed by law for filing the return for such year (including extensions thereof).
In the case of a qualified funded plan, the amount allowable as a deduction for the taxable year shall be subject to-
(i) a plan under which the benefits are fixed or determinable, limitations similar to those contained in clauses (ii) and (iii) of subparagraph (A) of section 404(a)(1) (determined without regard to the last sentence of such subparagraph (A)), or
(ii) any other plan, limitations similar to the limitations contained in paragraph (3) of section 404(a), and
(B) limitations similar to those contained in paragraph (7) of section 404(a).
(A) the aggregate of the contributions paid during the taxable year reduced by any contributions not allowable as a deduction under paragraphs (1) and (2) of subsection (g), exceeds
(B) the amount allowable as a deduction under subsection (a) (determined without regard to subsection (d)),
(5) Amounts must be paid to qualified trust, etc.
In the case of a qualified funded plan, a contribution shall be taken into account only if it is paid-
(A) to a trust (or the equivalent of a trust) which meets the requirements of section 401(a)(2),
(B) for a retirement annuity, or
(C) to a participant or beneficiary.
(c) Rules relating to qualified reserve plans
(2) Income item
(3) Rights must be nonforfeitable, etc.
In the case of a qualified reserve plan, an item shall be taken into account for a taxable year only if-
(A) there is no substantial risk that the rights of the employee will be forfeited, and
(B) such item meets such additional requirements as the Secretary may by regulations prescribe as necessary or appropriate to ensure that the liability will be satisfied.
(4) Spreading of certain increases and decreases in reserves
There shall be amortized over a 10-year period any increase or decrease to the reserve on account of-
(A) the adoption of the plan or a plan amendment,
(B) experience gains and losses,
(C) any change in actuarial assumptions,
(D) changes in the interest rate under subsection (g)(3)(B), and
(E) such other factors as may be prescribed by regulations.
(d) Amounts taken into account must be consistent with amounts allowed under foreign law
In the case of any plan, the amount allowed as a deduction under subsection (a) for any taxable year shall equal-
(i) the cumulative United States amount, or
(ii) the cumulative foreign amount, reduced by
(B) the aggregate amount determined under this section for all prior taxable years.
(2) Cumulative amounts defined
(A) Cumulative United States amount
The term "cumulative United States amount" means the aggregate amount determined with respect to the plan under this section for the taxable year and for all prior taxable years to which this section applies. Such determination shall be made for each taxable year without regard to the application of paragraph (1).
(B) Cumulative foreign amount
The term "cumulative foreign amount" means the aggregate amount allowed as a deduction under the appropriate foreign tax laws for the taxable year and all prior taxable years to which this section applies.
(3) Effect on earnings and profits, etc.
(e) Qualified foreign plan
For purposes of this section, the term "qualified foreign plan" means any written plan of an employer for deferring the receipt of compensation but only if-
(1) such plan is for the exclusive benefit of the employer's employees or their beneficiaries,
(2) 90 percent or more of the amounts taken into account for the taxable year under the plan are attributable to services-
(A) performed by nonresident aliens, and
(B) the compensation for which is not subject to tax under this chapter, and
(3) the employer elects (at such time and in such manner as the Secretary shall by regulations prescribe) to have this section apply to such plan.
(f) Funded and reserve plans
(1) Qualified funded plan
The term "qualified funded plan" means a qualified foreign plan which is not a qualified reserve plan.
(2) Qualified reserve plan
The term "qualified reserve plan" means a qualified foreign plan with respect to which an election made by the taxpayer is in effect for the taxable year. An election under the preceding sentence shall be made in such manner and form as the Secretary may by regulations prescribe and, once made, may be revoked only with the consent of the Secretary.
(1) No deduction for certain amounts
Except as provided in section 404(a)(5), no deduction shall be allowed under this section for any item to the extent such item is attributable to services-
(A) performed by a citizen or resident of the United States who is a highly compensated employee (within the meaning of section 414(q)), or
(B) performed in the United States the compensation for which is subject to tax under this chapter.
(2) Taxpayer must furnish information
No deduction shall be allowed under this section with respect to any plan for any taxable year unless the taxpayer furnishes to the Secretary with respect to such plan (at such time as the Secretary may by regulations prescribe)-
(i) a statement from the foreign tax authorities specifying the amount of the deduction allowed in computing taxable income under foreign law for such year with respect to such plan,
(ii) if the return under foreign tax law shows the deduction for plan contributions or reserves as a separate, identifiable item, a copy of the foreign tax return for the taxable year, or
(iii) such other statement, return, or other evidence as the Secretary prescribes by regulation as being sufficient to establish the amount of the deduction under foreign law.
(B) Redetermination where foreign tax deduction is adjusted
(3) Actuarial assumptions must be reasonable; full funding
(B) Interest rate for reserve plan
(ii) Rate remains in effect so long as it falls within permissible range
(iii) Permissible range
For purposes of this subparagraph, the term "permissible range" means a rate of interest which is not more than 20 percent above, and not more than 20 percent below, the average rate of interest for long-term corporate bonds in the appropriate country for the 15-year period ending on the last day before the beginning of the taxable year.
(4) Accounting method
(5) Section 481 applies to election
(Added Pub. L. 96–603, §2(a), Dec. 28, 1980, 94 Stat. 3505 ; amended Pub. L. 99–514, title XI, §1114(b)(8), title XVIII, §1851(b)(2)(C)(iii), Oct. 22, 1986, 100 Stat. 2451 , 2863; Pub. L. 100–647, title I, §1012(b)(4), Nov. 10, 1988, 102 Stat. 3496 ; Pub. L. 109–280, title VIII, §801(c)(4), Aug. 17, 2006, 120 Stat. 995 ; Pub. L. 115–141, div. U, title IV, §401(a)(74), Mar. 23, 2018, 132 Stat. 1187 .)
2018-Subsec. (c)(4)(B). Pub. L. 115–141 struck out "and" at end.
2006-Subsec. (g)(3)(A). Pub. L. 109–280 substituted "paragraphs (3) and (6) of section 431(c)" for "paragraphs (3) and (7) of section 412(c)".
1988-Subsec. (d)(3). Pub. L. 100–647 inserted "except as provided in regulations," after "qualified foreign plan,".
1986-Subsec. (a). Pub. L. 99–514, §1851(b)(2)(C)(iii), substituted "under this chapter" for "under section 162, 212, or 404" in par. (1) and "they would otherwise be deductible" for "they satisfy the conditions of section 162" in par. (2).
Subsec. (g)(1)(A). Pub. L. 99–514, §1114(b)(8), substituted "a highly compensated employee (within the meaning of section 414(q))" for "an officer, shareholder, or highly compensated".
Amendment by Pub. L. 109–280 applicable to years beginning after Dec. 31, 2007, see section 801(e)(1) of Pub. L. 109–280, set out as a note under section 404 of this title.
Amendment by section 1114(b)(8) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub. L. 99–514, set out as a note under section 414 of this title.
Amendment by section 1851(b)(2)(C)(iii) 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.
Pub. L. 96–603, §2(e), Dec. 28, 1980, 94 Stat. 3510 , as amended by Pub. L. 97–448, title III, §305(a), Jan. 12, 1983, 96 Stat. 2399 ; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095 , provided that:
"(1) In general.-The amendments made by this section [enacting this section and section 6689 of this title and amending sections 679 and 905 of this title] shall apply with respect to employer contributions or accruals for taxable years beginning after December 31, 1979.
"(2) Election to apply amendments retroactively with respect to foreign subsidiaries.-
"(A) In general.-The taxpayer may elect to have the amendments made by this section [enacting this section and section 6689 of this title and amending sections 679 and 905 of this title] apply retroactively with respect to its foreign subsidiaries.
"(B) Scope of retroactive application.-Any election made under this paragraph shall apply with respect to all foreign subsidiaries of the taxpayer for the taxpayer's open period.
"(C) Distributions by foreign subsidiary must be out of post-1971 earnings and profits.-The election under this paragraph shall apply to distributions made by a foreign subsidiary only if made out of accumulated profits (or earnings and profits) earned after December 31, 1970.
"(D) Revocation only with consent.-An election under this paragraph may be revoked only with the consent of the Secretary of the Treasury or his delegate.
"(E) Open period.-For purposes of this subsection, the term 'open period' means, with respect to any taxpayer, all taxable years which begin before January 1, 1980, and which begin after December 31, 1971, and for which, on December 31, 1980, the making of a refund, or the assessment of a deficiency, was not barred by any law or rule of law.
"(3) Allowance of prior deductions in case of certain funded branch plans.-
"(i) the taxpayer elects to have this paragraph apply, and
"(ii) the taxpayer agrees to the assessment of all deficiencies (including interest thereon) arising from all erroneous deductions,
then an amount equal to 1/15th of the aggregate of the prior deductions which would have been allowable if the amendments made by this section [enacting this section and section 6689 of this title and amending sections 679 and 905 of this title] applied to taxable years beginning before January 1, 1980, shall be allowed as a deduction for the taxpayer's first taxable year beginning in 1980, and an equal amount shall be allowed for each of the succeeding 14 taxable years.
"(B) Prior deduction.-For purposes of subparagraph (A), the term 'prior deduction' means a deduction with respect to a qualified funded plan (within the meaning of section 404A(f)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) of the taxpayer-
"(i) which the taxpayer claimed for a taxable year (or could have claimed if the amendments made by this section [enacting this section and section 6689 of this title and amending sections 679 and 905 of this title] applied to taxable years beginning before January 1, 1980) beginning before January 1, 1980,
"(ii) which was not allowable, and
"(iii) with respect to which, on December 1, 1980, the assessment of a deficiency was not barred by any law or rule of law.
"(4) Time and manner for making elections.-
"(A) Time.-An election under paragraph (2) or (3) may be made only on or before the due date (including extensions) for filing the taxpayer's return of tax under chapter 1 of the Internal Revenue Code of 1986 [section 1 et seq. of this title] for its first taxable year ending on or after December 31, 1980.
"(B) Manner.-An election under paragraph (2) may be made only by a statement attached to the taxpayer's return for its first taxable year ending on or after December 31, 1980. An election under paragraph (3) may be made only if the taxpayer, on or before the last day for making the election, files with the Secretary of the Treasury or his delegate such amended return and such other information as the Secretary of the Treasury or his delegate may require, and agrees to the assessment of a deficiency for any closed year falling within the open period, to the extent such deficiency is attributable to the operation of such election."
[ Pub. L. 97–448, title III, §311(c)(1), Jan. 12, 1983, 96 Stat. 2411 , provided that: "The amendment made by subsection (a) of section 305 [amending par. (2)(E) of this note] shall take effect on December 28, 1980."]