An Act to amend the Internal Revenue Code of 1954 to reduce individual and corporate income taxes, to make certain structural changes with respect to the income tax, and for other purposes
PL 88-272 (H.R.8363), enacted 02/26/1964

78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
19 
Public Law 88-272 
A N A C T 
February 26, 1964 
To amend the Internal Revenue Code of 1954 to reduce individual and corporate 
[H. R. 8363] 
income taxes, to malie certain structural changes with respect to the income 
tax, and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled, 
SECTION 1. DECLARATION BY CONGRESS. 
It is the sense of Congress that the tax reduction provided by 
this Act through stimulation of the economy, will, after a brief 
transitional period, raise (rather than lower) revenues and that 
such revenue increases should first be used to eliminate the deficits 
in the administrative budgets and then to reduce the jjiiblic debt. 
To further the objective of obtaining balanced budgets in the near 
future. Congress by this action, recognizes the importance of taking 
all reasonable means to restrain Government spending and urges the 
President to declare his accord with this objective. 
SEC. 2. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the "Kevenue Act 
of 1964". 
(b) AMENDMENT or 1954 CODE.—Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed 
m terms of an amendment to, or repeal of, a section or other pro-
vision, the reference shall be considered to be made to a section or 
other provision of the Internal Revenue Code of 1954. 
Title I—Reduction Of Income Tax Rates And 
Related Amendments 
PART I—INDIVIDUALS 
SEC. in. REDUCTION OF TAX ON INDIVIDUALS. 
(a) INDIVIDUALS OTHER THAN HEADS or HOUSEHOLDS.—Subsection 
(a) of section 1 (relating to rates of tax on individuals other than 
heads of households) is amended to read as follows: 
" (a) RATES or TAX ON INDIVIDUALS.— 
"(1) TAXABLE YEARS BEGINNING IN I964,—In the case of a 
taxable year beginning on or after January 1, 1964, and before 
January 1, 1965, there is hereby imposed on the taxable income 
of every individual (other than a head of a household to whom 
subsection (b) applies) a tax determined in accordance with the 
following table: 
"If the taxable income is: 
The tax is: 
Not over $500 
16% of the taxable income. 
Over $500 but not over $1,000 
$80, plus 16.5% of excess over $500. 
Over $1,000 but not over $1,500 
$162.50, plus 17.5% of excess over 
$1 000. 
Over $1,500 but not over $2,000 
$25oi plus 18% of excess over $1,.500. 
Over $2,000 but not over $4,000 
$340, plus 20% of excess over $2,000. 
Over $4,000 but not over $6,000 
$740, plus 23.5% of excess over 
$4 000. 
Over $6,000 but not over $8,000 
$1,210, plus 27% of excess over 
$6,000. 
Over $8,000 but not over $10,000 
$1,750, plus 30.5% of excess over 
CO OOQ 
Over $10,000 but not over $12,000 
$2,360, plus 34% of excess over 
$10,000. 
Over $12,000 but not over $14,000 
$3,040, plus 37.5%, of excess over 
$12,000. 
Revenue Act of 
19 64. 
68 A Stat. 3. 
26 u s e 1. 
20 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
"If the taxable income is: 
The tax is: 
Over $14,000 but not over $16,000 
$3,790, plus 4 1 % of 
excess 
over 
$14,000. 
Over $16,000 but not over $18,000 
$4,610, plus 44.5% o(C excess over 
$16,000. 
Over $18,000 but not over $20,000 
$5,500, plus 47.5% of excess over 
$18,000. 
Over .$20,000 but not over $22,000 
$6,450, plus 50.5% of excess over 
$20,000. 
Over .$22,000 but not over $26,000 
$7,460, plus .53.5% of excess over 
$22,000. 
Over $26,000 but not over $32,000 
$9,600, plus 56% 
of 
excess 
over 
$26,000. 
Over $32,000 but not over $38,000 
$12,960, plus .")8.5% of excess over 
$32,000. 
Over $38,000 but not over .$44,000 
$16,470, plus 6 1 % of excess over 
$38,000. 
Over .$44,000 but not over $50,000 
$20,130, plus 63.5% of excess over 
$44,000. 
Over $50,000 but not over $60,000 
$23,940, plus 66% of excess over 
$50,000. 
Over $60,000 but not over $70,000 
$30,.540, plus 68.5% of excess over 
$60,000. 
Over $70,000 but not over $80,000 
.$37,390, plus 7 1 % of excess over 
$70,000. 
Over $80,000 but not over .$90,000 
.$44,490, plus 73.5% of excess over 
$80,000. 
Over $90,000 but nut over $100,000__-. 
.$51,840, plus 75% of excess over 
$90,000. 
Over $100,000 but not over $200,000— 
$59,340, plus 76.5% of excess over 
$100,000. 
Over .$200,000 
—..- 
.$135,840, plus 77% of excess over 
$200,000. 
" ( 2 ) 
T A X A B L E YEARS B E G I N N I N G A F T E R D E C E M B E R : n , 
i 9 6 4 . — I n 
the case of a taxable year beginning after Decemlier 31, 1964, 
there is hereby imposed on the taxable income of every hi-
dividual (other than a head of a household to whom subsection 
(b) applies) a tax determined in accordance with the following 
table: 
"If the taxable income is: 
The tax is: 
Not over $500 
14% of the taxable income. 
Over $.500 but not over $1,000 
.$70, plus 15% of excess over .$.500. 
Over $1,000 but not over $1,500 
$145, plus 16% of excess over $1,000. 
Over .$1..500 but not over $2,000 
$225, plus 17% of excess over $1,500. 
Over $2,000 but not over $4,000 
$310, plus 19% of excess «jver $2,000. 
Over .$4,000 but not over .$6,000 
$690, plus 22% of excess over $4,000. 
Over .$6,000 but not over $8,000 
$1,130, plus 25% of 
excess 
over 
$6,000. 
Over $8,000 but not over $10,000 
,$1,630; plus 28% of 
excess 
over 
$8,000. 
Over $10,000 but not over $12,000_-,. 
$2,190, plus 
32% 
of 
excess 
over 
$10,000. 
Ovor .$12,0(X) but not over .$14,000--. 
$2,830, plus 
.36% 
of 
excess 
over 
$12,000. 
Over $14,000 but not over $16,000 
$3,5.50, plus 39o; 
„f 
exi-ess 
over 
$14,000. 
Over $16,000 but not over .$18,000 
.$4,330, plus 
42'''; 
of 
excess 
over 
$16,000. 
Over .$1.S,0(K> luit n«»t over .$20,000 
.$.^,170, plus 45';» 
«»f excess «.ver 
$18,000. 
Over .$20,(H^H) but not over .$22,000. 
.$6,070, plus 
48% 
of 
excess 
over 
$20 000. 
Over .$22,000 hut not over .$20,000- 
.$7,030, pins 
.'»0% of 
excess 
over 
$22 000. 
Over .$26.(KK> Imf not over .$82,000 
. 
.$9,030, plus 
.537' 
of 
excess 
over 
.$26 000. 
Over .$32.(»(K) Init nol, over .$.S8,000 
$ 1 2 ^ 0 , plus 
.'.5% of excess over 
$32 000. 
Over .$38.(KK» but not over .$44,000 
. 
$1.5..5io, pins .58% of excess over 
$38,000. 
78 STAT. ] 
PUBLIC U W 88-272-FEB. 26, 1964 
21 
"If the taxable income is: 
The tax is: 
Over $44,000 but not over $50,000 
$18,990, plus 60% of excess over 
$44,000. 
Over $50,000 but not over $60,000— 
$22,590, plus 62% of excess over 
$50,000. 
Over $60,000 but not over $70,000— 
$28,790, plus 64% of excess over 
$60,000. 
Over $70,000 but not over $80,000 
$35,190, plus 66% of excess over 
$70,000. 
Over $80,000 but not over $90,000— 
$41,790, plus 68% of excess over 
$80,000. 
Over $90,000 but not over $100,000__ 
$48,590, plus 69% of excess over 
$90,000. 
Over 
$100,000 
$55,490, plus 70% of excess over 
$100,000." 
(b) HEADS OF HOUSEHOLDS.—Paragraph 
(1) of section 1(b) 
se'uscT*!.^' 
(relating to rates of tax on heads of households) is amended to read 
as follows: 
" (1) EATES OF TAX.— 
"(A) TAXABLE YEARS BEGINNING IN 1964.—^In the case of a 
taxable year beginning on or after January 1, 1964, and be-
fore January 1, 1965, there is hereby imposed on the taxable 
income of every individual who is the head of a household a 
tax determined in accordance with the following table: 
"If the taxable income is: 
The tax is: 
Not over $1,000 
16% of the taxable income. 
Over $1,000 but not over $2,000 
$160, plus 17.5% of excess 
over 
$1,000. 
Over $2,000 but not over $4,000 
$335, 
pli^is 19% of 
excess 
over 
$2,000. 
Over $4,000 but not over $6,000 
$715, plus 
22% of 
excess 
over 
$4,000. 
Over $6,000 but not over $8,000 
$1,155, plus 23% of excess 
over 
$6 000 
Over $8,000 but not over $10,000 
$1,615, plus 27% of excess 
over 
$8 000 
Over $10,000 but not over $12,000__ 
$2,155, plus 29% of excess 
over 
$10,000. 
Over $12,000 but not over $14,000__ 
$2,735, plus 32% of excess 
over 
$12,000. 
Over $14,000 but not over $16,000__ 
$3,375, plus 34% of excess 
over 
$14,000. 
Over $16,000 but not over $18,000__ 
$4,055, plus 37.5% of excess over 
$16 000 
Over $18,000 but not over $20,000__ 
$4,805, plus 39% of excess 
over 
$18,000. 
Over $20,000 but not over $22,000__ 
$5,585, plus 42.5% of excess over 
$20 000. 
Over $22,000 but not over $24,000__ 
$6,435, plus 43.5% of excess over 
$22 000 
Over $24,000 but not over $26,000__ 
$7,305, plus 45.5% of excess over 
$24,000. 
Over $26,000 but not over $2S,000__ 
$8,215, plus 47% of excess 
over 
$26,000. 
Over $28,000 but not over $32,000__ 
$9,155, plus 48.5% of excess over 
coo Q
Q
O 
Over $32,000 but not over $36,000__ 
$llio95, plus 51.5% of excess over 
$32,000. 
Over $36,000 but not over $3S,000__ 
$13,155, plus 53% of excess over 
$36,000. 
Over $38,000 but not over $40,000__ 
$14,215, plus 54% of excess over 
$38 000 
Over $40,000 but not over $44,000__ 
$15,295. plus 56% of excess over 
$40 000 
Over $44,000 but not over $50,000__ 
$17,535, plus 58.5% of excess over 
$44 000 
Over $50,000 but not over $52,000__ 
$21,045, plus 59.5% of excess over 
$50 000 
Over $.J2,000 but not over $60,000__ 
$22,235, plus 0 1 % of excess over 
$52,000. 
22 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
"If the taxable income is: 
The tax i s : 
Over $60,000 but not over $64,000— 
$27,115, plus 62% of excess over 
$60,000. 
Over $64,000 but uot over $70,000— 
$29,595, plus 63.5% of excess over 
$64,000. 
Over $70,000 but not over $76,000— 
$33,405, plus 65% of excess 
over 
$70,000. 
Over $76,000 but not over .$80,000__ 
$37,305, plus 66% of excess 
over 
$76,000. 
(Jver $80,000 but not over $88,000— 
$39,945, plus 67% of excess 
over 
$80,000. 
over $88,000 but not over $90,000— 
$45,305, plus 69% of excess over 
$88,000. 
Over $90,000 but uot over $100,000— 
$46,685, plus 69.5% of excess over 
$90,000. 
Over $100,000 but not over $120,000— 
$53,635, plus 7 1 % of excess 
over 
$100,000. 
Over $120,000 but not over $140,000— 
$67,835, plus 72.5% of excess over 
$120,000. 
Over $140,000 but not over $160,000— 
$82,335, plus 74% of excess 
over 
$140,000. 
Over $160,000 but not over $180,000— 
$97,135, plus 75% of excess 
over 
$160,000. 
Over $180,000 but not over $200,000— 
$112,135, plus 75.5%, of excess over 
$180,000. 
(Jver 
$200,000 
$127,235, plus 77% of excess over 
$200,000. 
" ( B ) 
TAXAHLE 
YEARS 
REGINNING 
AFTER 
DECEMMER 
.SI, 
iu(!4.—III the case of a taxable year beginning after Decem-
ber ol, 1J)()4, there is hereby imposed on the taxable income 
of every individual who is the head of a household a tax 
determined in accordance with the following table: 
"If the taxable income is: 
The tax is: 
Not over $1,000 
14% of the taxable income. 
Over $1,000 but not over $2,000 
$140, plus 16% of excess over $1,000. 
Over $2,000 but not over $4,000 
$300, plus 18% of excess over $2,000. 
Over $4,000 but not over $6,000 
$660, plus 20% of excess over $4,000. 
Over $6,000 but not over $8,000 
$1,060, plus 
22% 
of 
excess 
over 
$6,000. 
Over $8,000 but not over $10,000 
$1,500, plus 
25% 
of 
excess 
over 
$8,000. 
Over $10,000 but not over $12,000 
$2,000, plus 
27% 
of 
excess 
over 
$10,000. 
Over $12,000 but not over $14,000 
$2,540, plus 
3 1 % of 
excess 
over 
$12,000. 
Over $14,000 but not over $16,000 
$3,160, plus 
32% 
of 
excess 
over 
$14,000. 
Over $16,000 but not over $18,000 
$3,800, plus 
35% 
of 
excess 
over 
$16,000. 
(•ver .$18,000 but not over $20,000 
$4,500, plus 
36% 
of 
excess 
over 
$18,000. 
Ov«u- .$20,000 but not over $22,000 
.$5,220, plus 
40% 
of 
excess 
over 
$20,000. 
Over $22,000 but not over $24.000 
$6,020, plus 
4 1 % of 
excess 
over 
.$22,000. 
<^)ver .$24.0(X) but not over $26.000 
$6,840. plus 
43% 
of 
excess 
over 
$24,000. 
Over .$26,000 but not over .$28,000 
$7,700, plus 
45% of 
excess 
over 
$26,000. 
Over .$28,000 but not over $32,000 
$8,600, plus 
46% 
of 
excess 
over 
$28,000. 
(Uri- .$32.(XX> but not over $36,000 
$10,440, plus 48% of excess 
over 
$32,000. 
Over .$36,000 but not over $38.000 
$12,360, plus 50% 
of excess 
over 
$36,000. 
Over .$'i8.000 but uot over $40,000 
$13,360, plus 52% of excess 
over 
$38,000. 
Over $40,000 but not over $44,000 
$14,400, plus 53% of excess 
over 
$40,000. 
Over $44.0(X) but not over $50,000 
$16,520, plus 55% of excess 
over 
$44,000. 
68A Stat. 40. 
26 u s e 141. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
23 
"If the taxable income is: 
The tax is: 
Over $50,000 but not over $52,000 
$19,820, plus 56% of excess over 
$50,000. 
Over $52,000 but not over $64,000 
$20,940, plus 58% of excess over 
$52,000. 
Over $64,000 but not over $70,000 
$27,900, plus 59% of excess over 
$64,000. 
Over $70,000 but not over $76,000 
$31,440, plus 61% of excess over 
$70,000. 
Over $76,000 but not over $80,000 
$35,100, plus 62% of excess over 
$76,000. 
Over $80,000 but not over $88,000 
$37,580, plus 63% of excess over 
$80,000. 
Over $88,000 but not over $100,000— 
$42,620, plus 64% of excess over 
$88,000. 
Over $100,000 but not over $120,000— 
$50,300, plus 66% of excess over 
$100,000. 
Over $120,000 but not over $140,000— 
$63,500, plus 67% of excess over 
$120,000. 
Over $140,000 but not over $160,000— 
$76,900, plus 68% of excess over 
$140,000. 
Over $160,000 but not over $180,000— 
$90,500, plus 69% of excess over 
$160,000. 
Over $180,000 
$104,300, plus 70% of excess over 
$180,000." 
SEC. 112. MINIMUM STANDARD DEDUCTION. 
(a) GENERAL RUI>E.—Section 141 (relating to standard deduction) 
is amended to read as follows: 
"SEC. 141. STANDARD DEDUCTION. 
"fa) 
STANDARD DEDUCTION.—Except as otherwise provided in this 
section, the standard deduction referred to in this title is the larger 
of the 10-percent standard deduction or the minimum standard 
deduction. The standard deduction shall not exceed $1,000, except 
that in the case of a separate return by a married individual the 
standard deduction shall not exceed $500. 
"(b) TEN-PERCENT STANDARD DEDUCTION.—The 10-percent stand-
ard deduction is an amount equal to 10 percent of the adjusted gross 
income. 
"(c) MINIMUM 
STANDARD DEDUCTION.—The minimum standard 
deduction is an amount equal to the sum of— 
"(1) $100, multiplied by the number of exemptions allowed 
for the taxable year as a deduction under section 151, plus 
^^ "^^ ^^^' 
"(2) (A) $200, in the case of a joint return of a husband and 
wife under section 6013, 
26 use eo 13. 
"(B) $200, in the case, of a return of an individual who is not 
married, or 
"(C) $100, in the case of a separate return by a married 
individual. 
"(d) MARRIED iNoivmuALS FILING SEPARATE RETURNS.—Xotwith-
standing subsection (a)— 
"(1) The minimum standard deduction shall not apply in the 
case of a separate return by a married individual if the tax of 
the other spouse is determined with regard to the 10-percent 
standard deduction. 
"(2) A married individual filing a sep.Trate return may, if 
the minimum standard deduction is less than the 10-percent 
standard deduction, and if the minimum standard deduction of 
his spouse is greater than the 10-peiv.ent standard deduction of 
such sjwuse, elect (under regulations prescribed by the Secre-
tary or his delegate) to have his tax determined with regard to 
the minimum standai*d deduction in lieu of being determined 
with regard to tlie lO-percent standard deduction." 
31-667 0-65—5 
24 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
68A Stat. 8. 
26 use 2. 
Post, p. 129; 
Ante, p. 23. 
26 u s e 3, 141. 
Post, p. 110. 
26 u s e 144. 
26 u s e 6212. 
26 u s e 6504. 
Post, p. 32. 
2
© use 37. 
Ante, p. 19. 
26 use 1. 
26 u s e 871. 
(b) AMENDMENT OF SECTION 2.—The second sentence of section 
2(a) (relating to tax in case of joint return or return of surviving 
spouse) is amended by striking out "and section 3" and insert-
ing in lieu thereof ", section 3, and section 141". 
(c) AMENDMENTS OF SECTION 144.— 
(1) The first sentence of section 144(b) (relating to change 
of election of standard deduction) is amended to read as 
follows: "Under regulations prescribed by ther Secretary or his 
delegate, a change of election with respect to the standard de-
duction for any taxable year may be made after the filing of the 
return for such year." 
(2) Section 144 is amended by adding at the end thereof the 
following new subsection: 
"(c) CHANGE OF ELECTION DEFINED.—For purposes of this title, 
the term 'change of election with respect to the standard deduc-
tion' means— 
"(1) a change of an election to take (or not to take) the 
standard deduction; 
"(2) a change of an election to pay (or -jiot to pay) the 
tax under section 3; or 
"(3) a change of an election under section 
141(d)(2)." 
(d) CONFOKMING AMENDMENTS.— 
(1) Subparagraph (A) of section 6212(c)(2) 
(relating to 
crosB references) is amended by striking out "to take" and in-
serting in lieu thereof "with respect to the". 
(2) Paragraph (3) of section 6504 (relating to cross refer-
ences) is amended by striking out "to take" and inserting in lieu 
thereof "with respect to the". 
SEC. 113. RELATED AMENDMENTS. 
(a) RETIREMENT 
INCOME CREDIT.—Section 37(a) 
(relating to 
<;redit against tax for retirement income) is amended by strik-
ing out "an amount equal to the amount received by such indi-
vidual as retii-enient income (as defined in subsection (c) and as 
limited by subsection (d)), multiplied by the rate provided in 
section 1 for the first $2,000 of taxable income;" and inserting 
in lieu thereof "an amount equal to 17 percent, in the case of a 
taxable year beginning in 1964, or 15 percent, in the case of a 
taxable year beginning after December 31, 1964, of the amount 
ret^eived by such hidividual as retirement income (as defined in 
sul)sectioii (c) and as limited by subsection (d));". 
(b) TAX ON XONRESIDENT ALIEN INDIVIDITALS.—Section 871 (relat-
ing to tax on nonresident alien individuals) is amended— 
(1) By striking out "is more than $15,400, except that^—" in 
su])section (b) and inserting in lieu thereof "is more than 
$19,000 ill the case of a taxable year beginning in 1964 oi* more 
than $21,2(K* in the case of a taxable year l)eginning after 1964, 
except that—". 
(2) By strikiug out the heading to subsection (a) and insert-
ing in lieu theivof the following: 
"(a) Xo rNiTKi) STATUS BUSINESS—30 PERCENT TAX.—". 
(3) By stnking out the lieading to subsection (b) and insei"t-
ing in lieu thereof the following: 
" (b) Ni > r N rrED STAIKS B i SIN ESS 
REGULAR TAX. -". 
SEC. 114. ("ROSS REFERENCES TO TAX TABLES, ETC. 
(1) For optional tax if adjusted ti^ross income is less than $5,000, 
see section 301 of this Act. 
(2) For income tax collected at source, see section .302 of this Act. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
25 
PART II—CORPORATIONS 
SEC. 121. REDUCTION OF TAX ON CORPORATIONS. 
Section 11 (relating to tax on corporations) is amended to i-ead as 26^Jsc*nV* 
follows: 
"SEC. 11. TAX IMPOSED. 
"(a) CORPORATIONS IN GENKRAL.—A tax is hereby imposed for 
each taxable year on the taxable income of eveiy corporation. The 
tax shall consist of a normal tax computed under subsection (b) and 
a surtax computed under subsection (c). 
"(b) NORMAL TAX.—The normal tax is equal to the following 
percentage of the taxable income: 
"(1) 30 percent, in the case of a taxable year beginning 
before January 1,1964, and 
"(2) 22 percent, in the case of a taxable year beginning 
after December 31,1963. 
"(c) SURTAX.—The surtax is equal to the following percentage 
of the amount by which the taxable income exceeds the surtax 
exemption for the taxable year: 
"(1) 22 percent, in the case of a taxable year beginning 
before January 1,1964, 
"(2) 28 percent, in the case of a taxable year beginning 
after December 31, 1963, and before January 1, 1965, and 
"(3) 26 percent, in the case of a taxable year beginning 
after December 31, 1964. 
"(d) SURTAX EXEMPTION.—For purposes of this subtitle, the 
surtax exemption for any taxable year is $25,000, except that, 
with respect to a corporation to which section 1561 (relating 
Post,p.ii6. 
to surtax exemptions in case of certain controlled corporations) 
applies for the taxable year, the surtax exemption for the taxable 
year is the amount determined under such section. 
"(e) ExcEPiTONS.—Subsection (a) shall not apply to a cor-
poration subject to a tax imposed by— 
"(1) section 594 (relating to mutual savings banks con-
ducting life insurance business), 
"(2) subchapter L (sec. 801 and following, relating to 
insurance conipanies), 
"(3) subchapter M (sec. 851 and following, relating to ^^26usc85iet 
regulated investment companies and real estate investment 
tnists^, or 
"(4) section 881(a) 
(relating to foreign corporations not 
26usc88i. 
engaged in business in United States)." 
SEC. 122. CURRENT TAX PAYMENTS BY CORPORATIONS. 
(a) INSTALLMENT PAYMENTS OF ESTIMATED INCOME TAX BY COR-
i*ORATiONS.—Section 6154 (relating to installment payments of ^^ ^^^ ^^^'*-
estimated income tax by corpoi-ations) is amended to read as follows: 
"SEC. 6154. INSTALLMENT PAYMENTS OF ESTIMATED INCOME TAX BY 
CORPORATIONS. 
"(a) AMOUNT AND TIME FOR PAYMENT OF EACJI INSTALLMENT.— 
The amount of estimated tax (as defined in section 6016(b)) with 
seusceoie. 
respect to which a declaration is required under section 6016 shall 
be paid as follows: 
"(1) PAYMENT IN 4 INSTALLMENTS.—If the declaration is filed 
on or l>efore the 15th day of the 4th month of the taxable ye^r, 
the estimated tax shall be paid in 4 installments. The aniount 
26 u s e 594. 
26 u s e 801 et 
aeq. 
26 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
and time for payment of each installment shall be (leterniine<l 
in accordance Avith the following table: 
"If the taxable year begins in— 
1964 
1965-
1966 
1967 
1968 
1969 
1970 or any subsequent year 
The following percentages of the 
estimated tax shall be paid on the 
15th day of the— 
4th 
month 
1 
4 
9 
14 
19 
22 
26 
6th 
month 
1 
4 
9 
14 
19 
22 
25 
9th 
month 
25 
25 
25 
25 
25 
25 
25 
12th 
month 
25 
25 
25 
25 
25 
25 
25 
Post, p. 28. 
26 u s e 6074. 
"(2) PAYMENT IN 3 INSTALLMENTS.—If the declaration is filed 
after the 15th day of the 4th month and not after the 15th day 
of the Gth month of the taxable year, and is not required by 
section 6074(a) to be filed on or before the 15th day of such 4th 
month, the estimated tax shall be paid in 3 installments. The 
amount and time for payment of each installment shall be de-
termined in accordance with the following table: 
"If the taxable year begins in— 
1964 
1965 
1966 
1967 
1968 
_-
1969 
1970 or any subsequent year 
The following percentages of the esti-
mated tax Siall be paid on the 15th 
day of the— 
6th month 
12 
18/3 
25/3 
29/3 
33/3 
9th month 
25>'3 
26>i 
28 
29?^ 
31/3 
32/, 
33)^ 
12t}i month 
25>^ 
26y3 
28 
29% 
31H 
32>^ 
33H 
"(3) PAYMENT IN 2 INSTALLMENTS.—If the declaration of 
estimated tax is filed after the 15th day of the 6th month and 
not after the 15th day of the 9th month of the taxable year, and 
is not required by section 6074(a) to be filed on or before the 
15th day of such 6th month, the estimated tax shall be paid in 
2 installments. 
The amount and time for payment of each 
installment shall be determined in accordance with the following 
table: 
"If the taxable year begins in— 
1964 
1965 
- _--
1966 
- -- --
1967 
1968 
1969 
1970 or any subsequent year 
The following percent-
ages of the estimated 
tax shall be paid on 
the 15th day of the— 
9th month 
26 
29 
34 
39 
44 
47 
50 
12th mouth 
26 
29 
34 
39 
44 
47 
50 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
27 
"(4) PAYMENT IX i 
INSTALLMENT.—If the declaration of 
estimated tax is filed after the 15th day of the 9th month of 
the taxable year, and is not required by section 6074(a) to be ^e usc*6?74. 
filed on or before the 15th day of such 9th month, the estimated 
tax shall be paid in 1 installment. The amomit and time for 
payment of the installment shall be determined in accordance 
with the following table: 
"If the taxable year begins In— 
1964_ 
1965 
1966 
1967._ 
- . 
1968 
-
1969 
1970 or any subsequent year 
The following percentages of the es-
timated tax shall be paid on the 
16th day of the 12th month 
52 
58 
68 
78 
88 
94 
100 
"(5) LATE FILING.—If the declaration is filed after the time 
prescribed in section 6074(a) 
(determined without regard 
to any extension of time for filing the declaration under 
section 6081), paragraphs (2), (3), and (4) of this subsection 
shall not apply, and theias shall be paid at the time of such 
filing all installments of estimated tax which would have 
been payable on or before such time if the declaration had 
been filed within the time prescribed in section 6074(a), and the 
remaining installments shall be paid at the times at which, 
and in the amounts in which, they would ha^'e been payable 
if the declaration had been so filed. 
"(b) 
AMENDMENT OF DFXL'LARATION.—If any amendment of a 
declaration is filed, the amount of each remaining installment (if 
any) shall be the amount which would have been payable if the 
new estimate had been made when the first estimate for the taxable 
year was made, increased or de(.*reased (as the case may be), by the 
amount computed by dividing— 
"(1) the difference between (A) the amount of estimated tax 
required to be paid before the date on which the amendment is 
made, and (B) the amount of estimated tax which would liave 
been required to be paid before such date if the new estimate 
had been made when the first estimate was made, by 
"(2) the number of installments remaining to be paid on or 
after the date on wliich the amendment is made. 
"(c) Ari'Tj(v\TioN TO SHORT TAXABLE YEAR.—The application of 
this sectix)n to taxable years of less than 12 months shall be in 
accordance with regulations prescribed by the Secretary or his 
delegate. 
"(d) INSTALLMKNTS PAID IX AOVAXCE.—At the election of the 
corporation, any installment of the estimated tax may be paid 
l)efore the date prescribed for its payment." 
(b) TIME FOR FILING DE(*I>ARATIOXS OF ESTIMATED IXCO^IE TAX BY 
Cinn'OKATiox-s.-Secf ion 6074 (relating to time for filing declarations 
of e.**timaied iiK-ome tax by corporations) is amended to read as 
follows: 
68A Stat. 751. 
26 u s e 6081. 
28 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
26 u s e 6016. 
"SEC. 6074. TIME FOR FILING DECLARATIONS OF ESTIMATED INCOME 
TAX BY CORPORATIONS. 
"(a) GENERAL RULE.—The declaration of estimated tax required 
of corporations by section 6016 shall be filed as follows : 
"If the requirements of section 6016 are first met— 
68A Stat. 825. 
26 u s e 6655. 
before the 1st day of the 4th month of the 
taxable year 
after the last day of the 3d month and 
before the 1st day of the 6th month of 
the taxable year 
after the last day of the 5th month and 
before the 1st day of the 9th month of 
the taxable year 
after the last day of the 8th month and 
before the 1st day of the 12th month of 
the taxable year 
The declaration shall be filed on or before— 
the 15th day of the 4th month of the 
taxable year 
the 15th day of the 6th month of the 
taxable year 
the 15th day of the 9th month of the 
taxable year 
the 15th day of the 12th month of the 
taxable year 
"(b) AMENDMENT.—An amendment of a declaration may be filed 
in any interval between installment dates prescribed for the taxable 
year, but only one amendment may be filed in each such interval. 
"(c) SHORT TAXABLE YEAR.—The application of this section to 
taxable yeai-s of less than 12 months shall be in accordance with 
regulations prescribed by the Secretary or his delegate." 
(c) FAILURE BY CORPORATIONS TO PAY ESTIMATED INCOME TAX.— 
(1) The last sentence of section 6655(c)(2) 
(relating to 
j)eriod of underpayment) is amended to read as follows: "For 
purposes of this paragraph, a payment of estimated tax on any 
installment date shall be coiisidei-ed a payment of any previous 
underpayment only to the extent such payment exceeds the 
amount of the installment determined under subsection (b)(1) 
for such installment date." 
(2) Paragraph (3) of section 6655(d) (relating to exception) 
is amended to read as follows: 
"(3) (A) An amount equal to 70 percent of the tax for the 
taxable year computed by placing on an annualized basis the 
taxable income: 
"(i) for the first 3 months of the taxable year, in the 
case of the installment required to be paid in the Jrth month, 
"(ii) for the first 3 months or for the first 5 months of 
the taxable year, in the case of the installment required to 
be paid in the 6th month, 
"(iii) for the first 6 months or for the firet 8 months of 
the taxable year in the case of the installment required to 
be paid in the 9th month, and 
(iv) for the first 9 months or for tlie first 11 months 
of tlie taxable year, in the case of the installment require<l 
to be paid in the 12t]i month of the taxable year. 
"(B) For purposes of this paragraph, the taxable income 
shall l)e placed on an annualized basis by— 
"(i) multiplying by 12 the taxable income 
referred 
to in subparagraph (A), and 
"(ii) dividing the resulting amount by the number of 
months in the taxable year (3, 5, 6, 8, 9, or 11, as the case 
may be) i-eferred to in subparagraph (A)."' 
76 Stat. 989. 
26 u s e 821. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
29 
(d) TECHXICAI, 
AMEXDMEXT.—Section 
6016(f) 
(relating 
to 
ll%lc''6o\f: 
declarations of estimated income tax by corporations) is amended 
to read as follows: 
"(f) 
CROSS REFEHEXCE.— 
"For provisions relating to the number of amendments which 
may be filed, see section 6074(b)." 
Je use'6074 
SEC. 123. RELATED AMENDMENTS. 
(a) TAX ON MUTUAL IXSURAX'CE COMPANIES (OTHER THAN LITE, 
ETC.) — 
(1) Subsection (a) of section 821 (relating to imposition of 
tax) is amended to read as follows: 
"(a) IMPOSITION or TAX.—A tax is hereby imposed for each tax-
able year beginning after December 31, 1963, on the mutual insur-
ance company taxable income of every mutual insurance company 
(other than a life insurance company and other than a fire, flood, 
or marine insurance company subject to the tax imposed by section 
831). Such tax shall consist of— 
'^ "^^ ^^'• 
"(1) NORMAL TAX.—A normal tax of 22 percent of the mutual 
insurance company taxable income, or 44 percent of the amount 
by which such taxable income exceeds $6,000, whichever is the 
lesser; plus 
"(2) SURTAX.—A surtax on the mutual insurance company 
taxable income computed as provided in section 11(c) as though 
the mutual insurance company taxable income were the taxable 
income referred to in section 11 (c)." 
(2) Paragraph (1) of section 821(c) (relating to alternative 
tax for certain small companies) is amended to read as follows: 
"(1) IMPOSITION or TAX.—In the case of taxable years begin-
ning after December 31, 1963, there is hereby imposed for each 
taxable year on the income of each mutual insurance company 
to which this subsection applies a tax (which shall be in lieu of 
the tax imposed by subsection (a)) computed as follows: 
"(A) NORMAL TAX.—A normal tax of 22 percent of the 
taxable investment income, or 44 percent of the amount by 
which such taxable income exceeds $3,000, whichever is the 
lesser; plus 
"(B) SURTAX.—A suitax on the taxable 
investment 
income computed as provided in section 11(c) as though 
the taxable investment income were the taxable income 
referred to in section 11 (c)." 
(b) RECEIPT OF MINIMUM 
DISTRIBUTIONS BY DOMESTIC 
COR-
PORATIONS.—Subsection (b) of section 963 (relating to receipt of 
26 use 9
^
6
3
^
.
^
' 
minimum distributions by domestic corporations) is amended to 
read as follows: 
"(b) MINIMUM DISTRIBUTION.—For purposes of this section, a 
minimum distribution with respect to the earnings and profits for 
the taxable year of any controlled foreign corporation or corpora-
tions shall, in the case of any Ignited Slates shareholder, be its 
Ante, p. 25. 
26 use U. 
30 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
68A Stat. 72. 
26 u s e 242. 
26 u s e 21. 
pro rata share of an amount deterniined in accoidauce witli wliich-
ever of the following tables applies to the taxable year: 
" ( 1 ) 
T A X A B L E Y K A R S BKOlX XI X( J rX' 1 »(i . i , — 
The required minimum dis-
"If the effective foreign tax 
tribution of earnings and 
rate is (percentage)— 
profits is (percentage)— 
Under 10 
90 
10 or over but less than 20 
86 
20 or over but less than 28 
82 
28 or over but less than 34 
75 
34 or over but less than 39 
68 
39 or over but less than 42 
55 
42 or over but less than 44 
40 
44 or over but less than 46 
27 
46 or over but less than 47 
14 
47 or over 
0 
''(2) TAXABLE YEAUs BK(;ixxix<; IX' TJHU.— 
The required minimum dis-
"If the effective foreign tax 
tribution of earnings and 
rate is (percentage)— 
profits is (percentage)— 
ruder 10 
87 
10 or over but less than 19 
83 
19 or over but less than 27 
79 
27 or over but less than 33 
72 
33 or over but less than 37 
65 
.37 or over but less than 40 
53 
40 or over but less than 42 
38 
42 or over but less than 44 
26 
44 or over but less than 45 
13 
45 or over 
0 
" ( 8 ) 
TAXABLE YEARS BE(JIXXIX<; AKTKK DECEMBER ;n. 
iixu.— 
The required minimum dis-
"If the effective foreign tax 
tribution of earnings and 
rate is (percentage)— 
profits is (percentage)— 
Under 9 
S3 
9 or over but less than 18 
79 
18 or over but less than 26 
76 
26 or over but less than 32 
69 
32 or over but less than 36 
63 
36 or over but less than 39 
51 
.39 or over but less than 41 
37 
41 or over but less than 42 
25 
42 or over but less than 43 
13 
43 or over 
0" 
(c) Ai\rENi)MEXT OF SECTIOX' 242.—Section 242(a) 
(relating to 
deduction for partially tax-exempt interest) is amended by adding at 
the end thereof the following new sentence: "No deduction shall be 
allowed under this section foi- purposes of any surtax imposed by this 
subtitle." 
PART III—EFFECTIVE DATES 
SEC. 131. (iENERAL RULE. 
Except for purposes of section 21 of the Internal Revenue Code 
of 1054 (rehiting to effect of changes hi rates during a taxable year), 
the amendments made by parts I and I I of this title shall rtp])ly with 
res})ect to taxable years beginning after December 31, 1963. 
SEC. 132. FISCAL YEAR TAXPAYERS. 
Effective with resj)ect to taxable years ending after Decemlier 31, 
10(53, subsection (d) of section 21 (relating to effect of changes in 
rates tluring a taxable vein) is amended to read as follows: 
68A Stat. 10; 
post, pp. I l l , 140. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
31 
'* (d) CHANGES MADE BY REVENUE ACT OF 1964.— 
"(1) INDIVIDUALS.—In applying subsection (a) to the tax-
able year of an individual beginning in 1963 and ending in 
1964— 
"(A) 
the rate of tax for the period on and 
after 
January 1, 1964, shall be applied to the taxable income 
determined as if part IV of subchapter B (relating to 
standard deduction for individuals), as amended by the 
Revenue Act of 1964, applied to taxable years ending after 
December 31,1963, and 
"(B) section 4 (relating to rules for optional tax), as 
amended by such Act, shall be applied to taxable years " 26 'use 4 
ending after December 31,1963. 
In applying subsection (a) to a taxable year of an individual 
beginning in 1963 and ending in 1964, or beginning in 1964 
and ending in 1965, the change in the tax imposed under sec-
tion 3 shall be treated as a change in a rate of tax. 
5 use'3!^^ 
"(2) CORPORATIONS.—In applj^in^ subsection (a) to a tax-
able year of a corporation beginning in 1963 and ending in 
1964, if— 
"(A) the surtax exemption of such corporation 
for 
such taxable year is less than $25,000 by reason of the 
application of section 1561 (relating to surtax exemptions 
^°s''P- ii^ 
in case of certain controlled corporations), or 
"(B) an additional tax is imposed on the taxable income 
of such corporation for such taxable year by section 
1562(b) (relathig to additional tax in case of component 
^°«''P- "7 
members of controlled groups which elect multiple surtax 
exemptions), 
the change in the surtax exemption, or the imposition of such 
additional tax, shall be treated as a change in a rate of tax 
taking effect on January 1,1964." 
Title II—Structural Changes 
SEC. 201. DIVIDENDS RECEIVED BY INDIVIDUALS. 
(a) 
REDUCTION OF 4 PERCENT CREDIT TO 2 PERCENT CREDIT FOR 
('Ar.ENDAR YEAR 1964.— 
(1) GP:NERAL RULE.—Section 34(a) (relating to general rule 
26 use 34. 
for credit for dividends received) is amended by striking out "an 
amount equal to 4 percent of the dividends which are received 
after July 31, 1954, from domestic corporations and are included 
in gross income" and inserting in lieu thereof: 
"an amount equal to the following percentage of the dividends which 
lire received from domestic corporations and are included in gi*oss 
iiK'ome: 
"(1) 4 percent of the amount of such dividends which are 
received before January 1, 1964, and 
"(2) 2 percent of the amount of such dividends which are 
received during the calendar year 1964." 
(2) LIMITATIONS.—Section 34(b)(2) (relating to limitations 
on amount of credit) is amended— 
(A) by inserting ", or beginning after December 31,1963" 
after "1955" at the end of subparagraph (A), and 
(B) by inserting ", and beginning before January 1, 1964" 
after "1954" at the end of subparagraph (B). 
(b) 
REPEAL OF CREDIT FOR DIVIDENDS RECEIVED BY INDIVIDUALS.— 
Effective with respect to dividends received after December 31, 1964, 
32 
PUBLIC LAW 88-272-FEB. 26, 1964 
78 STAT. 
68A Stat. 37. 
26 use 116. 
26 use 35. 
Ante, p. 24. 
26 u s e 37. 
76 Stat. 963. 
26 use 46. 
26 use 584. 
26 use 642. 
26 use 142. 
26 use 652, 662. 
26 use 702. 
26 use 854. 
74 Stat. 1008. 
26 use 857. 
72 Stat. 1639. 
26 use 871. 
26 use 1375. 
26 use 6014. 
section 34 (relating to dividends received by individuals) is hereby 
repealed. 
(c) 
DOUBLING OV AMOUNT OF PARTIAL EXCLUSION FROM GROSS 
INCOME OF DIVIDENDS RECEIVED BY INDIVIDUALS.—Section 116(a) 
(relating to partial exclusion from gross income of dividends 
received by individuals) is amended by striking out "$50" each place 
it appears and inserting in lieu thereof "$100". 
(d) 
CONFORMING AMENDMENTS.— 
(1) The table of sections for subpart A of part IV of sub-
chapter A of chapter 1 is amended by striking out 
"Sec. 34. Dividends received by individuals." 
(2) Section 35(b) (1) is amended by striking out "the sum of 
the credits allowable under sections 33 and 34" and inserting in 
lieu thereof "the credit allowable under section 33". 
(3) Section 37(a) is amended by striking out "section 34 
(relating to credit for dividends received by individuals),". 
(4) Section 46(a)(3) is amended by striking out subpara-
graph (B), and by redesignating subparagraphs (C) and (D) 
as " ( B ) " and "(C)", respectively. 
(5) Section 584(c) (2) is amended by striking out "section 34 
or". 
(6) (A) Section 642(a) is amended by striking out para-
graph (3); 
(B) Section 642(i) is amended to read as follows: 
"(i) 
CROSS REFERENCES.— 
"(1) For disallowance of standard deduction in case of estates 
and trusts, see section 142(b)(4). 
"(2) For special rule for determining the time of receipt of divi-
dends by a beneficiary 
under section 652 or 662, see 
section 
116(c)(3)." 
(C) Section 116(c) is amended by adding at the end thereof 
the following new paragraph: 
"(3) The amount of dividends properly allocable to a bene-
ficiary under section 652 or 662 shall be deemed to have been 
received by the beneficiary ratably on the same date that the 
dividends were received by the estate or trust." 
(7) Section 702(a)(5) is amended by striking out "a credit 
under section 34," and the comma after "section 116". 
(8) Section 854(a) is amended by striking out "section 34(a) 
(relating to credit for dividends received by individuals)," and 
the comma after "section 116 (relating to an exclusion for divi-
dends received by individuals)". 
(9) Section 854(b) (1) is amended by striking out "the credit 
under section 34(a)," and the comma after "section 116". 
(10) Section 854(b)(2) is amended by striking out "the 
credit under section 34," and the comma after "section 116". 
(11) Section 857(c) is amended by striking out "section 34(a) 
(relating to credit for dividends received by individuals)," and 
the comma after "section 116 (relating to an exclusion for divi-
dends received by individuals)". 
(12) Section 871(b) is amended by striking out "the sum of 
the credits under sections 34 and 35" and inserting in lieu thereof 
"the credit under section 35". 
(13) Section 1375(b) is amended by striking out "section 34," 
and the comma after "section 37". 
(14) Section 6014(a) is amended ])y striking out "34 or". 
(e) EFFECTIVE DATES.—The amendments made by subsection (a) 
shall apply Avith respect to taxable years ending after December 31, 
11H>3. The amendment made by subsection (b) shall apply with 
68A Stat. 15. 
26 u s e 37. 
78 STAT.] 
PUBLIC LAW 8 8 - 2 7 2 - F E B . 26, 1964 
33 
respect to taxable years ending after December 31, 1904. The 
amendment made by subsection (c) shall apply with respect to tax-
able years beginning after December 31, 1963. The amendments 
made by subsection (d) shall apply with respect to dividends received 
after December ?!d, 1964, in taxable years ending after such date. 
SEC. 202. RETIREMENT INCOME CREDIT OF CERTAIN MARRIED INDI-
VIDUALS. 
(a) DETERMINATION OF KETIREMENT INCOME.—Section 37 (relating 
to retirement income) is amended by redesignating subsection (i) as 
subsection (j) and by inserting after subsection (h) the following new 
subsection: 
"(i) SPECIAL KULES FOR CERTAIN MARRIED COUPLES.— 
"(1) ELECTION.—A husband and wife who make a joint return 
for the taxable year and both of whom have attained the age> of 
65 before the close of the taxable year may elect (at such time and 
in such manner as the Secretary or his delegate by regulations 
prescribes) to determine the amount of the credit allowed by sub-
section (a) by applying the provisions of paragraph (2). 
"(2) SPECIAL RULES.—If an election is made under paragraph 
(1) for the taxable year, for purposes of subsection (a)— 
"(A) if either spouse is an individual who has received 
earned income within the meaning of subsection (b), the othei* 
spouse shall be considered to be an individual who has 
received earned income within the metining of such sub-
section ; and 
"(B) subsection (d) shall be considered as providing that 
the amount of the combined retirement income of both 
spouses shall not exceed $2,286, less the sum of the amounts 
specified in paragraphs (1) and (2) of subsection (d) for 
each spouse." 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply to taxable years beginning after December 31, 1963. 
SEC. 203. REPEAL OF REQUIREMENT THAT BASIS OF SECTION 38 PROP-
ERTY BE REDUCED BY 7 PERCENT; OTHER PROVISIONS 
RELATING TO INVESTMENT CREDIT. 
(a) REPEAL OF REQUIREMENT THAT BASIS BE REDICBD.— 
(1) I N GENERAL.—Subsectiou (g) of section 48 (requiring that 
26 use 48^'' 
the basis of section 38 property be reduced by 7 percent of 
26 use as! 
tlie qualified investment) is hereby repealed. 
(2) INCREASE IN BASIS OF PROPERTY PLACED IN SERVICE BEFORE 
JANUARY 1 , 1 9 6 4 . — 
(A) The basis of any section 38 property (as defined 
in section 48(a) of the Internal Revenue Oode of 1954) 
placed in service l>ef()re January 1, 1964, shall be increased, 
under regulations prescrited by the Secretary of the 
Treasury or his delegate, by an amount equal to 7 percent 
of the qualified inA-estment with respect to such property 
under section 46(c) of the Internal Revenue Code of 
1954. 
If there has l)een any increase with respect to such 
^^ "^^ '*^' 
property under section 48(g) (2) of such Code, the increase 
under the pi'ecediug sentence shall be appropriately reduced 
therefor. 
(B) If a lessor made the election proAdded bv section 
48(d) of ihe Internal Revenue Code of 1954 Avitli respect 
to property placed in service l)efore January 1, 1964— 
(i) subparagraph (A) shall not apply with respect 
to su<*h j)roperty, but 
34 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
(ii) iiiuler regulations ])rescribe(l by the Seoretary of 
the Treasury or liis delegate, the deductions otherwise 
68A Stat. 45. 
alloAvable under section lfi2 of such Code to the lessee 
26 use 162. 
^^^ amounts paid to the lessor under the lease (or, if 
such lessee has purchased such j^i-operty, the basis of 
such property) shall be adjusted in a manner consistent 
with subparagraph (A). 
/ 
(C) The adjustments under this paragraph shall be made 
as of the first day of the taxpayer's first taxable year which 
begins after December 31, 1963. 
(3) CONFORMING AMENDMENTS.— 
76 Stat. 967. 
^^\ 
The last senteuce of scctiou 48(d) (relating to certain 
^^ " 
'^^' 
leased property) is hereby repealed. 
26 use 181. 
(B) Section 181 (relating to deduction for certain unused 
investment credit) is hereby repealed. 
26 use 1016. 
(C) Section 1016(a) (19) (relating to adjustments to 
basis) is amended to read as follows: 
•'(19) to the extent provided in section 48(g) and in section 
203(a)(2) of the Eevenue Act of 1964, in the case of property 
which is or has been section 38 property (as defined in section 
48(a));" 
(D) The table of sections for part VI of subchapter B 
of chapter 1 is amended by striking out the following: 
"Sec. 181. Deduction for certain nnnsed investment credit." 
(4) EFFECTIVE DATE.—Paragraphs (1) and (3) of this subsec-
tion shall apply— 
(A) m the case of property ])laced in ser\-ice after Decem-
ber 31, 1963, with respect to taxable years ending after such 
date, and 
(B) in the case of pi'operty placed in service before Jan-
uary 1, 1964, with respect to taxable years beginning after 
December 31,1963. 
(b) BASIS or CERTAIN LEASED PROPERTY TO LESSEE.—Paragraphs 
(1) and (2) of section 48(d) (relating to certain leased property) are 
amended to read as follows: 
"(1) except as provided in paragraph (2), the fair market 
\'alue of such property, or 
"(2) if such property is leased by a corporation Avhich is a 
member of an afRliated group (within the meaning of section 
26 use 46. 
46(a) (5)) to another corporation which is a member of the same 
affiliated group, the basis of such pr()perty to the lessor," 
(c) TREATMENT OF ELEVATORS AND ESCALATORS FOR PURPOSES OF 
26 use 48, 38. 
piiE INVESTMENT CREDIT.—Scctiou 48(a)(1) (relating to section 3S 
property) is amended— 
(1) by striking out the period at the end of subparagraph 
(B) and inserting in lieu thereof ", or"; and 
(2) by adding after subparagraph (B) the following new 
subparagraph: 
" (C) elevators and escalators, but only if— 
"(i) the construction, reconstruction, or erection of 
the elevator or escalator is completed by the taxpaver 
after June 30,1063, or 
"(ii) the elevator or escalator is accjuired after June 
30, 1963, and the original use of such elevator or esca-
lator commences witli the taxpayer and commences after 
such date." 
68A Stat. 52. 
26 use 168. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
35 
( d ) 
T K K A T M E X T OF Kl-EVATCMiS AX1> ESCALATOKS If ()]{ PlUrOSKS OF 
SKCTIOX 1*245.—Section I'i+afii) (relntino- to «rini\ from dispositions 
26 use 1
^
2
4
5
^
.
' 
of certain depreciahle property) is amended— 
(1) by striking- out so much of para<^i"apli (2) as precedes 
tlie second sentence tliereof and inserting in lieu thereof the 
following: 
"(2) RECo^rPITTED BASIS,—Foi" purposes of this section, the 
term 'i-ecomputed basis' means— 
"(A) with respect to any ])roperty referred to in para-
graph (3) (A) or (B), its adjusted basis recomputed by 
adding thereto all adjustments, attributable to periods after 
December 31,1961, or 
"(B) with respect to any property referred to in para-
graph (3)(C), its adjusted basis recomputed by adding 
thereto all adjustments, attributable to periods after June 
30, 1963, 
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 for 
amortization under section 168,"; 
(2) by striking out the period at the end of paragraph (3) (B) 
and inserting in lieu thereof ", or"; and 
(3) by adding at the end of paragraph (3) the following new 
subparagraph: 
"(C) an elevator or an escalator," 
(e) TREATMENT OF lNA'EsT:\rENT Cincnrr RY FEDERAL REOFLATORY 
A(tEX(TES.—It was the intent of the Congress in providhig an 
investment credit under section 38 of the Internal Revenue Code of 
1954, and it is the intent of the ('ongress in repealing the reduction 
in basis required by section 48(g) of such Code, to provide an 
In(e, p."33 
incentive for modernization and growth of private industry (includ-
ing that portion thereof which is regulated). 
Accordingly, Congress 
does not intend that any agency or instrumentality of the United 
States having jurisdiction with res])ect to a taxpaj^er shall, without 
the consent of the taxpayer, use— 
(1) in the case of ]nd)lic utility property (as defined in 
section 46(c) (3) (B) ()f the Internal Revenue Code of 1954), 
more than a proportionate part (determined with i*eference to 
the average useful life of the property with respect to which 
the credit was allowed) of the credit against tax allowed for any 
taxable year by section 38 of such (^ode, or 
(2) in the case of any other j^roperty, any credit against 
tax allowed by section 38 of such Code. 
fo reduce such taxpayer's Federal income taxes for the purpose of 
establishing the cost of service of the taxpayer or to accomplish 
a similar result by anj- other method. 
(f) EFFECTIVE DATES.— 
(1) The amendments made by subsection (b) shall apply 
Avith respect to i^roperty i)ossession of which is transferred to a 
lessee on or after the date of enactment of this Act. 
(2) The amendments made by subsection (c) shall appl^- with 
respect to taxable years ending after June 30,1963. 
(3) The amendments made by subsection (d) shall apply with 
respect to dispositions after December 31, 1963, in taxable years 
en d i n g a ft er such date. 
76 Stat. 962. 
26 use 38, 
26 use 46. 
72 Stat. 1613. 
26 u s e 213. 
36 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
SEC. 204. GROUP-TERM LIFE INSURANCE 
PURCHASED FOR EM-
PLOYEES. 
(a) 
INCLUSION IN INCOME.— 
76^stlt^*iooi^' 
(1) Part I I of subchapter B of chapter 1 (relatmg to items 
26 use 71-78. 
specifically included in gross income) is amended by adding at 
the end thereof the following new section: 
"SEC. 79. GROUP-TERM LIFE INSURANCE PURCHASED FOR EM-
PLOYEES. 
"(a) GENERAL RULE.—There shall be included in the gross income 
of an employee for the taxable year an amount equal to the cost of 
group-term life insurance on his life provided for part or all of such 
year under a policy (or policies) carried directly or indirectly by his 
employer (or employers); but only to the extent that such cost 
exceeds the sum of— 
" (1) the cost of $50,000 of such insurance, and 
"(2) the amount (if any) paid by the employee toward the 
purchase of such insurance. 
"(b) EXCEPTIONS.—Subsection (a) shall not apply to— 
"(1) the cost of group-term life insurance on the life of an 
individual which is provided under a policy carried directly or 
indirectly by an employer after such individual has terminated 
his employment with such employer and either has reached the 
retirement age with respect to such employer or is disabled 
(within the meaning of paragraph (3) of section 213(g), deter-
mined without regard to paragraph (4) thereof), 
"(2) the cost of any portion of the group-term life insurance 
on the life of an employee provided during part or all of the 
taxable year of the employee under which— 
"(A) the employer is directly or indirectly the beneficiary, 
or 
26 use 170. 
"(B) a person described in section 170(c) is the sole 
beneficiary, 
for the entire period during such taxable year for which the 
employee receives such insurance, and 
"(3) the cost of any group-term life insurance which is pro-
26 use 72^^' 
vided under a contract to which section 72 (m) (3) applies. 
"(c) DEI'ERMINATION OF COST OF INSURANCE.—For purposes of this 
Post, p. 37. 
se(ition and section 6052, the cost of group-term insurance on the life 
of an employee provided during any period shall be determined on the 
basis of uniform premiums (computed on the basis of 5-year age 
brackets) prescribed by regulations by the Secretary or his delegate. 
In the case of an employee who has attained age 64, the cost prescribed 
shall not exceed the cost with respect to such individual if he were 
age 63." 
(2) The table of sections for part I I of subchapter B of chap-
ter 1 is amended by adding at the end thereof the following: 
"Sec. 79. Group-term life insurance i)urchasecl for employees." 
26 use 7701. 
(;|) Section 7701(a) (20) (defining employee) is amended by 
striking out "For the purpose of applying the provisions of 
26 use 104. 
sections 104'' and inserting in lieu thereof "For the purpose of 
applying the provisions ot section 79 with respect to group-tenn 
life insurance purchased for employees, for the purpose of apply-
ing the provisions of sections 104". 
6/stat.'6i6'^' 
^*') WITHHOLDING.—Section 3401(a) 
(relating to definition of 
75 Stat! 626.' 
wages) is amended by striking out the period at the end of paragraph 
26 use 3401. 
^j3^ .jj^j inserting in lieu thereof "; or'', and by adding at the end 
thereof the following new paragraph : 
" (14) in the form of group-term life insurance on the life of an 
employee; or". 
78 STAT;] 
PUBLIC LAW 88-272-FEB. 26, 1964 
37 
(c) INFORMATION Ep:roR'nNG.— 
(1) REQIIKEMENT.—Subpart C of part 111 of subcliapter A 
of oliapter (U (relating? to inforniatioii and returns) is amended 
26 us^c^eosl!' 
by adding at the end thereof the following new section: 
"SEC. 6052. RETURNS REGARDING PAYMENT OF WAGES IN THE FORM 
OF GROUP-TERM LIFE INSURANCE. 
"(a) 
REQUIREMENT OF REPORTING.—Every employer who during 
any calendar year provides group-term life insurance on the life 
of an employee during part or all of such calendar year \mder a 
policy (or policies) carried directly or indirectly by such employer 
shall make a return according to the forms or regulations prescribed 
by the Secretary or his delegate, setting forth the cost of such 
insurance and the name and address of the employee on whose life 
such insurance is provided, but only to the extent that the cost of 
such insurance is includible in the employee's gross income under 
section 7&(a). For purposes of this section, the extent to which 
^"''''P-36. 
the cost of group-term life insurance is includible in the employee's 
gross income under section 79(a) shall be determined as if the 
employer were the only employer paying such employee i-enunier-
ation in the form of such insurance. 
"(b) STATEMENTS TO B E FURNISUP^) TO EMPLOYEES W I J I I RESPECT 
ro WHOM INFORMATION I S FURNISHED.—Every em])loyer making a 
return under subsection (a) shall furnish to each employee whose name' 
is set forth in such return a written statement showing the cost of the 
group-term life insurance shown on such return. The written state-
ment required under the preceding sentence shall be fui'nished to the 
employee on or before January 81 of the year following the calendar 
year for which the return under subsection (a) was made." 
(2) PENALTIES FOR FAILURE TO FURNISH STATEMENTS TO PERSONS 
WITH RESPECT TO WHOM RETLTiNS ARE FILED.—Section (i()78 (I'elat- post^p.^y's!"^^' 
ing to failure to furnish certain statements) is amended— 
26'usc 6678. 
(A) by striking out "or (5049(c)" and inserting in lieu 
thereof "6049(c), or 60.52(b)"; and 
(B) by striking out "or 6049(a)(1).*' and inseiting in 
26 use 6049. 
lieu thereof "6049(a) (J), or 6052(a),". 
(8) CLERICAL AMENDMENT.—The table of sections for subpart 
('of part 111 of subchapter A of cha])ter 61 is amended by adding 
at the end thereof the following: 
"Sec. 6().")2. Returns regarding payment of wajres in tlie form of 
group-term life insurance." 
(4) CROSS REFERENCE.— 
For penalty for failure to file information returns required by 
section 6052(a) of the Internal Revenue Code of 1954 (added by 
paragraph (1) of this subsection), see section 6652(a)(3) of such 
Code (as amended by section 221(b)(2) of this Act). 
(d) EFFEcriVE DATES.—The amendments made by subsections (a) 
and (c), and paragraph (8) of section 66o2(a) of the Internal Reve-
nue Code of 19.54 (as amended by secti(m 221(b)(2) of this Act), 
^°«''P- '^^^ 
shall apply with respect to group-term life insurance pro\ided after 
December 81, 1968, in taxable years ending after such date. The 
amendments made by sul>section (b) shall apply with respect to 
remuneration paid after December 81, 1968. in the form of group-
lerm life insurance proxided after such date. In applying section 
79(b) of tlie Internal Revenue (xnle of 1954 (as added by subsection 
(a)(1) of this section) to a taxable year beginning before May 1, 
^rxte, v 36. 
1964. if jiaragraph (2) (B) of such section api)lies with i-espect to an 
j^ni|)loyee for the period beginning May 1. 1964, and ending with the 
dose of his first taxable year endnig after A])ril 80, 1964, such |)ai'a-
graph (2)(B) shall be treated as applying with res|)ect to such 
26 use 105. 
26 use 101-121. 
38 
PUBLIC LAW 88-27 2-FEB. 26, 1964 
[78 STAT. 
employee for the period beginning January 1, 1964, and ending April 
80, 1964. 
SEC. 205. AMOUNTS RECEIVED UNDER WAGE CONTINUATION PLANS. 
(a) WAGE CONTINUATION PLANS.—The second sentence of sec-
^8^ |tat,^3o. 
f JQjj 105(d) (relating to wage continuation plans) is amended to read 
o
« Ttcr- in.: 
^^ follows: "The preceding sentence shall not apply to amounts attrib-
utable to the first 30 calendar days in such period, if such amounts are 
at a rate which exceeds 75 percent of the regular weekly rate of wages 
of the employee (as determined under regulations prescribed by the 
Secretary or his delegate). If amounts attributable to the first 
80 calendar days in such period are at a rate which does not exceed 
75 percent of the regular weekly rate of wages of the employee, the 
first sentence of this subsection (1) shall not apply to the extent that 
such amounts exceed a weekly rate of $75, and (2) shall not apply to 
amounts attributable to the first 7 calendar days in such period unless 
t he employee is hospitalized on account of personal injuries or sickness 
for at least one day during such period." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to amounts attributable to periods of absence commenc-
ing after December 31, 1963. 
SEC. 206. EXCLUSION FROM GROSS INCOME OF GAIN ON SALE OR 
EXCHANGE OF RESIDENCE OF INDIVIDUAL WHO HAS AT-
TAINED AGE 65. 
(a) I N GENERAL.—Part I I I of subchapter B of chapter 1 (relating 
to items specifically excluded from gross income) is amended by 
redesignating section 121 as section 122 and by inserting before such 
section the lollowing new section: 
"SEC. 121. GAIN FROM SALE OR EXCHANGE OF RESIDENCE OF INDI-
VIDUAL WHO HAS ATTAINED AGE 65. 
" (a) GENERAL RULE.—At the election of the taxpayer, gi-oss income 
does not include gain from the sale or exchange of property if— 
"(1) the taxpayer has attained the age of 65 before the date of 
such sale or exchange, and 
"(2) during the 8-year period ending on the date of the sale or 
exchange, such property has been owned and used by the taxpayer 
as his principal residence for periods aggregating 5 years or more. 
"(b) LIMITATIONS.— 
"(1) WHERE ADJUSTED SALES PRICE EXCEEDS $20,000.—If the 
adjusted sales price of the property sold or exchanged exceeds 
$20,000, subsection (a) shall apply to that portion of the gain 
which bears the same ratio to the total amount of such gain as 
$20,000 bears to such adjusted sales price. For purposes of Uie 
preceding sentence, the term 'adjusted sales price' has the meaning 
26 use 1034. 
assigned to such term by section 1034(b) (1) (determined without 
regard to subsection (d) (7) of this section). 
"(2) APPLICATION TO ONLY ONE SALE OR EXCHANGE.—Sub-
section (a) shall not apply to any sale or exchange by the tax-
payer if an election by the taxpayer or his spouse under sub-
section (a) with respect to any other sale or exchange is in 
effect. 
"(c) ELT^.CTION.—An election under subsection (a) may be made 
or revoked at any time before the expiration of the period for 
making a claim for credit or refund of the tax imposed by this 
chapter for the taxable year in which the sale or exchange occurred, 
and shall be made or I'evoked in such manner as the Secretary or his 
delegate shall by regulations pi'escribe. In the case of a taxpayer 
who is married, an election under subsection (a) or a revocation 
(hereof may be made only if his s^wuse joins in such election or 
revocation. 
68A Stat. 733. 
26 u s e 6013. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
39 
"(d) 
SPECIAL RULES.— 
"(1) 
PROPERTY HELD JOINTLY BY HUSBAND AND WIFE.—For 
purposes of tliis section, if— 
"(A) property is held by a husband and wife as joint 
tenants, tenants by the entirety, or community property, 
"(B) such husband and wife make a joint return under 
section 6013 for the taxable year of the sale or exchange, and 
"(C) one spouse satisfies the age, holding, and use i-equire-
ments of subsection (a) with respect to such property, 
then both husband and wife shall be treated as satisfying the age, 
holding, and use requirements of subsection (a) with respect to 
such property. 
" (2) PROPERTY OF DECEASED SPOUSE.—For purposes of this sec-
tion, in the case of an unmarried individual whose spouse is 
deceased on the date of the sale or exchange of propei"ty, if— 
"(A) the deceased spouse (during the 8-year period end-
ing on the date of the sale or exchange) satisfied the holding 
and use requirements of subsection (a) (2) with respect to 
such property, and 
"(B) no election by the deceased spouse undei- subsection 
(a) is in effect with respect to a prior sale or exchange, 
then such individual shall be treated as satisfying the holding 
and use requirements of subsection (a)(2) witli resjx'ct to suclv 
property. 
"(3) TENANT-STC)€KI10IJ)ER IN (OOPEKATIM-: H()l81N(5^ C
O
R
P
O
R
A
-
TION.—For purposes of this section, if the taxpayer holds stock 
as a tenant-stockholder (as defined in section 216) in a coopera- 
26 use 216. 
tive housing corporation (as defined in such section), then— 
"(A) the holding requirements of subsection (a)(2) shall 
be applied to the holding of such stock, and 
"(B) the use requirements of subsection (a)(2) shall 
be applied to the house or apartment wliich tlie taxpayer was 
entitled to occupy as such stockholder. 
"(4) INVOLI'NTARY CONVERSIONS.—F"()r purposes of this section. 
tlie destruction, theft, seizure, reijuisition, or condemnation of 
|)roperty shall be treated as the sale of such pro[)ei"ty. 
"(5) PROPERI'Y USED IN PART AS PRINCIPAL RESIDENCE.—Tu the 
case of property only a portion of which, during the 8-year period 
ending on tlie date of the sale or exchange, has been owned and 
used by the taxpayer as his principal residence for periods aggi-e-
gating 5 years or more, this section shall a[)pl3' with respect to so 
much of the gain from the sale or exchange of such property as is 
<leterniined, undei' regulations prescribed by the Secretary or his 
delegate, to be attributable to tlie ])ortion of the property so 
owned and used by the tax])ayer. 
"(6) DETERMINATION OF MARITAL STATUS.—In tlie case of any 
sjile or exchange, for purposes of this section— 
"(A) the determination of wliether an individual is mar-
ried shall l>e made as of the date of the sale or exchange: 
and 
"(B) an individual legally separated from his spouse 
under a decree of div^orce oi- of separate maintenance shall 
not be considered as married. 
"(7) APPLICATION OF SECTIONS loaa AND JO.U.—In applying 
sections 1033 (relating to involuntai-y conversions) and 1034 1034.^^*^ ^°"' 
(relating to sale or exchange of residence), the amount realized 
from the sale or exchange of property shall be treated as l)ehig 
the amount determined without leyfard to this section, reduced bv 
31-667 0-65—6 
40 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
the amount of gain not included in <2:ro«s income piii-snant to an 
election under this section.'" 
(1)) TKCIINICAL Axn CI^ERICAL A.MKXDMKXTS.— 
26 us^c 60^^°* 
^^^ Section H()12(c) 
(relating to persons required to make 
returns of income) is amended to read as follows: 
"(c) 
CERTAIX INCOME EARNED ABROAD OR F R O M SALE OF R E S I -
DENCE.—For purposes of this section, gross income shall be computed 
Ante, p. 38. 
withoiit regard to the exclusion provided for in section 121 (relating 
(o sale of residence by individual who has attained age 65) and with-
26 us^c 91°°^ 
out regard to the exclusion provided for in section 911 (relating to 
ea rned income from sources without the United States)." 
(2) T h e table of sections for part I I I of subchapter B of 
chapter 1 is amended by striking out 
"Sec. 121. Cross references to other Acts." 
and inserting in lieu thereof 
"Sec. 121. Gain from sale or exchange of residence of inrtiviilual 
who has attained age 65. 
"Sec. 122. Cross references to other Acts." 
26 use 1033. 
^3^ Section 1033(h) (relating to involuntary conversions) is 
amended by adding at the end thereof the following new para-
graph : 
"(3) For exclusion from gross income of certain gain from invol-
untary conversion of residence of taxpayer who has attained age 65, 
see section 121." 
26 use 1034. 
(^^^ Section 1034 (relating to sale or exchange of residence) 
is amended by adding at the end thereof the following new 
subsection: 
" ( k ) 
CROSS REFERENCE.— 
"For exclusion from gross income of certain gain from sale or 
exchange of residence of taxpayer who has attained age 65, see sec-
tion 121." 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
;ipply to dispositions after December 31, 1063, in taxable years endin|» 
after such date. 
SEC. 207. DENIAL OF DEDUCTION FOR CERTAIN STATE, LOCAL, ANI 
FOREIGN TAXES. 
Il\ilc\e4' 
i^) I^' GENERAL.—Subsections (a), (b), and (c) of section 164 
(relating to deduction for taxes) are amended to reacl as follows: 
" (a) GENERAL RULE.—Except as otherwise provided in this section, 
the following taxes shall be allowed as a deduction for the taxable 
year within which paid or accrued : 
" (1) State and local, and foreign, real property taxes. 
"(2) State and local ])ersonal property taxes. 
"(3) State and local, and foreign, income, war profits, and 
excess profits taxes. 
"(4) State and local general sales taxes. 
"(5) State and local taxes on the sale of gasoline, diesel fuel, 
and other motor fuels. 
In addition, there shall be allowed as a deduction State and local, and 
foreign, taxes not described in the ]>receding sentence which are paid 
or accrued within the taxable year in carrying on a trade or business 
or an activity described in section 212 (relating to expenses for pro-
duction of income). 
"(b) 
DEFINITIONS AND SPECIAL RULES.—For purposes of this 
section— 
"(1) PERSONAL I»ROPEKTY TAXES.—The term 'personal pro[>erty 
tax" means an ad valorem tax which is imposed on an annual basis 
in respect of personal property. 
26 use 212. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
41 
" ( 2 ) 
G E N E R A I . SALES TAXES.— 
"(A) I N GENERAL.—The term 'general sales tax' means 
a tax imposed at one rate in respect of the sale at retail 
of a broad range of classes of items. 
"(B) SPECIAL RULES FOR FOOD, ETC.—In the case of items 
of food, clothing, medical supplies, and motor vehicles— 
"(i) the fact that the tax does not apply in respect 
of some or all of such items shall not be taken into 
account in determining whether the tax applies in 
respect of a broad range of classes of items, and 
"(ii) the fact that the rate of tax applicable in 
respect of some or all of such items is lower than the 
general rate of tax shall not be taken into account in 
determining 
whether the tax is imposed at one 
rate. 
"(C) ITEMS TAXED AT DIFFERENT RATES.—Except in the 
case of a lower rate of tax applicable in respect of an 
item described in subparagraph (B), no deduction shall 
be allowed under this section for any general sales tax im-
posed in respect of an item at a rate other than the general 
rate of tax. 
"(D) COMPENSZ^TING "
U
S
E TAXES.—A compensating use 
tax in respect of an item shall be treated as a general sales 
tax. 
For purposes of the preceding sentence, the term 
'compensating use tax' means, in respect of any item, a tax 
which— 
"(i) is imposed on the use, storage, or consumption 
of such item, and 
" (ii) is complementary to a general sales tax, but onlj' 
if a deduction is allowable under subsection (a) (4) in 
respect of items sold at retail in the taxing jurisdiction 
which are similar to such item. 
" (3) STATE OR LOCAL TAXES.—A State or local tax includes only 
a tax imposed by a State, a possession of the United States, or a 
political subdivision of any of the foregoing, or by the District 
of Columbia. 
"(4) FOREIGN TAXES.—A foreign tax includes only a tax 
imposed by the authority of a foreign countiy. 
"(5) SEPARATELY STATED GENERAL SALES TAXES AND GASOLINE 
TAXES.—If the amount of any general sales tax or of any tax on 
the sale of gasoline, diesel fuel, or other motor fuel is separately 
stated, then, to the extent that the amount so stated is paid by 
(he consumer (otherwise than in connection with the consumer's 
trade or business) to his seller, such amount shall be treated as a 
tax imposed on, and paid by, such consumer. 
"(c) DEDUCTION DENIED IN CASE OF CERTAIN TAXES.—No deduction 
si I nil be allowed for the following taxes: 
" (1) Taxes assessed against local benefits of a kind tending to 
iiK-rease the vdlne of the property assessed; but this paragraph 
shall not pi-event the deduction of so much of such taxes as is 
properly allocable to maintenance or interest charges. 
"(2) Taxes on real property, to the extent that subsection (d) 
requires such taxes to be treated as imposed on another taxpayer.'' 
(b) TECHNICAL AMENDMENTS.— 
(1) The first sentence of section 164(f) (relating to payments ' ^^ sta^ leos. 
for iimiilcipal services in atomic energy coninmnities) is amended 
by inserting "Stale" before "real property taxes". 
26 use 3101-
3126. 
42 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
72^sttt!*i608^' 
(2) Section 164(g) (relating to cross references) is ninendetl 
26 use 164. 
to read as follows: 
"(g) 
CROSS REFERENCES.— 
"(1) For provisions disallowing any deduction for the payment 
of the tax imposed by subchapter B of chapter 3 (relating to tax-
free covenant bonds), see section 1451. 
"(2) For provisions disallowing any deduction for certain taxes, 
see section 275." 
26 use 261-274. 
(3) (^) p^^.^ j x of Subchapter B of chapter 1 (relating to 
items not deductible) is amended by adding at the end tliereof 
the following new section: 
"SEC. 275. CERTAIN TAXES. 
"(a) GENERAL RULE.—No deduction shall be allowed for the follow-
ing taxes: 
"(1) Federal income taxes, including— 
75 Stat. 141. 
"(A) the tax imposed by section 3101 (relating to the tax 
on employees under the Federal Insurance Contributions 
Act); 
"(B) the taxes imposed by sections 3201 and 3211 (relating 
•jy^ii^i^^22i^' ^^' 
^^ ^ ^
® taxes on railroad employees and railroad employee 
26 use 3201, 
representatives); 
and 
3211- 
"(C) the tax withheld at source on wages under section 
^°usc' ^^°' 
3402, and corresponding provisions of prior revenue laws. 
"(2) Federal war profits and excess profits taxes. 
"(3) Estate, inheritance, legacy, succession, and gift taxes. 
"(4) Income, war profits, and excess profits taxes imposed by 
the authority of any foreign country or possession of the United 
States, if the taxpayer chooses to take to any extent the benefits 
26 use 901. 
Q
-
f section 901 (relating to the foreign tax credit). 
26 use 164. 
«(5) Taxes on real property, to the extent that section 164(d) 
requires such taxes to be treated as imposed on another taxpayer. 
"(b) 
CROSS REFERENCE.— 
"For disallowance of certain other taxes, see section 164(c)." 
(B) The table of sections for such part I X is amended by add-
ing at the end thereof the following: 
"Sec. 275. Certain taxes." 
26 use 535. 
^4^ Paragraph (1) of section 535(b) (relating to adjustments 
to accumulated taxable income) is amended by striking out "sec-
tion 164(b) (6) "and inserting in lieu thereof "section 275 (a) (4)". 
26 use 545. 
(5) The first sentence of paragraph (1) of section 545(b) 
(relating to adjustments to personal holding company taxable 
income) is amended by striking out "section 164(b) (6)" and in-
serting in lieu thereof "section 275(a) (4)". 
26 use 556. 
(g) The first sentence of paragraph (1) of section 556(b) 
(relating to adjustments to forei^ personal holding company 
taxable income) is amended by striking out "section 164 (b) (6)" 
and inserting in lieu thereof "section 275(a) (4)". 
26 use 901. 
(Y) Paragraph (1) of section 901(d) (relating to credit for 
taxes imj)ose4 by foreign countries) is amended by striking out 
"section 164" and inserting in lieu thereof "sections 164 and 275". 
26 use 903. 
(8) Section 903 (relating to credit for taxes imposed by a for-
eign country in lieu of income, etc., taxes) is amended by striking 
out "section 164(b)" and insei-ting in lieu thereof "sections 164(a) 
and 275(a)". 
Ante, p. 40. 
26 use 164. 
68A Stat. 49. 
26 use 165. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
43 
(e) 
EFFECTIVE DATE.— 
(1) GENERAL RULE.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to taxable years 
beginning after December 31,1963. 
(2) SPECIAL TAXING DISTRICTS.—Section 164 (c)(1) of the Inter-
nal Revenue Code of 1954 (as amended by subsection (a)) shall 
not prevent the deduction under section 164 of such Code (as so 
amended) of taxes levied by a special taxing district which is 
described in section 164(b) (5) of such Code (as in effect for a 
taxable year ending on December 31, 1963) and which was in 
existence on December 31,1963, for the purpose of retiring indebt-
edness existing on such date. 
SEC. 208. PERSONAL CASUALTY AND THEFT LOSSES. 
(a) LIMITATION ON AMOUNT OF CASUALTY OR THEFT Loss DEDUC-
TION.—Section 165 (c) (3) (relating to losses of property not connected 
with trade or business) is amended to read as follows: 
" (3) losses of property not connected with a trade or business, 
if such losses arise from fire, storm, shipwreck, or other casualty, 
or from theft. A loss described in this paragraph shall be allowed 
only to the extent that the amount of loss to such individual 
arising from each casualty, or from each theft, exceeds $100. 
For purposes of the $100 limitation of the preceding sentence, 
a husband and wife making a joint return under section 6013 for 
^^ ^^^ ^°^^-
the taxable year in which the loss is allowed as a deduction shall 
be treated as one individual. 
No loss described in this paragraph 
shall be allowed if, at the time of filing the return, such loss has 
been claimed for estate tax purposes in the estate tax return," 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to losses sustained after December 31, 1963, in taxable 
years ending after such date. 
SEC. 209. CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS. 
(a) 
CERTAIN ORGANIZATIONS ADDED TO ADDITIONAL 10-PERCENT 
CHARITABLE LiMiTATiON.--Section 170(b) (I) (A) (relating to limita- 
H ulc iVo? 
tion on amount of deduction for charitat3le contributions by individ-
uals) is amended by striking out "or" at the end of clause (iii), and 
l)y inserting after clause (iv) the following new clauses: 
"(v) a governmental unit referred to in subsection 
(^)(1)'0^ 
. 
. 
.
.
. 
" (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 
performance by such organization of its charitable, edu-
cational, or other purpose or function constituting the 
basis for its exemption under section 501(a)) from a 
26 use soi. 
governmental unit referred to in subsection (c) (1) or 
from direct or indirect contributions from the general 
public,". 
(b) 
UNLIMITED CHARITABLE CONTRIBUTION DP:DUCTION.—Section 
170 (relating to charitable, etc., contributions and gifts) is amended by 
^°^'' ^' ^
^
^ 
inserting after subsection (f) (added by subsection (e) of this section) 
the following new subsection: 
"(g) 
APPLICATION OF UNLIMITED CHARITABLE CONTRIBUTION DE-
miCTION.— 
"(1) 
ALLOWANCE OF DEDUCTION FOR TAXABLE YEARS BEGIN-
NING AFTER D
E
C
E
M
B
E
R 31, 1963.—If the taxable year begins after 
December 31, 1963— 
"(A) subsection (b)(1)(C) shall apply only if the tax-
payer so elects (at such time and in such manner as the Secre-
tary or his delegate by i*egulations prescribes); and 
44 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(B) for purposes of subsection (b) (1) (C), tlie amount of 
the charitable contributions for the taxable year (and for all 
prior taxable years beginning after December 31, 1963) 
shall be determined without the application of subsection 
(b) (5) and solely by reference to charitable contributions 
described in paragraph (2). 
If the taxpayer elects to have subsection (b) (1) (C) apply for the 
taxable year, then for such taxable year subsection (a) shall apply 
only with respect to charitable contributions described in para-
graph (2), and no amount of charitable contributions made in 
the taxable year or any prior taxable year may be treated under 
subsection (b) (5) as having been made in the taxable year or 
in any succeeding taxable year. 
"(2) QUALIFIED CONTRIBUTIONS.—The charitable contributions 
referred to in paragraph (1) are— 
"(A) any charitable contribution described in subsection 
(b)(1)(A); 
"(B) any charitable contribution, not described in subsec-
tion (b)(1)(A), to an organization described in subsection 
(c) (2) substantially more than half of the assets of which 
is devoted directly to, and substantially all of the income of 
which is expended directly for, the active conduct of the 
activities constituting the purpose or function for which it is 
organized and operated; 
"(C) any charitable contribution, not described in sub-
section (b) (1) (A), to an organization described in subsection 
(c)(2) which meets the requirements of paragraph (3) with 
respect to sucli charitable contribution; and 
"(D) any charitable contribution payment of which is 
made on or before the date of the enactment of the Revenue 
Act of 1964. 
"(3) 
ORGANIZATIONS EXPP:NDING AT LEAST 50 P?:RCENT OF DONOR'S 
CONTRIBUTIONS.—An Organization 
shall be an 
organization 
referred to in paragraph (2) (C), with respect to any charitable 
contribution, only if— 
"(A) not later than the close of the third year after the 
organization's taxable year in which the contribution is re-
ceived (or before such later time as the Secretary or his dele-
gate may allow upon good cause shown by such organization), 
such organization expends an amount equal to at least 50 
percent of such contribution for— 
"(i) the active conduct of the activities constituting 
the purpose or function for which it is organized and 
operated, 
"(ii) assets which are directly devoted to such active 
conduct, 
"(iii) contributions 
to 
organizations 
which 
are 
described in subsection (b) (1) (A) or in paragraph (2) 
(B) of this subsection, or 
"(iv) any combination of the foregoing; and 
"(B) for the period beginning with the taxable year in 
Avhich such contribution is received and ending with the 
taxable year in which subparagraph (A) is satisfied with 
respect to such contribution, such organization expends all 
of its net income (determined without regard to capital 
gains and losses) for the purposes described in clauses (i), 
(ii), (iii), and (iv) of subparagraph (A). 
If the taxpayer so elects (at such time and in such manner as the 
Secretary or his delegate by regulations prescribes) with respect 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
45 
to contributions made by him to any organization, then, in 
applying subpaiagraph (B) with respect to contributions made 
by him to sucli organization during his taxable year for which 
such election is made and during all his subsequent taxable years, 
amounts expended by the organization after the close of any of 
its taxable years and on or before the loth day of the third 
month following the close of such taxable year shall be treated 
as expended during such taxable year. 
"(4) DISQUALIFYING TRANSACTIONS.—An organization shall be 
an organization referred to in subj^aragraph (B) or (C) of 
paragraph (2) only if at no time during the period consisting of 
the organization's taxable year in which the contribution is 
received, its 3 preceding taxable yeai-s, and its 3 succeeding tax-
able years, such organization— 
" (A) lends any part of its income or corpus to, 
"(B) pays compensation (other than reasonable com-
pensation for personal services actually rendered) to, 
"(C) makes any of its serA'ices available on a preferential 
basis to, 
"(D) purchases more than a minimal amount of securities 
or other property from, or 
"(E) sells more than a minimal amoinit of securities or 
other property to, 
the donor of such contribution, any member of his family (as 
defified in section 267(c) (4)), any employee of the donor, any 26^us*c*267^* 
officer or employee of a corporation in which he owns (directly 
or indirectly) 50 percent or more in value of the outstandhig 
stock, or any partner or employee of a partnership in which he 
owns (directly or indirectly) 50 percent or more of the capital 
interest or profits interest. 
This paragraph shall not apply to 
transactions occurring on or before the date of the enactment 
of tlie^ Re venue Act of 1964."' 
(c) 5-YKAR 
CARRYOVER OF CERTAIN CirARiTAHLK COXTRIHI TIONS 
MADE HY INDIVIDUALS.— 
(1) I N GENERAL.—Section 170(b) (relating to limitations on 
amount of deduction for charitable cimtributions) is amended by 
adding at the end thereof the following new paragraph: 
"(5) 
CARRYOVER 
OF 
CERTAIN 
EXCESS 
COXTRIIUTIONS 
BY 
INDIVIDUALS. 
"(A) In the case of an individual, if the amount of chari-
table contributions described in paragraph (1)(A) payment 
of which is made within a taxable year (hereinafter in this 
paragraph referred to as the 'contiibution year') beginning 
after December 31,1963. exceeds 30 percent of the taxpayer's 
adjusted gi-oss income for such year (com])uted without 
regard to any net operating loss carryback to such year 
under section 172), such excess shall l)e treated as a chari- 
^^ "^*^ ^'^'-
table contribution described in paragraph (1)(A) paid in 
each of the 5 succeeding taxable years in order of time, but. 
with respect to any such succeeding taxable year, only to the 
extent of the lesser of the two following amounts: 
"(i) the amount by which 30 percent of the taxpayer's 
adjusted gross income for such succeeding taxable year 
(cx)mpute(i without regard to any net operating loss 
carryback to such succeeding taxable year under section 
172) exceeds the sum of the charitable contributions 
describe<l in paragra])h (1)(A) payment of which is 
made by the taxpa3'er within such succeeding taxable 
year (determined without regard to this subparagrapli) 
72 Stat. 1610. 
26 use 170. 
46 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
and the charitable contributions described in paragraph 
(1)(A) payment of which was made in taxable years 
(beginning after December 31, 1963) before the contri-
bution year which are treated under this subparagraph 
as having been paid in such succeeding taxable year; or 
"(ii) in the case of the first succeeding taxable year, 
the amount of such excess, and in the case of the second, 
third, fourth, or fifth succeeding taxable vear, the portion 
of such excess not treated under this suoparagraph as a 
charitable contribution described in paragraph (1)(A) 
paid in any taxable year intervening between the con-
tribution year and such succeeding taxable year. 
"(B) In applying subparagraph (A), the excess deter-
mined under subparagraph (A) for the contribution year 
shall be reduced to the extent that such excess reduces taxable 
income (as computed for purposes of the second sentence of 
26 us^c f?^^' 
section 172 (b) (2)) and increases the net operating loss deduc-
tion for a taxa])le year sucM-eedi iig the contribution year." 
72 Stat. 1631, 
(2) TECHNICAL AM?:XDMKNT«.—Sections .545(b)(2) (i"elating 
<() deductions for charitable contributions by personal holding 
26 use 556. 
companies) and o56(b) (2) (relating to deductions for charitable 
contributions by foreign personal holding companies) are each 
amended by striking out "section 170(b)(2)" and inserting in 
lieu thereof ''section 170 (b) (2) and (5)". 
(d) 5-YEAR CAKRYOVER OF CERTAIN' CHARrrAJiiJ*: CoNnnBunoxs 
MAHE BY CoRPOR-VriONS.— 
68Astat. 58. 
(1) j ^ GENERAL.—Sectlou 170(b)(2) (relating to limitation 
^^ 
' 
on amount of deduction for charitable contributions by corpora-
tions) is amended by striking out the sentence following subpara-
graph (D) and inserting in lieu thereof the follow^ing: 
"Any contribution made by a corporation in a taxable year (here-
inafter in this sentence referred to as the 'contribution year') in 
excess of the amount deductible for such year under the preced-
ing sentence shall be deductible for each of the 5 succeeding 
taxable years in order of time, but only to the extent of the lesser 
of the two following amounts: (i) the excess of the maximum 
amoimt deductible for such succeeding taxable year under the 
preceding sentence over the sum of tlie contributions made in 
such year plus the aggregate of the excess contributions which 
were made in taxable years before the (contribution year and 
which are deductible under this sentence for such succeeding tax-
able year; or (ii) in the case of the first succeeding taxable year, 
the amount of such excess contribution, and in the case of the 
second, third, fourth, or fifth succeeding taxable year, the por-
tion of such excess contribution not deductible under this sentence 
for any taxable year intervening between <he conti-ibution year 
and such succeeding taxable year." 
(2.) CARRYOVERS IN CERTAIN CORPORATK ACQI isrnoNS.—Par-
26 use 381. 
agraph (19) of section 381(c) (relathig to items of distri])utor 
or transferor corporation) is amended to read as follows: 
"(19) CHARITABLE CONTRIHUTIONS IN EXCESS OF PRIOR YEARS* 
LIMITATIONS.—Contributions made in the taxable year ending 
on the date of distribution or transfer and the 4- prior taxable 
years by the distributor or transferor corporation in excess 
of the amount deductible nnder section 170(b^ (2) for such 
taxable years shall be dednctible by the acquiring corporation 
for its taxable years which begin after the date of distribution 
or transfer, subject to tiie limitations imposed in section l7f> 
(b)(2). Tn applying the pi-eceding sentence, eacli taxable year 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
47 
of the distributor or transferor corporation beginning on or before 
the date of distribution or transfer shall be treated as a prior 
taxable year with reference to the acquiring coi*poration's tax-
able years beginning after such date." 
(e) FUTURE INTERESTS IN TANGIBLE PERSONAL PROPERTY.—Sec-
tion 170 (relating to charitable, etc., contributions and gifts) is ^J^^ ^*r*43!°^^' 
amended by redesignating subsections (f) and (g) as subsections (h) 26 use no. 
and (i), respectively, and by inserting after subsection (e) the 
following new subsection: 
"(f) 
FUTURE INTERESTS IN TANGIBLE PER«K)NAL PROPERTY,—For 
purposes of this section, payment of a charitable contribution whicli 
consists of a future interest in tangible personal property shall be 
treated as made only when all intervening interests in, and rights to 
the actual possession or enjoyment of, the property have expired or 
are held by persons other than the taxpayer or those standing in a 
relationship to the taxpayer described in section 267(b). For pur- 26 use 267. 
poses of the preceding sentence, a fixture which is intended to be 
severed from the real property shall be treated as tangible personal 
property." 
(f) EFFECTIVE DATES.— 
(1) The amendments made by subsections (a), (b), and (c), 
shall apply with respect to contributions which are paid' in 
taxable years beginning after December 31,1963. 
(2) The amendments made by subsection (d) shall apply 
to taxable years beginning after December 31, 1963, with respect 
to contributions which are paid (or treated as paid under section 
170(a)(2) of the Internal Revenue Code of 1954) in taxable 
years beginning after December 31,1961. 
(3) The amendments made by subsection (e) shall apply to 
transfers of future interests made after December 31, 1963, in 
taxable years ending after such date, except that such amend-
ments shall not apply to any transfer of a future interest made 
before July 1, 1964, where— 
(A) the sole intervenuig interest or right is a nontrans-
ferable life interest reserved by the donor, or 
(B) in the case of a joint gift by husband and wife, the 
sole intervening interest or right is a nontransferable life 
interest, reserved by the donors which expires not later than 
the death of whichever of such donors dies later. 
For purposes of the exception contained in the preceding sen-
tence, a right to make a transfer of the reserved life interest to 
the donee of the future interest shall not be treated as making 
a life interest transferable. 
SEC. 210. LOSSES ARISING FROM EXPROPRIATION OF PROPERTY BY 
GOVERNMENTS OF FOREIGN COUNTRIES. 
(a) NET OPERATING LOSS CARRYOVER.—Section 172 (relating to 
26 use f?^ 
net operating loss deduction) is amended— 
(1) by striking out "Except as provided in clause (ii)" in 
subsection ( b ) ( l ) ( A ) ( i ) and inserting in lieu thereof "Except 
as provided in clause (ii) and in subparagraph (D)" 
(3) by adding at the end of subsection (b) (1) the followhig 
new subparagraph: 
"(D) In the case of a taxpayer which has a foreign expro-
priation loss (as defined in subsection (k)) for any taxable 
^°^*' P' '*^-
year ending after December 31, 1958, the portion of the net 
operating loss for such year attributable to such foreign ex-
48 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
I)ropriation loss shall not be a net operating loss carryback 
to any taxable year preceding the taxable year of such loss 
and shall be a net operating loss carryover to each of the 10 
taxable years foUowmg the taxable year of such loss."; 
(4) by adding at the end of subsection (b) (3) the following 
new subparagraphs: 
"(C) Paragraph (1) (D) shall apply only if— 
"(i) the foreign expropriation loss (as defined in sub-
section (k)) for the taxable year equals or exceeds 50 
percent of the net operating loss for the taxable year, 
"(ii) in the case of a foreign expropriation loss for a 
taxable year ending after December 31, 1963, the tax-
payer elects (at such time and in such manner as the 
Secretary or his delegate by regulations prescribes) to 
have paragraph (1) (D) apply, and 
"(iii) in the case of a foreign expropriation loss for a 
taxable year ending after December 31,1958, and before 
January 1, 1964, the taxpayer elects (in such manner as 
the Secretary or his delegate by regulations prescribes) 
on or before December 31, 1965, to have paragraph 
(1)(D) apply. 
"(D) If a taxpayer makes an election under subparagraph 
(C)(iii), then (notwithstanding any law or i-ule of law), 
with respect to any taxable year ending before January 1, 
196-1-, affected by the election— 
"(i) the time for making or changing any choice or 
ae'uscTgoii-gos 
election under subpart A of part I I I of subchapter X 
(relating to foreign tax credit) shall not expire before 
January 1,1966, 
"(ii) any deficiency attributable to the election under 
subparagraph (C) (iii) or to the application of clause 
(i) of this subparagraph m&.j be assessed at any time 
before January 1,1969, and 
"(iii) refund or credit of any overpayment attrib-
utable to the election under subparagraph (C) (iii) or 
to the application of clause (i) of this subparagraph may 
be made or allowed if claim therefor is filed before Janu-
ary 1,1969." ; 
26 use m ' 
^'*^ ^y redesignating subsection (k) as (1), and by inserting 
after subsection (j) the following new subsection: 
'• (k) FoRETGx ExpKOPRiATiox Loss DEFINED.—For purposes of sub-
stH-iion ( b ) — 
"(1) The term 'foreign expropriation loss' means, for any tax-
able year, the sum of the losses sustained by reason of the expro-
priation, intervention, seizure, or similar taking of property by 
the government of any foreign country, any political subdivision 
thereof, or any agency or instrumentality of the foregoing. For 
purposes of the preceding sentence, a debt which becomes worth-
less shall, to the extent of any deduction allowed under section 
166 (a), be treated as a loss. 
"(2) The portion of the net operating loss for any taxable 
year attributable to a foreign expropriation loss is the amount of 
the foreign expro])riation loss for such year (but not in excess 
of tiie net operating loss for such year)." 
26 u*sc m* 
^*^^ TECHNICAL AMENDMENTS.—Section 172(b) (2) is amended— 
(1) by striking out subparagraph (B) and inserting in lieu 
thereof the following: 
"(B) by determining the amount of the net o])erafing loss 
deduction— 
68A Stat. 69. 
26 u s e 213. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
49 
"(i) without regard to the net operating loss for the 
loss ^ear or for any taxable year thereafter, and 
"(li) without regard to that portion, if any, of a net 
operating loss for a taxable year attributable to a foreign 
expropriation loss, if such portion may not, under para-
graph (1)(D), be carried back to such prior taxable 
year,"; and 
(2) by adding at the end thereof the following new sentence: 
"For purposes of this paragraph, if a portion of the net operating 
loss for the loss year is attributable to a foreign expropriation 
loss to which paragraph (1)(D) applies, such portion shall be 
considered to be a separate net operating loss for such year to be 
applied after the other portion of such net operating loss." 
(c) ErPECTn^ DATE.—The amendments made by this section shall 
apply in respect of foreign expropriation losses (as defined in section 
172 (k) of the Internal Revenue Code of 1954, as amended by sub- 
^"'^' ^' ^^• 
section (a) (5) of this section), sustained in taxable years ending after 
December 31, 1958. 
SEC. 211. ONE-PERCENT LIMITATION ON MEDICINE AND DRUGS. 
(a) GENERAL RULE.—Subsection (b) of section 213 (relating to 
medical, dental, etc., expenses) is amended by adding at the end thereof 
the following new sentence: "The preceding sentence shall not apply 
to amounts paid for the care of— 
" (1) the taxpayer and his spouse, if either of them has attained 
the age of 65 before the close of the taxable year, or 
"(2) any dependent described in subsection (a) (1) (A)." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 1963. 
SEC. 212. CARE OF DEPENDENTS. 
(a) CHILD CARE ALLOWANCE.—Section 214 (relating to expenses 
^^ ^^^ ^^'* 
for care of certain dependents) is amended to read as follows: 
"SEC. 
2
1
4
. 
EXPENSES 
FOR 
CARE 
OF 
CERTAIN 
DEPENDENTS. 
"(a) 
GENERAL RULE.—There shall be allowed as a deduction 
expenses paid during the taxable year by a taxpayer who is a woman 
or widower, or is a husband whose wife is incapacitated or is institu-
tionalized, for the care of one or more dependents (as defined in sub-
section (d) (1)), but only if such care is lor the purpose of enabling 
t he taxpayer to be gainfully employed. 
"(b) 
LIMITATIONS.— 
"(1) 
DOLLAR LIMIT.— 
" (A) Except as provided in subparagraph (B), the deduc-
tion under subsection (a) shall not exceed $600 for any tax-
able year. 
"(B) The $600 limit of subparagraph (A) shall be 
increased (to an amount not above $900) by the amount of 
expenses incurred by the taxpayer for any period during 
which the taxpayer had 2 or more dependents. 
"(2) 
WORKING 
WIVES AND HUSBANDS WITH 
INCAPACITATED 
WIVES,—In the case of a woman who is married and in the case of 
a husband whose wife is incapacitated, the deduction under sub-
section (a)— 
"(A) shall not be allowed unless the taxpayer and his 
spouse file a joint return for the taxable year, and 
"(B) shall be reduced by the amount (if any) by which 
the adjusted gross income of the taxpayer and his spouse 
exceeds $6,000. 
This paragraph shall not apply, in the case of a woman who is 
married, to expenses incurred while her husband is incapable of 
68A Stat. 42 
26 use 151. 
50 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
self-support because mentally or physically defective, or, in the 
case of a husband whose wife is incapacitated, to expenses in-
curred while his wife is institutionalized if such institutionaliza-
tion is for a period of at least 90 consecutive days (whether or not 
within one taxable year) or a shorter period if terminated by her 
death. 
"(3) CERTAIN PAYMENTS NOT TAKEN INTO ACCOUNT.—Subsec-
tion (a) shall not apply to any amount paid to an individual with 
respect to whom the taxpayer is allowed for his taxable year 
a deduction under section 151 (relating to deductions for personal 
exemptions). 
"(c) SPECIAL RULE AVHERE W I F E I S INCAPACITATED OR INSTITU-
TIONALIZED.—In the case of a husband whose wife is incapacitated or 
is institutionalized, the deduction under subsection (a) shall be 
allowed only for expenses incurred while the wife was incapacitated 
or institutionalized (as the case may be) for a period of at least 90 
consecutive days (whether or not within one taxable year) or a shorter 
period if terminated by her death. 
"(d) DEFINITIONS.—For purposes of this section— 
"(1) DEPENDENT.—^The term 'dependent' means a pei*son with 
respect to whom the taxpayer is entitled to an exemption under 
section 151(e) (1)— 
"(A) who has not attained the age of 18 years and who 
26 ubu 152. 
(within the meaning of section 152) is a son, stepson, 
daughter, or stepdaughter of the taxpayer; or 
"(B) who is physically or mentally incapable of caring 
for himself. 
"(2) WIDOWER.—The term 'widower' includes an unmarried 
individual who is legally separated from his spouse under a decree 
of divorce or of separate maintenance. 
"(3) INCAPACITATED WIFE.—A wife sliall be considered inca-
pacitated only (A) while she is incapable of caring for herself 
because mentally or physically defective, or (B) Avhile she is 
institutionalized. 
"(4) INSTITUTIONALIZED WIFE.—A wife shall be considered 
institutionalized only while she is, for the purpose of receiving 
medical care or treatment, an inpatient, resident, or inmate of a 
public or private hospital, sanitarium, or other similar institution. 
"(5) DETERMINATION OF STATUS.—A woman shall not be con-
sidered as married if— 
"(A) she is legally separated from her spouse under 
a decree of divorce or of separate maintenance at the 
close of the taxable year, or 
"(B) she has been deserted by her spouse, does not know 
his whereabouts (and has not known his whereabouts at 
any time during the taxable year), and has applied to a 
court, of competent jurisdiction for appropriate process 
to compel him to pay support or otherwise to comply with 
the law or a judicial order, as determined under regula-
tions ijrescribed by the Secretary or his delegate." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 1963. 
SEC. 213. MOVING EXPENSES. 
(a) DEDUCTION ALLOWED FOR MOVING EXPENSES.— 
26 use 211-217. 
(1) pj^rt V l l of Subchapter B of chapter 1 (relating to 
additional itemized deductions for individuals) is amended by 
redesignating section 217 as section 218 and by inserting after 
section 216 the following new section: 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
51 
"SEC. 217. MOVING EXPENSES. 
"(a) I)P:DUCTIOX ALLOWED.—There shall be allowed as a deduc-
tion moving expenses paid or incurred during the taxable year in 
connection with the commencement of work by tlie taxpayer as an 
employee at a new principal place of work. 
" (b) 
DEFIXITIOX or MOVIXG EXPENSES.— 
"(1) Ix GENERAL.—For purposes of this section, the term 
'moving expenses' means only the reasonable expenses— 
"(A) of moving household goods and personal, effects 
from the former residence to the new residence, and 
"(B) of traveling (including meals and lodging) from 
the former residence to the new place of residence. 
"(2) iNDivmuALS OTHER THAN TAXPAYER.—In the case of any 
individual other than the taxpayer, expenses referred to in para-
graph (1) shall be taken into account only if such individual 
has both the former residence and the new residence as his prin-
cipal place of abode and is a member of the taxpayer's household, 
''(c) CONDITIONS FOR ALLOWANCE.—Xo deduction shall be allowed 
imder this section unless— 
"(1) the taxpayers new principal place of work— 
"(A) is at least 20 miles farther from his former residence 
than was his former principal place of work, or 
"(B) if he had no former principal place of work, is at 
least 20 miles from his former residence, and 
"(2) during the 12-month period innnediately following his 
arrival in the general location of his new principal place of work, 
the taxpayer is a full-time employee, in such general location, 
during at least 39 weeks. 
"(d) 
RULES FOR APPLICATION OF SI'BSECTION ( C ) ( 2 ) . — 
" (1) Subsection (c) (2) shall not apply to any item to the extent 
that the taxpayer receives reimbursement or other expense allow-
ance from his employer for such item. 
"(2) If a taxpayer has not satisfied the condition of subsection 
(c)(2) before the time prescribed by law (including extensions 
thereof) for filing tlie return for the taxable year during which 
he paid oi- incurred moving expenses ^yhich would otherwise be 
deductible under this section, but may still satisfy such condi-
tion, then such expenses may (at the election of the taxpayer) be 
deducted for such taxable vear notwithstanding sid^section (c) (2). 
"(3) 
If— 
"(A) for any taxable year moving expenses have been 
deducted in accordance with the rule provided in paragraph 
(2), and 
" ( B ) the condition of subsection (c) (2) is not satisfied by 
tlie close of the subsequent taxable year, 
then an amount equal to the expenses which were so deducted 
shall be in('lude<l in gross income for such subsequent taxable 
year. 
"(e) 
DISALLOWANCE OF DEDUCTION "WITH RESPECT TO REIMBURSE-
MENTS XOT IN(^LI DED IN GROSS INCOME.—No deduction shall be al-
lowed under this section for any item to the extent that the taxpayer 
receive*?, reimbursement or other expense allowance for such item 
which is not included in his gross income. 
"(f) REGULAITONS.—The Secretary or his delegate shall prescribe 
such regulations as may be necessary to carry out the purposes of this 
section."' 
52 
PUBLIC LAW88-272-FEB. 26, 1964 
[78 STAT. 
(2) The table of sections for part V I I of subcliaj)ter B of 
chapter 1 is amended by striking out— 
"See. 217. Cross references." 
and inserting in lieu thereof the following: 
"Sec. 217. Moving expenses. 
"Sec. 218. Cross references." 
76^stlf 
*828^^' 
^^^ ADJUSTED GROSS INCOME.—Section 62 (defining adjusted gross 
26 use 62. 
income) is amended by inserting after paragraph (7) the following 
new paragraph: 
"(8) MOVING EXPENSE DEDUCTION.—The deduction allowed by 
Ante. p. 51. 
SeCtloU 217." 
Ante, p. 36. 
(
^
^
.
^ WITHHOLDING.—Sectiou 3401(a) 
(relating to definition of 
"wages") is amended by adding after paragraph (14) (added by sec-
tion 204 (b) of this Act) the following new paragraph: 
" (15) to or on behalf of an employee if (and to the extent that) 
at the time of the payment of such remmieration it is reasonable 
to believe that a corresponding deduction is allowable under 
section 217." 
(d) EFFECTIVE DAT^S.—The amendments made by subsections (a) 
and (b) shall apply to expenses incurred after December 31, 1963, in 
taxable years ending after such date. 
The amendment made by sub-
section (c) shall apjjly with respect to remuneration paid after 
the seventh day following the date of the enactment of this Act. 
SEC. 214. 100 PERCENT DIVIDENDS RECEIVED DEDUCTION FOR MEM-
BERS OF ELECTING AFFILIATED GROUPS. 
26 use 243. 
^.^^ 200 PERCENT DIVIDENDS RECEIVED DEDUCTION.—Section 243 
(relating to dividends received by corporations) is amended to read 
as follows: 
"SEC. 243. DIVIDENDS RECEIVED BY CORPORATIONS. 
" (a) (TENERAL RULE.—In the case of a corporation, there shall be 
allowed as a deduction an amount equal to the following percentages 
of the amoiuit re<'eived as dividends from a domestic corporation 
which is subject to taxation under this chapter: 
"(1) 85 percent, in the case of dividends other than dividends 
described in paragraph (2) or (3) ; 
"(2) 100 percent, in the case of dividends I'eceived by a small 
business investment company operating under the Small Business 
Is use 6^?' 
Investment Act of 1958; and 
note. 
" (3) 100 percent, in the case of qualifying dividends (as defined 
in subsection (b) (1)). 
" ( b ) 
Ql'ALTFYlNG DIVIDENDS. 
"(1) DEFINITION.—For pui-poses of subsection (a)(3), the 
term 'qualifying dividends' means dividends received by a cor-
porat ion which, at the close of the day the dividends are received. 
IS a meml)er of the same aifiliate<I,group of corporations (as 
defined in paragraph (5)) as the corporation distributing the 
dividends, if— 
"(A) such affiliated gi-oup has made an election under 
paragraph (2) which is effective for the taxable years of its 
members which include such day, and 
"(B) such dividends are distributed out of earnings and 
profits of a taxable year of the distributing corporation end-
ing after December 31, 1963— 
"(i) on each day of which the distributing corporation 
and the corporation receiving the dividends were mem-
bers of such affiliated group, and 
Post. p. 117. 
"(ii) for which an election under section 1502 (relat-
ing to election of nniltiple sin-ta.v exemptions) is not 
elTectixe. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
53 
"(2) ELECTIOX.—An election under this paragraph shall be 
made for an affiliated group bv the common parent corporation, 
and shall be made for any taxable year of the common parent cor-
l)oration at such time and in such manner as the Secretary or his 
delegate by regulations prescribes. Such election may not be 
made for an affiliated group for any taxable year of the common 
parent corporation for which an election under section 1562 is 
^°®^' P- ^in-
effective. 
Each corporation which is a member of such group at 
any time during its taxable year which includes the last day of 
such taxable year of the common parent corporation must consent 
to such election at such time and in such manner as the Secretary 
or his delegate by regulations prescribes. An election under this 
paragraph shall be effective— 
"(A) for the taxable year of each member of such affili-
ated group which includes the last day of the taxable year 
of the common parent corporation with respect to which the 
election is made (except that in the case of a taxable year of 
a member beginning in 1963 and ending in 1964, if the elec-
tion is effective for the taxable year of the common parent 
corporation which includes the last day of such taxable year 
of such member, such election shall be effective for such tax-
able year of such member, if such member consents to such 
election with respect to such taxable year), and 
"(B) for the taxable year of each member of such affiliated 
group which ends after the last day of such taxable year of 
the common parent corporation but which does not include 
such date, unless the election is terminated under para-
graph (4). 
" (3) EFFECT OF ELECTION.—If an election by an affiliated group 
is effective with respect to a taxable year of the common parent 
corporation, then under regulations prescribed by the Secretary 
or his delegate— 
"(A) no member of such affiliated group may consent to 
an election under section 1562 for such taxable year, 
"(B) the members of such affiliated group shall be treated 
as one taxpayer for purposes of making the elections under 
section 901(a) (relatuig to allowance of foreign tax credit) 
se^scT^go^i^^" 
and section 904(b) (1) (relating to election of overall limita- 
74 stat. 1010. 
tion),and 
26 use 904. 
"(C) the members of such affiliated group shall be limited 
to <me— 
"(i) $100,000 minimum accumulated earnings credit 
under section 535(c) (2) or (3), 
^ 
26 use 535. 
"(ii) $100,000 limitation for exploration expenditures 
under section 615(a) and (b), 
^e use e 15. 
"(iii) $400,000 limitation for exploration expendi-
tures under section 615(c)(1), 
"(iv) $25,000 limitation on small business deduction 
of life insurance companies under sections 804(a)(4) 
llf^^X'}}^' 
1 •^^>/-i / i \ / - . . ^ \ 
1 
^ 
^ ' ' ' ' 2 6 use 
804. 
and 809(d) (10),and 
_ 
26 use 809. 
" (v) $100,000 exemption for purposes of estimated tax 
filing requirements under section 6016 and the addition 
^6 use 6016. 
to tax under section 6655 for failui*e to pay estimated tax. 
^^ "
^
*
-
^ ^^^^• 
"(4) TERMINATION.—An election by an affiliated group under 
paragraph (2) shall terminate with respect to the taxable year of 
the common parent corporation and with respect to the taxable 
years of the members of such affiliated group which Include the 
last day of sucli taxable year of the conmion parent corporation 
if— 
54 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
"(A) (\)XSKXT OF MEMHKKs,—Such iittiliiited or()U}) files 
M
, terminjitioii of siicli election (at such time and in such 
manner as the Seci'etary or his deleg'ate hy regulations pre-
scril)es) with respect to such taxable year of the coiinnon 
parent corporation, and each corporation which is a member 
of such affiliated grouj) at any time during its taxable year 
which includes the last day of such taxable year of the com-
mon parent corporation consents to such termination, or 
"(B) REFLSAL BY NEW MEMBER TO CONSENT.—During such 
taxable year of the common parent corporation such affiliated 
group includes a member which— 
"(i) was not a member of such group during such 
common parent corporation's immediately pi-eceding 
taxable year, and 
"(ii) such member files a statement that it does not 
consent to the election at such time and in such manner 
as the Secretary or his delegate by regulations prescribes. 
"(5) DEFINITION OP AFFILIATED GROUP.—For purposes of this 
subsection, the term 'affiliated group' has the meaning assigned 
9fi'^i^r^*i=;n4^' 
^^ it by sectioii 1504(a), except that for such purposes sections 
1504(b) (2) and 1504(c) shall not apply. 
"(6) SPECIAL RULES FOR INSURANCE COMPANIES.—If an election 
under this subsection is effective for the taxable year of an in-
26 use 80^^.' 
su ranee company subject to taxation under section 802 or 821— 
Ante, p. 29.' 
"(-A-) part I I of Subchapter B of chapter 6 (relating to 
certain controlled corporations) shall be applied without 
Post. p. 120. 
regard to section 1563(a) (4) (relating to certain insurance 
companies) and section 1563(b) (2) (D) (relating to certain 
excluded members) with respect to such company and the 
other corporations which are members of the controlled group 
of corporations (as determined under section 1563 without 
regard to subsections (a) (4) and (b) (2) (D)) of which such 
company is a member, and 
"(13) for purposes of paragraph (1), a distribution by 
such company out of earnings and profits of a taxable year 
for which an election under this subsection was not effec-
tive, and for which such company was not a component 
member of a controlled group of corporations within the 
meaning of section 1563 solely by reason of 
sectioii 
1563(b) (2) (D), shall not be a qualifying dividend. 
"(c) 
SPECIAL RULES FOR CERTAIN DISTRIBUTIONS.—For purposes 
of subsection (a)— 
26 use 591. 
"(1) Any amount allowed as a deduction under section 501 
(relating to deduction for dividends i)aid by mutual savings 
banks, etc.) shall not he treated as a dividend. 
"(2) A dividend received from a regulated investment com-
"t"/^' ^99^^' 
P^^^^y shall be subject to the limitations prescribed in section 854. 
26'usc 8
*
5
4
. 
"(3) Any dividend received from a real estate investment trust 
w'hich, for the taxable year of the trust in which the dividend 
is paid, (Qualifies under part I I of subchapter M (section 856 and 
26 us^c 85^858 
followiug) shall uof be treated as a dividend. 
Post, p. 55. 
' 
"(4) Any dividend received which is described in section 244 
26 use 244. 
(relating to dividends received on preferred stock of a public 
utility) shall not be treated as a dividend. 
•'(d) 
CERTAIN 
DIVII>ENDS 
F R O M 
FOREIGN 
CORPORATIONS.—For 
26 use 2
4
5
^
* 
purposes of Rubsecti<m (a) and for purposes of section 245, any divi-
dend from a foreign corporation from earnings and profits accumu-
late<l by a domestic cor^xiration during a period with res[>ect to which 
sucli domestic corpoi'ation was subject to taxation under this chapter 
68A Stat. 73. 
26 u s e 244. 
Ante, p. 52. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
55 
(or corresponding provisions of prior law) sliall be treated as a 
dividend from a domestic corporation Aviiioh is subject to taxation 
under this chapter." 
(b) TECHNICAL AMENDMENTS.— 
(1) Section 244 (relating to dividends received on certain 
preferred stock) is amended by inserting "(a) GENERAL EULE.—" 
before "'In case of a corporation," and by adding at the end thereof 
the following new subsection: 
"(b) EXCEPTION.—If the dividends described in subsection (a) (1) 
are qualifying dividends (as defined in section 248(b) (1), but deter-
mined without regard to section 243 (c)(4)) — 
"(1) subsection (a) shall be applied separately to such quali-
fying dividends, and 
"(2) for purposes of subsection 
(a)(3), the percentage 
applicable to such qualifying dividends shall be 100 percent in 
lieu of 85 percent." 
(2) Section 246(b) 
(relating to limitation on aggregate 
26 use 246. 
amount of deductions for dividends received) is amended by 
striking out "243(a), 244," each place it appears therein and 
inserting in lieu thereof "243 (a)(1), 244(a),". 
(3) Section 804(a) (5) (relating to the application of section 
26 u^sc sol' 
246(b) to taxable investment income of life insurance com-
panies) is amended by striking out "243(a), 244," and inserting 
m lieu thereof "243(a) (1), 244(a),". 
(4) Section 809(d)(8)(B) 
(relating to the application of 
26 use sog. 
section 246(b) to the life insurance company's share of certain 
dividends) is amended by striking out "243(a), 244," each place 
it appears therein and inserting in lieu thereof "243(a)(1), 
244(a),". 
(c) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply with respect to dividends received in taxable 
years ending after December 31,1963. 
SEC. 215. INTEREST ON LOANS INCURRED TO PURCHASE CERTAIN 
INSURANCE AND ANNUITY CONTRACTS. 
(a) DISALLOWANCE OF INTEREST 
DEDUCTION.—Section 
264(a) 
26 use 264. 
(relating to certain amounts paid in connection with insurance con-
tracts) is amended— 
(1) by inserting after paragraph (2) the following new 
paragraph: 
"(3) Except as provided in subsection (c), any amount paid 
or accrued on indebtedness incurred or continued to purchase 
or carry a life insurance, endowment, or annuity contract (other 
than a single premium contract or a contract treated as a single 
premium (contract) pureuant to a plan of purchase which con-
templates the systematic direct or indirect borrowing of part 
or all of the increases in the cash value of such contract (either 
from the insurer or otherwise)." 
(2) by adding at the end thereof the following new sentence: 
"Paragraph (3) shall apply only in respect of contracts pur-
chased after August 6, 1963." 
(b) ExcEi-rioNs.—Section 264 is amended by adding at the end 
thereof the following new subsection: 
"(c) ExcEiTioNS,—Subsection (a)(3) 
shall not apply to any 
amount [>aid or accrued by a person durhig a taxable year on indebt-
edness incurred or continued as part of a plan referred to in sub-
action (a) (3) — 
"(1) if no part of 4 of the annual premiums due during the 
7-yenr period (beginning with the date the first premium on the 
31-667 0-65—7 
56 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
contract to which such plan relates was paid) is paid under such 
plan by means of indebtedness, 
" (2) if the total of the amounts paid or accrued by such pei*son 
during such taxable year for which (without regard to this para-
graph) no deduction would be allowable by reason of subsection 
(a) (3) does not exceed $100, 
"(3) if such amount was paid or accrued on indebtedness 
incurred because of an unforeseen substantial loss of income or 
unforeseen substantial increase in his financial obligations, or 
"(4) if such indebtedness was incurred in connection with his 
trade or business. 
For purposes of applying paragraph (1), if there is a substantial 
increase m the premmms on a contract, a new 7-year period described 
in such paragraph with respect to such contract shall commence on 
f he date the first such increased premium is paid." 
(c) Eri-TiCTiMi: DAnc.—The amendments made by this section shall 
apply with respect to amounts paid or accrued in taxable years begin-
ning after December 31,1963. 
SEC. 216. INTEREST ON INDEBTEDNESS INCURRED OR CONTINUED 
TO PURCHASE OR CARRY TAX-EXEMPT BONDS. 
(a) Ari'LicATiox W I T K RESPECT TO CERTAIN FrNANciAi. INSTITU-
TIONS.—Section 265 (relating to expenses and interest relating to tax-
exempt income) is amended by adding at the end of paragraph (2) 
the following new sentence: "In applying the preceding sentence to 
a financial institution (otlier than a bank) which is a face-amount cer-
tificate company registered under the Investment (^ompany Act of 
1040 (15 F.S.C. SOa-1 and following) and which is subject to the 
bankhig laws of the State in which such institution is incorporated, 
interest on face-amount certificates (as defined in section 2(a) (15) of 
15 use 80a-2. 
sucli Act) issued by such institution, and interest on amounts received 
for the purchase of such certificates to be issued by sucli institution, 
shall not l)e considered as interest on indebtedness incurred or con-
tinued to puivhase or carry obligations the interest on which is wholly 
exempt from the taxes imposed by this subtitle, to the extent that the 
average amount of such obligations held by such institution during 
the taxable year (as detennined under regulations presci'ibed by the 
Secretary or his delegate) does not exceed 15 percent of the average 
of the total assets held by such institution duruig the taxable year 
(as so determined).*' 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall api)ly with respect to taxable years ending after the date of the 
enactment of this Act. 
SEC. 217. LIMITATION OF TRAVEL ALLOCATION REQUIREMENT TO 
FOREIGN TRAVEL . 
26us^c 2V4" 
^'^^ LIMITATION OF APPLICATION OF SECTION 274(C).—Section 274 
((•) (relating to traveling) is amended to read as follows: 
" ( C ) CERTAIN FOREIGN TRAVEL.— 
"(1) I N (iENEiLVL.—In the case of any individual who travels 
outside the United States away from home hi pursuit of a trade or 
26 use 212. 
business or in pursuit of an activity described in section 212, no 
26 use 162. 
deduction shall be allowed under section 102 or section 212 for that 
portion of the expenses of such travel otherwise allowable luider 
such section which, under regulations prescribed by the Secretary 
or his delegate, is not allocable to such trade or Imsiness or to such 
activitv-
68A Stat. 78 
26 u s e 265. 
54 Stat. 789. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
57 
"(•2) ExcEFi'iox.—Paragraph (1) shall not apply to the 
expenses of any travel outside the United States awav from home 
if— 
" (A) such travel does not exceed one week, or 
"(B) the portion of the time of travel outside the United 
States away from home which is not attributable to the pur-
suit of the taxpayer's trade or business of an activity 
described in section 212 is less than 25 percent of the total 
2rusc'2i2!* 
time on such travel. 
" (3) DOMESTIC TRAVEL EXCLUDED.—For purposes of this subsec-
tion, travel outside the United States does not include any travel 
from one point in the LTnited States to another point in the United 
States." 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply with respect to taxable years endhig after December 31, 
1962, but only in respect of periods after such date. 
SEC. 218. ACQUISITION OF STOCK IN EXCHANGE FOR STOCK OF COR-
PORATION WHICH IS IN CONTROL OF ACQUIRING CORPO-
RATION. 
(a) DEFINITION OF REORGAXIZATION.—Section 368(a)(1) (relat- 
26 use 368. 
m^ to definition of reorganization) is amended by inserting after 
"voting stock" in subparagraph (B) "(or in exchange solely for all 
or a part of the voting stock of a corporation which is in control of 
the acquiring corporation)". 
(b) TECHNICAL AMENDMENTS.— 
(1) Section 368(a)(2)(C) 
(relating to special rules) is 
amended to read as follows: 
"(C) 
TRANSFERS OF ASSETS OR STOCK TO SUBSIDIARIES IN 
CERTAIN PARAGRAPH (1)(A), (1)(B), AND ( 
1 
) 
(C) CASES.—A 
transaction otherwise qualifying under paragraph (1)(A), 
(1) (B), or (1) (C) shall not be disqualified by reason of the 
fact that part or all of the assets or stock which were ac-
quired in the transaction are transferred to a corporation 
controlled by the corporation acquiring such assets or stock." 
(2) Section 368(b) (relating to definition of party to a reorga-
nization) is amended by striking out the last two sentences and 
inserting in lieu thereof the following: "In the case of a reorgani-
zation qualifying under paragraph (1)(B) or (1)(C) of sub-
section (a), if the stock exchanged for the stock or properties is 
stock of a corporation which is in control of the acquiring corpo-
ration, the terai 'a party to a reorganization' includes the corpora-
tion so controlling the acquiring corporation. In the case of a 
reorganization qualifying under paragraph (1) (A), (1) (B), or 
(1)(C) of subsection (a) by reason of paragraph (2) (C) of 
subsection (a), the term 'a party to a reorganization' includes the 
corporation controlling the corporation to which the acquired 
assets or stock are transferred." 
(c) EFFECTIVE DATP:.—The amendments made by this section shall 
apply with respect to transactions after December 31, 1963, in taxable 
years ending after such date. 
SEC. 219. RETROACTIVE QUALIFICATION OF CERTAIN. UNION-NEGO-
TIATED MULTIEMPLOYER PENSION PLANS. 
(a) BwuNxiNG OF PERIOD AS QUALIFIED TRUST.—Section 401 (re- 
76 stat. 809. 
lating to qualified pension, profit-sharing, and stock bonus plans) is 
26 use 401. 
amended by redesignating subsection (i) as subsection (j), and by in-
serting after subsection (h) the following new subsection : 
"(i) 
CERTAIN 
[ ^NION-NEGOTIATED 
MULTIEMPLOYER 
PENSION 
PLANS.—In the case of a trust forming part of a pension plan which 
58 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
has been deteriuined by the Secretary or liis delegate to constitute a 
(lualified trust under subsection (a) and to be exempt from taxation 
26^scr*so\^^" 
under section 501 (a) for a period beginning after contributions were 
first made to or for such trust, if it is shown to the satisfaction of the 
SecretaiT or his delegate that— 
"(1) such trust was created pursuant to a collective bargaining 
agreement between employee representatives and two or more 
employers who are not related (determined under regulations 
prescribed by the Secretary or his delegate), 
"(2) any disbursements of contributions, made to or for such 
trust before the time as of which the Secretaiy or his delegate 
determined that the trust constitut-ed a qualified trust, substan-
tially complied with the terms of the trust, and the plan of which 
the trust is a part, as subsequently qualified, and 
"(3) before the time as of which the Secretary or his delegate 
determined that the trust constitutes a qualified trust, the con-
tributions to or for such trust were not used in a maimer which 
would jeopardize the interests of its beneficiaries, 
then such trust shall be considered as having constituted a qualified 
trust under subsection (a) and as having been exempt from taxation 
under section 501(a) for the period beginning on the date on which 
contributions were first made to or for such trust and ending on the 
date such trust first constituted (without regard to this subsection) a 
([ualified trust under subsection (a)." 
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 
shall apply with respect to taxable years beginning after December 
81, 1953, and ending after August 16, 1954, but onlj' with respect to 
contributions made after December 31, 1954. 
SEC. 220. QUALIFIED PENSION. ETC., PLAN COVERAGE FOR EMPLOY-
EES OF CERTAIN SUBSIDIARY EMPLOYERS. 
(a) 
EMPLOYEES OF FOREIGN SUBSIDIARIES COVERED BY SOCIAL SECU-
26 use 401-405. j^j^jry AGREEMENTS.—Part I of Subchapter D of chapter 1 (relating to 
pension, profit-sharing, stock bonus plans, etc.) is amended by add-
ing at the end thereof the following new section: 
"SEC. 406. CERTAIN EMPLOYEES OF FOREIGN SUBSIDIARIES. 
"(a) 
TREATMENT AS EMPLOYEES OF DOMESTIC CORPORATION.— 
For purposes of applying this part with respect to a pension, profit-
26 use 40 f
* 
sharing, or stock bonus plan described in section 401(a), an annu-
26 use 403! 
ity plan described in section 403(a), or a bond purchase plan 
26 u*sc 40^5' 
described in section 405(a), of a domestic corporation, an individual 
who is a citizen of the United States and who is an employee of 
?6 use 3121! 
^ foreign subsidiary (as defined in section 3121(1) (8)) of such 
domestic corporation shall be treated as an employee of such domestic 
corporation, if— 
"(1) such domestic corporation has entered into an agree-
ment under section 3121(1) which applies to the 
foreign 
subsidiary of which such individual is an employee; 
"(2) the plan of such domestic corporation expressly j)rovidea 
for contributions or benefits for individuals who are citizens of 
the Ignited States and who are employees of its foreign sub-
sidiaries to which an agreement entered into by such domestic cor-
poration under section 3121 (1) applies; and 
"(3) contributions under a funded plan of deferred compen-
sation (wliether or not a plan described in section 401 (a),403(a), 
or 405(a)) are not provided by any other person with respect to 
the remuneration paid to such individual by the loreigii 
subsidiary. 
68A Stat. 134. 
26 use 401. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
59 
••(i>) Si'KCiAL Kri.Ks K()i{ APPLKATKJN (»K SKCTIOX 401(a).— 
" ( 1 ) XONDI.SCKIMINATIOX 
KKQl IKKMKXTS. 
F o r 
pillpOSeS 
of 
applying? para^raplis (8) (J^) and (4) of section 401(a) with 
lespec't to an individual who is treated as an employee of a 
domestic corporation under subsection (a)— 
"(A) if such individual is an officer, sliareholder, or per-
son whose principal duties consist in supervising the work of 
other employees of a foreign sul)sidiary of such domestic 
corporation, he shall be treated as having such capacity with 
respect to such domestic corporation; and 
"(B) the determination of whether such individual is 
a highly compensated employee shall be made by treating 
such individual's total compensation (determined with the 
application of paragraph (2) of this subsection) as com-
pensation paid by such domestic corporation and by deter-
mining such individual's status with regard to such domestic 
corporation. 
"(2) 
DETERMINATION OF COMPENSATIOX.—For purposes 
of 
applying paragraph (5) of section 401(a) with respect to an 
individual w^ho is treated as an employee of a domestic corpora-
tion under subsection (a) — 
"(A) the total compensation of such individual shall be 
the remuneration paid to sucli individual by the foreign 
subsidiary which Avould constitute his total compensation if 
his services had been performed for such domestic corpora-
tion, and the basic or regular rate of compensation of such 
individual shall be determined under regulations x^rescribed 
by the Secretary or his delegate; and 
"(B) such individual shall be treated as having paid the 
amount paid by such domestic corpoiation which is equiv-
alent to the tax imposed by section 8101. 
"(<") IKKMIXATIOX OF STATIS AS DKEMED Ibri'LOYEE NOT To Bi: 
THEATED AS SEPAUATIOX FROM SEHVICE KOI; I^IHI'OSES OF CAIMTAL GAIN 
l*Ko\isi()xs.—For purposes of applying section 402(a) (2) and section 
40H(a) (2) with respect to an individual who is treated as an employee 
of a domestic corporation under subsection (a), such individual shall 
not be considered as separated from the service of such domestic corpo-
ration solely by reason of the fact tliat— 
"(1) tlie agreement entered into by such domestic corporation 
under section 8121(1) wliich covers the employment of such 
26U^C3i2U 
individual is terminated under the |n-ovisions of such section, 
"(2) such individual becomes an employee of a foreign sub-
sidiary with respect to which such agreement does not apply, 
"(8) such individual ceases to be an employee of the foreign 
subsidiary by reason of whicli he is treated as an employee of 
such domestic corporation, if he becomes an employee of another 
cor})oration controlled by such domestic cor])()ration, or 
"(4) the provision of the i)lan described in subsection (a)(2) 
is terminated. 
"(d) DEDrcTiBiLiTY OF CoxTiMiuTioxs.—For puiposes of ap])ly-
ing sections 404 and 40.5(c) witli respect to contributions made to or gjg^ ^*^*' ^^^' 
under a ])ension, })rotit-sharing, stock bonus, annuity, or bond pur- 
26 use 404, 
chase plan by a domestic corporation, or by another cor])oration '*°^* 
which is entitled to deduct its contributions under section 404(a) 
(5)(B), on behalf of an individual who is treated as an emploj-ee 
of such domestic corporation under subsection (a) — 
"(1) except as provided in paragraph (2), no deducticm shall 
be allowed to such domestic corpoiation or to any other cori^ora-
tion which is entitled to deduct its contributions under such 
sections. 
75 Stat. 141. 
26 use 3101. 
26 use 402. 
26 use 403. 
60 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(2) there shall be allowed as a deduction to the foreign sub-
sidiary of which such individual is an employee an amount 
equal to the amount which (but for paragraph (1)) would be 
ye^st^t^'s'ig^g^ae 
deductible under section 404 (or section 405(c)) hj the domestic 
26 use 404, 
corporation if he were an employee of the domestic corporation, 
-•OS. 
and 
"(3) any reference to compensation shall be considered to be 
a reference to the total compensation of such individual (deter-
mined with the application of subsection (b) (2)). 
Any amount deductible by a foreign subsidiary under this subsection 
shall be deductible for its taxable year %vith or wdthin which the 
taxable year of such domestic corporation ends. 
"(e) 
TREATMENT AS EMPLOYEE UNDER EELATED PROVISIONS.—An 
individual who is treated as an employee of a domestic corporation 
under subsection (a) shall also be treated as an employee of such 
domestic corporation, with respect to the plan described in subsection 
(a)(2), for purposes of applying the following provisions of this 
title: 
2^ ^^^'^2. 
«^2) Section 72(d) (relating to employees* annuities). 
"(2) Section 72(f) (relating to special rules for computing 
employees' contributions). 
26 use 101. 
u(3) Section 101(b) (relating to employees' death benefits). 
26 use 2039. 
«(4) Section 2039 (relating to annuities). 
72 Stat. 1659. 
«(5) Sectiou 2517 (relating to certain annuities under (lualitied 
26 u s e 2517. 
1 ^ <-,. 
'- 
*^ 
^ 
plans). 
(b) 
EMPLOYEES OF DOMESTIC SUBSIDIARIES EN(iA(iED IN Bi SINESS 
26 use 401-405. QuTSiDE THE UNITED STATES.—Part I of subchapter I) of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) 
is 
Ante, p. 58. 
amended by adding after section 406 (as added by subsection (a)) 
the following new section: 
"SEC. 407, CERTAIN EMPLOYEES OF DOMESTIC SUBSIDIARIES EN-
GAGED IN BUSINESS OUTSIDE THE UNITED STATES. 
''(a) 
TREATMENT AS EMPLOYEES OF DOMESTIC PARENT CORPORA-
TION.— 
"'(1) IN (JENERAL.—For purposes of applying this part with 
respect to a pension, profit-sharing, or stock bonus plan described 
in section 401 (a), an annuity plan described in section 403 (a), or a 
bond purchase plan described in section 405(a), of a domestic 
parent corporation, an individual who is a citizen of the United 
States and who is an employee of a domestic subsidiary (within 
the meaning of paragraph (2)) of such domestic parent corpora-
tion shall be treated as an employee of such domestic parent 
cori)oration, if— 
"(A) the plan of such domestic parent 
corporation 
expressly provides for contributions or benefits for individuals 
who are citizens of the ITnited States and who are employees 
of its domestic subsidiaries; and 
"(B) contributions luider a funded plan of deferred com-
pensation (whether or not a plan described in section 401(a), 
403(a), or 405(a)) are not provided by any other person 
with respect to the remuneration paid to sucli individual by 
the domestic subsidiary. 
'• (2) DEFINITIONS.—For purposes of this section— 
*'(A) DOMESTIC 
SUBSIDLVRY.—A 
corporation 
shall 
be 
treated as a domestic subsidiary for any taxable year onlv 
if— 
"(i) such corporation is a domestic corporation 80 
percent or more of the outstanding voting stock of which 
is owned by another domestic corporation; 
68A Stat. 134. 
26 u s e 401. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
61 
"(ii) 95 percent or more of its gross income for the 
three-year period immediately preceding the close of its 
taxable year which ends on or before the close of the 
taxable year of such other domestic corporation (or for 
such part of such period during which the corporation 
was in existence) was derived from sources without the 
United States; and 
"(iii) 90 percent or more of its gross income for such 
period (or such part) was derived from the active conduct 
of a trade or business. 
If for the period (or part thereof) referred to in clauses (ii) 
and (iii) such corporation has no gross income, the provisions 
of clauses (ii) and (iii) shall be treated as satisfied if it is 
reasonable to anticipate that, with respect to the first taxable 
! 
year thereafter for which such corporation has gross income, 
the provisions of such clauses will be satisfied. 
"(B) DOMESTIC PARENT CORPORATION.—The domestic par-
ent corporation of any domestic subsidiary is the domestic 
corporation which owns 80 percent or more of the outstanding 
voting stock of such domestic subsidiary. 
"(b) SPECIAL RULES FOR APPLICATION OF SECTION 401(a).— 
"(1) NONDISCRIMINATION REQUIREMENTS.—For purposes 
of 
sipplying paragraphs (3) (B) and (4) of section 401(a) with 
respect to an individual who is treated as an employee of a domes-
tic parent corporation under subsection (a)— 
"(A) if such individual is an officer, shareholder, or 
person whose principal duties consist in supervising the 
work of other employees of a domestic subsidiary, he shall 
be treated as having such capacity with respect to such 
domestic parent corporation; and 
"(B) the determination of whether such individual is 
a highly compensated employee shall be made by treating 
such individual's total compensation (determined with the 
application of paragraph (2) of this subsection) as com-
pensation paid by such domestic parent corporation and 
by determining such individual's status with regard to such 
domestic parent corporation. 
"(2) DETERMINATION OF COMPENSATION.—For purposes of 
applying paragraph (5) of section 401(a) with respect to an 
individual who is treated as an employee of a domestic parent 
corporation under subsection (a), the total compensation of 
such individual shall be the remuneration paid to such indi-
vidual by the domestic subsidiary which would constitute his 
total compensation if his services had been performed for such 
domestic parent corporation, and the basic or regular rate of 
compensation of such individual shall be determined under 
regulations prescribed by the Secretary or his delegate., 
"(c) TERMINATION OF STATUS AS DEEMED EMPLOYEE N'OT T O B E 
TREATED AS SEPARATION FROM SERVICE FOR PURPOSES OF CAPITAL 
(TATN PROVISIONS.—For purposes of applying section 402(a) (2) and 
section 403(a)(2) with respect to an individual who is treated as 
26use 402,403. 
an eniployee of a domestic parent corporation under subsection (a), 
fnicli individual shall not be considered as separated from the service 
of such domestic parent corporation solely by reason of the fact 
that— 
"(1) the corporation of which such individual is an employee 
ceases, for any taxable year, to be a domestic subsidiary within 
the meaning of subsection (a) (2) (A), 
62 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(2) such individual ceases to be an employee of a domestic 
subsidiary of such domestic parent corporation, if he becomes an 
employee of another corj)oration controlled by such domestic 
parent corporation, or 
"(3) the provision of the pLan described in subsection (a) (1) 
(A) is terminated. 
"(d) DEDUCTIBILITY OF COXTKIBUTIONS.—For purposes of apply-
76^stlt!M*9 ^2^6 
^"S sections 404 and 405(c) with respect to contributions made to or 
26 use 404,40*5. uiider a pension, profit-sharing, stock bonus, annuity, or bond pur-
diase plan by a domestic parent corporation, or by another corpora-
tion which is entitled to deduct its contributions under section 404 
(a) (3) (B), on belialf of an individual who is treated as an employee 
of such domestic corporation under subsection (a)— 
"(1) except as provided in paragraph (2), no deduction shall 
be allowed to such domestic parent corporation or to any other 
corporation which is entitled to deduct its contributions under 
such sections, 
"(2) there shall be allowed as a deduction to the domestic 
subsidiary of which such individual is an employee an amount 
equal to the amount which (but for paragraph (1)) would be 
deductible under section 404 (or section 405(c)) by the domestic 
parent corporation if he were an employee of the domestic parent 
corporation, and 
"(3) any reference to compensation shall be considered to be a 
I'eference to the total compensation of such individual (deter-
mined with the application of subsection (b) (2)). 
Ally amount deductible by a domestic subsidiaiy under this subsection 
shall be deductible for its taxable year with or within which the tax-
able year of such domestic parent corporation ends. 
"(e) 
TREATMENT AS P^MPLOYEE LTNUEK RELATED PROVISIONS,—An 
individual who is treated as an employee of a domestic parent corpo-
lation under subsection (a) shall also be treated as an employee of 
such domestic parent corporation, Avith respect to the plan described 
in subsection (a)(1)(A), for purposes of applying the following 
I)r<)visions of this title: 
26 use 72. 
'^(1) Section 72(d) (relating to employees' annuities). 
"(2) Section T2(f) (relating to sj)ecial rules for computing 
employees' contributions). 
26 use 101. 
;^^3) Section 101(b) (relathig to employees' death benefits). 
26 use 2039. 
"(4) Section 2039 (relatingto annuities). 
72 Stat. 1659. 
«(5) Section 2517 (relating to certain annuities under quali-
2 6 u S C 2 5 1 7 * 
i » i 
1 
\ * s 
ned plans), 
(c) 
TECHNICAL AMENDMENTS.— 
(1) The table of sections for part I of subchapter D of chapter 
1 is amended by adding at the end thereof the following: 
"Sec. 4(Hi. Certain employees of foreign subsidiaries. 
"Sec. 407. Certain employees of domestic subsidiaries engaged in 
business outside the United States." 
26 use 3121. 
^2) Section 3121(a)(5) (relating to definition of wages) is 
amended by striking out "or" at the end of subparagraph (A) 
and by striking out subparagraph (B) and inserting in lieu 
thereof the following new subparagraphs: 
"(B) under or to an annuity plan which, at the time of 
26 use 403. 
such payment, is a plan described in section 403(a), or 
"(C) under or to a bond purchase plan which, at the time 
of such payment, is a qualified bond purchase plan described 
in .section 405(a) ;". 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
63 
64 Stat. 492. 
42 u s e 409. 
53 Stat. 67. 
68A Stat. 134, 
163. 
26 u s e 403. 
76 Stat. 826. 
26 u s e 405. 
(3) Section 209(e) of the Social Security Act (relating to tlie 
definition of wages) is amended to read as follows: 
"(e) Any payment made to, or on behalf of, an employee or his 
beneficiary (1) from or to a trust exempt from tax under section 
165(a) of the Internal Revenue Code of 1939 at the time of such pay-
ment or, in the case of a payment after 1954, under sections 401 and 
501(a) of the Internal Revenue Code of 1954, unless such payment is 
made to an employee of the trust as remuneration for services "26use 401,501 
rendered as such employee and not as a beneficiary of the trust, or (2) 
under or to an annuity plan which, at the time of such payment, meets 
the requirements of section 165(a) (3), (4), (5), and (6) of the Inter-
nal Revenue Code of 1939 or, in the case of a payment after 1954 and 
prior to 1963, the requirements of section 401(a) (3), (4), (5), and 
(6) of the Internal Revenue Code of 1954, or (3) under or to an 
annuity plan which, at the time of any such payment after 1962, is a 
plan described in section 403(a) of the Internal Revenue Code of 
1954, or (4) under or to a bond purchase plan which, at the time of 
any such payment after 1962, is a qualified bond purchase plan 
described in section 405(a) of the Internal Revenue Code of 1954;". 
(d) EFFECTIVE DATE.—The amendments made by subsections (a), 
(b), and (c) (1) shall apply to taxable years ending after December 
31,1963. The amendments made by subsections (c) (2) and (3) shall 
apply to remuneration paid after December 31, 1962. 
SEC. 
2
2
1
. 
EMPLOYEE STOCK 
OPTIONS 
AND 
PURCHASE 
PLANS. 
(a) I N GENERAL.—Pait I I of subchapter D of chapter 1 is 
amended to read as follows: 
"PART II—CERTAIN STOCK OPTIONS 
"Sec*. 421. General rules. 
"Sec. 422. Qualified, stock options. 
"Sec. 423. Employee stock purchase plans. 
"Sec. 424. Restricted stock options. 
"Sec. 42.5. Definitions and special rules. 
"SEC. 421. GENERAL RULES. 
"(a) EFFEcrr OF QUALIFYING TKANSFEK.—If a share of stock is 
transferred to an individual in a transfer in respect of which the 
requirements of section 422 (a), 423(a), or 424(a) are met— 
e/'"**' ^^* ^^' ^^' 
"(1) except as provided in section 422(c) (1), no income shall 
result at the time of the transfer of such ^hare to the individual 
upon his exercise of the option with respect to such share; 
"(2) no deduction under section 162 (relating to trade or 
^^ ^^^ ^^^* 
business expenses) shall be allowable at any time to the employer 
corporation, a parent or subsidiary corporation of such corpora-
tion, or a corporation issuing or assuming a stock option in a 
transai'tion to which section 425(a) applies, with res^ject to the 
^°*'' ''* ^^* 
share so transferred; and 
"(3) no amount other than the price paid under the option 
shall be considei'ed as received by any of such corporations for 
the share so transferred. 
"(b) EFFE("r OF DisQUALiFViN(} DiSFOsiTioN.—If the transfer of 
a sliare of stock to an individual pursuant to his exercise of an option 
would otherwise meet the requirements of section 422(a), 423(a), or 
424(a) except that there is a failure to meet any of the holding period 
requirements of section 422(a) (1), 423(a) (1), or 424(a) (1), then any 
increase in the income of such individual or deduction from the in-
come of his employer corporation for the taxable year in which such 
exercise, occurred attributable to such disposition, shall be treated as 
an increase in income or a deduction from income in the taxable year 
of such individual or of such employer cori:)oration in which suchdis-
position occurred. 
64 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(c) P^xEKcisK B
V ESTATE.— 
''(1) I x GENERAL.—If till optiou to wliicli tliis part applies is 
exercised after the death of the employee by the estate of the 
decedent, or by a person wlio acquired the right to exercise such 
option by bequest or inheritance or by reason of the death of the 
decedent, the provisions of subsection (a) shall apply to the same 
extent as if the option had been exercised by the decedent, except 
that— 
"(A) the holding period and employment requirements of 
sections 422(a), 423(a), and 424(a) shall not apply, and 
"(B) any transfer by the estate of stock acquired shall be 
considered a disposition of such stock for purposes of sec-
Post. pp. 67,69. 
tions423(c) and424(c) (1). 
"(2) DEDUCTION FOR ESTATE TAX.—If an amount is required 
to be included under section 422(c) (1), 423(c), or 424(c) (1) in 
gross income of the estate of the deceased employee or of a person 
(lescribed in paragraph (1), there shall be allowed to the estate 
or such person a deduction with respect to the estate tax attrib-
utable to the inclusion in the taxable estate of the deceased 
employee of the net value for estate tax purposes of the option. 
For this purpose, the deduction shall be determined under section 
26^sc°*69^i^^ 
^^^ ^^^ ^
® 
^
^
^
® option acquired from the deceased employee 
were an item of ^ross income in respect of the decedent under 
section 691 and as if the amount includible in gross income under 
section 422(c) (1), 423(c), or 424(c) (1) were an amount included 
in gross income under section 691 in respect of such item of gross 
income. 
'* (3) BASIS OF SHARES ACQUIRED.—In the case of a share of stock 
acquired by the exercise of an option to which paragraph (1) 
applies— 
"(A) the basis of such share shall include so much of 
the basis of the option as is attributable to such sliare; except 
that the basis of such share shall be reduced by the excess (if 
any) of (i) the amount which would have been includible in 
gross income under section 422(c) (1), 423(c), or 424(c) (1) 
if the employee had exercised the option on the date of his 
death and had held the share acquired pursuant to such 
exercise at the time of his death, over (ii) the amount which 
is includible in gross income under such section; and 
"(B) the last sentence of sections 422(c) (1), 423(c), and 
424(c)(1) shall apply only to the extent that the amount 
includible in gross income under such sections exceeds so 
much of the basis of the option as is attributable to such 
share. 
"vSEC. 422. QUALIFIED STOCK OPTIONS. 
"(a) I N GENERAL.—Subject to the provisions of subsection (c) (1), 
Ante. p. 63. 
sectjou 421(a) shall apply with i-espect to the transfer of a share of 
«t«x;k to an individual pursuant to his exercise of a qualified stock 
option if— 
"(1) no disposition of such share is made by such individual 
within the 3-year period l)eginning on the day after the day of 
the transfer of such share, and 
"(2) at all times during the period l>eginning with the date 
of the granting of the option and ending on the day 3 months 
before the date of such exercise, such individual was an employee 
of either the corporation granting sucli option, a parent or sub-
sidiary corporation of such corporation, or a corporation or a 
parent or subsidiary corporation of such corporation issuing or 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
65 
assuming a stock option in a transaction to which section 425(a) 
applies. 
"(b) QUALIFIED STOCK OITION.—For purposes of this part, the 
tei-m 'qualified stock option' means an option granted to an individual 
after December 31,1963 (other than a restricted stock option granted 
pursuant to a contract described in section 424(c) (3) (A)), for any 
reason connected with his employment by a corporation, if granted 
by the employer corporation or its parent or subsidiary corporation, 
to purchase stock of any of such corporations, but only if— 
"(1) the option is granted pursuant to a plan which includes 
the aggregate number of shares which may oe issued under op-
tions, and the employees (or class of employees) eligible to re-
ceive options, and which is approved by the stockholders of the 
granting corporation within 12 months before or after the date 
such plan is adopted; 
" (2) such option is granted within 10 years from the date such 
plan is adopted, or the date such plan is approved by the stock-
holders, whichever is earlier; 
"(3) such option by its terms is not exercisable after the ex-
piration of 5 years from the date such option is granted; 
"(4) except as provided in subsection (c)(1), the option 
price is not less than the fair market value of the stock at the 
time such option is granted; 
"(5) such option by its terms is not exercisable while there is 
outstanding (within the meaning of subsection (c)(2)) any 
qualified stock option (or restricted stock option) which was 
granted, before the granting of such option, to such individual 
to purchase stock in his employer corporation or in a corporation 
which (at the time of the granting of such option) is a parent 
or subsidiary corporation of the employer corporation, or in a 
predecessor corporation of any of such corporations; 
"(6) such option by its terms is not transferable by such in-
dividual otherwise than by will or the laws of descent and distri-
bution, and is exercisable, during his lifetime, only by him; and 
" (7) such individual, immediately after such option is granted, 
does not own stock possessing more tluin 5 percent of the total 
combined voting poAver or value of all classes of stock of the 
employer corporation or of its parent or subsidiary corporation; 
except that if the equity capital of such corporation or corpora-
tions (determined at the time the opti(m is granted) is less than 
$2,000,000, then, for ])urposes of applying the limitation of this 
paragraph, there shall be added to such 5 percent the percentage 
(not higher than 5 percent) which bears the same ratio to 5 ])er-
cent as the difference between such equity capital and $2,000,000 
bears to $1,000,000. 
"(c) SPFAIAL RULES.— 
"(1) ExER(^isE O
P orriox WIIEX PRICE IS LESS TJFAX VALUE OF 
STO(^K.—If a share of stock is transferred pursuant to the exer-
cise by an individual of an option which fails to qualify as a 
(|ualified stock ()])tion under subsection (b) because there was a 
failure in an attempt, made in good faith, to meet the require-
ment of subsection (b) (4), the requirement of subsection (b) (4) 
shall be considered to have been met, but there shall be included 
as compensation (and not as gain upon the sale or exchange of a 
capital asset) in his gross income for the taxable year in which 
such option is exercised, an amount equal to the lesser of— 
" (A) 1.50 percent of the difference between the option price 
and the fair market value of the share at the time the option 
was granted, or 
Post, p. 71. 
Post, p. 69. 
66 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
''(B) the (lifieience between the option i)ri(*e aiid tlie fair 
market value of tlie share at tlie time of sucli exercise. 
Tlie basis of tlie share aajuired shall be increased by an amount 
e<|ual to the amount included in his ^ross income umler this 
paragraph in the taxable year in which the exercise occurred. 
"(2) CERTAIX onioNs TKKATED AS orrsiAXDixcs.—For purposes 
of subsection (b) (5)— 
"(A) any restricted stock option which is not terminated 
before January 1, 1965, and 
" (B) any qualified stock opt ion granted after December 31, 
1063, 
shall be treated as outstanding until sucli o[)ti()n is exer<Msed in 
full or expires by reason of the lapse of time. For purposes of 
the preceding sentence, a restricted stock option granted before 
January 1, 1964, shall not be treated as outstanding for any 
period before the first day on which (under the terms of such 
o[)tion) it may be exercised. 
*'(3) OiTioNS oRAXTKU T
O cKKTAix siiAj{Knoi.i>K'Ks,—For pur-
poses of subsection (b)(7) — 
''(A) the term 'equity capital" means— 
"(i) in the case of one corporation, the sum of its 
money and other property (in an amount eipial to the 
adjusted basis of such property for determining gain), 
less the amount of its indebtedness (other than indebted-
ness to shareholders), and 
"(ii) in the case of a group of corporations consisting 
of a parent and its subsidiai'y coi'porations, the sum of 
the equity capital of each of such corporations adjusted, 
under regulations presci-ibed by the Secretary or his 
delegate, to eliminate the effect of intercorporate owner-
ship and transactions among such corporations: 
"(B) the rules of section -l'25(d) shall apply in determin-
ing the stock ownersliip of the individual; and 
''(C) stock which the individual may purchase under out-
standing options shall be treated as stock owned by such 
individual. 
If an individual is granted an option which permits him to 
j)ur('hase stock in excess of the limitation of subsection (b)(7) 
(determined by api>lying the rules of this paragraph)5 such 
oi)tion shall be treated as meeting the reciuirement of subsection 
(b) (7) to the extent that such individual could, if the option were 
fully exercised at the time of gi-ant, purchase stock under such 
option without exceeding such limitation. 
The portion of such 
option which is treated as meeting the re(juirement of subsection 
(b) (7) shall be deemed to be that portion of the option which is 
first exercised. 
'•(!:) CERTAIN 
DISQIALIFVIXG nisposrnoxs 
WHERE 
AMOUXT 
RKAKIZEO IS LESSTIIAX VAIAE AT KXERCISE. 
Tf 
"(A) an individual who has acquired a shaie of stock by 
the exercise of a ([ualified stock option makes a disposition of 
such share within the o-vear period described in subsection 
(a)(1), and 
"(B) such clistX)sition is a sale or exchange with respect 
to which a loss (if sustained) would be recognized to such 
individual, 
then the anicmut which is includible in the gross income of such 
individual, and the amount which is deductible from the income 
of his employer corporation, as compensation attributable to the 
exercise of such option shall not exceed the excess (if any) of the 
Post, p. 71. 
78 STAT. ] 
PUBLIC LAW 88.272-FEB. 26, 1964 
67 
amount realized on such sale or exchange over the adjusted basis 
of such share. 
"(5) 
CERTAIN TRANSFERS BY INSOLVENT INDIVIDUATE.—If an in-
solvent individual holds a share of stock acquired pursuant to his 
exercise of a qualified stock option, and if such share is trans-
ferred to a trustee, receiver, or other similar fiduciary, in any 
proceeding under the Bankruptcy Act or any other similar insol- gj^gtatr^s/o!^' 
vency proceeding, neither such transfer, nor any other transfer 
11 use i note. 
of such share for the benefit of his creditors in such proceeding, 
shall constitute a 'disposition of such shai'e' for purposes of sub-
section (a) (1). 
"(6) APPLICATION OF SUBSECTION (b)(5) WHERE OPTIONS ARE 
F
O
R STOCK OF SAME CLASS IN SAME CORPORATION.—^Tlie requirement 
of subsection (b) (5) shall be considered to have been met in the 
case of any option (referred to in this paragraph as 'new option') 
granted to an individual if— 
"(A) the new option and all outstanding options referred 
to in subsection (b) (5) are to purchase stock of tlie same 
class in the same corporation, and 
"(B) the new option by its tenns is not exercisable while 
there is outstanding (within the meaning of paragraph (2)) 
any qualified stock option (or restricted stock option) which 
was granted, before the granting of the new option, to such 
individual to purchase stock in such corporation at a price 
(determined as of the date of grant of the new option) higher 
than the option price of the new option. 
"SEC. 
4
2
3
. 
EMPLOYEE 
STOCK 
PURCHASE 
PLANS. 
"(a) GENFJIAL RULE.—Section 421(a) shall apply with respect to 
^"*e, p. 63. 
the transfer of a share of stock to an individual pursuant to his exer-
cise of an option granted after December 81, 1963 (other than a 
restricted stock option granted pui-suant to a plan described in section 
424(c)(3)(B)), imder an employee stock purchase plan (as defined 
in subsection (b)) if— 
"(1) no disposition of sucli share is made by him within 2 years 
after the date of the granting of the option nor within 6 months 
after the transfer of such share to him; and 
"(2) at all times during the period beginning with the date of 
the granting of the option and ending on the day 8 months before 
the date of such exercise, he is an employee of the corporation 
granting such option, a parent or subsidiary corporation of such 
corporation, or a corporation or a parent or subsidiary corpora-
tion of such corporation issuing or assuming a stock option in a 
transaction to which section 425(a) applies. 
"(b) EMPLOYEE STOCK PURCHASE PLAN.—For pur])oses of this part, 
the term 'employee stock purchase plan' means a plan wliich meets the 
following requii-ements: 
"(1) the plan provides that options are to be granted only to 
employees of the employer corporation or of its parent or sub-
sidiary corporation to purchase stock in any such corporation; 
"(2) such plan is approved by the stockholders of the granting 
corporation within 12 months before or after the date such plan 
is adopted; 
"(3) under the terms of the plan, no employee can be granted 
an option if such employee, immediately after the option is 
granted, owns stock possessing 5 percent or more of the total 
combined voting power or value of all classes of stock of the 
employer corporation or of its parent or subsidiary corporation. 
For purposes of this paragraph, the rules of section 425(d) shall 
apply in determining the stock ownership of an individual, and 
Post, p. 69. 
Post, p. 71. 
68 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
stock which the employee may purchase under outstanding options 
shall be treated as stock owned by the employee; 
"(4) under the terms of the plan, options are to be granted 
to all employees of any corporation whose employees are granted 
any of such options by reason of their employment by such corpo-
ration, except that there may be excluded— 
" (A) employees who have been employed less than 2 years, 
"(B) employees whose customary employment is 20 hours 
or less per week, 
"(C) employees whose customary employment is for not 
more than 5 months in any calendar year, and 
"(D) officers, persons whose principal duties consist of 
supervising the work of other employees, or liighly compen-
sated employees; 
"(5) under the terms of the plan, all employees granted such 
options shall have the same rights and privileges, except that 
the amount of stock which may be purchased by any employee 
under such option may bear a uniform rehitionship to the total 
compensation, or the basic or regular rate of compensation, of 
employees, and the plan may provide that no employee may pur-
chase more than a maximum amount of stock fixed under the 
plan; 
"(6) under the terms of the plan, the option price is not less 
than the lesser of— 
"(A) an amount equal to 85 percent of the fair market 
value of the stock at the time such option is granted, or 
"(B) an amount which under the terms of the option may 
not be less than 85 percent of the fair market value of the 
stock at the time such option is exercised; 
"(7) under the terms of the plan, such option cannot be exer-
cised after the expiration of— 
"(A) 5 years from the date such option is granted if, 
under the terms of such plan, the option price is to be not 
less than 85 percent of the fair market value of such stock 
at the time of the exercise of the option, or 
"(B) 27 months from the date such option is granted, if 
the option price is not determinable in the manner described 
in subparagraph (A); 
"(8) under the terms of the plan, no enij)loyee may be granted 
ail option which permits his rights to purchase stock under all 
such plans of his ejnployer corporation and its parent and sub-
sidiary corporations to accrue at a rate which exceeds $25,00() of 
fair market value of such stock (determined at the time such 
option is granted) for each calendar year in which such option 
is outstanding at any time. For purposes of this paragraph— 
"(A) the right to purchase stock under an option accrues 
when the option (or any portion thereof) first l)ecomes exer-
cisable during the calendar year; 
"(B) the right to purchase stock under an option accrues 
at the rate provided in the option, but in no case may such 
rate exceed $25,000 of fair market value of such stock (deter-
mined at the time such option is granted) for any one cal-
endar year; and 
"(C) a right to purchase stock which has accrued under 
one option granted pursuant to the plan may not be carried 
over to any other option; and 
"(9) under the terms of the plan, such option is not trans-
ferable by such individual otherwise than by will or the laws of 
descent and distribution, and is exercisable, during his lifetime, 
only by him. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
69 
For purposes of paragraphs (3) to (9), inclusive," where additional 
terms are contained in an offering made under a plan, such additional 
terms shall, with respect to options exercised under such offering, be 
treated as a part of the terms of such plan. 
"(c) 
SPECIAL RULE WHERE OPTION PRICE Is BETWJ:EX 85 PERCENT 
AND 100 PERCENT OF VALUE or STOCK.—If the option price of a share 
of stock acquired by an individual pursuant to a transfer to which 
subsection (a) applies was less than 100 percent of the fair market 
value of such share at the time such option was granted, then, in the 
event of any disposition of such share by him w-hich meets the holding-
period requirements of subsection (a), or in the event of his death 
(whenever occurring) while owning such share, there shall be included 
as compensation (and not as gain upon the sale or exchange of a capital 
asset) in his gross income, for the taxable year in which falls the date 
of such disposition or for the taxable year closing with his death, 
whichever applies, an amount equal to the lesser of— 
" (1) the excess of the fair market value of the share at the time 
of such disposition or death over the amount paid for the share 
under the option, or 
"(2) the excess of the fair market value of the share at the 
time the option was granted over the option price. 
If the option price is not fixed or determinable at the time the option 
is granted, then for purposes of this subsection, the option price shall 
be determined as if the option were exercised at such time. In the case 
of the disposition of such share by the individual, the basis of the share 
in his hands at the time of such disposition shall be increased by an 
amount equal to the amount so includible in his gross income. 
"SEC. 424. RESTRICTED STOCK OPTIONS. 
"(a) I N GENERAL.—Section 421(a) shall apply with respect to the 
^"^^' ^' "• 
transfer of a share of stock to an individual pursuant to his exercise 
after 1949 of a restricted stock option, if— 
" (1) no disposition of such share is made by him within 2 years 
from the date of the granting of the option nor within 6 months 
after the transfer of such share to him, and 
•' (2) at the time he exercises such option— 
"(A) he is an employee of either the corporation granting 
such option, a parent or subsidiary corporation of such corpo-
ration, or a corporation or a parent or subsidiary corpora-
tion of such corporation issuing or assuming a stock option in 
a transaction to which section 425(a) applies, or 
"(B) he ceased to be an employee of such corporations 
within the 3-month period preceding the time of exercise. 
"(b) RESTRICTED STOCK OITION.—For purposes of this part, the 
term 'restricted stock option' means an option granted after Febniary 
26, 1945, and before January 1, 1964 (or, if it meets the requirements 
of subsection (c) (3), an option granted after December 31, 1963), to 
an individual, for any reason connected with his employment by a 
(X)rporation, if granted by the employer corporation or its parent or 
sul)sidiary corporation, to i)urchase stock of any of such corporations, 
but only if— 
•'( 1) at the time such option is granted— 
"(A) the option price is at least 85 ])ercent of the fair 
market value at such time of the stock subject to the option, or 
"(H) in ti)e case of a variable price option, the option price 
(computed as if the option had been exercised when granted) 
is at least 85 percent of the fair market value of the stock at 
the time such option is granted; 
"(2) such option by its terms is not transferable by such indi-
vidual otherwise than by will or the laws of descent and distribu-
tion, and is exercisable, during his lifetime, only by him; 
Post, 
p. 71. 
Post, 
p. 71. 
70 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
" (3) such individual, at the time the option is granted, does not 
own stock possessing more than 10 percent of the total combined 
voting power of all classes of stock of the employer corporation or 
of its parent or subsidiary corporation. 
This paragraph shall not 
apply if at the time such option is granted the option price is at 
least 110 percent of the fair market value of the stock subject to 
the option, and such option either by its terms is not exercisable 
after the expiration of 5 years from the date such option is granted 
or is exercised within one year after August 16, 1954. For pur-
poses of this paragraph, the provisions of section 425(d) shall 
apply in determining the stock ownership of an individual; and 
" (4) such option by its terms is not exercisable after the expira-
tion of 10 years from the date such option is granted, if such 
option has been granted on or after June 22, 1954. 
"(c) 
SPECIAL EULES.— 
"(1) 
OPTIONS UNDER WHICH OPTION PRICE IS BETWEEN 85 PER-
CENT AND 95 PERCENT OF VALUE OF STOCK.—If uo disposition of 
a share of stock acquired by an individual on his exercise after 
1949 of a restricted stock option is made by him within 2 years 
from the date of the granting of the option nor within 6 months 
after the transfer of such share to him, but, at the time the 
restricted stock option was granted, the option jH-ice (computed 
under subsection (b)(1)) was less than 95 j)ercent of the fair 
market value at such time of such share, then, in the event of any 
disposition of such share by him, or in the event of his death 
(whenever occurring) while owning such share, there shall be 
included as compensation (and not as ^ain upon the sale or 
exchange of a capital asset) in his gross income, for the taxable 
year in which falls the date of such disposition or for the taxable 
year closing with his death, whichever applies— 
"(A) in the case of a share of stock acquired under an 
option qualifying under subsection (b)(1)(A), an amount 
equal to the amount (if any) by which the option price is 
exceeded by the lesser of— 
"(i) the fair market value of the share at the time 
of such disposition or death, or 
"(ii) the fair market value of the share at the time 
the option was granted; or 
"(B) in the case of stock acquired under an option 
qualifying under subsection (b)(1)(B), an amount equal 
to the lesser of— 
"(i) the excess of the fair market value of the 
share at the time of such disposition or death over 
the price paid under the option, or 
"(ii) the excess of the fair market value of the 
share at the time the oi)tion was granted over the 
option price (computed as if, the option had been 
exercised at such time). 
In the case of a disposition of such share by the individual, the 
basis of the share in his hands at the time of such disposition 
shall be increased by an amount equal to the amount so 
includible in his gross income. 
"(2) VARIABLE PRICE OPINION.—For purposes of subsection (b) 
(1), the term 'variable price option' means an option under 
w^hich the purchase price of the stock is fixed or determinable 
under a formula in which the only variable is the fair market 
value of the stock at any time during a period of 6 months which 
includes the time the option is exercised; except that in the case 
of options granted after September 80, 1958, such tenn does not 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
71 
include any such option in which such formula provides for 
determining such price by reference to the fair market value of 
the stock at any time before the option is exercised if such value 
may be greater than the average fair market value of the stock 
during the calendar month in which the option is exercised. 
"(3) 
CERTAIN OPTIONS GRANTED AFTER DECEMBER 3 1 , 1 9 6 3 . — 
For purposes of subsection (b), an option granted after Decem-
ber 31, 1963, meets the requirements of this paragraph if granted 
pursuant to— 
"(A) a binding written contract entered into before 
January 1, 1964, or 
"(B) a written plan adopted and approved before Jan-
uary 1, 1964, which (as of January 1, 1964, and as of the 
date of the granting of the option)— 
"(i) met the requirements of paragraphs (4) and 
(5) of section 423(b), or 
^"'"' ''• '^• 
"(ii) was being administered in a way which did not 
discriminate in favor of officers, persons whose principal 
duties consist of 
supervising 
the work 
of 
other 
employees, or highly compensated employees. 
"SEC. 425. DEFINITIONS AND SPECIAL RULES. 
"(a) CORPORATE REORGANIZATIONS. LIQUIDATIONS. ETC.—For pur-
poses of this part, the term 'issuing or assuming a stock option in a 
transaction to which section 425(a) applies' means a substitution of a 
new option for the old option, or an assumption of the old option, 
by an employer corporation, or a parent or subsidiary of such corpo-
ration, by reason of a corporate merger, consolidation, acquisition of 
property or stock, separation, reorganization, or liquidation, if— 
" (1) the excess of the aggregate fair market value of the shares 
subject to the option immediately after the substitution or assump-
tion over the aggregate option price of such shares is not more 
than the excess of the aggregate fair market value of all shares 
subject to the option immediately before such substitution or 
assumption over the aggregate option price of such shares, and 
"(2) the new option or the assumption of the old option does 
not give the employee additional benefits which he did not have 
under the old option. 
Kor purposes of this subsection, the parent-subsidiary relationship 
shall be determined at the time of any such transaction under this 
subsection. 
"(b) AcQursrnoN or NEW STOCK.—For purposes of this part, if 
stock is received by an individual in a distribution to which section 
305, 354, 355, 356, or 1036 (or so much of section 1031 as relates to 
jeljIc'soT/ 
section 1036) applies, and such distribution was made with respect to 354, 355, sse! 
stock transferi-ed to him upon his exercise of the option, such stock ^°36, 1031. 
shall be considered as having been transferred to him on his exercise of 
such option. A similar rule shall be applied in the case of a series 
of such distributions. 
"(c) 
DISPOSITION.— 
"(1) I N GENERAL.—Except as provided in paragraph (2), for 
I)iirposes of this part, the t«rm 'disposition' includes a sale, 
excliange, gift, or a transfer of legal title, but does not include— 
"(A) a transfer from a decedent to an estate or a transfer 
by bequesl or inheritance; 
'"(B) an exchange to which section 354, 355, 356, or 1036 
(or so much of section 1031 as reilates to section 1036) 
applies; or 
"(C) a mei-e pi edge or hypothecation. 
31-667 0-65—8 
72 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
Ante, pp. 64, 
67, 69. 
i<inte, p. 71. 
"(2) JoiXT TENAXCY.—Tlie acquisition of a share of stock in 
the name of the employee and another jointly with the right of 
survivorship or a subsequent transfer of a share of stock into 
such joint ownership shall not be deemed a disposition, but a 
termination of such joint tenancy (except to the extent such 
employee acquires ownership of such stock) shall be treated as 
a disposition by him occurring at the time such joint tenancy is 
terminated. 
"(d) ATTRIBUTION OF STOCK OWNERSHIP.—For purposes of this 
[)art, in applying the percentage limitations of sections 422(b)(7), 
423(b) (3), and424(b) (3)— 
"(1) the individual with respect to whom such limitation is 
being determined shall be considered as owning the stock owned, 
directly or indirectly, by or for his brothers and sisters (whether 
by the whole or half blood), spouse, ancestors, and lineal 
descendants; and 
"(2) stock owned, directly or indirectly, by or for a corpora-
tion, partnership, estate, or trust, shall be considered as being-
owned proportionately by or for its shareholders, partners, or 
beneficiaries. 
"(e) PARENT CORPORATION,—For purposes of this part, the term 
'parent corporation' means any corporation (other than the employer 
corporation) in an unbroken chain of corporations ending with the 
employer corporation if, at the time of the granting of the option, 
each of the corporations other than the employer corporation owns 
stock possessing 50 percent or more of the total combined voting 
power of all classes of stock in one of the otlier corporations in such 
chain. 
"(f) 
SUBSIDIARY CORPORATION.—For purposes of this part, the 
term 'subsidiary corporation' means any corporation (other than the 
employer corporation) in an unbroken chain of corporations begin-
ning with the employer corporation if, at the time of the granting 
of the option, each of the corporations other than the last corporation 
in the unbroken chain owns stock possessing 50 percent or more of 
the total combined voting power of all classes of stock in one of the 
other corporations in such chain. 
"(g) SPECIAL RULE FOR APPLYING SUBSECTIONS (e) AND (f).—In 
applying subsections (e) and (f) for purposes of section 422(a) (2), 
423(a)(2), and 424(a)(2), there shall be substituted for the term 
'employer corporation' wherever it appears in subsections (e) and (f) 
the term 'grantor corporation', or the term 'corporation issuing or 
assuming a stock option in a transaction to which section 425(a) 
applies', as the case may be. 
"(h) 
MODIFICATION, EXTENSION, OR RENEWAL OF OPITON.— 
"(1) I N GENERAL.—For purposes of this part, if the terms of 
any option to purcliase stock are modified, extended, or renewed, 
such modification, extension, or renewal shall be considered as 
the granting of a new option. 
"(2) 
SPECIAL RULES FOR SECTIONS 4 2.{ AND 4 24 OPITONs.— 
"(A) In the case of the transfer of stock pursuant to the 
exercise of an option to which section 423 or 424 applies and 
which has been so modified, extended, or renewed, then, ex-
cept as provided in subparagraph (B), the fair market value 
of such stock at the time of the granting of such option shall 
be considered as whichever of the following is the highest: 
"(i) the fair market value of such stock on the date 
of the original gi'anting of the option, 
" (ii) the fair market value of such stock on the date of 
the making of such modification, extension, or renewal, 
or 
Ante, pp. 64, 
67, 69. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
73 
"(iii) the fair market value of such stock at the 
time of the making of any intervening modification, 
extension, or renewal. 
"(B) Subparagraph (A) shall not apply with respect 
to a modification, extension, or renewal of a restricted 
stock option before January 1, 1964 (or after December 31, 
1963, if made pursuant to a binding written contract 
entered into before January 1, 1964), if the aggregate of the 
monthly average fair market values of the stock subject 
to the option for the 12 consecutive calendar months before 
the date of the modification, extension, or renewal, divided 
by 12, is an amount less than 80 percent of the fair 
market value of such stock on the date of the original 
granting of the option or the date of the making of any 
intervening modification, extension, or renewal, whichever 
is the highest. 
"(3) DEFINITION OF MODIFICATION.—The term 'modification' 
means any change in the terms of the option which gives the 
employee additional benefits under the option, but such term 
shall not include a change in the terms of the option— 
"(A) attributable to the issuance or assumption of an 
option under subsection ( a ) ; 
"(B) to permit the option to qualify under sections 422(b) 
(6),423(b)(9),and424(b)(2);or 
"(C) in the case of an option not immediately exercisable 
in full, to accelerate the time at which the option may be 
exercised. 
If a restricted stock option is exercisable after the expiration of 
10 years from the date such option is granted, subparagraph (B) 
shall not apply unless the terms of the option are also changed to 
make it not exercisable after the expiration of such period. 
"(i) STOCKHOLDER APPROVAL.—For purposes of this part, if the 
grant of an option is subject to approval by stockholders, the date of 
grant of the option shall be determined as if the option had not been 
subject to such approval. 
"(j) CROSS REFERENCES.— 
"For provisions requiring the reporting of certain acts with 
respect to a qualified stock option, options granted under employer 
stock purchase plans, or a restricted stock option, see section 6039." 
(b) ADMINISTRATIVE PROVISIONS.— 
(1) REPORTING REQUIREMENT FOR CERTAIN OPTIONS,—Subpart 
A of part I I I of subchapter A of chapter 61 (relating to informa-
tion returns) is amended by renumbering section 6039 as 6040, 
and by inserting after section 6038 the following new section: 
"SEC. 6039. INFORMATION REQUIRED IN CONNECTION WITH CERTAIN 
OPTIONS. 
"(a) REQUIREMENT OF REPORTING.—Every corporation— 
"(1) which in any calendar year transfers a share of stock to 
any person pursuant to such person's exercise of a qualified stock 
option or a restricted stock option, or 
"(2) which in any calendar year records (or has by its agent 
recorded) a transfer of the legal title of a share of stock— 
"(A) acquired by the transferor pursuant to his exercise 
of an option described in section 423(c) (relating to special 
rule where option price is between 85 percent and 100 percent 
of value of stock), or 
26 u s e 6031-
6039. 
74 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(B) acquired by the transferor pursuant to his exercise 
Ante, p. 69. 
^f ^ restricted stock option described in section 124(c)(1) 
(relating to options under which option price is between 85 
percent and 95 percent of value of stock), 
shall, for such calendar year, make a return at such time and in such 
manner, and setting forth such information, as the Secretary or his 
delegate may by regulations prescribe. 
For purposes of the preceding 
sentence, any option which a corporation treats as a qualified stock 
option, a restricted stock option, or an option granted under an 
employee stock purchase plan, shall be deemed to be such an option. 
A return is required by reason of a transfer described in paragraph 
(2) of a share only with respect to the first transfer of such share by 
the person who exercised the option. 
"(b) 
STATEMENTS TO B E FURNISHED TO PERSONS W I T H EESPEGT TO 
WHOM INFORMATION I S FURNISHED.—F>ery corporation making a 
return under subsection (a) shall furnish to each person whose name is 
set forth in such return a written statement setting forth such infor-
mation as the Secretary or his delegate may by regulations prescribe. 
The written statement required under the preceding sentence shall be 
furnished to the person on or before January 31 of the year following 
the calendar year for which the return under subsection (a) was made. 
"(c) iDENTiFif'ATiON OF STOCK.—Any Corporation M'hich transfers 
any share of stock pursuant to the exercise of an option described in 
subsection (a) (2) shall identify such stock in a manner adequate to 
carry out the purposes of this section. 
"(d) 
CROSS KEFERENCES.— 
"For definition of— 
"(1) The term 'qualified stock option', see section 422(b). 
"(2) The term 'employee stock purchase plan', see section 
423(b). 
"C3) The term 'restricted stock option', see section 424(b)." 
(2) 
PENAL'TIES FOR FAILURE TO FILE INFORMATION RETURNS.—• 
Section 6652(a) (relating to failure to file certain information 
returns) is amended to read as follows: 
"(a) RETURNS RELATING TO PAYMENTS OF DIVIDENDS, ETC., AND CER-
TAIN TRANSFERS OF STOCK,—In the case of each failure— 
"(1) to file a statement of the aggregate amount of payments 
to another person required by section 6042(a)(1) (relating to 
payments of dividends aggregating $10 or more), section 6044 
(a) (1) (relating to payments of patronage dividends aggregat-
ing $10 or more), or section 6049(a) (1) (relating to payments of 
interest aggregating $10 or more), 
Ante, p. 73. 
u^2) to make a return required by section 6039(a) (relating 
to reporting information in connection with certain options) with 
resj^ect to a transfer of stock or a transfer of legal title to stock, 
or 
Ante, p. 37. 
u^g^ |-Q n^^ke a retum required by section 6052(a) (relating 
to reporting payment of wages in the form of group-term life 
insurance) with respect to group-term life insurance on the life of 
an employee, 
on the date prescribed therefor (determined with regard to any exten-
sion of time for filing), unless it is shown that such failure is due to 
reasonable cause and not to willful neglect, tliere shall be paid (upon 
notice and demand by the Secretary or his delegate and in the same 
manner as tax), by the person failing to file a statement referred to in 
paragraph (1) or failing to make a return referred to in paragraph 
(2) or (3), $10 for each such failure, but the total amount imposed 
on the delinquent person for all such failures during anv calendar 
year shall not exceed $25,000." 
76 Stat. 1057. 
26 use 6652. 
26 use 6042. 
26 use 6044. 
26 use 6049. 
Ante, 
p. 73. 
68A Stat. 135. 
26 u s e 402. 
Ante, 
p. 71. 
26 u s e 691. 
Ante, 
p. 63. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
75 
(3) 
PENALTIES FOR FAILURE TO FURNISH STAIT-IMENTS TO PERSONS 
WITH RESPECT TO WHOM RETURNS ARE FILED. 
ScctioU 6678 ( r e l a t i n g 
AntefT'^'37^^^'' 
to failure to furnish certain statements) is amended— 
26'use 6678. 
(A) by striking out "section 6042(c)," and inserting in 
^e use 6042. 
lieu thereof "section 6039 (b), 6042(c),"; and 
(B) by striking out "section 6042 (a) (1)," and inserting in 
lieu thereof "section 6039(a), 6042(a) (l),''. 
(c) 
TECHNICAL AMENDMENTS.— 
(1) Section 402(a)(3)(B) (relating to taxability of benefi-
ciary of employees' trust) is amended by striking out "section 
421(d) (2) and (3)" and inserting in lieu thereof "subsections 
(e) and (f) of section 425". 
(2) The last sentence of subparagraph (li) of section 691(c) 
(2) (relating to allowance of deduction for estate tax in case of 
items constituting income in respect of a decedent) is amended to 
read as follows: "Such net value shall be determined with respect 
to the provisions of section 421(c) (2), relating to the deduction 
for estate tax with respect to stock options to which pait II of 
subchapter D applies." 
(d) 
CLERICAL AMENDMENTS.— 
(1) The table of parts for subchapter I) of chapter 1 is 
amended by striking out 
"Part II. Miscellaneous provisions." 
and inserting in lieu thereof the following: 
"Part II. Certain stock options." 
(2) The table of sections for subpart A of j)art I I I of sub-
chapter A of chapter 61 is amended by striking out 
"Sec. 6039. Cross references." 
and inserting in lieu thereof: 
"Sec. 6039. Information required in connection with certain options. 
"Sec. 6040. Cross references." 
(e) 
EFFECTIVE DATES AND TRANSITION RUT.ES.— 
(1) Except as provided in paragraphs (2) and (3), the amend-
ments made by this section shall apply to taxable years ending 
after December 31, 1963. 
(2) The amendments made by paragraphs (1) and (3) of 
subsection (b), and paragraph (2) of section 6652(a) of the In-
ternal Revenue Code of 1954 (as amended by paragraph (2) of 
^5 use'665*2 
subsection (b)), shall apply to stock transferred pursuant to 
options exercised on or after January 1,1964. 
(3) In the case of an option granted after December 31, 1963, 
and before January 1, 1965— 
(A) paragraphs (1) and (2) of section 422(b) of the 
Internal Revenue Code of 1954 (as added by subsection (a)) 
^"'^' ^' ^^* 
shall not apply, and 
(B) paragraph (1) of section 425(h) of such Code (as 
added by subsection (a)) shall not apply to any change in 
the terms of such option made before January 1, 1965, to 
permit such option to qualify under paragraphs (3), (4), 
and (5) of such section 422(b). 
SEC. 222. SALES AT RETAIL UNDER REVOLVING CREDIT PLANS. 
(a) 
TREATMENT 
I'NDER 
INSTALLMENT 
METHOD.—Section 
453 
26 use 453. 
(relatijjg to installment method of accounting) is amended by adding 
:it the end thereof the following new subsection: 
"(e) 
REVOLVING (CREDIT TYPE PLANS.—For purposes of subsection 
(a), the teiTO 'histallment plan' includes a revolving credit type plan 
which provides that the purchaser of pei-sonal property at retail may 
76 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
pay for sudi property in a series of periodic paynieiiis of ;\n a«^ree(l 
portion of the amounts due tlie seller under the plau, ex('e[)t that such 
term does not include any sucli plan witli respect to a purchaser who 
uses liis account primarily as an ordinary charge account." 
(b) EFFB:GTIVK DATE.—The amendment made by subsection (a) 
shall apply in respect of sales made during taxable years beginning-
after December 31,1963. 
SEC. 223. TIMING OF DEDUCTIONS IN CERTAIN CASES WHERE 
ASSERTED LIABILITIES ARE CONTESTED. 
(a) 
TAXABLE YEAR OP' DEDUCTION.— 
7/stlf*io2o-^^' 
^^^ Section 461 (relating to general rule for taxable year of 
76 Stat! 1199! 
deduction) is amended by adding at the end thei-eof the following 
26 use 461. 
new subsection: 
" ( f ) 
CoNTESran LlABlLI'lTES. 
I f 
" (1) the taxpayer contests an asserted 1 iability, 
" (2) the taxpayer transfers money or other pro[)erty to provide 
for the satisfaction of the asserted liability, 
"(3) the contest with respect to the assei-ted liability exists after 
the time of the transfer, and 
"(4) but for the fact that the asserted liability is coutested, a 
deduction would be allowed for the taxable year of the transfer 
(or for an earlier taxable year), 
then the deduction shall be allowed for the taxable year of the transfer. 
This subsection shall not apply in resj)ect of tlie deduction for income, 
war profits, and excess profits taxes iin{)osed by the authority of any 
foreign country or possession of the United States." 
" Stat. 24. 
(2) Section 43 of the Internal Revenue Code of n)3<) (relating 
to period for which deductions and credits taken) is amended by 
adding at the end thereof the following new sentences: "'If— 
''(1) the taxpayer contests an assei'ted liability, 
"(2) the taxpayer transfers money or otliei- pro[)erty to pro-
vide for the satisfaction of the asserted liability, 
"(3) the contest witli respect to the asserted liability exists after 
the time of the transfer, and 
"(4) but for the fact that the asserted liability is contested, a 
deduction would be allowed for the taxable yeai- of the transfer 
(or for an earlier taxable year), 
then the deduction shall be allowed for the taxable year of the transfer. 
The preceding sentence shall not Jij)ply in respect of the deduction for 
income, war profits, and excess profits taxes imposed by the authority 
of any foi'eign country or possession of the United States.'' 
(b) KFFKCTIVK DATES.—Except as provided in subsections (c) and 
(<!)-
(1) (lie amendment made by subsection (a)(1) shall apply 
to taxable years beginning after December 31, 1953, and ending 
after August 16, 1954, and 
(2) the amendment made by subsection (a) (2) shall apply to 
taxable years to which the Internal Keveiiiie Code of 1939 applies. 
( c ) 
P^LKCTIOX AS TO T R A X S F E K S 
IN 
TAXAHJ.K 
Y E A R S 
BEGINNING 
IVKFORK JANUARY 1, 1964.— 
(1) The amendments made by subsection (a) shall not apply 
to any transfer of money or other i)roperty described in subsec-
tion (a) made in a taxable year beginning befoie January 1, 1964, 
if the taxpayer elects, in the manner provided by regulations pre-
scribed by the Secretary of the Treasury or his delegate, to have 
this [)aragraph apply. 
Such an election— 
(A) must l>e made within one year after the date of the 
enactment of this Act, 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
77 
(B) may not be revoked after the expiration of siicli one-
year period, and 
(C) shall apply to all transfers described in the first sen-
tence of this paragraph (other than transfers deserilied in 
paragraph (2)). 
In the case of any transfer to which this paragrapli applies, the 
deduction shall be allowed only for the taxable year in which the 
contest with respect to such transfer is settled. 
(2) Paragraph (1) shall not apply to any transfer if the 
assessment of any deficiency which would result from the appli-
cation of the election in respect of such transfer is, on the date 
of the election under paragraph (1), prevented by the oi)eration 
of any law or rule of law. 
(3) If the taxpayer makes an election under paragraph (1), 
and if, on the date of such election, the assessment of any defi-
ciency which results from the application of the election in 
respect of any transfer is not prevented by the operation of any 
law or rule of law, the period within which assessment of such 
deficiency may be made shall not expire earlier than 2 years after 
the date of the enactment of this Act. 
(d) CERTAIN OTHER TRANSFERS IN TAXABLE YEARS BEGINNING 
BEFORE JANUARY 1, 1964.—The amendments made by subsection (a) 
shall not apply to any transfer of money or other property described 
in subsection (a) made in a taxable year beginning before Januarv 1, 
1964, if— 
(1) no deduction has been allowed in respect of such transfer 
for any taxable year before the taxable year in Avhich the contest 
with respect to such transfer is settled, and 
(2) refund or credit of any overpayment which would result 
from the application of such amendments to such transfer is pre-
vented by the operation of any law or rule of law. 
In the case of any transfer to which this subsection applies, the deduc-
tion shall be allowed for the taxable year in which the contest with 
respect to such transfer is settled. 
SEC. 224. INTEREST ON CERTAIN DEFERRED PAYMENTS. 
(a) I N GENERAL.—Part I I I of subchapter E of cha])ter 1 (relating 
lo accounting periods and methods of accounting) is amended by 
adding at the end thereof the following new section : 
"SEC. 483. INTEREST ON CERTAIN DEFERRED PAYMENTS. 
"(a) AMOUNT CONSTITUTING INTEREST.—For purposes of this title, 
in the case of any contract for the sale or exchange of property there 
shall be treated as interest that part of a payment to M'hich this section 
applies which bears the same ratio to the amount of such payment as 
the total unstated interest under such contract bears to the total of 
the payments to which this section applies which are due under such 
contract. 
"(b) TOTAL UNSTATED INTEREST.—For purposes of this section, the 
term 'total unstated interest' means, with res])ect to a contract for the 
sale or exchange of property, an amount equal to the excess of— 
"(1) tile sum of the payments to which this section applies 
which are due under the contract, over 
"(2) the sum of the present values of such payments and the 
present values of any interest payments due under the contract. 
For purposes of paragraph (2), the present value of a payment shall 
be determined, as of the date of the sale or exchange, by discounting 
such payment at the rate, and in the manner, provided in regulations 
prescril>ed by the Secretary or his delegate. Such regulations shall 
])rovide for discounting on the basis of 6-m()nth brackets and shall 
provide that the present value of any interest [)ayment due not more 
68A Stat. 160. 
26 u s e 481, 482. 
78 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
tlisiii () luontlis after the date of the sale or exchange is an amount 
e(jiial to 100 percent of such payment. 
'' (c) PAYMENTS rt) Wiiicii SECTIOX APPLIES.— 
"(1) I N GENERAL.—Except as provided in subsection (f), this 
section shall apply to any payment on account of the sale or 
exchange of property which constitutes part or all of the sales 
price and which is due more than 6 months after the date of 
such sale or exchange under a contract— 
"(A) under which some or all of the payments are due 
more than one year after the date of such sale or exchange, 
and 
"(B) under which, using a rate provided by regulations 
prescribed by the Secretary or his delegate for purposes of 
this subparagraph, there is total unstated interest. 
Any rate prescribed for determining whether there is total 
unstated interest for purposes of subparagraph (B) shall be at 
least one percentage point lower than the rate prescribed for 
purposes of subsection (b) (2). 
"(2) TREATMENT OF EVIDENCE OF INDEBTEDNESS.—For purposes 
of this section, an evidence of indebtedness of the purchaser given 
in consideration for the sale or exchange of property shall not 
be considered a payment, and any payment due under such 
evidence of indebtedness shall be treated as due under the con-
tract for the sale or exchange. 
"(d) PAYMENTS THAT ARE INDEFINII-E AS TO TIME, LIABILITY, OR 
AMOUNT.—In the case of a contract for the sale or exchange of prop-
erty under which the liability for, or the amount or due date of, any 
j>ortion of a payment cannot be determined at the time of the sale 
or exchange, this section shall be sepai-ately applied to such portion 
as if it (and any amount of interest attributable to such portion) 
were the onlj^ payments due under the contract; and such determina-
tions of liability, amount, and due date shall be made at the time 
2:>ayment of such portion is made. 
"(e) CHANGE IN TERMS OF CONTRACT.—If the liability for, or the 
amount or due date of, any payment (including interest) under a con-
tract for the sale or exchange of property is changed, the 'total 
inistated interest' under the contract shall be recomputed and allocated 
(with adjustment for prior interest (including unstated interest) pay-
ments) under regulations prescribed by the Secretary or his delegate. 
"(f) EXCEPTIONS AND LIMITATIONS.— 
"(1) SALES PRICE OF $.S,OOO OR LESS.—This section shall not 
apply to any payment on account of the sale or exchange of prop-
erty if it can be determined at the time of such sale or exchange 
that the sales price cannot exceed $3,000. 
"(2) CARRYING CHARGES.—In the case of the purchaser, the tax 
treatment of amounts paid on account of the sale or exchange of 
property shall be made without regard to this section if any such 
amounts are treated under section 163(b) as if they included 
interest. 
"(3) TREATMENT OF SELLER.—In the case of the seller, the tax 
treatment of any amounts received on account of the sale or 
exchange of property shall be made without regard to this section 
if no part of any gain on such sale or exchange would be con-
sidered as gain from the sale or exchange of a capital asset or 
property described in section 1231. 
"(4) SALES OR EXCHANGES OF PATENTS.—This section shall not 
apply to any payments made pursuant to a transfer described in 
26 use 1235. 
section 1235 (a) (relating to sale or exchange of patents). 
68A Stat. 46. 
26 use 163. 
26 use 1231. 
26 use 151. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
79 
"(5) ANNUITIES.—This section shall not apply to any 
amount the liability for which depends in whole or in part 
on the life expectancy of one or more individuals and which 
constitutes an amount received as an annuity to which section 72 yg^stat.* 8
*
2
1
^
*
^
1
0
0
5
. 
applies." 
^ 
26 use 72'. 
(b) CLERICAL AMENDMENT.—The table of sections for such part 
is amended by adding at the end thereof the following new item: 
"Sec. 483. Interest on certain deferred payments." 
(c) CERTAIN CARRYING CHARGES.—Section 163(b) (1) (relating to 
^^ "^^ ^^3. 
installment purchases where interest charge is not separately stated) 
is amended— 
(1) by striking out "personal property is purchased" and 
inserting in lieu thereof "personal property or educational 
services are purchased"; and 
(2) by adding at the end thereof the following new sentence: 
"For purposes of this paragraph, the term 'educational serv-
ices' means any service (including lodging) which is purchased 
from an educational institution (as defined in section 151(e) (4)) 
and which is provided for a student of such institution." 
(d) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply to payments made after December 31, 1963, on 
account of sales or exchanges of property occurring after June -30, 
1963, other than any sale or exchange made pursuant to a binding 
written contract (including an irrevocable written option) entered 
into before July 1, 1963. The amendments made by subsection (c) 
shall apply to payments made during taxable years beginning after 
December 31,1963. 
SEC. 225. PERSONAL HOLDING COMPANIES. 
(a) PERSONAL HOLDING COMPANY TAX RATE.—Section 541 (relating 
^^ "^^ ^'*^-
to imposition of personal holding company tax) is amended by striking 
out "tax equal to" and all that follows and inserting in lieu thereof: 
"tax equal to 70 percent of the undistributed pei*sonal holding com-
pany income." 
(b) DEFiNinoN OF PERSONAL HOLDING COMPANY.—Paragraph (1) 
of section 542(a) (relating to the gross income requirement for per- 
^^ ^^^ ^'*^' 
sonal holding company purposes) is amended to read as follows: 
" (1) ADJUSTED ORDINARY GROSS INCOME REQUIREMENT.—At least 
60 percent of its adjusted ordinary gross income (as defined in 
section 543(b)(2)) for the taxable year is personal holding 
^gusc'sVa 
company income (as defined in section 543 (a)), and". 
(c) EXCLUDED CORPORATIONS.— 
(1) DOMESTIC BUILDING AND LOAN ASSOCIATIONS.—Paragraph 
(2) of section 542(c) (relating to corporations excepted from the 
definition of personal holding company) is amended to read as 
follows: 
"(2) a bank as defined in section 581, or a domestic building 
^^ ^^^ ^^^' 
and loan association within the meaning of section 7701(a)'(19) 
^^ f}^^ ^?^-
without regard to subparagraphs (D) and (E) thereof;". 
(2) LENDING AND FINANCE COMPANIES.—Section 542(c) is 
amended by striking out paragraphs (6), (7), (8), and (9), by 
renumbering paragraphs (10) and (11) as paragraphs (7) and 
(8), and by inserting after paragraph (5) the following new 
paragraph: 
"(6) a lending or finance company if— 
"(A) 60 percent or more of its ordinary ^ross income (as 
defined in section 543(b)(1)) is derived directly from the 
active and regular conduct of a lending or finance business; 
"(B) the personal holding company income for the tax-
68A Stat. 1! 
26 use 544 
80 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
able year (computed Avitliout regard to income desciibed in 
subsection (d)(3) and income derived directly fi-om tlie 
active and regular conduct of a lending or firiHiice business, 
and computed by including as personal holding company 
income the entire amount of the gross income from rents, 
royalties, produced film rents, and compensation for use of 
corporate property by shareholders) is not more than 20 
percent of the ordinary gross income; 
"(C) the sum of the deductions which are directly allocable 
to the active and regular conduct of its lending or finance 
business equals or exceeds the sum of— 
"(i) 15 percent of so much of the ordinary gross 
income derived tlierefrom as does not exceed $500,000. 
plus 
"(ii) 5 percent of so nuich of the ordinary gross 
income derived therefrom as exceeds $500,000 but not 
$1,000,000; and 
"(D) the loans to a person who is a shareholder in such 
company during the taxable year by or for whom 10 percent 
or more in value of its outstanding stock is owned directiv 
or indirectly (including, in the case of an individual, stock 
owned by members of his family as defined in section 544 
(a)(2)), outstanding at any time during such year do not 
exceed $5,000 in principal amount;". 
26 use 542. 
1
^
3
^ SPKCIAL RiTj.KS i
<
^
)
K SECTION r)42(C)(r, t.—Sectiou 542 is 
ainended by adding at the end thereof the following new sub-
section : 
•*('d) SPECIAL R L L E S FOR A P P L Y I N G SUHSECTION (c) ((>).— 
" (1) LENDING OR FINANCE BUSINESS DEFINED.— 
"(A) I N GENERAL.—Except as provided in sub])aragra])h 
(B), for purposes of subsection (c)(6), the term 'lending 
01' finance business' means a business of— 
"(i) making loans, 
"(ii) purchasing or discounting accounts receivable, 
notes, or installment obligations, 
"(iii) rendering services or making facilities avail-
able in connection with activities described in clauses (i) 
and (ii) carried on by the corporation rendering serv-
ices or making facilities available, or 
"(iv) rendering services or making facilities avail-
able to another corporation which is engaged in the lend-
ing or finance business (within the meaning of this para-
, 
graph), if such services or facilities are related to the 
lending or finance business (within such meaning) of 
such other corporation and such other corporation and 
the corporation rendering services or making facilities 
available are members of the same affiliated group (as 
26 use 1504. 
defined in section 1504). 
"(B) PJX(EPTIONS.—For purposes of subparagi-aph (A), 
ihe term 'lending or finance business' does not include the 
business of— 
"(i) making loans, or purchasing or discounting ac-
counts receivable, notes, or installment obligations, if 
(at the time of the loan, purchase, or discount) the I'e-
maining maturity exceeds 60 monlks, unless the loans, 
notes, or installment obligations are evidenced or secured 
by contracts of conditional sale, chattel mortgages, or 
chattel lease agreements arising out of the sale of goods 
or services in the course of the bonower's or trans-
feror's trade or business, or 
68A Stat. 45. 
26 use 162, 404. 
26 use 544. 
26 use 167. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
81 
"(ii) making loans evidenced by, or purchasing, cer-
tificates of indebtedness issued w a series, under a trust 
indenture, and in registered form or with interest cou-
pons attached. 
For purposes of clause (i), the remaining maturity shall be 
treated as including any period for which there may be a 
renewal or extension under the terms of an option exercisable 
by the borrower. 
"(2) BUSINESS DEDUCTIONS.—For purposes of subsection (c) 
(6)(C), the deductions which may be taken into account shall 
include only— 
" (A) deductions which are allowable only by reason of sec-
tion 162 or section 404, except there shall not be included any 
such deduction in respect of compensation for personal serv-
ices rendered by shareholders (including members of the 
shareholder's family as described in section 544(a) (2)), and 
"(B) deductions allowable under section 167, and deduc-
tions allowable under section 164 for real property taxes, but 
^g USCIM* 
in either case only to the extent that the property with respect 
to which such deductions are allowable is used directly in the 
active and regular conduct of the lending or finance business. 
"(3) 
INCOME 
RECEIVED FROM 
CERTAIN 
AFFILIATED CORPORA-
TIONS.—For purposes of subsection (c) (6) (B), in the case of a 
lending or finance company which meets the requirements of sub-
section (c) (6) (A), there shall not be treated as personal holding 
company income the lawful income received from a corporation 
which meets the re<iuirements of subsection (c) (6) and which is a 
member of the same affiliated group (as defined in section 1504) 
26 use 1504. 
of which such company is a member." 
(d) 
PERSONAL HOLDING COMPANY INCOME.—Subsections (a) 
and 
(b) of section 543 (relating to personal holding company income) are 
^^ ^^^ ^'*^' 
amended to read as follows: 
"(a) GENERAL RULE.—For purposes of this subtitle, the term 'per-
sonal holding company income' means the portion of the adjusted ordi-
nary gross income which consists of: 
"(1) DIVIDENDS, ETC.—Dividends, interest, royalties 
(other 
than mineral, oil, or gas royalties or copyright royalties), and 
annuities. 
This paragraph shall not apply to— 
"(A) interest constituting rent (as defined in subsection 
(b)(3)),, 
"(B) interest on amounts set aside in a i-eserve fund under 
section 511 or 607 of the Merchant Marine Act, 1936, and 
49^stftr2oo5?' 
"(C) a dividend distribution of divested stock (as defined 
46 use uei, 
in subsection (e) of section 1111), but only if the stock with ^^yQ^Q^^^ 4 
respect to which the distribution is made was owned by the 
26 use 1111. 
distributee on September 6, 1961, or was owned by the dis-
tributee for at least 2 years before the date on which the 
antitrust order (as defined in subsection (d) of section 1111) 
was entered. 
"(2) RENTS.—The adjusted income from rents; except that such 
adjusted income shall not be included if— 
"(A) such adjusted income constitutes 50 percent or more 
of the adjusted ordinary gross income, and 
"(B) the sum of— 
" (i) the dividends paid during the taxable year (deter-
mined under section 562), 
^^ "^^ ^^2. 
"(ii) the dividends considered as paid on the last daj-
of the taxable year under section 563(c) (as limited by 
^^ ^^^ ^^^' 
the second sentence of section 563(b)), and 
82 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(iii) tlie consent dividends for the taxable year (de-
26'uscr*565°°' 
termined under section 565), 
equals or exceeds the amount, if any, by which the personal hold-
ing company income for the taxable year (computed without re-
gard to this paragraph and paragraph (6), and computed by in-
cluding as personal holding company income copyright royalties 
and the adjusted income from mineral, oil, and gas royalties) ex-
ceeds 10 percent of the ordinary gross income. 
"(3) MINERAL, OIL, AND GAS ROYALTIES.—The adjusted income 
from mineral, oil, and gas royalties; except that such adjusted in-
come shall not be included if— 
" (A) such adjusted income constitutes 50 percent or more 
of the adjusted ordinary gross income, 
"(B) the personal holding compan;^ income for the taxable 
year (computed without regard to this paragraph, and com-
puted by including as personal holding company income copy-
right royalties and the adjusted income from rents) is not 
more than 10 percent of the ordinary gross income, and 
"(C) the sum of the deductions which are allowable under 
section 162 (relating to trade or business expenses) other 
than— 
"(i) deductions for compensation for personal services 
rendered by the shareholders, and 
" (ii) deductions which are specifically allowable under 
26 use 162. 
sections other than section 162, 
equals or exceeds 15 percent of the adjusted ordinary gross 
income. 
"(4) COPYRIGHT ROYALTIES.—Copyright royalties; except that 
copyright royalties shall not be included if— 
" (A) such royalties (exclusive of royalties received for the 
use of, or right to use, copyrights or interests in copyrights on 
works created in whole, or in part, by any shareholder) con-
stitute 50 percent or more of the ordinary gross income, 
"(B) the personal holding company income for the taxable 
year computed— 
" (i) without regard to copyright royalties, other than 
royalties received for the use of, or right to use, copy-
rights or interests in copyrights in works created in whole, 
or in part, by any shareholder owning more than 10 per-
cent of the total outstanding capital stock of the 
corporation, 
"(ii) without regard to dividends from any corpora-
tion in which the taxpayer owns at least 50 percent of all 
classes of stock entitled to vote and at least 50 percent of 
the total value of all classes of stock and which corpora-
tion meets the requirements of this subparagraph and 
subparagraphs (A) and (C),and 
"(iii) by includmg as personal holding company in-
come the adjusted income from rents and the adjusted 
income from mineral, oil, and gas royalties, 
is not more than 10 percent of the ordinary gross income, and 
"(C) the sum of the deductions which are properly 
allocable to such royalties and which are allowable under 
section 162, other than— 
"(i) deductions for compensation for personal serv-
ices rendered by the shareholders, 
"(ii) deductions for royalties paid or accrued, and 
"(iii) deductions which are specifically 
allowable 
under sections other than section 162, 
26 u s e 544. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
83 
equals or exceeds 25 percent of the aiiiount by which the 
ordinary gross income exceeds the sum of the royakies paid 
or accrued and the amounts allowable as deductions under 
section 167 (relating to depreciation) with respect to copy- 76^|fa?io34.^' 
right royalties. 
. . 
^^ "^^ ^^^• 
For purposes of this subsection, the term 'copyright royaUies' 
means compensation, however designated, for the use of, or the 
right to use, copyrights in works protected by copyriglit issued 
under title 17 of the United States Code (other than by reason 
of section 2 or 6 thereof) and to w^hich copyright protection is 
also extended by the laws of any country other than the United 
States of America by virtue of any international treaty, con-
vention, or agreement, or interests in any such copyrighted 
works, and includes payments from any person for performing 
rights in any such copyrighted work and payments (otlier than 
produced film rents as defined in paragraph (5)(B)) received 
for the use of, or right to use, films. For purposes of this para-
graph, the term 'shareholder' shall include any i>erson Avho owns 
stock within the meaning of section 5-14. 
" (5) PRODUCED FILM RENTS.— 
"(A) Produced film rents; except that sucli rents shall 
not be included if such rents constitute 50 percent or more of 
the ordinary gross income. 
"(B) For purposes of this section, the term 'produced film 
rents- means payments received with respect to an interest 
in a film for the use of, or right to use, such film, but only 
to the extent that such interest was acquired before sub-
stantial completion of production of sudi film. 
" (6) USE OF CORPORATION PROPERT'^* RV SHAREHOLDER.—Amounts 
received as compensation (however designated and from whom-
soever received) for the use of, or right to use, pro])erty of the 
corporation in any case where, at any time during the taxable 
year, 25 percent or more in value of the outstanding stock of 
the corporation is owned, directly or indirectly, by or for an 
individual entitled to the use of the ])roperty; whether such right 
is obtained directly from the corporation or by means of a sub-
lease or other arrangement. 
This paragraph shall apply only to 
a corporation which has pei'sonal holding com])any income for 
the taxable year (computed without regard to this ])aragraph 
and paragraph (2), and computed by incTudina: as personal hold-
ing company income copyright royalties and the adjusted income 
from mineral, oil, and gas royalties) in excess of 10 percent of 
its ordinary gross income. 
"(7) PERSONAL SERVICE CONTRACTS.— 
"(A) Amounts received under a contract under which the 
corporation is to furnish personal services; if some person 
other than the corporation has the right to designate (by 
name or by description) the individual who is to perform the 
services, or if the individual who is to perform the services 
is designated (by name or by description) in the contract; 
and 
"(B) amomits received from the sale or other disposition 
of such a contract. 
This paragraph shall apply with respect to amounts received for 
services under a particular contract only if at some time during 
the taxable year 25 percent or more in value of the outstanding 
stock of the corporation is owned, directly or indirectly, by or for 
tlie individual who has performed, is to perform, or may be 
84 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
(lesigiiated (by name or by description) as the one to i^erform, 
such services. 
"(8) ESTATES AXD TRUSTS.—^Amounts inchidible in computing 
the taxable income of the corporation mider part I of sub-
26^us?*6/i-6*83. 
Chapter J (sec. 641 and following, relating to estates, trusts, and 
beneficiaries). 
*' (b) DEFINITIONS.—For purposes of this part— 
"(1) ORDINARY GROSS INCOME.—The term 'ordinary 
gross 
income' means the gross income determined by excluding— 
" (A) all gains from the sale or other disposition of capital 
assets, and 
"(B) all gains (other than those referred to in subpara-
graph (A)) from the sale or other disposition of property 
26 "s^ 1231. 
described in section 1231(b). 
"(2) ADJUSTED ORDINARY (JROSS INCOME.—^The term 'adjusted 
ordinary gross income' means the ordinary gross income adjusted 
as follows: 
"(A) RENTS.—From the gross income from rents (as de-
fined in the second sentence of paragraph (3) of this sub-
section) subtract the amount allowable as deductions for— 
"(i) exhaustion, wear and tear, obsolescence, and 
amortization of property other than tangible personal 
property which is not customarily retained by any one 
lessee for more than three years, 
"(ii) property taxes, 
"(iii) interest, and 
"(iv) rent, 
to the extent allocable, under regulations prescribed by the 
Secretary or his delegate, to such gross income from rents. 
The amount subtracted under this subparagraph shall not 
exceed such gross income from rents. 
"(B) MINERAL ROYALTIES, ETC.—From the gross income 
from mineral, oil, and gas royalties described in paragraph 
(4), and from the gross income from working interests in an 
oil or gas well, subtract the amount allowable as deductions 
for— 
" (i) exhaust ion, wear and tear, obsolescence, amortiza-
tion, and depletion, 
"(ii) property and se\erance taxes, 
"(iii) interest, and 
"(iv) rent, 
to the extent nllocable, under regulations prescribed by the 
Secretary or liis delegate, to such gross income from royalties 
or such gross income from working interests in oil or gas 
wells. The amount subtracted under this subparagraph with 
respect to royalties shall not exceed the gross income from 
such royalties, and the amount subtracted under this subpara-
graph with respect to working interests shall not exceed the 
gross income from such working interests. 
"(C) INTEREST.—There shall l)e excluded—-
"(i) interest received on a direct obligation of the 
United States held for sale to customers in the ordinary 
course of trade or business by a regular dealer who is 
making a primary market in such obligations, and 
"(ii) interest on a condemnation award, a judgment, 
and a tax refund. 
"(3) ADJUSTED 
INCOME FROM RENTS.—The term 
'adjusted 
income from rents' means the gross income from i-ents, reduced by 
the amount subtracted under paragraph (2) (A) of this subsecticm. 
68A Stat. 195. 
26 use 553, 554. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
85 
For purposes of the preceding sentence, the term 'rents' means 
compensation, however designated, for the use of, or ri^ht to use, 
property, and the interest on debts owed to the corporation, to the 
extent such debts represent the price for which real property held 
primarily for sale to customers in the ordinary course of its trade 
or business was sold or exchanged by the corporation; but does not 
include amounts constituting personal holding company income 
under subsection (a)(6), nor copyright royalties (as defined in 
subsection (a) (4)), nor produced film rents (as defined in sub-
section (a)(5)(B)). 
"(4) 
ADJUSTED INCOME FROM MINERAL, OIL, AND GAS ROYAL-
TIES.—The term 'adjusted income from mineral, oil, and gas 
royalties' means the gross income from mineral, oil, and gas royal-
ties (including production payments and overriding royalties), 
reduced by the amount subtracted under paragraph (2)(B) of 
this subsection in respect of such royalties.'' 
(e) 
FOREIGN PERSONAL HOLDING COMPANY INCOME AND STOCK 
OWNERSHIP.—Section 553 (relating to foreign personal holding com-
pany income) and section 554 (relating to stock ownership) are 
amended to read as follows: 
"SEC. 553. FOREIGN PERSONAL HOLDING COMPANY INCOME. 
" (a) FOREIGN PERSONAL HOLDING (^OMPANY INCOME.—For purposes 
of this subtitle, the term 'foreign personal holding company income' 
means that portion of the gross income, determined for puii:)Oses of 
section 552, which consists of: 
"(1) DIVIDENDS, ETC.—Dividends, interest, royalties, and annui-
ties. This paragraph shall not apply to a dividend distribution 
of divested stock (as defined in subsection (e) of section 1111) 
96 use "
^
i 
but only if the st(X'k with respect to which the distribution is 
made was owned by the distributee cm September 6, 1961, or was 
owned by the distributee for at least 2 years before the date on 
which the antitiiist order (as defined in subsection (d) of section 
1111) was entered. 
"(2) STCK^K AND SECURITIES TRANSACTIONS.—Except in the case 
of regular dealers in stock or securities, gains from the sale or 
exchange of stock or securities. 
"(3) COMMODITIES TRANSACTIONS.—Gains from futures trans-
actions in any commodity on or subject to the rules of a board of 
trade or commodity exchange. This paragraph shall not apply 
to gains by a producer, processor, merchant, or handler of the 
commodity which arise out of bona fide hedging transactions 
reasonably necessary to the conduct of its business in the manner 
in which such business is customarily and usually conducted by 
others. 
"(4) ESTATES AND TRUSTS.—Amounts includible in computing 
the taxable income of the corporation under part I of subchapter 
J (sec. 641 and following, relating to estates, trusts, and bene- 
^^ ^^^ 641-683. 
ficiaries) ; and gains from the sale or other disposition of any 
interest in an estate or trust. 
"(5) 
PERSONAL SERVICE CONTRACTS.— 
"(A) Amounts received under a contract under which the 
corporation is to fui-nish personal services; if some person 
otiier than the corporation has the right to designate (by 
name or by description) the individual who is to perform the 
services, or if the individual who is to perform the services 
is designated (l)v name or by description) in the contract; 
and 
"(B) amounts received from the sale or other disposition 
of such a contract. 
26 use 552. 
86 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
This paragraph shall apply with respect to amounts received for 
services under a particular contract only if at some time during 
the taxable year 25 percent or more in value of the outstanding 
stock of the corporation is owned, directly or indirectly, by or for 
the individual who has performed, is to perform, or may be 
designated (by name or by description) as the one to perform, 
such services. 
" (6) USE OF CORPORATION PROPERTY BY SHAREHOLDER.—Amounts 
received as compensation (however designated and from whom-
soever received) for the use of, or right to use, property of the 
corporation in any case where, at any time during the taxable 
year, 25 percent or more in value of the outstanding stock of the 
corporation is owned, directly or indirectly, by or for an indi-
vidual entitled to the use of the property; whether such right is 
obtained directly from the corporation or by means of a sublease 
or other arrangement. 
This paragraph shall apply only to a 
corporation which has foreign personal holding company income 
for the taxable year, computed without regard to this paragraph 
and paragraph (7), in excess of 10 percent of its gross income, 
"(t) RENTS.—Rents, unless constituting 50 percent or more of 
the gross income. For purposes of this paragraph, the term 
'rents' means compensation, however designated, for the use of, 
or ri^ht to use, property; but does not include amounts con-
stituting foreign 
personal holding comj^any income 
under 
paragraph (6). 
"(b) LIMITATION ON GROSS INCOME IN CERTAIN TRANSACTIONS.— 
For purposes of this part— 
"(1) gross income and foreign personal holding company 
income determined with respect to transactions described in sub-
section (a) (2) (relating to gains from stock and security trans-
actions) shall include only the excess of gains over losses from 
such transactions, and 
"(2) gross income and foreign personal holding company 
income determined with respect to transactions described in sub-
section (a) (3) (relating to gains from commodity transactions) 
shall include only the excess of gains over losses from such 
transactions. 
"vSEC. 554. STOCK OWNERSHIP. 
"(a) CONSTRUCTIVE OWNERSHIP.—For purposes of determining 
whether a corporation is a foreign personal holding company, insofar 
as such determination is based on stock ownership under section 
68A^stay^95. 
rM2(a) (2),section 553(a) (5), or section 553(a) (6) — 
Ante, p. 85.' 
" ( 1 ) S T O C K NOT OWNED BY INDIVIDUAL. 
StOCk OWUed, dlTeCtly 
or indirectly, by or for a corporation, partnership, estate, or trust 
shall be considered as beiii^ owned proportionately by its share-
holders, partners, or beneficiaries. 
"(2) FAMILY AND PARTNERSHIP OWNERSHIP.—An individual 
shall be considered as owning the stock owned, directly or 
indirectly, by or for his family or by or for his partner. For 
purposes of this paragraph, the family of an individual includes 
only his brothers and sisters (whether l\y the whole or half 
blood), spouse, ancestors, and lineal descendants. 
"(3) OPTIONS.—If any person has an option to acquire stock, 
such stock shall Im considei-ed as owned by such j>erson. For pur-
poses of this j)aragraph, an option to acquire such an option, and 
each one of a series of such options, shall be considered as an 
option to acquire such stock. 
68A Stat. 195. 
26 use 552. 
Ante, p, 85. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
87 
" ( 4 ) 
A F P M C ATIOX OF FAMILY-PAKTNKRSHII' AM) omiON IJl l.KS. 
Parairisiphs {'2) and (8) shall l>e applied— 
"(A) for purposes of the stock ownership requirement 
provided in se<^tion 552(a) (2), if, but only if, the eti'ect is to 
26ljsc*552 
make the corporation a forei<>:n personal holding company; 
"(B) for purposes of section 553(a) (5) (relating to per-
sonal service contracts) or of section 553(a) (6) (relating to 
the use of property by shareholders), if, but only if, the effect 
is to make the amounts therein referred to includible under 
such paragraph as foreign personal holding company income. 
"(5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.—Stock 
constructively owned by a person by reason of the application of 
paragraph (1) or (3) shall, for purposes of applying paragraph 
(1) or (2), be treated as actually ow^ned by such person; but stock 
constructively owned by an individual by reason of the applica-
tion of paragraph (2) shall not be treated as owned by him for 
purposes of again applying such paragraph in order to make 
another the constructive owner of such stock. 
"(6) OPTION RULE IN LIEU OF FAMILY AND PARTNERSHIP RULE.—• 
If stock may be considered as owned by an individual under 
either paragraph (2) or (3) it shall be considered as owned by 
him under paragraph (3). 
"(b) CONVERTIBLE SECURITIES.—Outstanding securities convertible 
into stock (whether or not convertible during the taxable year) shall 
be considered as outstanding stock— 
"(1) for purposes of the stock ownership requirement provided 
in section 552(a) (2), but only if the effect of the inclusion of all 
such securities is to make the corporation a foreign personal hold-
ing company; 
"(2) for purposes of section 553(a)(5) (relating to personal 
service contracts), but only if the effect of the inclusion of all such 
securities is to make the amounts therein referred to includible 
under such paragraph as foreign personal holding company in-
come; and 
"(3) for purposes of section 553(a) (6) (relating to the use of 
property by shareholders), but only if the effect of the inclusion 
of all such securities is to make the amounts therein referred to 
includible under such paragraph as foreign personal holding 
company income. 
The requirement in paragraphs (1), (2), and (3) that all convertible 
securities must be included if any are to be included shall be subject 
to the exception that, where some of the outstanding securities are con-
vertible only after a later date than in the case of others, the class 
having the earlier conversion date may be included although the others 
are not included, but no convertible securities shall be included unless 
all outstanding securities having a prior conversion date are also 
included." 
(f) DIVIDENDS-PAID DEDICTION.— 
(1) Paragraph (2) of section 316(b) (relating to special rules 
for dividend defined) is amended to read as follows: 
"(2) DISTRIBUTIONS BY PERSONAL HOLDING COMPAXTES.— 
"(A) In the case of a corporation Avhich— 
"(i) under the law applicable to the taxable year in 
Avhich the distribution is made, is a personal holding 
company (as defined in section 542), or 
"(ii) for the taxable year in respect of which the 
distribution is made under section 563(b) (relating to 
dividends paid after the close of the taxable year), or 
section 547 (relating to deficiency dividends), or the cor-
26 u s e 316. 
Ante, p. 79. 
26 use 542. 
26 use 563. 
26 use 547. 
31-667 0-65—9 
88 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
responding provisions of prior law, is a personal holding 
company under the law applicable to such taxable year, 
the term 'dividend' also means any distribution of property 
(whether or not a dividend as defined in subsection (a)) 
made by the corporation to its shareholders, to the extent of 
its undistributed personal holding company income (deter-
68A Stat. 189. 
mined under section 545 without regard to distributions un-
der this paragraph) for such year. 
"(B) For purposes of subparagraph (A), the term 'dis-
tribution of property' includes a distribution in complete 
liquidation occurring within 24 months after the adoption 
of a plan of liquidation, but— 
"(i) only to the extent of the amounts distributed to 
distributees other than corporate shareholders, and 
"(ii) only to the extent that the corporation desig-
nates such amounts as a dividend distribution and duly 
notifies such distributees of such designation, under 
regulations prescribed by the Secretary or his delegate, 
but 
"(iii) not in excess of the sum of such distributees' 
allocable share of the undistributed personal holding 
company income for such year, computed without regard 
'n^'®- 
to this subparagraph or section 562 (b)." 
26 use 331. 
(2) Section 331(b) 
(relating to nonapplication of section 
301) is amended by inserting after "any distribution of prop-
erty" the phrase "(other than a distribution refen-ed to in para-
Ante, p. 87. 
graph (2) (B) of section 316(b))". 
26 use 562. 
(3) Section 562(b) (relating to distributions in liquidation) 
is amended to read as follows: 
" (b) DISTRIBUTIONS IN LiQuroATioN.— 
"(1) Except in the case of a personal holding company 
26 use 542. 
described in section 542 or a foreign personal holding company 
26 use 5 52. 
described in section 552— 
"(A) in the case of amounts distributed in liquidation, 
the pait of such distribution which is properly chargeable 
to earnings and profits accumulated after February 28,1913, 
shall be treated as a dividend for purposes of computing the 
dividends paid deduction, and 
"(B) in the case of a complete liquidation occurring 
within 24 months after the adoption of a plan of liquidation, 
any distribution within such period pursuant to such plan 
shall, to the extent of the earnings and profits (computed 
without regard to capital losses) of the corporation for the 
taxable year in which such distribution is made^ be treated 
as a dividend for purposes of computing the dividends paid 
deduction. 
"(2) In the case of a complete liquidation of a personal holding 
tioiripaiiy, occurring within 24 months after the adoption of a 
plan of liquidation, the amount of any distribution within such 
period. pursuant to such plan shall be treated as a dividend for 
purposes of computing the dividends paid deduction, to the extent 
that such amount is distributed to corporate distributees and 
represents such corporate distributees' allocable share of the un-
distributed personal holding company income for the taxable year 
of such distribution computed without regard to this paragraph 
and without regard to subparagraph (B) of section 316(b) (2)." 
26 use 551. 
(4) Section 551(b) 
(relating to amount included in gross 
incxMne) is amended by striking out "received as a dividend" and 
inserting in lieu thereof "received as a dividend (determined as if 
68A Stat. 103. 
26 use 333. 
26 use 332. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
89 
any disti-ibutioii in liquidation actually made in such taxable year 
had not been made)". 
(g) ONE-MONTH LIQUIDATIONS.—Section 333 (relating to election 
as to recognition of gain in certain liquidations) is amended by adding 
at the end thereof the following new subsection: 
"(g) 
SPECIAL RULE.— 
"(1) LIQUIDATIONS BEFORE JANUARY i. loci.—Li the case of a 
lixjuidation occurring before January 1, 1967, of a corporation 
referred to in paragraph (3)— 
"(A) the date 'December 31, 1953' referred to in subsec-
tions (e) (2) and (f) (1) shall be treated as if such date were 
'December 31,1962', and 
"(B) in the case of stock in such corporation held for more 
than 6 months, the term 'a dividend' as used in subsection 
(e) (1) shall be treated as if such term were 'long-terni capital 
gain'. 
Subparagraph (B) shall not apply to any earnings and profits to 
which the corporation succeeds after December 31, 1963, pursu-
ant to any corporate reorganization or pursuant to ajiy liquidation 
to which section 332 applies, except earnings and profits which on 
December 31, 1963, constituted earnings and profits of a corpora-
tion referred to in paragraph (3), and except earnings and profits 
which were earned after such date by a corporation referred to in 
paragraph (3). 
"(2) 
LIQUIDATIONS AFTER DECEMBER 3I, IOOG.— 
"(A) I N GENERAL.—In the case of a liquidation occurring 
after December 31, 1966, of a corporation to which this sub-
paiagraph applies— 
"(i) the date 'December 31, 1953' referred to in sub-
sections (e)(2) and (f)(1) shall be treated as if such 
date were 'December 31,1962', and 
"(ii) so much of the gain recognized under subsection 
(e)(1) as is attributable to the earnings and profits 
accumulated after February 28,1913, and before January 
1, 1967, shall, in the case of stock in such corporation 
held for more than 6 months, be treated as long-term 
capital gain, and only the remainder of such gain shall 
be treated as a dividend. 
(Mause (ii) shall not apply to any earnings and profits to 
which the corporation succeeds after December 31,1963, pur-
suant to any coiporate reorganization or pursuant to any 
liciuidation to which section 332 applies, except earnings 
and profits which on December 31,1963, constituted earnings 
and profits of a corporation referred to in paragraph (3), and 
except earnings and profits which were earned after such 
date by a corporation referred to in paragraph (3). 
"(B) CoRW)RATiONS TO WHICH APPLICABLE.—Subi)ara^raph 
(A) shall apply only with respect to a corporation which is 
referred to in paragraph (3) and which— 
"(i) on January 1, 1964, owes qualified indebtedness 
(as defined in section 545 (c)), 
"(ii) before January 1, 1968, notifies the Secretary or 
his delegate that it may wish to have subparagraph (A) 
apply to it and submits such information as may be re-
a
uired by regulations prescribed by the Secretary or his 
elevate, and 
"(lii) liquidates before the close of the taxable year 
in which such corporation ceases to owe such qualified 
indebtedness or (it earlier) the taxable year referred to 
in subparagraph (C). 
Post, p. 90. 
90 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(C) ADJUSTED POST-I963 EARNINGS AND PROFITS EXCEED 
QUALIFIED INDEBTEDNESS.—In the case of any corporation, the 
taxable year referred to in this subparagraph is the first taxa-
ble year at the close of which its adjusted post-1963 earnings 
and profits equal or exceed the amount of such corporation's 
qualified indebtedness on January 1, 1964. For purposes of 
the preceding sentence, the term 'adjusted post-1963 earnings 
and profits' means the sum of— 
"(i) the earnings and profits of such corporation for 
taxable ^ears beginning after December 31, 1963, with-
out diminution by reason of any distributions made out 
of such earnings and profits, and 
"(ii) the deductions allowed for taxable years begin-
ning after December 31, 1963, for exhaustion, wear and 
tear, obsolescence, amortization, or depletion. 
"(3) CORPORATIONS REFERRED TO.—For purposes of paragraphs 
(1) and (2), a corporation referred to in this paragraph is a cor-
poration which for at least one of the two most recent taxable 
years ending before the date of the enactment of this subsec-
a ^^e^ ^*79 ^^^' 
^^^^ ^^* ^^^ ^ pcTsoual holding company under section 542, but 
"ae'usc 542. 
would have been a personal holding company under section 542 
for such taxable year if the law applicable for the first taxable 
year beginning after December 31, 1963, had been applicable to 
such taxable year. 
"(4) MISTAKE AS TO APPLICABILITY OF SUBSECTION.—An elec-
tion made imder this section by a qualified electing shareholder 
of a corporation in which such shareholder states that such elec-
tion is made on the assumption that such corporation is a cor-
])oration referred to in paragraph (3) shall haA^e no force or 
effect if it is determined that the corporation is not a corporation 
referred to in paragraph (3)." 
(h) EXCEPTION FOR CERTAIN CORPORATIONS.— 
(1) GENERAL RLTI^E.—Except as provided in paragra])h (2), in 
the case of a corporation referred to in section 333(g)(3) of 
Ante. p. 89. 
^}^Q Internal Revenue Code of 1954 (as added by subsection (g) 
of this section), the amendments made by this section (other than 
subsections (f) and (g)) shall not apply if there is a complete 
liquidation of such corporation and if the distribution of all the 
property under such liquidation occurs before January 1, 1966. 
(2) EXCEPTION.—Paragraph (1) shall not apply to any liquida-
26 use 332. 
^JQJJ ^Q which section 332 of the Internal Revenue Code of 1954 
applies unless— 
(A) the corporate distributee (referred to in subsection 
(b) (1) of such section 332) in such liquidation is liquidated 
in a complete liquidation to which such section 332 does not 
apply, and 
(B) the distribution of all the property under such liqui-
dation occurs before the 91st day after the last distribution 
referred to in paragraph (1) and before Januarj'^ 1, 1966. 
(i) DEDUCTION FOR AMORTIZATION OF INDEBTEDNESS.— 
26 use 545. 
^1) Section 545(a) (relating to definition of undistributed 
])ersonal holding company income) is amended by striking out 
"subsection (b)" and inserting in lieu thereof "subsections (b) 
and (c)". 
(2) Section 545 is amended by adding at the end thereof the 
following new subsection: 
"(c) SPECIAL ADJUSTMENT TO TAXABLE INCOME.— 
"(1) I N GENER.\L.—Except as otherwise provided in this sub-
section, for purposes of subsection (a) there shall be allowed as 
26 use 381. 
Post, p. 92. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
91 
a deduction amounts used, or amounts irrevocably set aside (to 
the extent reasonable with reference to the size and terms of the 
indebtedness), to pay or retire qualified indebtedness. 
"(2) CORPORATIONS TO WHICH APPLICABLE.—This subsection 
shall apply only with respect to a corporation— 
"(A) which for at least one of the two most recent taxable 
years ending before the date of the enactment of this subsec-
tion was not a personal holding company under section 542, g^tl^^^^yl' ^^^' 
but would have been a personal holdmg company under sec- 
26'usc S42. 
tion 542 for such taxable year if the law applicable for the 
first taxable year beginning after December 31, 1963, had 
been applicable to such taxable year, or 
"(B) to the extent that it succeeds to the deduction referred 
to in paragraph (1) by reason of section 381(c) (15). 
" ( 3 ) Q U A L I F I E D INDEBTEDNESS.— 
"(A) I N GENERAL.—Except as otherwise provided in this 
paragraph, for purposes of this subsection the term 'qualified 
indebtedness' means— 
"(i) the outstanding indebtedness incurred by the 
taxpayer after December 31, 1933, and before January 
1,1964, and 
"(ii) the outstanding indebtedness incurred after 
December 31,1963, for the purpose of making a payment 
or set-aside referred to in paragraph (1) in tne same 
taxable year, but, in the case of such a payment or set-
aside wnich is made on or after the first day of the first 
taxable year beginning after December 31,1963, only to 
the extent the deduction otherwise allowed in paragraph 
(1) with respect to such payment or set-aside is treated 
as nondeductible by reason of the election provided in 
paragraph (4). 
"(B) EXCEPTION.—For purposes of subparagrapli (A), 
qualified indebtedness does not include any amounts which 
were, at any time after December 31, 1963, and before the 
payment or set-aside, owed to a person wlio at such time 
owned (or was considered as owning within the meaning of 
section 318(a)) more than 10 percent in value of the tax- 
26 use ais. 
payer's outstanding stock. 
"(C) 
REDUCTION FOR AMOUNTS IRREVOCABLY SET ASIDE.— 
For purposes of subparagraph (A), the qualified indebted-
ness with respect to a contract shall be reduced by amounts 
irrevocably set aside before the taxable yetir to pay or retire 
such indebtedness; and no deduction shall be allowed under 
paragraph (1) for payments out of amounts so set aside. 
"(4) ELECTION NOT TO DEDUCT.—A taxpayer may elect, under 
regulations prescribed by the Secretary or his delegate, to treat 
as nondeductible an amount otherwise deductible under para-
graph (1); but only if the taxpayer files such election on or 
before the 15th day of the third month following the close of the 
taxable year with respect to which such election applies, desig-
nating therein the amounts which are to be treated as nonde-
ductible and specifying the indebtedness (referred to in para-
graph (3) (A) (ii)) incurred for the puriK)se of making the pay-
ment or set-aside. 
"(5) LIMITATIONS.—The 
deduction 
otherwise 
allowed by 
this subsection for the taxable year shall be reduced by the. 
sum of— 
92 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
" (A) the amount, if any, by which— 
"(i) the deductions allowed for the taxable year 
and all preceding 
taxable 
years beginning 
after 
December 31, 1963, for exhaustion, wear and tear, 
obsolescence, amortization, or depletion (other than 
such deductions which are disallowed in computing 
undistributed personal holding company income under 
subsection (b) (8)), exceed 
"(ii) any reduction, by reason of this subparagraph, 
of the deductions otherwise allowed by this subsection 
for such preceding taxable years, and 
"(B) the amount, if any, by which— 
"(i) the deductions allowed under subsection (b) (5) 
in computing undistributed personal holding company 
income for the taxable year and all preceding taxable 
years beginning after December 31,1963, exceed 
"(ii) any reduction, by reason of this subparagraph, 
of the deductions otherwise allowed by this subsection 
for such preceding taxable years. 
"(6) PRO-RATA REDUCTION IN CERTAIN CASES.—For purposes of 
paragraph (3) (A), if property (of a character which is subject 
to an allowance for exhaustion, wear and tear, obsolescence, 
amortization, or depletion) is disposed of after December 31, 
1963, the total {unounts of qualified indebtedness of the taxpayer 
shall be reduced pro-rata in the taxable year of such disposition 
by the amount, if any, by which— 
"(A) the adjusted basis of such property at the time of 
such disposition, exceeds 
"(B) the amount of qualified indebte<lness which ceased 
to be qualified indebtedness with respect to the taxpayer by 
reason of the assumption of the indebtedness by the trans-
feree." 
SliscVi^*' 
(3) Paragraph (15) of section 381(c) (relating to carryovers 
in certain corporate acquisitions) is amended to read as follows: 
"(15) INDEBTEDNESS OF CERTAIN PERSONAL HOLDINCJ COMPANIES.— 
The acquiring corporation shall be considered to be the distributor 
or transferor corporation for the purpose of detennining the 
^usc'5^45 
applicability of subsections (b) (7) and (c) of section 545, relat-
ing to deduction with respect to payment of certain indebtedness." 
(j) INCREASE IN BASIS W I T H RESPECT TO CERTAIN FOREKIX PER-
SONAL HOLDING COMPANY STOCK OR SECURITIES.— 
JQ26 use 1011- 
(1) I N GENERAL.—Part I I of subchapter O of chapter 1 (relat-
ing to basis rules of general application) is amended by redesig-
nating section 1022 as section 1023 and by inserting after section 
1021 the following new section: 
"SEC. 1022. INCREASE IN BASIS WITH RESPECT TO CERTAIN FOREIGN 
PERSONAL HOLDING COMPANY STOCK OR SECURITIES. 
"(a) GENERAL RULE.—The basis (determined under section 1014(1)) 
26 use 1014. 
^5)^ i-elating to basis of stock or securities in a foreign personal hold-
ing company') of a share of stock or a security, acquired from a 
decedent dying after December 31, 1963, of a corporation which was 
a foreign personal holding company for its most recent taxable year 
ending before the date of the decedent's death shall be increased by 
its proportionate shai-e of any Federal estate tax attributable to the 
net appi"eciatioii in value of all of such shai-es and securities deter-
mined as provided in this section. 
"(b) PROPORTIONATE SHARE.—For purposes of subsection (a), the 
proportionate share of a share of stock or of a security is that amount 
which bears the same ratio to the aggregate increase determined under 
68A Stat. 373. 
26 use 2001, 
78 STAT. ] 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
93 
subsection (c) (2) as the appreciation in value of .such share or security 
bears to the aggregate appreciation in vahie of all such shares and 
securities having appreciation in value. 
"(c) 
SPECIAL RULES AND DEFiNmoNS.—For purposes of this 
section— 
"(1) FEDERAL ESTATE TAX.—The term 'Federal estate tax' means 
only the tax imposed by section 2001 or 2101, reduced by any 
credit allowable with respect to a tax on prior transfers bv section 210I 
2013 or 2102. 
" 
^l^^^"" 2013. 
"(2) 
FEDERAL ESTATE TAX ATTRIBUTABLE TO XET APPRECIATION 
IN VALUE.—The Federal estate tax attributable to the net appre-
ciation in value of all shares of stock and securities to which 
subsection (a) applies is that amount which bears the same ratio 
to the Federal estate tax as the net appreciation in value of all of 
such shares and securities bears to the value of the gross estate as 
determined under chapter 11 (including section 2032, relating to 
^^ "^^ 2°^^. 
alternate valuation). 
"(3) NET APPRECIATION.—The net appreciation in value of all 
shares and securities to which subsection (a) applies is the amount 
by which the fair market value of all such snares and securities 
exceeds the adjusted basis of such property in the hands of the 
decedent. 
"(4) FAIR MARKET VALUE.—For purposes of this section, the 
term 'fair market value' means fair market value determined 
under chapter 11 (including section 2032, relating to alternate 2209.^^^ ^°°^" 
valuation). 
'*(d) LIMITATIONS.—This section shall not apply to any foreign 
personal holding company referred to in section 342(a) (2).'' 
(2) AMENDMENT OF SECTION 101 (Ma).—Section 1016(a) (re- 
26 use/o^^ 
lating to adjustments to basis) is amended by striking out the 
period at the end thereof and by inserting in lieu thereof a semi-
colon and by adding at the end thereof the following new 
paragraph: 
"(21) to the extent provided in section 1022, relating to inci-ease 
'*"'*' ^' ^^' 
in basis for certain loreign personal holding company stock or 
securities." 
(3) CLERICAL AMENDMENT.—The table of sections for part I I 
of subchapter O of chapter 1 is amended by striking out 
"Sec. 1022. Cross references." 
and inserting in lieu thereof the following: 
"Sec. 1022. Increase in basis with rpsi)ect to certain foreign nersonal 
holding company stock or securities!. 
"Sec. 1023. Cross references." 
(k) TECHNICAL AMENDMENTS.— 
(1) Section 542(b) (relating to corpoi-ations filing consoli- 
26 use 542. 
dated returns) is amended by striking out "gross income*' each 
place it appeal's and inserting in lieu thereof "adjusted ordinary 
gross income". 
(2) Section 543 (relating to personal holding company 
je use 543. 
income) is amended by striking out subsection (d) (i-elating to 
special adjustment on disposition of antitrust stock received as a 
dividend). 
(3) Section 544 (relating to rules for determining stock own-
ership) is amended— 
(A) by striking out "section 543(a)(5)" each place it 
appeai-s and insei-ting in lieu thei-eof "section 543(a)(7)", 
^"'e, p. 83. 
and 
26 use 342. 
26 use 544. 
74 Stat. 1004 
26 use 856. 
94 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
(B) by striking out "section 543(a)(9)" each place it 
26 usc*s43'. 
appears and inserting in lieu thereof "section 543(a) (4)". 
(4) REAL ESTATE INVESTMENT TRUSTS.—Paragraph (6) of sec-
tion 856(a) (relating to definition of real estate investment trust) 
is amended by strikmg out "gross income" and inserting in lieu 
thereof "adjusted ordmary gross income (as defined in section 
543(b)(2))". 
(5) 
UNINCORPORATED BUSINESS ENTERPRISES ELECTING TO BE 
6
8
A Stat. 350. 
T
A
X
E
D AS DOMESTIC CORPORATIONS.—^Sectiou 1361 (i) (relating to 
personal holding company income) is amended to read as follows: 
" (i) PERSONAL HOLDING COMPANY INCOME.— 
"(1) EXCLUDED FROM INCOME OF ENTERPRISE.—Tliere shall be 
excluded from the gross income of the enterprise as to which an 
election has been made under subsection (a) any item of gross 
income (computed without regard to the adjustments provided in 
section 543(b) (3) or (4)) if, but for this paragraph, such item 
(adjusted, where applicable, as provided in section 543(b) (3) or 
(4)) would constitute personal holding company income (as 
defined in section 543 (a)) of such enterprise. 
"(2) 
INCOME AND DEDUCTIONS OF OWNERS.—Items excluded 
from the gross income of the enterprise under paragraph (1), and 
the expenses attributable thereto, shall be treated as the income 
and deductions of the proprietor or partners (in accordance 
with their distributive sliares of partnership income) of such 
enterprise. 
"(3) 
DiSTRlBUnONS.—If— 
"(A) the amount excluded from gi'oss income under para-
graph (2) exceeds the expenses attributable thereto, and 
"(B) any portion of such excess is distributed to the pro-
prietor or partner during the year earned, 
such portion shall not be taxed as a corporate distribution. 
The 
portion of such excess not distributed during such year shall 
be considered as ])aid-in surplus or as a contribution to capital as 
of the close of such year." 
(6) 
ASSESSMENT AND COLLECTION OF PERSONAL HOLDING COM-
26 use 6501. 
PANY TAX.—Scctioii 6501(f) (relating to personal holding com-
pany tax) is amended by striking out "gross income, described in 
section 543(a)," and inserting in lieu thereof "gross income and 
adjusted ordinarj'^ gross income, described in section 543,". 
(1) EFFECTIVE DATES.— 
(1) The amendments made by this section (other than by sub-
sections (c)(1), (f), (g), and (j)) shall apply to taxable yeai-s 
beginning after December 31, 1963. 
(2) The amendment made by subsection (c)(1) shall apply 
to taxable years beginning after October 16,1962. 
(3) The amendments made by subsections (f) and (^) shall 
apply to distributions made in any taxable year of the distribut-
ing corporation beginning after December 31, 1963. 
(4) Tlie amendments made by subsection (j) shall apply in 
resj)ect of decedents dying after December 31, 1963. 
(5) Subsection (li) shall apply to taxable years beginning after 
December 31, 1963. 
SEC. 226. TREATMENT OF PROPERTY IN CASE OF OIL AND GAS WELLS. 
26 use 614. 
^^^ jjj^ GENERAL.—Section 614(b) (relating to special rule as to 
operating mineral interests) is amended to read as follows: 
"(b) Si'KCiAL RULES AS TO OPERATING MINERAL INTERESI^S IX OIL 
A
N
D GAS WKFJ.S.—In the case of oil and gas wells— 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
95 
"(1) I N GENERAI..—Except as otherwise provided in this 
subsection— 
"(A) all of the taxpayers operating mineral interests in a 
separate tract or parcel of land shall be combined and treated 
as one property, and 
"(B) the taxpayer may not combine an operating mineral 
interest in one tract or parcel of land with an operating min-
eral interest in another tract or parcel of land. 
"(2) 
ELECTION TO TREAT ()PI:RATING MINERAL INTERESTS AS SEPA-
itATK PROPERTIES.—If the taxpayer has more than one operating 
mineral interest in a single tract or parcel of land, he may elect to 
treat one or more of such operating mineral interests as separate 
properties. The taxpayer may not have more than one combina-
tion of operating mineral interests in a single tract or parcel of 
land. 
If the taxpayer makes the election provided in this para-
graph with respect to any interest in a tract or parcel of land, each 
operating mineral interest which is discovered or acquired by the 
taxpayer in such tract or parcel of land after the taxable year for 
which the election is made shall be treated— 
"(A) if there is no combination of interests in such tract 
or parcel, as a separate property unless the taxpayer elects 
to combine it with another interest, or 
"(B) if there is a combination of interests in such tract or 
parcel, as part of such combination unless the taxpayer elects 
to treat it as a separate property. 
"(3) 
CERTAIN UNITIZATION OR IHIOLING ARR.\NGEMENI^.— 
"(A) I N GENERAL.—^Under regulations prescribed by the 
Secretary or his delegate, if one or more of the taxpayer's 
operating mineral interests participate, under a voluntary or 
compulsory unitization or pooling agreement, in a single 
cooperative or unit plan of operation, then for the period of 
such participation— 
"(i) they shall be treated for all purposes of this 
subtitle as one property, and 
"(ii) the application of paragraphs (1), (2), and (4) 
in respect of such interests shall be suspended. 
"(B) LIMITATION.—Subparagraph (A) shall apply to a 
voluntary agreement only if all the operating mineral inter-
ests covered by such agreement— 
"(i) are in the same deposit, or are in 2 or moi-e 
deposits the joint development or production of which is 
logical from the standpoint of geology, convenience, 
economy, or conservation, and 
"(ii) are in tracts or parcels of land wliich are 
contiguous or in close proximity. 
" ( C ) 
SPECIAL RULE I N T H E CASE OF ARRAN(JKMENTS ENTEUEn 
INTO I N TAXABLE YEARS BEGINNIN(i BEFORE JANUARY 1. 1 J)«4.— 
If— 
"(i) two or more of the taxpayer's operating mineral 
interests participate under a voluntary or compulsory 
unitization or pooling agreement entered into in any 
taxable year beghming before January 1, 1964, in a 
single cooperative or unit plan of operation, 
"(ii) the taxpayer, for the last taxable year l)egiii-
ning before January 1, 1964, tieated such "interests as 
two or more separate i)roperties, and 
"(iii) it is determined that such ti-eatment was proper 
under the law applicable to such taxable year, 
such taxpayer may continue to treat such interests in a con-
sistent manner for the period of such participation. 
96 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(4) 
MANNER, TIME, AND SCOPE OF ELECTION.— 
"(A) MANNER AND TIME.—Any election provided 
in 
paragrapli (2) shall be made for each operating mineral 
mterest, in the manner prescribed by the Secretary or his 
delegate by regulations, not later than the time prescribed 
by law for filing the return (including extensions thereof) 
for whichever of the following taxable years is the later: 
The first taxable year beginning after December 31, 1963, 
or the first taxable year in which any expenditure for 
development or operation in respect of such operating 
mineral interest is made by the taxpayer after the acqui-
sition of such interest. 
"(B) SCOPE.—Any election under paragraph (2) shall be 
for all purposes of this subtitle and shall be binding on the 
taxpayer for all subsequent taxable years. 
"(5) TREATMENT OF CERTAIN PROPERTIES.—If, on the day pre-
ceding the first day of the first taxable year beginning after 
December 31, 1963, the taxpayer has any openiting mineral 
interests which he treats under subsection (d) of this section (as 
in effect before the amendmeTits made by the Revenue Act of 
1964), such treatment shall be continued and shall be deemed to 
have been adopted pursuant to paragraphs (1) and (2) of this 
subsection (as amended by such Act)." 
(b) 
TECHNICAL AMENDMENTS.— 
26USC eu^" 
^^^ '^'^® heading of section 614(c) is amended to read as fol-
lows : 
"(c) SPECIAL 
RI'LES AS TO OPERATINCJ MINERAL INTERESTS IN 
MINES,—" 
^epe^i- 
(2) Paragraph (5) of section 614(c) is hereby repealed. 
(3) Section 614 (d) is amended to read as follows: 
"(d) ()PERATIN(} MINERAL INTERESTS DEFINED.—For purposes of 
this section, the term 'operating mineral interest' inclunes only an 
interest in respect of which the costs of production of the mineral are 
required to be taken into account by the taxpayer for purposes of 
26'uscf*6i3°^* 
ctmiputing the 50 jjercent limitation provided for hi section 613, or 
would be so recpiired if the mine, well, or other natural deposit were 
in the production stage.'" 
(4) Sec'tion 614(e) (2) is amended by striking out "within 
the meaning of subsection (b)(3)". 
(c) 
ALLOCATION OF BASIS IN CERTAIN CASES.—For purposes of 
the Internal Revenue Code, of 1954— 
(1) FAIR MARKET VALUE RULE.—Except as provided in para-
graph (2), if a taxpayer has a section 614(b) aggregation, then 
the adjusted basis (as of the fii-st day of the fii-st taxable year 
beginning after December 31, 1963) of each property included 
in such aggregation shall be determined by multiplying the 
adjusted basis of the aggregation by a fraction— 
(A) the numerator of which is the fair market value of 
su(?h property, and 
(B) the denominator of which is the fair market value 
of such aggregation. 
For purposes of this paragraph, the adjusted basis and the 
fair market value of the aggregation, and the fair market value 
of each property included therein, shall be determined as of the 
day preceding the first day of the firet taxable year which begins 
after Detrember 31,1963. 
(2) ALLOCATION OF ADJUSTMENTS, ETC,—If the taxpayer makes 
an election under this paragraph with respe(;t to any section 614 
(b) aggregation, then the adjusted basis (as of the fii-st day of the 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
97 
first taxable year beginning after December 31, 1963) of each 
property included in such ag^egation shall be the adjusted basis 
of such property at the time it was first included in the aggrega-
tion by the taxpayer, adjusted for that portion of those adjust-
ments to the basis of the aggregation which are i"easonably attrib-
utable to such property. 
If, under the preceding sentence, the 
total of the adjusted bases of the interests included in the aggre-
gation exceeds the adjusted basis of the aggregation (^as of the 
day preceding the first day of the first taxable year which begins 
after Deceml^r 31, 1963), the adjusted bases of the properties 
which include such interests shall be adjusted, under i-egulations 
prescribed by the Secretary of the Treasury or his delegate, so 
that the total of the adjusted bases of such interests equals the 
adjusted basis of the aggregation. 
An election under this para-
graph shall be made at such time and in such manner as the 
Secretary of the Treasury or his delegate shall by regulations 
prescribe. 
(3) DEFINITIONS.—For purposes of this subsection— 
(A) 
SECTION 614(b) 
AGGREGATION,—The term "section 
614(b) aggregation" means any aggregation to which section 
614(b) (1) (A) of the Internal Revenue Code of 1954 (as in 
^^^ul*c*6iV°" 
effect before the amendments made b j subsection (a) of this 
section) applied for the day precedmg the first day of the 
first taxable year beginning after December 31, 1963. 
(B) PROPERTY.—The term "property" has the same mean-
ing as is applicable, under section 614 of the Internal Rev-
enue Code of 1954, to the taxpayer for the first taxable year 
beginning after December 31,1963. 
(d) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply to taxable years l)eginning after December 31, 
1963. 
SEC. 227. TREATMENT OF CERTAIN IRON ORE ROYALTIES. 
(a) 
I N GENERAL.— 
(1) AMENDMENT OF SECTION (5.SI (C).—Section 631(c) (relating 
26 use eai. 
to disposal of coal with a retained economic interest) 
is 
amended— 
(A) by striking out the heading and inserting in lieu 
thereof the following: 
"(c) 
DISPOSAL OF COAL OR DOMESTIC IRON ORE W I T H A RETAINED 
ECONOMIC INTEREST.—"; 
(B) by inserting "or iron ore mined in the United States," 
after "coal (including lignite),"; 
(C) by inserting "or iron ore" after "coal" each other 
place it appeal's in section 631(c) ; and 
(D) by adding at the end thereof the following new 
sentence: 
"This subsection shall not apply to any disposal of iron ore— 
"(1) to a person w^hose relationship to the person disposing 
of such iron ore would result in the disallowance of losses under 
section 267 or 707 (b), or 
^e use 267,707. 
"(2) to a person owned or controlled directly or indirectly by 
the same interests which own or control the person disposing of 
such iron ore." 
(2) AMENDMENT OF SPXTION .12.M (b).—Section 1231(b)(2) 
26 use 1231. 
(defining property used in the trade or business) is amended to 
read as follows: 
"(2) TIMBER, COAL, OR DOMESTIC IRON ORE.—Such term includes 
timber, coal, and iron ore with respect to which section 631 
applies." 
98 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
26^scr*27*2^' 
^'^^ AMKXDMKNT OF sKCTiox 272.—The tt>xt of sectioii 272 
(relating to disposal of coal) is anieiuled by inserting "or iron 
ore" after "coal*' each place it appears. 
(b) CLERICAL AMENDMENTS.— 
Ante, p. 97. 
n\ 
^|jg headini>' of section (531 is amended to read as follows: 
26 use 631. 
^ ' 
*
= 
'SEC. 631. GAIN OR LOSS IN THE CASE OF TIMBER, COAL, OR DOMES-
TIC IRON ORE." 
(2) The table of sections for part I I I of subchapter I of chap-
ter 1 is amended by striking out 
"Sec. 631. Gain or loss in the case of timber or coal." 
and inserting in lieu thereof the following: 
"Sec. 631. Gain or loss in the case of timber, coal, or domestic iron 
ore." 
(3) The heading of section 272 is amended to read as follows: 
"SEC. 272. DISPOSAL OF COAL OR DOMESTIC IRON ORE." 
(4) The table of sections for part I X of subchapter B of 
chapter 1 is amended by striking out 
"Sec. 272. Disposal of coal." 
and inserting in lieu thereof the following: 
"Sec. 272. Disposal of coal or domestic iron ore." 
26 use 1016. 
^5^ Section 1016(a) (15) is amended by inserting "or domestic 
iron ore" after "coal". 
26 use 
rt02. 
(0) Section 14()2(a) (3) (B) is amended to read as follows: 
"(B) from the cutting of timber, or the disposal of 
timber, coal, or iron ore, if section 631 applies to such gain 
or loss, or" 
68^stItr'io?5!' 
C^') .Section 211(a) (3) of the Social Security Act is amended 
42 use 411. 
by striking out clause (B) and inserting in lieu thereof "(B) 
from the cutting of timber, or the disposal of timber, coal, or 
iron ore, if section 631 of the Internal Revenue Code of 1954 
applies to such gain or loss,". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply with respect to amounts received or accrued in taxable years 
beginning after December 31, 1963, attributable to iron ore mined in 
such taxjible years. 
SEC. 228. INSURANCE COMPANIES. 
(a) CERTAIN MUTUAMZATION DISTUIBUTIONS MADE IN 1962.— 
( 1 ) 
D E D U C T F O N FOR C E R T A I N 3IUTUALIZATI0N DISTRIBUTIONS.— 
75^stat^*i2o^^' 
Section 809(d) (11) (relating to deductions in computing ^ahi 
26 use 80*9. 
from operations in the case of certain mutualization distribu-
tions) IS amended by striking out "and 1961" and inserting in 
lieu thereof "1961, and 1962". 
(2) APPLICATION OF SECTION sir..—Section 809(g) (3) (relating 
to application of section 815 to certain mutualization distribu-
tions) is amended by striking out "or 1961" and inserting in lieu 
thereof "1961, or 1962". 
(b) ACCRUAL OF BOND DISCOUNT.— 
73 Stat. 133. 
(J) LiFE INSURANCE COMPANIES.—Sectiou 818(b) (relating to 
amortization of premium and accrual of discount) is amended by 
adding at the end thereof the following new paragraph: 
"(3) EXCEPTION.—For taxable years beginning after Decem-
ber 31, 1962, no accrual of discount shall be required under para-
26 use 171. 
graph (1) on any bond (as defined in section 171(d)), except iu 
the case of discount which is— 
26 use 103. 
" (A) interest to which section 103 applies, or 
"(B) original 
issue discount 
(as denned in section 
1232(b)). 
26 use 1232. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
99 
For purposes of section 805(b) (3) (A), the curi-ent eariiiiigs rate 
for any taxable year beginning before January 1, 1063, sliall be 
determined as if the preceding sentence applied to such taxable 
73 Stat. 118. 
26 use 80 5. 
year." 
68A Stat. 261. 
26 use 822. 
(2) MUTUAL INSURANCE COMPANIES.—Section 822(d) (2) (relat-
ing to amortization of premium and accrual of discount) is 
amended by adding at the end thereof the following new sentence: 
"For taxable years beginning after December 31,1962, no accrual 
of discount shall be required under this paragraph on any bond 
(as defined in section 171(d))." 
^e use 171. 
(c) CONTRIBUTIONS TO QUALIFIED, ETC., PLANS.—Section 832(c) (10) 
^^ "^^ ^22. 
(relating to deductions allowed in computing taxable income of cer-
tain insurance companies) is amended by inserting before the semi-
colon at the end thereof "and in part I of subchapter D (sec. 
401 and following, relating to pension, profit-sharing, stock bonus 
^6ifsc'4of-407°" 
plans, etc.)". 
(d) EFFECTIVE DATES.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31,1961. The 
amendment made by subsection (c) shall apply to taxable year's 
beginning after December 31, 1953, and ending after August 16, 1954. 
SEC. 229. REGULATED INVESTMENT COMPANIES. 
(a) TIME FOR MAILING CERTAIN NOTICES TO SHAREiiorj)ERS.—The 
following provisions (relating to notices to shareholders by regulated 
investment companies) are amended by striking out "30 days", wher-
ever appearing therein, and inserting in lieu thereof "45 days": 
(1) Section 852(b)(3)(C), 
26 use852.855. 
(2) Section 852(b) (3) (D)(i), 
(3) Section 853(c), 
(4) Section 854 (b) (2), and 
(5) Section 855(c). 
(b) CERTAIN REDEMPITONS BY U N I T INVKSTMKNT TRUSTS.—Section 
852 (relating to taxation of regulated investment companies and their 
shareholders) is amended by adding at the end thei-eof the following 
new subsection: 
" ( d ) 
DlSTRIBlTIONS IN REDEMPTION OF I N T E K K S T S IX T^NIT I N V E S T -
MKNT TRUSTS.—In the case of a unit investment trust— 
"(1) which is registered under the Investment Company Ad 
of 1940 and issues periodic pavmeiit plan cei'tificates (as defined 
f
^ f
^
f
*
- '^^^• 
1 
. 
,v 
-
1 
^ 
^ 
•
•
• 
^- 
^ 
1 5 U S C 8 0 a - 5 1 . 
in such Act), and 
"(2) substantially all of the assets of wliich consist of securities 
issued by a management company (as defined in such Act), 
section 562(c) (relating to preferential dividends) shall not apply to 
a distribution by such trust to a holder of an intere.st in snch trust in 
redemption of part or all of sudi interest, with respect to the net 
(•apital gain of such trust attributable to such redemption." 
(c) EFFECTIVE DATES.—The amendments made by subsection (a) 
shall apply to taxable years of regulated investment companies ending 
on or after the date of the enactment of this Act. The amendment 
made by subsection (b) shall apply to taxable years of i-egulated in-
ve-stment companies ending after December 31,1963. 
SEC. 
2
3
0
. 
CAPITAL 
LOSS 
CARRYOVERS 
FOR 
TAXPAYERS 
OTHER 
THAN 
CORPORATIONS. 
(a) IN GENKKAL.—Section 1212 (relating to capital loss carryover) 
is amended— 
(1) by striking out "If for any taxal)le year the taxpayer" and 
inserting in lieu thereof: 
"(a) ('ORPORATioNs.—If for any taxable year a corporation": and 
(2) l)y adding at the en<l thereof the following new subsection : 
"(b) {y\H¥.v. TAXPAYERS.— 
26 use 562. 
26 use 1212. 
26 u s e 1211. 
26 u s e 1222. 
100 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(1) I N GENERAL.—If a taxpayer other than a corporation has 
a net capital loss for any taxable year beginning after December 
31,1963— 
"(A) the excess of the net short-term cai)ital loss over the 
net long-term capital gain for such year sliall l)e a short-term 
capital loss in the succeeding taxable year, and 
"(B) the excess of the net long-term capital loss over the 
net short-term capital gain for such year shall be a long-term 
capital loss in the succeeding taxable year. 
For purposes of this paragraph, in determining such excesses an 
amount equal to the excess of the sum allowed for the taxable year 
^^A |tat. 321. 
under section 1211(b) over the gains from sales or exchanges of 
capital assets (determined without regard to this sentence) shall 
be treated as a short-term capital gain in such year. 
" (2) TRANSITIONAL RULE.—In the case of a taxpayer other than 
a corporation, there shall be treated as a short-term capital loss in 
the first taxable year beginning after December 31, 1963, anj-
amount which is treated as a short-term capital loss in such year 
under this subchapter as in effect immediately befoi'e the enact-
ment of the Revenue Act of 1964." 
(b) 
TECHNICAL AMENDMENTS.— 
(1) Section 1222(9) (relating to net capital gain) is amended 
to read as follows: 
"(9) NET CAPITAL GAIN.—In the case of a corporation, the term 
'net capital gain' means the excess of the gams from sales or 
exchanges of capital assets over the losses from such sales or 
exchanges." 
(2) The second sentence of section 1222(10) (relating to net 
capital loss) is amended by striking out "For the purpose" and 
inserting in lieu thereof "In the case of a corporation, for the 
purpose". 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply to taxable years beginning after December 31, 1963. 
SEC. 231. GAIN FROM DISPOSITIONS OF CERTAIN 
DEPRECIABLE 
REALTY. 
(a) 
GAIN FROM DISPOSITIONS OF CERTAIN DEPRECIABLE REALTY.— 
2
^
6 use 1231- 
Part IV of subchapter P of chapter 1 (relating to special rules for 
determining capital gains and losses) is amended by adding at the end 
thereof the following new section: 
"SEC. 1250. GAIN FROM DISPOSITIONS OF CERTAIN DEPRECIABLE 
REALTY. 
'*(a) GENERAL RULE.— 
"(1) ORDINARY INCOME.—Except as otherwise provided in this 
section, if section 1250 proi>ei'ty is disposed of after December 31, 
1963, the applicable percentage of the lower of— 
"(A) the additional depreciation (as defined in subsection 
(b) (1)) in respe<'t of the property, or 
'*(B) the excess of— 
"(i) the amount realized (in the case of a sale, 
exchange, or involuntary conversion), or the fair market 
value of such property (in the case of any other dis-
position), over 
"(ii) the adjusted basis of such jnoperty, 
shall l)e trejited as gain from the sale or exchange of pro[)erty 
which is neither a capital asset nor property described in section 
1231. 
Such gain shall be recognized notwithstanding any other 
provision of this snbtitle. 
"(2) APPLICABLE PERCENTAGE.—For ])in})oses of paragraph 
(1), the term 'applicable percentage^ means 100 percent minus 
1249. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
101 
one percentage point for each full month the property was held 
after the date on which the property was held 20 full months, 
"^b) ADDmoNAL DEPRECIATION DEFINED.—For purposes of this 
section— 
"(1) I N OBNER.VL,.—The term 'additional depreciation' means, 
in the case of any property, the depreciation adjustments in 
respect of such property; except that, in the cjise of property held 
more than one year, it means such adjustments only to the extent 
that they exceed the amount of the depreciation adjustments 
which would have resulted if such adjustments had been deter-
mined for each taxable year under the straight line method of 
adjustment. For purposes of the preceding sentence, if a useful 
life (or salvage value) was used in determining the amount 
allowed as a deduction for any taxable year, such life (or value) 
shall be used in determining the depreciation adjustments which 
would have resulted for such year under the straight line method. 
" (2) PROPERTY HELD BY LESSEE.—In the case of a lessee, in deter-
mining the depreciation adjustments which would have resulted 
in respect of any building erected (or other improvement made) 
on the leased property, or in respect of any cost of acquiring the 
lease, the lease period shall be treated as including all renewal 
periods. 
For purposes of the preceding sentence-— 
" (A) the term 'renewal period' means any period for which 
the lease may be renewed, extended, or continued pursuant 
to an option exercisable by the lessee, but 
"(B) the inclusion of renewal periods shall not extend the 
period taken into account b^ more than % of the period on 
the basis of which the depreciation adjustments were allowed. 
"(3) DEPRECIATION 
ADJUSTMENTS.—The term 
'depreciation 
adjustments' means, in respect of any property, all adjustments 
attributable to periods after Decemlier 31, 1963, reflected in the 
adjusted basis of such property 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 exhaustion, wear and tear, 
obsolescence, or amortization (other than amortization under sec-
tion 168). For purposes of the preceding sentence, if the taxpayer 
26'uscr*i6'8!' 
can establish by adequate records or other sufficient evidence that 
the amount allowed as a deduction for any period was less than 
the amount allowable, the amount taken into account for such 
period shall be the amount allowed. 
" (c) SECTION 1250 PROPERTY.—For purposes of this section, the term 
'section 1250 property' means any real property (other than section 
1245 property, as defined in section 1245(a) (3)) which is or has been 
property of a character subject to the allowance for depi'eciation pro-
vided in section 167. 
^^ "^^ ^^''• 
"(d) ExcEiiTONs AND LIMITATIONS.— 
"(1) GIFTS.—Subsection (a) shall not apply to a disposition by 
gift. 
"(2) TRANSFERS AT DEATH.—Except as provided in section 691 ^e use 691.. 
(relating to income in respect of a decedent), subsection (a) sliall 
not apply to a transfer at death. 
" (3) CERTAIN TAX-FREE TILVNSACTIONS.—If the basis of property 
in the hands of a transferee is determined by reference to its tmsis 
in the hands of the transferor by reason of the application of 
section 332, 351, 361, 371 (a), 374(a), 721, or 731, then the amount Jf ^^c 332,351, 
of gain taken into account by the transferor mider subsection 721,' 731! 
(a) (1) shall not exceed the amount of gain recognized to the trans-
leror on the transfer of such property (determined without regard 
to this section). 
This paragraph shall not apply to a disposition 
76 Stat. 1032. 
26 use 1245. 
102 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
to an organization (other than a cooperative described in section 
ae'uscr^s?^^* 
^^^^ which is exempt from the tax imposed by this chapter. 
" (4) LIKE KIND EXCHANGES ; INVOLUNTARY CONVERSIONS, ETC.— 
"(A) 
RECOGNITION LIMIT.—If property is disposed of 
and gain (determined without regard to this section) is not 
10^3^"^^ '°^^' 
recognized in whole or in part under section 1031 or 1033, 
then the amount of gain taken into account by the trans-
feror under subsection (a)(1) shall not exceed the greater 
of the following: 
"(i) the amount of gain recognized on the disposition 
(determined without regard to this section), increased 
as provided in subparagraph (B), or 
(ii) the amount determined under subparagrapli 
,(C). 
"(B) INCREASE FOR CERTAIN STOCK.—^W'^ith respect to any 
transaction, the increase provided by this subparagraph is 
the amount equal to the fair market value of any stock 
purchased in a corporation which (but for this paragraph) 
would result in nonrecognition of gain under section 1033 
(a)(3)(A). 
"(C) ADJUSTMENT WHERE INSUFFICIENT SECTION 1250 
PROPERTY IS ACQUIRED.—^With respect to any transaction, the 
amount determined under this subparagraph shall be the 
excess of— 
"(i) the amount of gain which would (but for this 
paragraph) be taken into account under subsection (a) 
(1), over 
"(ii) the fair market vahie (or cost in the case of a 
transaction described in section 1033(a) (3)) of the sec-
tion 1250 property acquired in the transaction. 
"(I)) BASIS OF PROPERTY ACQUIRED.—In the case of prop-
erty purchased by the taxpayer in a transaction described n\ 
section 1033(a) (3), in applying the hist sentence of section 
1033 (c), such sentence shall be applied— 
"(i) first solely to section 1250 properties and to the 
amount of gain not taken into account under subsection 
(a) (1^ by reason of this paragraph, and 
"(ii) then to all purchased properties to which such 
sentence applies and to the remaining gain not recog-
nized on the transaction as if the cost of tlie section 1250 
properties were the basis of such properties computed 
under clause (i). 
In the case of property acquired in any other transaction to 
which this paragraph applies, rules consistent with the pre-
(;eding sentence shall be applied under regulations prescribed 
by the Secretary or his delegate. 
"(E) ADDITIONAL DEPRECIATION WITH RESPECT TO PROPERTY 
DISPOSED OF.—In the case of any transaction described in 
section 1031 or 1033, the additional depreciation in respect 
Ante. p. 101. 
Qf f^Q section 1250 property acquired which is attributable 
to the section 1250 property disposed of shall be an amount 
equal to the amount of the gain which was not taken into 
account under subsection (a) (1) by reason of the application 
of this paragraph. 
108^1."^^ ^°^^' 
"(^) SECTION 1071 AND losi TRANSACTIONS.—Under regulations 
prescribed by the Secretary or his delegate, rules consistent with 
paragraphs (3) and (4) of this subsection and with subsections 
(e) and (f) shall apply in the case of transactions described in 
section 1071 (relating to o-nin from sale or exchange to effectuate 
Ante, p. 38. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
103 
policies of FCC) or section 1081 (relating to exclianges in 26^scr*io8\^" 
obedience to SEC orders). 
"(6) 
PROPERTY DISTRIBUTED BY A PARTNERsmr TO A PARTNER,— 
"(A) I N GENERAL,.—For purposes of this section, the basis 
of section 1250 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) ADDITIONAL DEPRECIATION.—In respect of any prop-
erty described in subparagraph (A), the additional deprecia-
tion attributable to 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 and the applicable per-
centage for the property had been 100 percent, reduced 
by 
" (ii) if section 751 (b) applied to any part of such gain, 
^^ "^^ ^^ ^• 
the amount of such gain to which section 751 (b) would 
have applied if the applicable percentage for the prop-
erty had been 100 percent. 
"(7) DISPOSITION OF PRINCIPAL RESIDENCE.—Subsection (a) shall 
not apply to a disposition of— 
"(A) property to the extent used by tlie taxpayer as his 
principal residence (within the meaning of section 1034, re- 
26 use 1034. 
lating to sale or exchange of residence), and 
"(B) property in respect of which the taxpayer meets 
the age and ownership requirements of section 121 (relating 
to gains from sale or exchange of residence of individual who 
has attained the age of 65) but only to the extent that he 
meets the use requirements of such section in respect of such 
property. 
"(e) HOLDING PERIOD,—For purposes of determining the applicable 
percentage under this section, the provisions of section 1223 shall not 
^^ ^^^ ^^^^' 
apply, and the holding period of section 1250 property shall be deter-
mined under the following rules: 
"(1) BEGINNING OF HOLDING PERIOD.—The holding period of 
section 1250 property shall be deemed to begin— 
"(A) in the case of property acquired by the taxpayer, 
on the day after the date of acquisition, or 
"(B) in the case of property constructed, reconstructed, 
or erected by the taxpayer, on the first day of the month 
during which the property is placed in service. 
"(2) PROPERTY WITH TRANSFERRED BASIS.—If the basis of prop-
erty acquired in a transaction described in paragraph (1), (2), 
(3), or (5) of subsection (d) is determined by reference to its 
basis in the hands of the transferor, then the holding period of 
the property in the hands of the transferee shall include the hold-
ing period of the property in the hands of the transferor. 
"(3) PRINCIPAL RESIDENCE.—If the basis of property acquired 
in a transaction described in paragraph (7) of subsection (d) is 
determined by reference to the basis in the hands of the taxpayer 
of other property, then the holding period of the property ac-
quired shall include the holding period of such other property. 
"(f) 
SPECIAL RULES FOR PROPERTY W H I C H Is SUBSTANTIALLY 
IMPROVED.— 
"(1) AMOUNT TREATED AS ORDINARY IXCO^IE.—If, in the case 
of a disposition of section 1250 property, the property is treated 
as consisting of more than one element by reason of paragraph 
31-667 0-65—10 
Ante, p. 101. 
104 
PUBLIC LAW 88-272~FEB. 26, 1964 
[78 STAT. 
(3), then the amount taken into account under subsection (a) (1) 
in respect of such section 1250 property as gain from the sale or 
exchange of property which is neither a capital asset nor prop-
26^scr*i23"' 
^^^y described in section 1231 shall be the sum of the amounts 
determined under paragraph (2). 
"(2) ORDINARY INCOME ATTRIBUTABLE TO AN ELEMENT.—For 
purposes of paragraph (1), the amount taken into account for 
any element shall be the amount determined by multiplying— 
"(A) the amount which bears the same ratio to the lower 
of the amounts specified in subparagraph (A) or (B) of 
subsection (a) (1) for the section 1250 property as the addi-
tional depreciation for such element bears to the sum of the 
additional depreciation for all elements, by 
"(B) the applicable percentage for such element. 
For purposes of this paragraph, determinations with respect 
to any element shall be made as if it were a separate property. 
"(3^ PROPERTY CONSISTING OF MORE THAN ONE ELEMENT.—In 
ai)plying this subsection in the case of any section 1250 property, 
tliere shall be treated as a separate element— 
"(A) each separate improvement, 
"(B) if, before completion of section 1250 pi*operty, imits 
thereof (as distinguished from improvements) were placed 
in service, each such unit of section 1250 property, and 
"(C) the remaining property which is not taken into 
account under subparagraphs (A) and (B). 
''(4) PROPERTY WHICH IS SUBSTANTIALLY IMPROVED.—For pur-
poses of this subsection— 
"(A) I N 
GENERAL.—The tei*m 'separate improvement 
means each improvement added during the 36-month period 
ending on the last day of any taxable year to the capital 
account for the property, but only if the sum of the amounts 
added to such account during such period exceeds the 
greatest of— 
"(i) 25 percent of the adjusted basis of the property, 
"(ii) 10 ]>ercent of the adjusted basis of the property, 
determined without regard to the adjustments provided 
in paragraphs (2) and (3) of section 1016(a), or 
'^(iii) $5,000. 
For purposes of clauses (i) and (ii), the adjusted basis of 
the property shall be determined as of the beginning of the 
first day of such 36-month period, or of the holding period 
of the property (within the meaning of subsection (e)), 
whichever is the later. 
"(B) EXCEPTION.—Improvements in any taxable year 
shall be taken into account for purposes of subparagraph 
(A) only if the sum of the amounts added to the capital 
account for the property for such taxable year exceeds the 
greater of— 
«(i) $2,000, or 
"(ii) one percent of the adjusted basis i-eferred to in 
subparagraph (A) (ii), determined, however, as of the 
beginning of such taxable year. 
For purj)oses of this section, if the amoiuit added to the 
capital account for any separate improvement does not exceed 
the greater of clause (i) or (ii), such improvement shall be 
treated as placed in service on the first day, of a calendar 
month, which is closest to the middle of the taxable year. 
"(C) IMPROVEMENT.—The term 'impi*ovement' means, in 
the case of any section 1260 pro[)erty, any addition to capital 
26 use 1016. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
105 
account for such property after the initial acquisition or after 
completion of the property. 
'•(g) ADJUSTMENTS TO BASIS.—The Secretary or his delegate shall 
prescribe such regulations as he may deem necessary to provide for 
adjustments to the basis of property to reflect gain recognized under 
fiubsection (a). 
"(h) APPLICATION OF SECTION.—This section shall apply notwith-
standing any other provision of this subtitle." 
(b) TECHNICAL AMENDMENTS.— 
(1) SPECIAL RULE FOR CHARITABLE CONTRIBUTIONS.— 
(A) The heading of section 170 (e) (relating to special rule 
for charitable contributions of section 1245 property) is 
amended by striking out "SECTION 1245 PROPERTY" and in-
serting in lieu thereof "CERTAIN PROPERTY". 
(B) The text of such section 170(e) is amended by strik-
ing out "section 1245(a)" and inserting in lieu thereof "sec-
tion 1245 (a) or 1250(a)". 
J,l ^^^oot 
(2) CORPORATE DISTRIBUTIONS OF PROPERTY.—Subsections (b) 
and (d) of section 301 (relating to amount distributed) are each 
amended by striking out "under section 1245(a)" and inserting 
in lieu thereof "under section 1245 (a) or 1250 (a)". 
(3) EFFECT ON EARNINGS AND PROFITS.—Paragraph (3) of sec-
tion 312(c) (relating to adjustments of earnings and profits) is 
amended by striking out "or under section 1245 (a)" and inserting 
in lieu thereof "or under section 1245(a) or 1250(a)". 
(4) COLLAPSIBLE CORPORATIONS.—Paragraph (12) of section 
341 (e) (relating to collapsible corporations) is amended by strik-
ing out "section 1245(a)" and inserting in lieu thereof "sections 
1245(a) and 1250(a)". 
(5) INSTALLMENT OBLIGATIONS IN CERTAIN LIQUIDATIONS.—Sub-
paragraphs (A) and (B) of section 453(d) (4) (relating to dis-
tribution of installment obligations in certain corporate liquida-
tions) are each amended by striking out "section 1245(a)" and 
inserting in lieu thereof "section 1245 (a) or 1250(a)". 
(6) SPECIAL RULE FOR PARTNERSHIPS.—Section 751(c) (relat- 
26 use 751. 
ing to definition of "unrealized receivables" for purposes of sub-
chapter K) is amended by striking out "(as defined in section 
1245(a) (3))" and inserting in lieu thereof "(as defined in section 
1245 (a) (3)) and section 1250 property (as defined in section 
1250(c))" and by striking out "to which section 1245(a)" and 
inserting in lieu thereof "to which section 1245(a) or 1250(a)". 
(7) The table of sections for part IV of subchapter P of chap-
ter 1 is amended by adding at the end thereof the following: 
"Sec. 1250. Gain from dispositions of certain depreciable realty." 
(c) EFFECTIVE DATE.—The amendments made by this section shall 
apply to dispositions after December 31,1963, in taxable years ending 
after such date. 
SEC. 232. AVERAGING. 
(a) GENERAL RULE.—Part I of subchapter Q of chapter 1 is 
amended to read as follows: 
"PART I—INCOME AVERAGING 
"Sec. 1301. Limitation on tax. 
"Sec. 1302. Definition of averagable income; related definitions. 
"Sec. 1303. Eligible individuals. 
"Sec. 1304. Special rules. 
"Sec. 1305. Regulations. 
76 Stat. 1034. 
26 use 170. 
26 use 1245, 
26 use 301. 
26 use 312. 
26 use 341. 
26 use 453. 
106 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"SEC. 1301. LIMITATION ON TAX. 
"If an eligible individual has averagable income for the computa-
tion year, and if the amount of such income exceeds $3,000, then the 
an^tl^ f^fg ^' 
^^^ imposed by section 1 for the computation year which is attribut-
26'use i'. 
able to averagable income shall be 5 times the increase in tax under 
such section which would result from adding 20 percent of such 
income to the sum of— 
"^1) 1331^ percent of average base period income, and 
"(2) the amount (if any) of the average base period capital 
gain net income. 
"SEC. 1302. DEFINITION OF AVERAGABLE INCOME; RELATED DEFI-
NITIONS. 
"(a) AVERAGABLE INCOME.—For purposes of this part— 
"(1) I N GENERAL.—The term 'averagable income' means the 
amount (if any) by which adjusted taxable income exceeds ISZy^ 
percent of average base period income. 
"(2) ADJUSTMENT IN CERTAIN CASES FOR CAPITAL, GAINS.—If— 
"(A) the average base period capital gain net income, 
exceeds 
"(B) the capital gain net income for the computation 
year, 
then the term 'averagable income" means the amount determined 
under paragraph (1), reduced by an amount equal to such excess. 
"(b) ADJUSTED TAXABLE INCOME.—For purposes of this part, the 
term 'adjusted taxable income' means the taxable income for the com-
putation year, decreased by the sum of the following amounts: 
"(1) CAPITAL GAIN NET INCOME FOR THE COMPUTATION YEAR.— 
The amount (if any) of the capital gain net income for the com-
putation year. 
"(2) INCOME ATTRIBUTABLE TO GIFTS, BEQUESTS, ETC.— 
" (A) I N GENERAL.—^The amount of net income attributable 
to an interest in property where such interest was received by 
the taxpayer as a gift, bequest, devise, or inheritance during 
the computation year or any case period year. This para-
graph shall not apply to gifts, bequests, devises, or inherit-
ances between husband and wife if they make a joint return, 
or if one of them makes a return as a surviving spouse (as 
26 use 2. 
defined in section 2 (b)), for the computation year. 
"(B) AMOUNT OF NET INCOME.—Unless the taxpayer other-
wise establishes to the satisfaction of the Secretary or his 
delegate, the amount of net income for any taxable year 
attributable to an interest described in subparagraph (A) 
shall be deemed to be 6 percent of the fair market value of 
such interest (as determined in accordance with the provi-
sions of chapter 11 or chapter 12, as the case may be). 
"(C) LIMITATION.—^This paragraph shall apply only if the 
sum of the net incomes attributable to interests described in 
subparagraph (A) exceeds $3,000. 
"(D) NET INCOME.—For purposes of this paragraph, the 
term 'net income' means, with respect to any interest, the 
excess of— 
"(i) items of gross income attributable to such inter-
est, over 
"(ii) the deductions properly allocable to or charge-
able against such items. 
For purposes of computing such net income, capital gains and 
losses shall not be taken into account. 
"(3) WAGEUIN<4 INCOME.—The amount (if any) by which 
the gains from wagering transactions for the computation year 
exceed^the losses from such transactions. 
26 u s e 2001, 
2501. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
107 
76 Stat. 821. 
26 u s e 72. 
"(4) 
CERTAIN 
AMOUNTS 
RECEIVED 
BY 
OWNER-EMPLOYEES.— 
The amount (if any) to which section 72(m) (5) (relating to 
penalties applicable to certain amounts received by owner-
employees) applies. 
"(c) AVERAGE BASE PERIOD INCOME.—For purposes of this part— 
"(1) I N GENERAL.—^The term 'average base period income' 
means one-fourth of the sum of the base period incomes for the 
base period. 
"(2) BASE PERIOD INCOME.—^The base period income for any 
taxable year is the taxable income for such year first increased 
and then decreased (but not below zero) in the following order: 
"(A) Taxable income shall be increased by an amount 
equal to the excess of— 
"(i) the amount excluded from gross income under 
section 911 (relating to earned income from sources 
^e use 9n ^
* 
without the United States) and subpart D of part III 
of subchapter N (sec. 931 and following, relating to 
^^ "^^ 931-934. 
income from sources within possessions of the United 
States), over 
"(ii) the deductions which would have been properly 
allocable to or chargeable against such amount but 
for the exclusion of such amount from gross income. 
"(B) Taxable income shall be decreased by the capital 
gain net income. 
"(C) If the decrease provided by paragraph (2) of sub-
section (b) applies to the computation year, the taxable 
income shall be decreased under the rules of such para-
graph (2) (other than the limitation contained in subpara-
graph (C) thereof). 
"(d) CAPITAL GAIN NET INCOME, ETC.—For purposes of this part— 
"(1) CAPITAL GAIN NET INCOME.—The term 'capital gain net 
income' means the amount equal to 50 percent of the excess of the 
net long-term capital gain over the net short-term capital loss. 
" (2) AVERAGE BASE PERIOD CAPITAL GAIN NET INCOME.—The term 
'average base period capital gain net income* means one-fourth 
of the sum of the capital gain net incomes for the base period. 
For purposes of the preceding sentence, the capital gain net 
income for any base period year shall not exceed tlie base period 
income for sue!) year computed without regard to subsection 
(c)(2)(B). 
"(e) OTHER RELATED DEFINITIONS.—For purposes of this pari— 
"(1) COMPUTATION YEAR.—Tlie term 'computation year' means 
the taxable year for which the taxpayer cliooses the benefits of 
this part. 
"(2) BASE PERIOD.—The term 'base period' means the 4 taxable 
years immediately preceding the computation year. 
"(3) BASE PERIOD YEAR.—The term 'base period year' means 
any of the 4 taxable years immediately preceding the computa-
tion year. 
"(4) JOINT RETURN.—The term 'joint return' means the return 
of a husband and wife made under section 6013. 
^^'^J^^I^l^^* 
2o use 60 13. 
"SEC. 1303. ELIGIBLE INDIVIDUALS. 
"(a) GENERAL RULE.—Except as otherwise provided in this sec-
f if)ii, for i)urposes of this part the term 'eligible individual' means any 
individual who is a citizen or resident of the United States throughout 
the computation year. 
"(b) NONRESIDENT ALIEN INDIVIDUALS.—For i)urposes of this part, 
an individual shall not be an eligible individual for the computation 
76 Stat. 1003. 
26 u s e 9 U . 
lt)8 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
year if, at any time during such year or tlie base period, such in-
dividual was a nonresident alien. 
"(c) INDIVIDUALS RECEIVING StrppoRT FROM OTHERS.— 
"(1) I N GENERAL.—For purposes of this part, an individual 
shall not be an eligible individual for the computation year if, for 
any base period year, such individual (and his spouse) furnished 
less than one-halt of his support. 
"(2) EXCEPTIONS.—Paragraph (1) shall not apply to any com-
putation year if— 
" (A) such year ends after the individual attained age 25 
and, during at least 4 of his taxable years beginning after he 
attained a^e 21 and ending with his computation year, he was 
not a full-time student, 
"(B) more than one-half of the individual's adjusted tax-
able income for the computation year is attributable to work 
performed hj him in substantial part during 2 or more of 
the base period years, or 
"(C) the individual makes a joint return for the computa-
tion year and not more than 25 percent of the aggregate 
adjusted gross income of such individual and his spouse 
for the computation year is attributable to such individual. 
In applying subparagraph (C), amounts which constitute earned 
income (within the meaning of section 911(b)) and are com-
munity income under community property laws applicable to 
such income shall be taken into account as if such amounts did 
not constitute community income. 
"(d) 
STUDENT DEFINED.—i'or purposes of this section, the term 
'student' means, with respect to a taxable year, an individual who 
during each of 5 calendar months during such taxable year— 
"(1) was a full-time student at an educational institution (as 
defined in section 151(e) (4)); or 
"(2) was pursuing a full-time course of institutional on-farm 
training under the supervision of an accredited agent of an edu-
cational institution (as defined in section 151(e)(4)) or of a 
State or political subdivision of a State. 
"SEC. 1304. SPECIAL RULES. 
"(a) TAXPAYER MUST CHOOSE BENEFITS.—This part shall apply 
to the taxable year only if the taxpayer chooses to have the benefits 
of this part for such taxable year. 
Such choice may be made or 
changed at any time before the expiration of the period prescribed 
for making a claim for credit or refund of the tax imposed by this 
chapter for the taxable year. 
"(b) CERTAIN PROVISIONS INAPPLICABLE.—If the taxpayer chooses 
the benefits of this part for the taxable year, the following provisions 
shall not apply to him for such year: 
Poif^^.^129 
"(^) section 3 (relating to optional tax if adjusted gross 
income is less than $5,000), 
26 use 7*2^' 
"(^) section 72(n) (2) (relating to limitation of tax in case 
of certain distributions with respect to contributions by self-
employed individuals), 
"(3) section 911 (relating to earned income from sources 
without the United States), and 
26USC931.934. 
"(4) subpart D of part I I I of subchapter N (sec. 931 and 
following, relating to income from sources within possessions of 
the United States). 
"(c) 
FAILURE OF CERTAIN MARRIED INDI\TDUALS TO MAKE JOINT 
RETURN, ETC.— 
"(1) 
APPLICATION OF SUBSECTION.—Paragraphs (2), (8), and 
(4) of this subsection shall apply in the case of any individual 
68 A Stat. 42. 
26 u s e 151. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1%4 
109 
who was married for any base period year or the coniputation 
year; except that— 
"(A) such paragraphs shall not apply in respect of a 
base period year if— 
"(i) such individual and his spouse make a joint 
return, or such individual makes a return as a surviving 
spouse (as defined in section 2(b)), for the computation 
26 us*c*'2." 
year, and 
"(ii) such individual was not married to any other 
spouse for such base period year, and 
"(B) paragraph (4) shall not apply in respect of the com-
putation year if the individual and his spouse make a joint 
return for such year. 
" (2) MINIMUM BASE PERIOD INCOME.—For purposes of this part, 
the base period income of an individual for any base period year 
shall not be less than 50 percent of the base period income which 
would result from combining his income and deductions for such 
year— 
" (A) with the income and deductions for such year of the 
individual who is his spouse for the computation year, or 
"(B) if greater, with the income and deductions for such 
year of the individual who was his spouse for such base 
period year. 
"(3) 
MINIMUM BASE PERIOD CAPITAL GAIN NET INCOME.—For 
purposes of this part, the capital gain net income of any indi-
vidual for any base period year shall not be less than 50 percent 
of tlie capital ^ain net income which would result from combining 
his capital gain net income for such year (determined without 
regard to this paragraph) with the capital gain net income for 
such year (similarly determined) of the individual with whom 
he is required by paragi'aph (2) to combine his income and deduc-
tions for such year. 
"(4) 
COMMUNITY INCOME ATTRIBUTABLE TO SERVICES.—In the 
case of amounts which constitute earned income (within the mean-
ing of section 911(b)) and are community income under com- 
26 use 9 n^* 
munity property laws applicable to such income— 
"(A) the amount taken into account for any base period 
year for purposes of determining base period income shall not 
be less than the amount which would be taken into account 
if such amounts did not constitute community income, and 
"(B) the amount taken into account for purposes of deter-
mining adjusted taxable income for the computation year 
shall not exceed the amount which would be taken into account 
if such amounts did not constitute community income. 
"(5) MARITAL STATUS.—For purposes of this subsection, section 
143 shall apply in determining whether an individual is married 
^^ "^^ ^
'
*
^
* 
for any taxable year. 
"(d) DOLLAR LIMITATIONS IN CASE OF JOINT RETURNS.—In the case 
of a joint return, the $3,000 figure contained in section 1301 shall be 
^"^^' P* *°^-
applied to the aggregate averagable income, and the $3,000 figure con-
tained in section 1302(b) (2) (C) shall be applied to the aggregate net 
incomes. 
"(e) 
SPECIAL RULES WHERE THERE ARE CAPITAL GAINS.— 
"(1) 
TREATMENT OF CAPITAL GAINS IN COMPUTATION YEAR.—In 
the case of any taxpayer who has capital gain net income for the 
computation year, the tax imposed by section 1 for tlie computa- 
^g use' 
tion year which is attributable to the amount of su(;h net income 
shall be computed— 
19. 
26 use 1. 
110 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
" (A) by adding so much of the aiiioiiiit thereof as does not 
exceed average base period capital gain net income above 
1331^ percent of average base period income, and 
"(B) by adding the remainder (if any) of such net income 
above the 20 percent of the averagable income as taken into 
account for purposes of computing the tax imposed by section 
6
8
A Stat. 5; 
^ (and abovc the amounts (if any) i-eferred to in subsection 
il'vici 
(f)(1)). 
"(2) COMPUTATION or ALTERNATIVE TAX.—In the case of any 
taxpayer who has capital gain net mcome for the computation 
26 use 1201. 
year, section 1201(b) shall be treated as imposing a tax equal to 
the t-ax imposed by section 1, reduced by the amount (if any) by 
which— 
"(A) the tax imposed by section 1 and attributable to the 
capital gain net income for the computation year (determined 
under paragraph (1)), exceeds 
"(B) an amount equal to 25 percent of the excess of the net 
long-tei*m capital gain over the net short-tei-m capital loss. 
"(f) TREATMENT OF CERTAIN OTHER ITEMS.— 
"(1) GIFT OR WAGERING INCOME.—The tax imposed by section 1 
for the computation year which is attributable to the amounts 
subtracted from taxable income under paragraphs (2) and (3) of 
Ante, p. 106. 
sectiou 1302(b) shall equal the increase in tax under section 1 
which results from adding such amounts above the 20 percent 
of the averagable income as taken into account for purposes of 
cx)mputing the tax imposed thereon by section 1. 
26 use 72 ^' 
"^^) SECTION 72(m) (5).—Section 72(m) (5) (relating to pen-
alties applicable to certain amounts received by owner-employees) 
shall be applied as if this part had not been enacted. 
"(3) OTHER ITEMS.—Except as otherwise provided in this part, 
the order and manner in which items of income shall be taken 
into account in computing the tax imposed by this chapter on the 
Ante, p. 106. 
iucome of any eligible individual to whom section 1301 applies 
for any coni[)utation year shall be determined under regulations 
prescribed by the Secretary or his delegate. 
"(g) SHORT IAXARLE YEARS.—In the case of any computation year 
or base period year which is a short taxable year, this part shall be 
applied in the manner provided in regulations prescribed by the Secre-
tary or his delegate. 
"SEC. 1305. REGULATIONS. 
"The Secretary or his delegate shall prescribe such regulations as 
may be necessary to carry out the purposes of this part." 
26U°sc72 
(^) REPEAL OF SECTION 72(e) (3).—Section 72(e)(3) (relating to 
limit on tax attributable to receipt of lump sum) is hereby repealed. 
^2\%r\^Al 
(^) AMENDMENT OF SECTION 144.—Section 144 (relating to elec-
tion of standard deduction) is amended by adding after subsection (c) 
(as added by 112(c) (2) of this Act) the following new subsection: 
"(d) INDIVIDUALS ELECTING INCOME A\T5RAGING.—In the case of 
a taxpayer who chooses to have the benefits of part I of siil)chapter 
Q, (relating to income averaging) for the taxable year— 
"(1) subsection (a) shall not apply for such taxable year, and 
"(2) the standard deduction shall be allowed if the taxpayer 
so elects in his retuni for such taxable year. 
The Secu'etary or his delegate shall by regulations prescribe the man-
ner of signifying such election in the return. If the taxpayer on 
making his return fails to signify, in the manner so prescril)ed, his 
election to take the standard deduction, such failure shall be con-
sidered liis election not to take the standard deduction." 
26 u s e 144. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
111 
(d) STATUTE OF LIMITATTOXS.—Section 0511 (d) (2) (B) 
(relating 
lo special period of limitation with respect to net operating loss carry-
backs) is amended to read as follows: 
" ( B ) 
APPLICABLE RULES.— 
"(i) If the allowance of a credit or refund of an over-
payment of tax attributable to a net operating loss carry-
back is otherwise prevented by the operation of any law 
or rule of law other than section 7122, relating to com-
promises, such credit or refund may be allowed or made, 
if claim therefor is filed within the period provided in 
subparagraph (A) of this paragraph. 
If the allowance 
of an application, credit, or refund of a decrease in tax 
determined under section 6411(b) is otherwise prevented 
by the operation of any law or rule of law other than 
section 7122, such application, credit, or refund may be 
allowed or made if application for a tentative carryback 
adjustment is made within the period provided in section 
6411(a). In the case of any such claim for credit or 
refund or any such application for a tentative carryback 
adjustment, the determination by any court, including 
the Tax Court, in any proceeding in which the decision 
of the court has become final, shall be conclusive except 
with respect to the net operating loss deduction, and the 
effect of sncli deduction, to the extent that such deduction 
is affected bj- a carrj'back which was not in issue in such 
proceeding. 
"(ii) A claim for credit or refund for a computation 
year (as defined hi section 1302(e)(1)) shall be deter-
mined to relate to an overpayment attributable to a net 
operating loss carryback when such carryback relates to 
any base period year (as defined in section 1302(e) 
(3))." 
(e) TECHNICAL 
AMENDMENTS.—The 
following 
provisions 
are 
amended by striking out "except that section 72(e)(3) shall not 
apply": 
(1) The first sentence of section 402(a) (1) (relating to gen-
eral rule for taxability of beneficiary of exempt trust). 
(2) The second sentence of section 402(b) (relating to tax-
ability of beneficiary of non-exempt trust). 
(3) The second sentence of section 402(d) (relating to certain 
employees' annuities). 
(4) Section 403(a) (1) (relating to the general rule for tax-
ability of a beneficiary under a qualified annuity plan). 
(5) The second sentence of section 403(b) (1) (relating to gen-
eral rule for taxability of beneficiary, etc.) • 
(6) The second sentence of section 403(c) (relating to tax-
ability of beneficiary under a nonqualified annuity). 
(f) 
CLERICAL AMENDMENTS.— 
(1) Subsection (f) of section 4 (relating to cross references to 
rules for optional tax) is amended by adding at the end thereof 
the following new paragraph: 
"(3) For rule that optional tax is not to apply if individual chooses 
the benefits of income averaging, see section 1304(b)." 
(2) Subsection (b) of section 5 (relating to cross references to 
special limitations on tax) is amended to read as follows: 
68A Stat. 808. 
26 use 6511. 
26 use 7122. 
26 u s e 6411. 
Ante, p. 107. 
Ante, p. 110. 
26 use 402. 
26 use 403. 
26 use 4. 
Post, p. 140. 
26 use 5. 
68A Stat. 334. 
26 use 1301. 
112 
PUBLIC LAW 88-272-FEB. 26, 1%4 
[78 STAT. 
" (b) Si»KciAL LIMITATIONS ON T A X . — 
"(1) For limitation on surtax attributable to sales of oil or gas 
properties, see section 632. 
"(2) For limitation on tax in case of income of members of Armed 
Forces on death, see section 692. 
"(3) For limitation on tax where an individual chooses the bene-
fits of income averaging, see section 1301. 
"(4) For computation of tax where taxpayer restores substan-
tial amount held under claim of right, see section 1341. 
"(5) For limitation on surtax attributable to claims against the 
United States involving acquisitions of property, see section 1347." 
(3) The table of parts for subchapter Q of chapter 1 is amended 
by striking out 
"Part I. Income attributable to several taxable years." 
and inserting in lieu thereof 
"Part I. Income averaging." 
(g) EFFECTIVE DATE.— 
(1) GENERAL RULE.—^Except as provided in p a r a ^ a p h (2), the 
amendments made by this section shall apply with respect to 
taxable years beginning after December 31,1963. 
(2) INCOME FROM AN EMPLOYMENT.—If, in a taxable year 
beginning after December 31,1963, an individual or partnership 
i-eceives or accrues compensation from an employment (as defined 
by section 1301(b) of the Internal Revenue Code of 1954 as in 
effect immediately before the enactment of this Act) and the 
employment began before February 6, 1963, the tax attributable 
to such compensation may, at the election of the taxpayer, be 
computed under the provisions of sections 1301 and 1307 of 
such Code as in effect immediately before the enactment of this 
Act. If a taxpayer so elects (at such time and in such manner 
as the Secretary of the Treasury or his delegate by regulations 
prescribes), he may not choose for such taxable year the benefits 
Ante, p. 105. 
provided oy part I of subchapter Q of chapter 1 of such Code 
(relating to income averaging) as amended by this Act and 
26 use /Sf?** 
(^^ ^® elects to have subsection (e) of such section 1307 apply) 
Ante, p. 45.* 
sectiou 170(b)(5) of such Code as amended by this Act shall 
26 use 170. 
not, apply to charitable contributions paid in such taxable year. 
SEC. 233. SMALL BUSINESS CORPORATIONS. 
73^Statr*699^^°' 
^^^ OWNERSHIP OF C E R T A I N 
S T O C K DISREGARDED. 
SectioU 1371 
26 use 1371. 
(relating to definition of small business corporation) is amended by 
adding at the end thereof the following new subsection: 
"(d) OWNERSHIP OF CFJKTAIN STOCK.—For purposes of subsection 
(a), a corporation shall not be considered a memlber of an affiliated 
group at any time during any taxable year by reason of the ownership 
of stock in another corporation if such other corporation— 
"(1) has not begun business at any time on or after the date 
of its incorporation and before the close of such taxable year, 
and 
"(2) does not have taxable income for the period included 
within such taxable year." 
(b) CERTAIN DISTRIBUTIONS or MONEY AFTFJI CLOSE OP TAXABLE 
YEAR.—Section 1375 (relating to special rules applicable to distribu-
tions of electing small business corporations) is amended by adding 
at the end thereof the following new subsection: 
"(e) CFJITAIN DISTRIBUTIONS AFTER CF^OSE OF TAXABLE YEAR.— 
" (1) I N GENERAL.—For purposes of this chapter, if— 
"(A) a corporation makes a distribution of money to its 
shareholders on or before the 15th day of the third montli 
26 use 1375. 
68 A Stat. 325. 
26 u s e 1231. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
113 
following the close of a taxable year Avith re«pe<'t to which 
it was an electing small business corporation, and 
"(B) such distribution is made pursuant to a resolution 
of the board of directors of the corporation, adopted before 
the close of such taxable year, to distribute to its shareholders 
all or a part of the proceeds of one or more sales of capital 
assets, or of property described in se<"tion 1231(b), made 
during such taxable year, 
such distnbution shall, at the election of the coi'poration, be 
treated as a distribution of money made on the last day of such 
taxable year. 
"(2) SHAREHOLDERS.—An election under paragraph (1) with re-
spect to any distribution may be made by a corporation only if 
each person who is a shareholder on the day the distribution is 
received— 
" (A) owns the same proportion of the stock of the corpora-
tion on such day as he owned on the last day of the taxable 
year of the corporation preceding the distribution, and 
"(B) consents to sucli election at such time and in such 
manner as the Secretary or his delegate shall prescribe by 
regulations. 
"(3) MANNER AND TIME or ELECITON.—An election under para-
graph (1) shall be made in such manner as the Secretary or his 
delegate shall prescribe by regulations. 
Such election shall be 
made not later than the time prescribed by law for filing the 
return for the taxable year during which the sale was made (in-
cluding extensions thereof) except that, with respect to any tax-
able year ending on or before the date of the enactment of the 
Revenue Act of 1964, such election shall l^e made within 120 
days after such date." 
(c) EFFECTIVE DATES.—The amendment made by subsection (a) 
shall apply with respect to taxable years of corporations beginning 
after December 31, 1962. The amendment made by subsection (b) 
shall apply with respect to taxable years of corporations beginning 
after December 31,195Y. 
SEC. 234. REPEAL OF ADDITIONAL 2-PERCENT TAX FOR CORPORA-
TIONS FILING CONSOLIDATED RETURNS. 
(a) REPEAL OF TAX.—Subsection (a) of section 1503 (relating to 
computation and payment of tax in case of consolidated returns) is 
S
I mended to read as follows: 
" (a) GENERAL RULE.—^In any case in which a consolidated return is 
made or is required to be made, the tax shall be determined, computed, 
assessed, collected, and adjusted in accordance with the regulations 
under section 1602 prescribed before the last day prescribed by law 
^^ "^^ ^5°2. 
for the filing of such return." 
(b) 
TECHNICAL AND CONFORMING AMENDMENTS.— 
(1) Section 1603 is amended by striking out subsections (b) and 
(c) and by relettering subsection (d) as subsection (b). 
(2) Paragraph (3) of section 1503(b) (as relettered by para-
graph (1)) IS amended to read as follows: 
"(3) 
SPECIAL RULES.— 
"(A) For purposes of para^aph (2), a corporation is a 
regulated public utility only if it is a regulated public utility 
within the meaning of subparagraph (A) (other than clauses 
(ii) and (iii) thereof) or (D) of section 7701(a) (33). For 
26°u's^-7^7J,t'. 
purposes of the preceding sentence, the limitation contamed 
m the last two sentences of section 7701(a) (33) shall be 
applied as if subparagraphs (A) through ( F ) , inclusive, of 
section 7701(a) (33) were limited to subparagraphs (A) (i) 
and (D) thereof. 
26 u s e 1503. 
114 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(B) For purposes of paragrapli (2), the foreign coun-
tries referred to in this subparagraph include only any coun-
try from which any public utility referred to in the first sen-
tence of paragraph (2) derives the principal part of its 
income. 
"(C) For purposes of this subsection, the tenn 'consoli-
dated taxable income' means the consolidated taxable incom*^ 
computed without regard to the deduction provided by sec-
68A Stat. 7 2. 
tiou 242 for partially tax-exempt interest.*' 
26 use 7701. 
(3) Section 7701(a) (relating to definitions) is amended by 
adding at the end thereof the following new paragraph: 
"(33) REGULATED PUBLIC LTILITY.—The term 'regulated public 
utility' means— 
"(A) A corporation engaged in the furnishing or sale 
of— 
"(i) electric energy, gas, water, or sewerage disposal 
services, or 
"(ii) transportation (not included in subparagraph 
(C)) on an intrastate, suburban, municipal, or mter-
urban electric railroad, on an intrastate, municipal, or 
suburban trackless trolley system, or on a municipal or 
suburban bus system, or 
"(iii) transportation (not included in clause (ii)) by 
motor vehicle— 
if the rates for such furnishing or sale, as the case ma^' be, 
have been established or approved by a State or political 
subdivision thereof, by an agency or instrumentality of 
the United States, by a public service or public utility com-
mission or other similar body of the District of Columbia 
or of any State or political subdivision thereof, or by a for-
eign country or an agency or instrumentality or political 
subdivision thereof. 
"(B) A corporation engaged as a common carrier in the 
furnishing or sale of transportation of gas by pipe line, if 
subject to the jurisdiction of the Federal Power Commis-
sion. 
"(C) A corporation engaged as a common carrier (i) in the 
furnishing or sale of transportation by railroad, if subject 
to the jurisdiction of the Interstate Commerce Commission, 
or (ii) in the furnishing or sale of transportation of oil or 
other petroleum products (including shale oil) by pipe line, 
if subject to the jurisdiction of the Interstate Commerce 
Commission or if the rates for such furnishing or sale are 
subject to the jurisdiction of a public service or public utility 
commission or other similar body of the District of Columbia 
or of any State. 
"(D) A corporation engaged in the furnishing or sale of 
telephone or telegraph service, if the rates for such furnish-
ing or sale meet the requirements of subparagraph (A). 
"(E) A corporation engaged in the furnishing or sale of 
transportation as a common carrier by air, subject to the 
jurisdiction of the Civil Aeronautics Board. 
"(F) A corporation engaged in the furnishing or sale of 
transportation by common carrier by water, subject to the 
jurisdiction of the Interstate Commerce Commission under 
54 Stat. 929. 
p^i't I I I of tlic Interstate Commerce Act, or subject to the 
jurisdiction of the Federal ISIaritime Board under the Inter-
coastal Shipping Act, 1933. 
" (Gr) A railroad corporation subject to part I of the Inter-
24 Stat. 379. 
state Commerce Act, if (i) substantialh^ all of its railroad 
49 u s e I et 
• 
\ / 
47 Stat. 1425. 
46 u s e 848. 
seq. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
115 
properties have been leased to another such railroad corpora-
tion or corporations by an agreement or agreements entered 
into before January 1, 1954, (ii) each lease is for a term of 
more than 20 years, and (iii) at least 80 ])ercent or more of 
its ^ross income (computed without regard to dividends and 
capital gains and losses) for the taxable year is derived from 
such leases and from sources described in subparagraphs 
(A) through (F), inclusive. For purposes of the precedmg 
sentence, an agreement for lease of railroad properties entered 
into before January 1, 1954, shall be considered to be a lease 
including such term as the total number of years of such 
agreement may, unless sooner terminated, be renewed or con-
tinued under the terms of the agreement, and any such 
renewal or continuance under such agreement shall be con-
sidered part of the lease entered into before January 1, 1954. 
"(H) A common parent corporation which is a common 
carrier by railroad subject to part I of the Interstate Com-
merce Act if at least 80 percent of its gross income (computed 
^^ ^^^ ^'^^^• 
without regard to capital gains or losses) is derived directly seq. 
or indirectly from sources described in subparagraphs (A) 
through (F), inclusive. For purposes of the preceding sen-
tence, dividends and interest, and income- from 
leases 
described in subparagraph (G), received from a regulated 
public utility shall be considered as derived from sources 
described in subparagraphs (A) through (F), inclusive, if 
the regulated public utility is a meml>er of an affiliated 
group (as defined in section 1504) which includes the common 
26^8(^*1504!* 
parent corporation. 
The term 'regulated public utility' does not (except as provided 
in subparagraphs (G) and (H)) include a corporation described 
in subparagraphs (A) through (F), inclusive, unless 80 percent 
or more of its gross income (computed without regard to 
dividends and capital gains and losses) for the taxable year is 
derived from sources described in subparagraphs (A) through 
(F), inclusive. If the taxpayer establishes to the satisfaction 
of the Secretary or his delegate that (i) its revenue from 
regulated rates described in subparagraph (A) or (D) and its 
revenue derived from unregulated rates are derived from the 
operation of a single interconnected and coordinated system or 
from the operation of more than one such system, and (ii) the 
unregulated rates have been and are substantially as favorable 
to users and consumers as are the regulated rates, then such 
revenue from such unregulated rates shall be considered, for 
purposes of the preceding sentence, as income derived from sources 
described in subparagraph (A) or (D)." 
(4) Section 12(8) (relating to cross reference to additional tax 
26*^usc 12. 
for corporations filing consolidated returns) is hereby repealed. 
(5) Paragraphs (1) and (2) of section 172(j) (relating to 
carryover of net operating loss for certain regulated transporta-
tion corporations) are amended to read as follows: 
"(1) DEFINITION.^—For purposes of subsection (b) (1) (C), the 
term 'regulated transportation corporation' means a corporation— 
"(A) 80 percent or more of the gross income of which 
(computed without regard to dividends and capital gains and 
losses) for the taxable year is derived from the furnishing or 
sale of transportation described in subparagrap)h (A), (C) 
(i), (E), or (F) of section 7701(a) (33) and taken into 
^f^^P'/^i^i; 
account for purposes of the limitation contained in the last 
two sentences of section 7701(a) (33), 
76 Stat. 649. 
26 use 172. 
116 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
Ante, p. 114, 
26 u s e 7701 
76 Stat. 1031. 
26 u s e 904. 
"(B) which is described in subparagraph (G) or (II) of 
section7701 (a) (33),or 
"(C) which is a member of a regulated transportation 
system. 
"(2) REGULATED TRANSPORTATION" SYSTEM.—For purposes of 
this subsection, a corporation shall be treated as a member of a 
regulated transportation system for a taxable year if— 
"(A) it IS a member of an-affiliated group of corporations 
making a consolidated retutn for such taxaole year, and 
"(B) 80 percent or more of the aggregate gross income of 
the members of such affiliated group (computed without 
regard to dividends and capital gains and losses) for such 
taxable year is derived from sources described in paragraph 
(1)(A). 
For purposes of subparagraph (B), income derived by a corpo-
ration described in subparagraph (G) or (H) of section 7701(a) 
(33) from leases described m subparagraph (G) thereof shall be 
considered as derived from sources described in paragraph (1) 
(A)." 
(6) Section 904(g) (2) (relating to cross references for pur-
poses of the limitation on the f o r e i ^ tax credit) is amended bj-
striking out "section 1503(d)"* and inserting in lieu thei-eof "sec-
tion 1503(b)-'. 
26^scr*i34?' 
('^). 'Section 1341(b) (2) (relating to special rules for the com-
putation of tax where taxpayer restores substantial amount held 
under claim of right) is amended by striking out "(as defined in 
section 1503(c) without regard to paragraph (2) thereof)" and 
inserting in lieu thereof "(as defined in section 7701(a) (33) with-
out regard to the limitation contained in the last two sentences 
thereof)". 
26 use 1552. 
(8) Section 1552(a) (3) (relating to the allocation of tax lia-
bility among members of an affiliated group of corporations filing 
consolidated returns) is amended by striking out "(determined 
without regard to the 2 percent increase provided by section 
^nte,^P.u3. 
1503(a))". 
(c) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (b) shall apply with respect to taxable years beginning after 
December 31, 1963. 
SEC. 
2
3
5
. 
REDUCTION 
OF 
SURTAX 
EXEMPTION 
IN 
CASE 
OF 
CERTAIN 
CONTROLLED 
CORPORATIONS, 
ETC. 
(a) I N GENERAL.—Subchapter B of chapter 6 (related rules for 
<ronsolidated returns) is amended by adding at the end thereof the 
following new part: 
"PART II—CERTAIN CONTROLLED CORPORATIONS 
"Sec. l."»(il. Surtax exemptions in case of certain controlled cor-
porations. 
*
*
§
©
<
•
. 1562. Privilege of groups to elect multiple surtax exemptions. 
"Sec. 1563. Definitions and si»ecial rules. 
"SEC. 1561. SURTAX EXEMPTIONS IN CASE OF CERTAIN CONTROLLED 
CORPORATIONS. 
"(a) GENERAL RULE.—If a corporation is a component member 
of a controlled group of corporations on a December 31, then for 
purposes of this subtitle the surtax exemption of such corporation for 
the taxable year which includes such December 31 shall be an amount 
equal to— 
"(1) $25,000 divided by the number of corporations which 
a.re component members of such group on such December 31, or 
"(2) if all such component members consent (at such time and 
26 u s e 1503. 
Post, p. 120. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
117 
in such manner as the Secretary or his delegate shall by regula-
tions prescribe) to an apportionment plan, such iDortion of $25,000 
as is apportioned to such member in accordance with such plan. 
The sum of the amounts apportioned under paragraph (2) among 
the component members of any controlled group shall not exceed 
$25,000. 
"(b) CERTAIN SHORT TAXABLE YEARS.—If a corporation— 
"(1) has a short taxable year which does not include a Decem-
ber 31, and 
"(2) is a component member of a controlled group of corpo-
rations with respect to such taxable year, 
then for purposes of this subtitle the surtax exemption of such corpo-
ration for such taxable year shall be an amount equal to $25,000 
divided by the number of corporations which are component members 
of such group on the last day of such taxable year. For jjurposes of 
the preceding sentence, section 1563(b) shall be applied as if such last 
day were substituted for December 31. 
"SEC. 1562. PRIVILEGE OF GROUPS TO ELECT MULTIPLE SURTAX 
EXEMPTIONS. 
" (a) ELECTION OF MULTIPLE SURTAX EXEMITIOXS.— 
"(1) I N GENERAL.—A controlled group of corporations shall 
(subject to the provisions of this section) have the privilege of 
electing to have each of its component members make its returns 
without regard to section 1561. Such election shall be made with 
'*"*°' P* *'^' 
respect to a specified December 31 and shall be valid only if— 
"(A) each corporation which is a component member of 
such group on such December 31, and 
"(B) each other corporation which is a component mem-
ber of such group on any succeeding December 31 before the 
day on which the election is filed, 
consents to such election. 
"(2) YEARS FOR WHICH EFFECTIVE.—An election by a con-
trolled group of corporations under paragraph (1) shall be 
effective with respect to the taxable year of each component 
member of such group which includes the specified December 31, 
and each taxable year of each corporation which is a component 
member of such group (or a successor group) on a succeeding 
December 31 included within such taxable year, unless the 
election is terminated under subsection (c). 
"(3) 
EFFECT OF ELECTION.—If an election by a controlled 
group of corporations under paragraph (1) is effective with 
respect to any taxable year of a corporation— 
"(A) section 1561 shall not apply to such corporation for 
such taxable year, but 
"(B) the additional tax imposed by subsection (b) shall 
apply to such corporation for such taxable year. 
**(b) ADDITIONAL TAX IMPOSED.— 
"(1) GENERAL RULE.—If an election imder subsection (a) (1) 
by a controlled group of corporations is effective with respect to 
the taxable year of a corporation, there is hereby imposed for such 
taxable year on the taxable income of such corporation a tax 
equal to 6 percent of so much of such corporation's taxable income 
for such taxable year as does not exceed $25,000. This paragrapli 
shall not apply to the taxable year of a corporation if— 
"(A) such corporation is the only component member of 
such controlled group on the December 31 included in such 
corporation's taxable year which has taxable income for a 
taxable year including such December 31, or 
73 Stat. 115. 
26 u s e 80 2. 
26 use 852. 
118 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(B) sucli corporation's surtax exemption is disallowed 
for such taxable year under any provision of this subtitle. 
^6 u'sc'n^* 
" ( ^ ) "^^^ 
TREATED AS IMPOSED BY SECTION 11, ETC. 
I f f o r t h e 
taxable year of a corporation a tax is imposed by section 11 on the 
taxable income of such corporation, the additional tax imposed by 
this subsection shall be treated for purposes of this title as a tax 
imposed by section 11. If for the taxable year of a corporation 
a tax is imposed on the taxable income of such corporation which 
is computed under any other section by reference to section 11, 
the additional tax imposed by this subsection shall be treated for 
purposes of this title as imposed by such other section. 
"(3) TAXABLE INCOME DEFINED.—For purposes of this subsec-
tion, the term 'taxable income' means— 
"(A) in the case of a corporation subject to tax under sec-
^
^
6
8
A Stat. 169. 
^jon 511, its Unrelated business taxable income (within the 
26use5ii,5i2. 
meaning of section 512); 
"(B) in the case of a life insurance company, its life insur-
ance company taxable income (within the meaning of section 
802(b)); 
"(C) in the case of a regulated investment company, its 
investment company taxable income (within the meaning of 
section 852(b) (2)); and 
"(D) in the case of a real estate investment trust, its real 
estate investment trust taxable income (within the meaning 
26USC85T* 
of section857(b)(2)). 
"(4) SPECIAL RULES.—If for the taxable year an additional tax 
is imposed on the taxable income of a corporation by this sub-
^6 use'244* 
section, then sections 244 (relating to dividends received on cer-
26 use 24?! 
tain preferred stock), 247 (relating to dividends paid on certain 
73 Stat. 116. 
preferred stock of public utilities), 804(a) (3) (relating to deduc-
26 use 804. 
^.^^^ ^^^ partially tax-exempt interest in the case of a life insur-
26 use 922. 
.^y^^Q 
company), and 922 (relating to special deduction for 
Western Hemisphere trade corporations) shall be applied with-
out regard to the additional tax imposed by this subsection. 
"(c) TERMINATION OF ELECTION.—An election by a controlled 
group of corporations imder subsection (a) shall terminate with 
respect to such group— 
"(1) CONSENT OF THE MEMBERS.—If such group files a termi-
nation of such election with respect to a specified December 31, 
and— 
"(A) each corporation which is a component member 
of such group on such December 31, and 
"(B) each other corporation which is a component mem-
ber of such group on any succeeding December 31 before the 
day on which the termination is filed, 
consents to such termination. 
"(2) REFUSAL BY NEW MEMBER TO CONSENT.—If on Decem-
ber 31 of any year such group inchules a component member 
which— 
"(A) on the immediately preceding January 1 was not 
a member of such group, and 
"(B) within the time and in the manner provided by 
regiilations prescril^ed by the Secretary or his delegate, 
files a statement that it does not consent to tlie election. 
"(3) 
CONSOLIDATED RETLTRNS.—If— 
"(A) a corporation is a component member (determined 
j^°*''PP- 120, 
without regard to section 1563(b)(3)) of such group on a 
December 31 included within a taxable 3'ear ending on or 
after January 1,1964, and 
26 u s e 1501 et 
seq. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
119 
"(B) such corporation is a member of an affiliated group 
of corporations which makes a consolidated return under this 
chapter (sec. 1501 and following) for such taxable year. 
"(4) CONTROLLED GROUP NO LONGER IN EXISTENCE.—If such 
group is considered as no longer in existence with respect to any 
December 31. 
Such termination shall be effective with respect to the December 31 
referred to in paragraph (1)(A), (2), (3), or (4), as the case may be. 
"(d) ELECTION AFTER TERMINATION.—If an election by a controlled 
group of corporations is terminated under subsection (c), such group 
(and any successor group) shall not be eligible to make an election 
under subsection (a) with respect to any December 31 before the sixth 
December 31 after the December 31 with respect to which such termi-
nation was effective. 
" (e) MANNER AND TIME OF GIVING CONSENT AND MAKING ELECTION, 
ETC.—^An election under subsection (a)(1) or a termination under 
subsection (c) (1) (and the consent of each member of a controlled 
group of corporations which is required with respect to such election 
or termination) shall be made in such manner as the Secretary or his 
delegate shall by regulations prescribe, and shall be made at any 
time before the expiration of 3 years after— 
"(1) in the case of such an election, the date when the income 
tax return for the taxable year of the component member of the 
controlled group which has the taxable year ending first on or 
after the specified December 31 is required to be filed (without 
regard to any extensions of time), and 
"(2) in the case of such a termination, the specified December 
31 with respect to which such termination was made. 
Any consent to such an election or termination, and a failure by a 
component member to file a statement that it does not consent to an 
election under this section, shall be deemed to be a consent to the 
application of subsection (g)(1) (relating to tolling of statute of 
limitations on assessment of deficiencies). 
" (f) SPECIAL RULES.—For purposes of this section— 
"(1) CONTINUING AND SUCCESSOR CONTROLLTJ) GROUPS.—The 
determination of whether a controlled group of corpomtions— 
"(A) is considered as no longer in existence with respect 
to any December 31, or 
"(B) is a successor to another controlled group of corpo-
rations (and the effect of such determination with respect 
to any election or termination), 
shall be made under regulations prescribed by the Secretary or 
his delegate. For purposes of siibparagraph (B), such regula-
tions shall be based on the continuation (or termination) of pre-
dominant equitable ownei-ship. 
"(2) CERTAIN SHORT TAXABLE YEARS.—If one or more corpo-
rations have short taxable years which do not include a Decem-
ber 31 and are component members of a controlled group of 
corporations with respect to such taxable years (determined bj-
applying section 1563(b) as if the last day of each such taxable ijf"*'' ^^' '^°' 
year were substituted for December 31), then an election by such 
group under this section shall apply with respect to such corpora-
tions with respect to such taxable years if— 
"(A) such election is in effect with respect to both the 
December 31 immediately preceding such taxable years and 
the December 31 immediatelj'- succeeding such taxable years, 
or 
"(B) such election is in effect with respect to the Decem-
ber 31 immediately preceding or succeeding such taxable 
31-667 0-65—11 
120 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
years and each such corporation files a consent to tlie appli-
cation of such election to its short taxable year at such time 
and in such manner as the Secretary or his delegate shall 
prescribe by regulations. 
"(g) TOLLING OP STATUTE OF LIMITATIONS.—In any case in which 
a controlled group of corporations makes an election or termination 
imder this section, the statutory period— 
"(1) for assessment of any deficiency against a corporation 
which is a component member of such group for any taxable 
year, to the extent such deficiency is attributalble to the applica-
tion of this part, shall not expire before the expiration of one 
year after the date such election or termination is made; and 
"(2) for allowing or making credit or refund of any overpay-
ment of tax by a corporation which is a component member of 
such group for any taxable year, to the extent such credit or 
refund is attributaole to the application of this part, shall not 
expire before the expiration of one year after the date such elec-
tion or termination is made. 
-SEC. 1563. DEFINITIONS AND SPECIAL RULES. 
"(a) CONTROLLED GROUP OP CORPORATIONS.—For purj)oses of this 
part, the term 'controlled group of corporations* means any group 
of— 
"(1) PARENT-suBsmiARY CONTROLLED GROUP.—One or uiore 
chains of corporations connected through stock ownei*ship with 
a common parent corporation if— 
"(A) stock possessing at least 80 percent of the total com-
bined voting power of all classes of stock entitled to vote or 
at least 80 percent of the total value of sliares of all classes 
of stock of each of the corporations, except the common 
parent corporation, is owned (within the meaning of sub-
section (d)(1)) by one or more of the other corporations; and 
"(B) the common parent corporation owns (within the 
meaning of subsection (d)(1)) stock possessing at least 80 
percent of the total combined voting power of all classes of 
stock entitled to vote or at least 80 percent of the total value 
of shares of all classes of stock of at least one of the other 
corporations, excluding, in computing such voting power or 
value, stock owned directly by such other corporations. 
"(2) BROTHER-SISTER CONTROLLED GROUP.—Two or more cor-
porations if stock possessing at least 80 percent of the total com-
bined voting power of all classes of stock entitled to vote or at 
least 80 percent of the total value of shares of all classes of stock 
of each of the corporations is owned (within the meaning of sub-
section (d) (2)) by one person who is an individual, estate, or 
trust. 
"(3) COMBINED GROUP.—Three or more corporations each of 
which is a member of a group of coi*porations described in para-
graph (1) or (2), and one of which— 
"(A) is a common parent corporation included in a group 
of corporations described in paragraph (1), and also 
"(B) is included in a group of corporations described in 
paragraph (2). 
"(4) CERTAIN INSURANCE COMPANIES.—Two or more insurance 
companies subject to taxation under section 802 which are mem-
bers of a controlled group of corporations described in paragraph 
(1), (2), or (3). Such insurance companies shall be treated as 
a controlled group of corporations separate from any other cor-
porations which are members of the controlled group of corpora-
tions described in paragraph (1), (2), or (3). 
73 Stat. 115. 
26 use 802. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
121 
''(b) COMPONENT JVIEMBER.— 
"(1) GENERAL RULE.—For purposes of this part, a corporation 
is a component member of a controlled group of corporations 
on a December 31 of any taxable year (and with respect to the 
taxable year which includes such December 31) if such corpora-
tion— 
" (A) is a member of such controlled group of corporations 
on the December 31 included in such year and is not treated 
as an excluded member under paragraph (2), or 
"(B) is not a member of such controlled group of corpora-
tions on the December 31 included in such year but is treated 
as an additional member under paragraph (3). 
"(2) EXCLUDED MEMBERS.—A corporation which is a member 
of a controlled group of corporations on December 31 of any tax-
able year shall be treated as an excluded member of such group 
for the taxable year including such December 31 if such corpor-
ation— 
" (A) is a member of such group for less than one-half the 
number of days in such taxable year which precede such 
December 31, 
" (B) is exempt from taxation under section 501 (a) (except ^^^^ ^*^*' ^^^' 
a corporation which is subject to tax on its unrelated business 
26 use so i, s11. 
taxable income under section 511) for such taxable year, 
"(C) is a foreign corporation subject to tax under section 
881 for such taxable year, 
^e use ss i. 
"(D) is an insurance company subject to taxation under 
section 802 or section 821 (other than an insurance company ye^stat.^^gsg!^' 
which is a member of a controlled group described in sub- 
26 use 802,821. 
section (a) (4)), or 
"(E) is a franchised cori^oration, as defined in subsection 
(f)(4). 
"(3) ADDITIONAL MEMBERS.—A corporation which— 
"(A) was a member of a controlled group of corporations 
at any time during a calendar year, 
"(B) is not a member of such group on December 31 of 
such calendar year, and 
"(C) is not described, with respect to such group, in sub-
paragraph (B), (C), (r)),or (E) of paragraph (2), 
shall be treated as an additional member of such group on Decem-
ber 31 for its taxable year including such December 31 if it was 
a member of such group for one-half (or more) of the number of 
days in such taxable year which precede such December 31. 
"(4) OVERLAPPING GROUPS.—If a corporation is a component 
member of more than one controlled group of corporations with 
respect to any taxable year, such corporation shall be treated as a 
component member of only one controlled group. The determina-
tion as to the group of which such corporation is a component 
member shall be made under regulations prescribed by the Secre-
tary or his delegate which are consistent with the purposes of this 
part. 
" (c) CERTAIN STOCK EXCLUDED.— 
"(1) GENERAL RULE.—For purposes of this part, the term 
'stock' does not include— 
"(A) nonvoting stock which is limited and preferred as 
to dividends, 
"(B) treasury stock, and 
" (C) stock which is treated as 'excluded stock' under para-
graph (2). 
122 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
" (2) 
STOCK TREATED AS 'EXCLUDED STOCK'.— 
"(A) PARENT-SUBSIDIARY CONTROLIJOD (JKOUJ».—For pur-
poses of subsection (a) (1), if a corporation (referred to in 
this paragraph as 'parent corporation') owns (within the 
meaning of subsections (d)(1) and (e)(4)), 50 percent or 
more of the total combined voting i)Ower of all classes of 
stock entitled to vote or 50 percent or more of the total vahie 
of shares of all classes of stock in another corporation 
(referred to in this paragraph as 'subsidiary corporation'), 
the following stock of the subsidiary corporation shall be 
treated as excluded stock— 
" (i) stock in the subsidiary corporation liehl by a trust 
which is part of a plan of deferred compensation for the 
benefit of the employees of the pai-ent corporation or 
tlie subsidiary corporation, 
"(ii) stock in the subsidiary corporation owned by an 
individual (within the meaning of subsection (d) (2)) 
who is a principal stockholder or officer of the parent 
corporation. 
For purposes of this clause, the term 'prin-
cipal stockholder' of a corporation means an individual 
who owns (within the meaning of subsection (d)(2)) 5 
percent or more of the total combined voting power of 
all classes of stock entitled to vote or 5 percent or moi'e 
of the total value of shares of all classes of stock in such 
corporation, or 
"(iii) 
stock in the subsidiaiy corporation owned 
(within the meaning of subsection (d)(2)) by an 
employee of the subsidiary corporation if such stock is 
subject to conditions which run in favor of such parent 
(or subsidiary) corporation and which substantialh' 
restrict or limit the employee's right (or if the employee 
constructively owns such stock, the direct owners right) 
tx) dispose of such stock. 
•'(B) BROTHER-SISTER coNiTiOLLKi) (}Rour.—For purposes of 
subsection (a)(2), if a person who is an individual, estate, 
or trust (referred to in this paragraph as 'common owner') 
owns (within the meaning of subsection (d)(2)), 50 percent 
or more of the total combined voting power of all classes 
of stxx?k entitled to vote or 50 percent or moiv of the total 
value of shares of all classes of sto<'k in a corporation, the 
following stock of such corporation shall be treated as 
excluded stock— 
"(i) stock in such corporation held by an employees' 
i63^^6^stat ^809 
ti'ust described in section 401(a) which is exempt from 
26 use 401,50 i. 
tax under section 501(a), if such trust is for the benefit 
of the employees of such corporation, or 
"(ii) stock in such corporation owned (within the 
meaning of subsection (d) (2)) by an employee of the 
corporation if such stock is subject to conditions which 
run in favor of such common owner (or siu^h corpora-
tion) and which substaiitiallj'^ restrict or limit the 
employee's right (or if the employee constructively owns 
such stock, the direct owner's right) to dispose of such 
stock. 
If a condition which limits or restricts the 
employee's right (or the direct owner's right) to dispose 
of such stock also applies to the stock held by the com-
mon owner pursuant to a bona fide reciprocal stock pur-
chase arrangement^ such condition shall not be treated 
as one which restricts or limits the employee's right to 
dispose of such stock. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
123 
*'(d) RuLi':s F
O
R DETKKMINIXG STOCK OWNERSHIP.— 
"(1) PARENT-SUBSIDIARY CONTROLLED OROI r.—For purposes of 
determining whether a corporation is a member of a parent-sub-
sidiary controlled group of corporations (within the meaning of 
subsection (a) (1)), stock owned by a corporation means— 
" (A) stock owned directly by such corporation, and 
"(B) stock owned with the application of subsection 
(e)(1). 
"(2) BROTHER-SISTER CONITIOIXED GROUP.—For purposes of de-
termining whether a corporation is a member of a brother-sister 
(Controlled group of corporations (within the meaning of subsec-
tion (a) (2)), stock owned by a person who is an individual, estate, 
or trust means— 
"(A) stock owned directly by such j)erson, and 
"(B) stock owned with the application of subsection (e). 
*'*(e) CONSTRUCTIVE OWNERSHIP.— 
"(1) OPTIONS.—If any person has an option to acquire stock, 
such stock shall be considered as owned oy such person. For 
purposes of this paragraph, an option to acquire such an option, 
and each one of a series of such options, shall be considered as an 
option to acquire such stock. 
"(2) ATTRIBUTION FROM PARTNERSHIPS.—Stock owned, directly 
or indirectly, by or for a partnership shall be considered as owned 
by any partner having an interest of 5 percent or more in either 
the capital or profits of the partnership in proportion to his in-
terest in capital or profits, whichever sucli proportion is the 
greater. 
"(3) ATTRIBUTION FROM ESTATES OR I-RUSTS.— 
"(A) Stock owned, directly or indirectly, by or for an 
estate or trust shall be considered as owned by any beneficiary 
who has an actuarial interest of 5 percent or more in such 
stock, to the extent of such actuarial interest. For pur-
poses of this subparagraph, the actuarial interest of eacli 
Deneficiary shall be determined by assuming the maxinmm 
exerc;ise of discretion by the fiduciary in favor of such l)ene-
ficiary and the maximum use of such stwk to satisfy his 
rights as a beneficiary. 
"(B) Stock owned, directly or indirectly, by or for any 
portion of a trust of which a person is considered the owner 
under subpart E of part I of subchapter J (relating to grant- 
^^^ ^tat. 226. 
ors and others treated as substantial owners) shall l>e con- 
^^"^*^ 671-678. 
sidered as owned by such person. 
"(C) This paragraph shall not apply to stock owned by 
any employees' trust described in section 401(a) which is ,^^f^^f^^^\^i1' 
, j> 
, 
-I 
J • 
K/-\-. / 
\ 
l o 3 ; 75 Stat. 8 0 9 . 
exenipt from tax under section 501 (a). 
26 use 401, so 1. 
••(4) ArrKiBUTioN FROM CORPORATIONS.—Stock owned, directly 
or indirectly, by or for a corporation shall be considered as owned 
b}' any pei-son who owns (within the meaning of subsection (d)) 
5 percent or more in value of its stock in that proportion which 
the value of the st<K'-k which such person so owns bears to the value 
of all the stock in such corporation. 
"(.5) SPOUSE.—An individual shall be considered as owning 
stock in a corjjoration owned, directly or indirectly, by or for his 
spouse (other than a spouse who is legally separated from the 
individual under a decree of divorce Avhether interlocutory or 
final, or a decree of separate maintenance), except in the case of 
a
_ corporation witli respect to which each of the following condi-
tions is satisfied for its taxable vear— 
121 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(A) The individual does not, at any time during such 
taxable year, own directly any stock in such corporation; 
"(B) The individual is not a director or employee and 
does not participate in the management of such corporation 
at any time during such taxable year; 
"(C) Not more tha«i 50 percent of such corporation's gross 
income for such taxable year was derived from royalties, 
rents, dividends, interest, and annuities; and 
"(D) Such stock in such corporation is not, at any time 
during such taxable year, subject to conditions which sub-
stantially restrict or limit the spouse's ri^ht to dispose of 
such stock and which run in favor of the individual or his 
children who have not attained the age of 21 years. 
" (6) 
CHILDREN, GRANDCHILDREN, PARENTS, AND GRANDPARENTS.— 
"(A) MINOR CHILDREN.—^An individual shall be consid-
ered as owning stock owned, directly or indirectly, by or for 
his children who have not attained the age of 21 years, and, 
if the individual has not attained the age of 21 years, the 
stock owned, directly or indirectly, by or for his parents. 
"(B) 
ADULT CHILDREN AND GRANDCHILDREN.—An individ-
ual who owns (within the meaning of subsection (d)(2), 
but without regard to this subparagraph) more than 50 
percent of the total combined voting power of all classes of 
stock entitled to vote or more than 50 percent of the total 
value of shares of all classes of stock in a corporation shall 
be considered as owning the stock in such corporation owned, 
directly or indirectly, oy or for his parents, grandparents, 
grandchildren, and children who have attained the age of 
21 years. 
"(C) 
ADOPTED CHILD.—For purposes of this section, a 
legally adopted child of an individual shall l)e treated as a 
child of such individual by blood. 
"(f) 
OTHER DEFINITIONS AND RULES.— 
"(1) EMPLOYEE DEFINED.—For purposes of this section the 
ferm 'employee' has the same meaning such term is given in sec-
68A Stat. 452. 
tlOn 3306 (1) . 
26 use 3306. 
^'(2) OPERATING RULES.-
"(A) I N GENERAL.—Exccpt as provided in subparagraph 
(B), stock constructively owned oy a person by reasoniof 
the application of paragraph (1), (2), (3), (4), (5), or (6) 
of subsection (e) shall, for purposes of applying such para-
graphs, be treated as actually owned by such person. 
"(B) MEMBERS OF FAMILY.—Stock constructively owned by 
an individual by reason of the application of paragraph (5) 
or (6) of subsection (e) shall not be treated as owned by him 
for purposes of again applying such paragraphs in order t-o 
make another the constructive owner of such stock. 
" (3) SPECIAL RULES.—For purposes of this section— 
"(A) If stock may be considered as owned by a person 
under subsection (e) (1) and under any other paragraph of 
subsection (e), it shall be considered as owned by him under 
subsection (e) (1). 
"(B) If stock is owned (within the meaning of subsection 
(d)) by two or more persons, such stock shall be considered 
as owned by the person whose ownership of such stock i-esults 
in the corporation being a component member of a controlled 
group. IT by reason of the preceding sentence, a corporation 
would (but for this sentence) become a component member of 
two controlled groups, it shall be treated as a component 
member of one controlled group. Tlie determination as to 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
125 
the group of wliicli such corporation is a component member 
shall be made under regulations prescribed by tlie Secretary' 
or his delegate which are consistent with the purposes of 
this part. 
"(C) If stock is owned by a person within the meaning of 
subsection (d) and such ownership results in the corporation 
being a component member of a controlled group, such stock 
shall not be treated as excluded stock under subsection (c) (2), 
if by reason of treating such stock as excluded stock the result 
is that such corporation is not a component member of a 
controlled group of corporations. 
" ( 4 ) 
F R A N C H I S E D CORPORATION. 
If— 
"(A) a parent corporation (as defined in subsection (c) 
(2)(A)), or a conunon owner (as defined in subsection (c) 
( 2 ) ( B ) ) , o f a corporation which is a member of a controlled 
group of corporations is under a duty (arising out of a written 
agreement) to sell stock of such corporation (referred to in 
this paragraph as 'franchised corporation') which is fran-
chised to sell the products of another member, or the common 
owner, of such control! ed group; 
"(B) such stock is to be sokl to an employee (or em-
ployees) of such francliised corporation pursuant to a bona 
tide plan designed to eliminate the stock ownership of the 
parent corporation or of the conmion owner in the franchised 
corporation; 
"(C) such plan— 
"(i) provides a reasonable selling price for such 
stock, and 
"(ii) requires that a portion of the employee's share 
of the profits of such corporation (whether received as 
compensation or as a dividend) be applied to the pur-
chase of such stock (or tlie purchase of notes, bonds, 
debentures or other similar evidence of indebtedness of 
such franchised corporation held by such parent corpo-
ration or common owner) ; 
"(D) such employee (or employees) owns directly more 
than 20 percent of the total value of shares of all classes of 
stock in such franchised corporation ; 
"(E) more than 50 percent of the inventory of such fran-
chised corporation is acquired from members of the con-
trolled group, the connnon owner, or both; and 
"(F) all of the conditions contained in subparagraphs 
fA), (B), (C), (D), and (E) have been met for one-half 
^or more) of the number of days preceding the December 31 
included within the taxable year (or if the taxable year does 
not include December 31, the last day of such year) of the 
franchised corporation, 
then such franchised corporation shall be treated as an excluded 
member of such group, under subsection (b)(2), for such tax-
able year." 
( b ) DiSALLOWAXCK OF SvRTAX 
EXEMI'TIOX AND ACCUMULATED 
EARXTXCJS CREDIT.—Section 1551 (relating to disallowance of surtax 
26^sc^*i5Vi^' 
exemption and accunnilated earnings credit) is amended to read as 
follows: 
"SEC. 1551. DISALLOWANCE OF SURTAX EXEMPTION AND ACCUMU-
LATED EARNINGS CREDIT. 
"(a) I N GENERAL.—If— 
"(1) any corporation ti-ansfers, on or after January 1, 1951, 
and on or before June 12, 19()3, all or ]>art of its property (other 
than money) to a transferee corporation, 
126 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
"(2) any corporation transfers, directly or indirectly, after 
June 12, 1963, all or part of its property (other than money) to a 
transferee corporation, or 
"(3) five or fewer individuals who are in control of a corpora-
tion transfer, directly or indirectly, after June 12, 1963, property 
(other than money) to a transferee corporation, 
and the transferee corporation was created for the purpose of acc^uirin^ 
such property or was not actively engaged in business at the tmie of 
such acquisition, and if after such transfer the transferor or transferors 
are in control of such transferee corporation during any part of the 
taxable year of such transferee corporation, then for such taxable year 
of such traii;3feree corporation the Secretary or his delegate may 
(except as may be otherwise determined under subsection (d)) dis-
^6usc*u^' 
iillow the surtax exemption (as defined in section 11(d)), or the 
$100,000 accumulated earnings credit provided in paragraph (2) or 
26^sc^*535^°* 
^'^^ °^ section 535(c), unless such transferee corporation shall estab-
lish by the clear preponderance of the evidence that the securing of 
such exemption or credit was not a major purpose of such transfer. 
"(b) CONTROL.—For purposes of subsection (a), the term 'control' 
means— 
" (1) With respect to a transferee corporation described in sub-
section (a) (1) or (2), the ownership by the transferor corpo-
ration, its shareholders, or both, of stock possessing at least 80 
percent of the total combined voting power of all classes of stock 
entitled to vote or at least 80 percent of the total value of shares 
of all classes of the stock; or 
"(2) With respect to each corporation described in subsection 
(a) (3), the ownership by the five or fewer individuals described 
in such subsection of stock possessing— 
"(A) at least 80 percent of the total combined voting 
power of all classes of stock entitled to vote or at least 80 
percent of the total value of shares of all classes of the stock 
of each corporation, and 
"(B) more than 50 percent of the total combined voting 
power of all classes of stock entitled to vote or more than 50 
percent of the total value of shares of all classes of stock of 
each corporation, taking into account the stock ownership of 
each such individual only to the extent such stock ownei*sliip 
is identical with respect to each such corjioration. 
^^Anfe, pp. 120, 
jp^yj. purposes of this subsection, section 1563(e) shall apply in deter-
mining tlie ownership of stock. 
"(c) AUTHORITY OF THE SECRETARY TENDER T H I S SECTKJN.—The 
26 use 269. 
provisions of section 269(b), and the authority of the Secretary luider 
such section, shall, to the extent not inconsistent with the provisions of 
this section, be applicable to this section." 
(c) TECHNICAL AMENDJIENTS.— 
(1) AMENDMENT OF SECTION 802.—The second sentence of 
26 use 80^^" 
section 802(a)(1) (relating to tax on life insurance companies) 
is amended to read as follows: "Such tax shall consisi of a normal 
tax and surtax computed as provided in section 11 as though the 
life insurance company taxable income were Ihe taxable income 
referred to in section 11." 
(2) AMENDMENT OF SECTION 2«».—Section 260(a) (i-elating to 
acquisitions made to evade or avoid income tax) is amended bv 
striking out "then such deduction, credit, or other allowance shall 
not be allowed" at the end of the first sentence and inserting in 
lieu thereof "then the Secretary or his delegate may «lisallow sijch 
deduction, credit, or oilier allowance". 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
127 
68A Stat. 149. 
26 use 441. 
26 u s e 6323. 
(3) SPECIAL RULE FOR 52-r)3-\VEEK YEAR.—Section 441(f)(2) 
(A) (relating to effective date with respect to special rules for 
o2-53-week year) is amended by striking out "In any case in 
which the effective date or the applicability of any provision of 
this title is expressed in terms of taxable years beginning or end-
ing with reference to a specified date"' and inserting in lieu 
thereof "In any case in which the effective date or the applica-
bility of any provision of this title is expressed in terms of tax-
able years beginning, including, or ending with i-eference to a 
specified date". 
(4) Subchapter B of chapter 6 is amended by iiLserting after 
the heading and before the table of sections the following: 
"Part I. In general. 
"Part II. Certain font rolled corpora tic ni,s. 
"PART I—IN GENERAL" 
(d) EFFECTIVE DATE.—The amendments made by subsections (a) 
and (c) shall apply with respect to taxable years ending after Decem-
ber 31, 1963. The amendment made by subsection (b) shall apply 
with respect to transfers made after June 12,1963. 
SEC. 236. VALIDITY OF TAX LIENS AGAINST PURCHASERS OF MOTOR 
VEHICLES. 
(a) 
PURCHASERS WrrHouT ACITAL 
XOTICE OR KNOWLEIKJE OF 
LiEX.—Section 6323 (relating to validity of liens for Federal taxes) 
is amended by redesignating subsection (d) as subsection (e) and by 
inserting after subsection (c) the following new subsection : 
"(d) ExcErrrox ix (1\SE or MOTOR VEHICLES.— 
"(1) ExcEFTiox.—Even though notice of a lien provided in 
section 6321 has been filed in the manner prescribed in subsection 
^^ "^^ ^^^^' 
(a) of this section, the lien shall not be valid with respect to a 
motor vehicle, as defined in paragraph (2) of this subsection, as 
against any purcliaser of such motor vehicle for an adequate and 
full consideration in money or money's worth if— 
"(A) at tlie time of the purchase the purchaser is without 
notice or knowledge of the existence of such lien, and 
"(B) before the purchaser obtains such notice or knowl-
edge, he has acquired possession of such motoi- vehicle and 
has not thereafter reUnquished possession of such motor 
vehicle to the seller or his agent. 
"(2) DEFIXITTOX OF MOTOR ixiiicLE.—As used in this subsec-
tion, the term "motor vehicle' means a self-propelled Aehicle which 
is registered for highway use under the laws of any State or for-
eign country." 
(b) XTEXS FOR ESTATE AXD GIFT TAXES.—Sex:*tion 6324 (relating 
^^ "^^ ^^24. 
to special lien for estate and gift taxes) is ameiuled by adding at the 
end thereof the followiiig new subsection : 
"(d) ExcEPTiox tx C.\SE or MOTOR YEincLES.—The lien imposed 
by subsection (a) or (b) shall not be valid with respect to a motor 
vehicle, as defined in section 6323(d) (2), as against any purchaser of 
128 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
68A Stat. 779. 
26 use 6323. 
26 u s e 6324. 
76 Stat. 1003. 
26 use 911. 
76 Stat. 51. 
26 use 165. 
An te, p 
26 use 
26 use 
1403. 
64 
Stat. 
42 use 
26 use 
. 43. 
6511. 
1401-
514. 
418. 
7122, 
such motor vehicle for an adequate and full consideration in money 
or money's worth if— 
" (1) at the time of the purchase the purchaser is without notice 
or knowledge of the existence of such lien, and 
"(2) before the purchaser obtains such notice or knowledge, he 
has acquired possession of such motor vehicle and has not there-
after relinquished possession of such motor vehicle to the seller or 
his agent." 
(c) 
CLERICAL AMENDMENTS.— 
(1) Section 6323(a) is amended by striking out "subsection 
(c)" and inserting in lieu thereof "subsections (c) and (d)". 
(2) Section 6324 is amended by inserting after "subsection (c) 
(relating to transfers of securities)" in subsections (a) and (b) 
the following: "and subsection (d) 
(relating to purchases of 
motor vehicles)". 
(d) EFFECTIVE DATES.—The amendments made by this section shall 
apply only with respect to purchases made after the date of the enact-
ment of this Act. 
SEC. 237. EXCLUSION OF EARNED INCOME OF CERTAIN UNITED 
STATES CITIZENS WHO ARE RESIDENTS OF FOREIGN 
COUNTRIES. 
(a) REDUCTION OF LIMITATION.—Subparagraph ^B) of section 
911(c)(1) (relating to limitations on amount of exclusion) is amended 
by striking out "$35,000" and inserting in lieu thereof "$25,000". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31,1964. 
SEC. 238. LOSSES ARISING FROM CONFISCATION OF PROPERTY BY 
CUBA. 
Se(5tion 165 (relating to losses) is amended by redesignating subsec-
tion (i) as subsection (j) and by inserting after subsecticm (h) the 
following new subsection: 
"(i) 
CERTAIN PROPERTY CONFISCATED BY CUUA.—For purposes of 
this chapter, any loss of tangible property, if such loss arises from 
expropriation, intervention, seizure, or similar taking by the govern-
ment of Cuba, any political subdivision thereof, or any agency or 
instrumentality of the foregoing, shall be treated as a loss from a 
casualty within the meaning of subsection (c) (3)." 
SEC. 239. CREDIT OR REFUND OF SELF-EMPLOYMENT TAX. 
Section 6511 (relating to limitations on credit or refund) is amended 
by adding at the end of subsection (d) the following new paragraph: 
"(5) 
SPECIAL PERIOD or 
LIMITATION W^ITJI RESPECT TO SELF-
EMPLOYMENT TAX IN CERTAIN CASES.—If the claiui for credit or 
refund relates to an overpayment of the tax imposed by chapter 2 
(relating to the tax on self-employment inconie) attributable to 
an agi-eement, or modification of an agreement, made pursuant to 
section 218 of the Social Security Act (relating to coverage of 
State and local employees), and if the allowance of a credit or 
refund of such overpayment is otherwise prevented by the oper-
ation of any law or rule of law^ other than se<'tion 7122 (relating 
to compromises), such ci-edit or refund may be allow^ed or made 
if claim therefor is filed on or before tlie later of the following 
dates: (A) the last day of the second year after the calendar 
year in which such agreement (or modification) is agreed to by 
the State and the Secretarv of Health, Education, and Welfare, 
or (B) Decenil>er 31, 1965." 
53 Stat. 140; 
72 Stat. 1658. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
129 
SEC. 240. EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX ON 
VALUE OF REVERSIONARY OR REMAINDER INTEREST IN 
PROPERTY. 
(a) EXTENSION UNDER 1954 CODE.—Section 6163(b) (relating to 
26us^c6f63.' 
extension of time for paying estate tax on value of reversionary or 
remainder interest in property to prevent undue hardship) is amended 
by striking out "not in excess of 2" and inserting in lieu thereof "or 
periods not in excess of 3". 
(b) EXTENSION UNDER 1939 CODE.—Section 925 of the Internal 
Revenue Code of 1939 (relating to periods of extension of time for 
paying estate tax attributable to future interests) is amended by 
striking out "not in excess of 2" and inserting in lieu thereof "or 
periods not in excess of 3". 
(c) 
EFFECTIVE DATE.— 
(1) The amendment made by subsection (a) shall apply in 
the case of any reversionary or remainder interest only if the time 
for payment of the tax under chapter 11 of the Internal Revenue 
Code of 1954 attributable to such interest, including any exten- ^^^ ^^^ 2°°^ ^' 
sions thereof, has not expired on the date of the enactment of 
this Act. 
(2) The amendment made by subsection (b) shall apply in 
the case of any reversionary or remainder interest only if the 
time for payment of the tax under chapter 3 of the Internal 
Revenue Code of 1939 attributable to such interest, including 
any extensions thereof, has not expired on the date of the enact-
ment of this Act. 
Title III—Optional Tax On Individuals; Collec-
tion Of Income Tax At Source On Wages 
SEC. 301. OPTIONAL TAX IF ADJUSTED GROSS INCOME IS LESS THAN 
$5,000. 
(a) OFPIONAL TAX.—Section 3 (^relating to optional tax if adjusted 
gross income is less than $5,000) is amended to read as follows: 
"SEC. 3. OPTIONAL TAX IF ADJUSTED GROSS INCOME IS LESS THAN 
$5,000. 
"(a) TAXABLE YEARS BEGINNING I N 1964.—In lieu of the tax 
imposed by section 1, there is liereby imposed for each taxable ye^r 
^g usc'i^^* 
beginning on or after January 1, 1964, and before January 1, 1965, 
oji the taxable income of everj' individual whose adjusted gi'oss income 
seq. 
53 Stat, 119. 
68A Stat. 8. 
26 use 3. 
130 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
for such year is less than $5,000 and who has elected for such year to 
pay the tax imposed by this section, a tax as follows: 
"Table I—Single Person—NOT Head of Household 
"Taxable Years Beginning in 1964 
If adjusted gross 
income is— 
At 
least 
$0 
900 
925 
950 
976 
1,000 
1.025 
1,050 
1,075 
1,100 
1,125 
1,150 
1,175 
1,200 
1,225 
1,250 
1,276 
1,300 
1,325 
1,350 
1,375 
1,400 
1,425 
1,450 
1,475 
1,600 
1,625 
1,550 
1,575 
1,600 
1,626 
1,650 
1,675 
1,700 
1,726 
1,750 
1,776 
1,800 
1,825 
1,850 
1.875 
1,900 
1,925 
1,950 
1,975 
2,000 
2,025 
2,050 
2,076 
2,100 
2,125 
2,150 
2,175 
2,200 
2,225 
2,250 
2.275 
2,300 
2,326 
2,350 
2,375 
2.400 
2,425 
But less 
than 
$900 
925 
960 
975 
1,000 
1,025 
1,050 
1,076 
1,100 
1,126 
1,150 
1,176 
1,200 
1,225 
1,250 
1,275 
1.300 
1,325 
1,350 
1,375 
1,400 
1,425 
1,460 
1.476 
1,500 
1,525 
1,550 
1,575 
1.600 
1,626 
1,660 
1,675 
1.700 
1,726 
1,750 
1.775 
1,800 
1,825 
1,850 
1,875 
1,900 
1.925 
1,950 
1,976 
2,000 
2,025 
2,050 
2,075 
2.100 
2,126 
2,150 
2.175 
2,200 
2,226 
2.250 
2,276 
2.300 
2,325 
2,350 
2,375 
2.400 
2,425 
2,450 
And the number of 
exemptions is— 
1 
2 
3 
4or 
more 
The tax is— 
$0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
60 
54 
58 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
116 
119 
123 
127 
132 
136 
140 
144 
148 
152 
156 
160 
165 
169 
173 
178 
182 
187 
191 
195 
200 
204 
208 
213 
217 
222 
226 
230 
235 
239 
243 
248 
262 
267 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
60 
64 
58 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
115 
119 
123 
127 
132 
136 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted cross 
income is— 
At 
least 
$2,450 
2,475 
2,500 
2,526 
2,550 
2,575 
2,600 
2,625 
2,650 
2,675 
2,700 
2,725 
2,750 
2,775 
2,800 
2,825 
2,850 
2,876 
2,900 
2.926 
2,950 
2,976 
3,000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3.500 
3,560 
3,600 
3,650 
3,700 
3,750 
3.800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4.250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,550 
4,600 
4,650 
4,700 
4,750 
4,800 
4,850 
4.900 
4.950 
But less 
than 
$2,475 
2,500 
2,525 
2,660 
2,575 
2,600 
2,625 
2,650 
2,675 
2,700 
2,725 
2,760 
2,775 
2,800 
2,825 
2,850 
2,875 
2,900 
2,925 
2,950 
2,975 
3,000 
3.0.'iO 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3,600 
3,660 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4.200 
4.250 
4,300 
4,350 
4,400 
4,450 
4,600 
4.550 
4,600 
4.650 
4,700 
4,760 
4.800 
4,850 
4,900 
4,950 
6,000 
And the numl>er of exemptions is— 
1 
2 
3 
4 
5 
6 
Tor 
more 
The tax is— 
$261 
266 
270 
275 
279 
284 
288 
293 
297 
302 
306 
311 
315 
320 
324 
329 
333 
338 
343 
348 
353 
358 
365 
374 
383 
392 
401 
410 
419 
428 
437 
446 
455 
464 
473 
482 
491 
500 
509 
518 
627 
536 
545 
554 
563 
572 
581 
590 
599 
608 
617 
626 
635 
644 
653 
662 
671 
680 
689 
698 
707 
716 
$140 
144 
148 
152 
156 
160 
166 
169 
173 
178 
182 
187 
191 
195 
200 
204 
208 
213 
217 
222 
226 
230 
237 
246 
255 
264 
273 
282 
291 
300 
309 
318 
327 
336 
345 
365 
365 
375 
385 
395 
405 
416 
425 
434 
443 
452 
461 
470 
479 
488 
497 
506 
515 
624 
633 
542 
551 
560 
569 
578 
587 
596 
$26 
30 
34 
38 
42 
46 
50 
64 
58 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
117 
125 
134 
142 
150 
l^ 
167 
176 
184 
193 
202 
211 
219 
228 
237 
246 
255 
264 
273 
282 
291 
300 
309 
318 
327 
336 
345 
355 
365 
375 
385 
396 
406 
416 
425 
436 
446 
455 
465 
475 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
101 
109 
117 
125 
134 
142 
150 
158 
167 
176 
184 
193 
202 
211 
219 
228 
237 
246 
255 
264 
273 
282 
291 
300 
309 
318 
327 
336 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
52 
60 
68 
76 
84 
92 
101 
109 
117 
125 
134 
142 
150 
168 
167 
176 
184 
193 
202 
211 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
52 
60 
68 
76 
84 
92 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
78 STAT.] 
PUBLIC L
A
W 88.272-FEB. 26, 1%4 
131 
"Table II—Head of Household 
"Taxable Years Beginning in 1964 
If adjusted cross 
income is— 
At 
least 
$0 
900 
925 
aw 
975 
1,000 
1,025 
1,050 
1,075 
1,100 
1,125 
1,160 
1,176 
1,200 
1.225 
1,250 
1.275 
1,300 
1.325 
1,350 
1,375 
1,400 
1,426 
1,460 
1,475 
1,600 
1,625 
1,5.'W 
1,675 
1,600 
1,625 
1,6m 
1,676 
1,700 
1,726 
1.760 
1,776 
1,800 
1,826 
1.860 
1,876 
1,900 
1,925 
1,960 
1.976 
2,000 
2.026 
2,060 
2,076 
2.100 
2.126 
2,160 
2.176 
2,200 
2.226 
2,260 
2,276 
2,300 
2.326 
2.350 
2.376 
2.400 
2,426 
But less 
than 
$900 
925 
950 
975 
1,000 
1,025 
1,060 
1,075 
1,100 
1,125 
1,150 
1,175 
1,200 
1,226 
1,250 
1,275 
1.300 
1,325 
1,3.50 
1,376 
1,400 
1,425 
1,450 
1,475 
1.600 
1,625 
1.6.'>0 
1,675 
1,600 
1,626 
l,6.'i0 
1,675 
1.700 
1,725 
1,760 
1,776 
1,800 
1.826 
1.860 
1,876 
1,900 
1,926 
1,960 
1.976 
2,000 
2.026 
2,050 
2,075 
2,100 
2,126 
2.160 
2.176 
2,200 
2,226 
2,260 
2.275 
2,300 
2.326 
2,360 
2,375 
2,400 
2,426 
2,460 
And the number of 
exemptions is— 
1 
2 
3 
4or 
more 
The tax is— 
$0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
60 
64 
68 
62 
66 
70 
74 
78 
82 
86 
90 
94 
98 
102 
106 
110 
114 
118 
122 
126 
130 
134 
138 
142 
146 
160 
164 
158 
162 
167 
171 
176 
180 
184 
188 
193 
197 
202 
206 
210 
216 
219 
223 
228 
232 
237 
241 
246 
250 
254 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
60 
64 
68 
62 
66 
70 
74 
78 
82 
86 
90 
94 
98 
102 
106 
110 
114 
118 
122 
126 
130 
134 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted gross 
income is— 
At 
least 
$2,460 
2,476 
2,600 
2,525 
2,660 
2,575 
2,600 
2,626 
2,650 
2,675 
2,700 
2,726 
2,750 
2,776 
2,800 
2,825 
2,850 
2,875 
2,900 
2,926 
2.950 
2,976 
3,000 
3, aw 
3,100 
3,160 
3,200 
3,250 
3.300 
3.360 
3,400 
3,460 
3.600 
3,660 
3.600 
3,660 
3,700 
3.760 
3.800 
3.860 
3,900 
3,960 
4,000 
4,060 
4.100 
4.160 
4.200 
4,250 
4,300 
4,360 
4,400 
4,460 
4,600 
4,660 
4,600 
4.660 
4,700 
4,760 
4.800 
4,860 
4,900 
4,960 
But less 
than 
$2,476 
2,600 
2,625 
2,660 
2,575 
2,600 
2,625 
2, mi 
2.675 
2,700 
2,725 
2,750 
2,776 
2,800 
2,825 
2, aw 
2,875 
2,900 
2,925 
2,950 
2.975 
3.000 
3.050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3.600 
3,650 
3.600 
3,660 
3.700 
3,760 
3,800 
3,860 
3,900 
3.950 
4,000 
4.050 
4,100 
4,160 
4.200 
4,250 
4,300 
4,360 
4.400 
4.450 
4,500 
4,660 
4.600 
4,650 
4,700 
4,760 
4,800 
4,850 
4,900 
4,960 
5,000 
And the number of exemptions is— 
1 
2 
3 
4 
6 
6 
7or 
more 
The tax is— 
$258 
263 
267 
272 
276 
280 
286 
289 
293 
298 
302 
307 
311 
316 
320 
324 
328 
333 
337 
342 
347 
352 
358 
367 
375 
384 
392 
401 
410 
418 
427 
435 
444 
462 
461 
469 
478 
487 
495 
504 
612 
621 
529 
538 
646 
555 
563 
572 
581 
689 
598 
606 
615 
623 
632 
640 
649 
658 
666 
675 
683 
692 
$138 
142 
146 
160 
154 
168 
162 
167 
171 
175 
180 
184 
188 
193 
197 
202 
206 
210 
216 
219 
223 
228 
234 
243 
2.52 
261 
269 
278 
287 
296 
304 
313 
322 
331 
340 
349 
359 
368 
378 
387 
397 
406 
416 
424 
432 
441 
449 
458 
467 
475 
484 
492 
501 
509 
518 
626 
635 
644 
662 
$26 
30 
34 
38 
42 
46 
60 
64 
68 
62 
66 
70 
74 
78 
82 
86 
90 
94 
98 
102 
106 
110 
116 
124 
132 
140 
148 
1.56 
164 
173 
182 
191 
199 
208 
217 
226 
234 
243 
252 
261 
269 
278 
287 
296 
304 
313 
322 
331 
340 
349 
369 
368 
378 
387 
397 
406 
416 
426 
436 
661 i 444 
669 
678 
464 
463 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
100 
108 
116 
124 
132 
140 
148 
166 
164 
173 
182 
191 
199 
208 
217 
226 
234 
243 
262 
261 
269 
278 
287 
296 
304 
313 
322 
331 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
100 
108 
116 
124 
132 
140 
148 
166 
164 
173 
182 
191 
199 
208 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
132 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
'Table III—Married Persons Filing JOINT Returns 
'Taxable Years Beginning in 1964 
IfadjastedKross 
income is— 
At least 
$0 
1.600 
1,626 
1,650 
1,675 
1,700 
1,725 
1,760 
1,775 
1,800 
1,825 
1,860 
1,876 
1,900 
1,026 
1,960 
1,976 
2,000 
2,025 
2,060 
2,076 
2,100 
2,126 
2,150 
2,175 
2,200 
2,225 
2,250 
2,275 
2,300 
2,325 
2,350 
2,375 
2,400 
2,426 
2,460 
2,475 
2,600 
2,525 
2,560 
2,575 
2,600 
2,625 
2.650 
2,676 
2,700 
2,725 
2,760 
2.775 
But less 
than 
$1,600 
1,626 
1,660 
1,676 
1,700 
1,726 
1,760 
1,776 
1,800 
1,825 
1,860 
1,875 
1,900 
1,925 
1,950 
1,975 
2,000 
2,025 
2,050 
2,076 
2,100 
2,125 
2,160 
2,175 
2,200 
2,225 
2,260 
2,275 
2,300 
2,325 
2,350 
2,375 
2,400 
2,425 
2.450 
2,476 
2,500 
2,625 
2,550 
2,575 
2,600 
2,625 
2,660 
2,675 
2,700 
2,725 
2,750 
2,775 
2,800 
And the number of 
exemptions is— 
2 
3 
4or 
more 
The tax is— 
90 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
50 
64 
68 
62 
66 
70 
74 
78 
82 
86 
90 
94 
98 
102 
106 
110 
114 
118 
122 
126 
130 
134 
138 
142 
146 
150 
154 
158 
162 
166 
170 
174 
179 
183 
187 
191 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
60 
64 
58 
62 
66 
70 
74 
78 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted cross 
income is— 
At least 
$2,800 
2,825 
2,850 
2,875 
2,900 
2,926 
2,950 
2,976 
3,000 
3,050 
3,100 
3,160 
3,200 
3,260 
3,300 
3,350 
3,400 
3,450 
3,600 
3,560 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3.950 
4.000 
4.050 
4.100 
4.150 
4.200 
4.250 
4.300 
4.350 
4.400 
4.450 
4,600 
4,550 
4,600 
4.660 
4.700 
4,750 
4.800 
4,850 
4,900 
4,950 
But less 
than 
$2,825 
2,860 
2,876 
2,900 
2,925 
2,950 
2,975 
3,000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3.600 
3,660 
3.600 
3,660 
3.700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4.050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,550 
4,600 
4,650 
4,700 
4,750 
4,800 
4,850 
4,900 
4,950 
5,000 
And the number of exemptions is— 
2 
3 
4 
5 
6 
Tor 
more 
The tax is— 
$196 
199 
203 
207 
212 
216 
220 
224 
230 
238 
247 
265 
263 
271 
280 
288 
296 
304 
313 
321 
329 
338 
347 
356 
364 
373 
382 
391 
399 
407 
415 
423 
430 
438 
446 
454 
462 
470 
478 
486 
493 
501 
509 
518 
526 
534 
542 
550 
$82 
86 
90 
94 
98 
102 
106 
110 
116 
124 
132 
140 
148 
166 
164 
172 
181 
189 
197 
205 
214 
222 
230 
238 
247 
256 
263 
271 
280 
288 
296 
304 
313 
321 
329 
338 
347 
366 
364 
373 
382 
391 
399 
408 
417 
426 
434 
443 
$0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
52 
60 
68 
76 
84 
92 
100 
108 
116 
124 
132 
140 
148 
166 
164 
172 
181 
189 
197 
206 
214 
222 
230 
238 
247 
265 
263 
271 
280 
288 
296 
304 
313 
321 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
100 
108 
116 
124 
132 
140 
148 
166 
164 
172 
181 
189 
197 
206 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
52 
60 
68 
76 
84 
92 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
78 STAT. ] 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
133 
"Table IV—Married Persons Filing SEPARATE Returns 
"10 PERCENT STANDARD DEDUCTION 
"Taxable Years Beginning in 1964 
If adjusted 
gross income is— 
At 
least 
$0 
676 
700 
725 
760 
776 
800 
826 
860 
876 
900 
926 
960 
976 
1,000 
1,026 
1,060 
1,076 
1,100 
1,126 
1.150 
1,176 
1,200 
1,225 
1,250 
1,276 
1,300 
1,325 
1.360 
1,375 
1,400 
1,425 
1,460 
1,475 
1,500 
1,626 
1,560 
1,676 
1,600 
1.625 
1,650 
1,675 
1,700 
1,726 
1,760 
1,776 
1,800 
1,826 
1,850 
1,875 
1.900 
1,926 
1,960 
1,976 
2,000 
2,025 
2,050 
2,075 
2.100 
2,126 
2,160 
2,175 
2,200 
2,226 
2,260 
2,276 
2.300 
But 
less 
than 
$675 
700 
725 
750 
775 
800 
825 
860 
876 
900 
926 
960 
975 
1,000 
1.026 
1,060 
1,076 
1,100 
1,125 
1,160 
1,176 
1,200 
1,225 
1,250 
1,276 
1,300 
1,325 
1,360 
1,375 
1,400 
1,425 
1,450 
1,475 
1,500 
1,525 
1,560 
1,575 
1,600 
1,625 
1,650 
1,675 
1,700 
1,725 
1,750 
1,775 
1,800 
1,825 
1,850 
1,875 
1,900 
1,925 
1,950 
1,975 
2,000 
2,026 
2,050 
2,075 
2,100 
2,126 
2,150 
2,175 
2,200 
2,225 
2,260 
2,275 
2,300 
2,326 
And the number of 
exemptions is— 
1 
$0 
3 
7 
10 
14 
17 
21 
25 
28 
32 
36 
39 
43 
46 
50 
63 
67 
61 
64 
68 
71 
75 
79 
82 
86 
90 
93 
97 
101 
106 
108 
112 
116 
119 
123 
127 
131 
134 
138 
142 
146 
149 
163 
167 
160 
164 
168 
172 
176 
180 
184 
188 
192 
196 
199 
203 
207 
211 
216 
219 
223 
227 
231 
236 
239 
243 
247 
2 
3 
4 or 
more 
The tax is— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
4 
8 
11 
15 
19 
22 
26 
29 
33 
37 
40 
44 
47 
51 
66 
58 
62 
66 
69 
73 
76 
80 
84 
87 
91 
95 
98 
102 
106 
109 
113 
117 
121 
124 
128 
132 
135 
139 
143 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
13 
16 
20 
23 
27 
31 
34 
38 
41 
46 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted 
gross Income is— 
At 
least 
$2,325 
2,350 
2,375 
2,400 
2.425 
2,450 
2,475 
2,500 
2,526 
2,650 
2,676 
2,600 
2,625 
2,650 
2,675 
2,700 
2,725 
2,750 
2,775 
2,800 
2.825 
2,850 
2,875 
2.900 
2.925 
2.960 
2.975 
3,000 
3,060 
3,100 
3,160 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3,600 
3,660 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,460 
4,600 
4,550 
4,600 
4,660 
4,700 
4,750 
4,800 
4,850 
4,900 
4,950 
But 
less 
than 
$2,360 
2,376 
2,400 
2,426 
2,460 
2,475 
2,600 
2,526 
2,660 
2,576 
2,600 
2,625 
2,650 
2,675 
2,700 
2,725 
2,750 
2,775 
2,800 
2,825 
2,860 
2,875 
2,900 
2.925 
2.960 
2,976 
3.000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3,600 
3,550 
3,600 
3,660 
3,700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,460 
4,500 
4,550 
4,600 
4,660 
4,700 
4,750 
4,800 
4,850 
4,900 
4,960 
6,000 
And the number of exemptions is— 
1 
2 
$261 
266 
259 
263 
267 
271 
276 
279 
283 
287 
291 
296 
299 
303 
307 
311 
316 
320 
324 
328 
332 
336 
340 
344 
349 
353 
358 
366 
374 
383 
392 
401 
410 
419 
428 
437 
446 
456 
464 
473 
482 
491 
500 
509 
518 
627 
536 
646 
554 
663 
672 
681 
690 
599 
608 
617 
626 
635 
644 
653 
662 
671 
680 
689 
698 
707 
716 
$147 
150 
154 
158 
161 
165 
169 
173 
177 
181 
186 
189 
193 
197 
201 
206 
209 
213 
217 
220 
224 
228 
232 
236 
240 
244 
248 
254 
262 
270 
278 
286 
295 
303 
311 
319 
327 
335 
344 
353 
362 
371 
380 
389 
398 
407 
416 
426 
434 
443 
452 
461 
470 
479 
488 
497 
606 
516 
624 
633 
642 
551 
560 
569 
578 
587 
696 
3 
$49 
52 
66 
69 
63 
67 
70 
74 
77 
81 
85 
88 
92 
96 
100 
103 
107 
111 
114 
118 
122 
126 
129 
133 
137 
140 
144 
160 
167 
165 
173 
180 
188 
196 
204 
212 
220 
228 
236 
243 
251 
259 
268 
276 
284 
292 
300 
308 
316 
324 
332 
341 
350 
359 
368 
377 
386 
396 
404 
413 
422 
431 
440 
449 
458 
467 
476 
4 
5 
6 
The tax Is— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
3 
7 
10 
14 
17 
21 
26 
28 
32 
35 
39 
43 
46 
52 
69 
66 
73 
80 
88 
95 
103 
110 
118 
126 
132 
140 
147 
166 
162 
170 
178 
186 
194 
201 
209 
217 
226 
233 
241 
249 
257 
266 
273 
281 
289 
297 
305 
313 
322 
330 
338 
347 
366 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
6 
13 
20 
28 
36 
42 
49 
66 
64 
71 
78 
86 
93 
100 
108 
115 
122 
130 
137 
145 
152 
160 
167 
175 
183 
191 
199 
207 
215 
222 
230 
238 
246 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
26 
32 
40 
47 
54 
61 
68 
76 
83 
90 
98 
106 
113 
120 
127 
136 
142 
7 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
8 
16 
23 
30 
37 
44 
8or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
134 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
*Table V—Married Persons Filing SEPARATE Returns 
"MINIMUM STANDARD DEDUCTION 
"Taxable Years Beginning in 1964 
If adjusted 
;T<MM income is— 
At 
least 
$0 
800 
825 
850 
875 
900 
925 
960 
975 
1.000 
1,026 
1,050 
1,075 
1,100 
1,125 
1,150 
1,175 
1,200 
1,225 
1,250 
1,275 
1,300 
1,325 
1,350 
1,375 
1,400 
1,425 
1,450 
1,475 
1,500 
1,626 
1,550 
1,676 
1,600 
1,625 
1,650 
1.675 
1,700 
1,725 
1,760 
1,776 
1,800 
1,826 
1,850 
1,875 
1,900 
1,925 
1.960 
1,976 
2,000 
2,025 
2.050 
2,075 
2,100 
2,125 
2,150 
2.175 
2.200 
2,226 
2,250 
2.276 
2,300 
2.325 
Z350 
2.376 
But 
less 
than 
$800 
825 
850 
876 
900 
926 
950 
975 
1,000 
1,025 
1,050 
1,076 
1,100 
1,125 
1,150 
1,175 
1,200 
1,225 
1,250 
1,276 
1,300 
1,325 
1,360 
1,375 
1,400 
1,425 
1,450 
1,475 
1,500 
1,525 
1,650 
1,676 
1,600 
1,625 
1,650 
1,676 
1,700 
1,725 
1,760 
1,775 
1.800 
1,825 
1,850 
1,875 
1,900 
1,925 
1,950 
1,975 
2.000 
2,026 
2,060 
2,076 
2.100 
2,125 
2,160 
2,176 
2,200 
2.226 
2,250 
2,276 
2,300 
2.325 
2,360 
2.375 
2,400 
And the number of 
exemptions is— 
1 
$0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
50 
64 
58 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
116 
119 
123 
127 
132 
136 
140 
144 
148 
152 
156 
160 
165 
169 
173 
178 
182 
187 
191 
195 
200 
204 
208 
213 
217 
222 
226 
230 
235 
239 
243 
248 
252 
267 
261 
266 
2 
3 
The tax is-
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
26 
30 
34 
38 
42 
46 
50 
54 
68 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
115 
119 
123 
127 
132 
136 
140 
144 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
18 
22 
26 
30 
4 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted 
gross income is— 
At 
least 
$2,400 
2,426 
2,450 
2,475 
2,500 
2,525 
2,550 
2,575 
2,600 
2,625 
2,650 
2,675 
2,700 
2,725 
2,760 
2,775 
2,800 
2,825 
2,850 
2,875 
2,900 
2,925 
2,950 
2,975 
3,000 
3,050 
3,100 
3,160 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3.500 
3,550 
3,600 
3,650 
3,700 
3,750 
3.800 
3,850 
3.900 
3,950 
4,000 
4,050 
4.100 
4.150 
4.200 
4,250 
4.300 
4,350 
4,400 
4,450 
4,600 
4,550 
4,600 
4,650 
4.700 
4.7.W 
4,800 
4.850 
4.900 
4.950 
But 
less 
than 
$2,425 
2,450 
2,476 
2,500 
2,525 
2,550 
2,575 
2,600 
2,625 
2,650 
2,675 
2,700 
2,726 
2,750 
2,776 
2,800 
2,825 
2,850 
2,875 
2,900 
2,925 
2,950 
2,975 
3,000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3.450 
3,500 
3,550 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3.900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4.350 
4,400 
4,450 
4,500 
4,550 
4,600 
4,650 
4,700 
4,750 
4.800 
4,850 
4.900 
4,960 
6.000 
And the number of exemptions is 
1 
2 
3 
$270 
275 
279 
284 
288 
293 
297 
302 
306 
311 
315 
320 
324 
329 
333 
338 
343 
348 
353 
358 
363 
368 
373 
378 
386 
395 
405 
415 
425 
435 
445 
455 
465 
475 
485 
495 
505 
515 
525 
535 
545 
655 
565 
575 
585 
695 
605 
615 
625 
635 
645 
655 
665 
675 
685 
695 
705 
715 
725 
735 
746 
768 
769 
781 
$148 
152 
156 
160 
165 
169 
173 
178 
182 
187 
191 
195 
200 
204 
208 
213 
217 
222 
226 
230 
235 
239 
243 
248 
256 
264 
273 
282 
291 
300 
309 
318 
327 
336 
345 
355 
365 
375 
385 
395 
405 
415 
425 
435 
445 
455 
465 
475 
485 
495 
505 
515 
525 
535 
646 
555 
565 
575 
585 
595 
605 
615 
625 
635 
$34 
38 
42 
46 
50 
54 
58 
62 
66 
70 
74 
78 
82 
86 
90 
94 
99 
103 
107 
111 
115 
119 
123 
127 
134 
142 
150 
158 
167 
176 
184 
193 
202 
211 
219 
228 
237 
246 
255 
264 
273 
282 
291 
300 
309 
318 
327 
336 
345 
355 
365 
375 
385 
395 
405 
415 
425 
435 
445 
455 
465 
475 
485 
496 
4 
5 
The tax is-
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
10 
14 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
101 
109 
117 
125 
134 
142 
150 
158 
167 
176 
184 
193 
202 
211 
219 
228 
237 
246 
255 
264 
273 
282 
291 
300 
309 
318 
327 
336 
345 
355 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
52 
60 
68 
76 
84 
92 
101 
109 
117 
126 
134 
142 
160 
158 
167 
176 
184 
193 
202 
211 
219 
228 
237 
246 
6 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
a 
(f 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
62 
60 
68 
76 
84 
92 
101 
109 
117 
125 
134 
142 
7 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
12 
20 
28 
36 
44 
8or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
135 
"(b) TAXABLE YEARS HK«IXNIXG AFTER DECEMHEK 'M. lOW.—In 
Ueu of the tax imposed by section 1, tliere is hereby imposed for each 
taxable year beginning after December 31, 1964, on the taxable 
income of every indivicUial Avliose adjusted gross income for such 
year is less than $5,000 and who has elected for siicli year to [ray tlie 
tax imposed by this secti<m a tax as follows: 
"Table I—Single Person—NOT Head of Household 
"Taxable Years Beginning After December 31,1964 
Ante, p. 19. 
26 u s e 1. 
If adjusted gross 
income Is— 
At 
least 
$0 
900 
925 
950 
975 
1,000 
1,025 
1,050 
1,075 
1,100 
1,126 
1,150 
1,175 
1,200 
1,226 
1,250 
1,275 
1,300 
1,325 
1,350 
1,376 
1,400 
1,426 
1,450 
1,475 
1,500 
1,626 
1,550 
1,575 
1,600 
1,625 
1,650 
1,676 
1,700 
1,725 
1,760 
1,776 
1.800 
1,826 
1,860 
1,876 
1,900 
1,925 
1,960 
1.976 
2,000 
2,025 
2,060 
2,076 
2,100 
2,126 
2.150 
2,176 
2,200 
2,225 
2,250 
2,276 
2.300 
2.325 
2.350 
2,378 
2.400 
2,425 
But less 
than 
$900 
925 
950 
976 
1,000 
1,025 
1,050 
1,075 
1,100 
1,126 
1,150 
1,175 
1,200 
1,225 
1,250 
1,275 
1,300 
1,325 
1,350 
1,375 
1,400 
1,426 
1,450 
1,476 
1,500 
1,525 
1,560 
1,675 
1,600 
1,625 
1,660 
1,675 
1.700 
1,725 
1,750 
1,776 
1,800 
1,826 
1,860 
1,876 
1,900 
1,925 
1,950 
1,976 
2.000 
2,026 
2,060 
2.076 
2,100 
2,125 
2.150 
2.175 
2,200 
2,225 
2,260 
2.276 
2,300 
2, .325 
2,350 
2.376 
2,400 
2.425 
2,450 
And the number of 
exemptions is— 
1 
2 
3 
4or 
more 
The tax is— 
$0 
2 
5 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
51 
64 
58 
61 
65 
68 
72 
76 
79 
83 
87 
91 
94 
98 
102 
106 
109 
113 
117 
121 
124 
128 
132 
136 
139 
143 
147 
161 
155 
159 
163 
167 
171 
176 
179 
183 
187 
191 
195 
199 
203 
207 
211 
215 
219 
223 
227 
231 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
61 
64 
68 
61 
66 
68 
72 
76 
79 
83 
87 
91 
94 
98 
102 
106 
109 
113 
117 
121 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
16 
19 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted ifross 
income is— 
At 
least 
$2,460 
2,475 
2,500 
2,525 
2,650 
2,576 
2,600 
2,625 
2,650 
2,676 
2,700 
2,725 
2.760 
2,775 
2,800 
2,825 
2,850 
2,875 
2,900 
2,926 
2,960 
2,975 
3,000 
3,050 
3.100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3,500 
3,5.'iO 
3.600 
3,660 
3,700 
3,750 
3,800 
3,850 
3.900 
3,950 
4,000 
4.050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,460 
4,600 
4,650 
4,600 
4,6.50 
4,700 
4.750 
4,800 
4,850 
4,900 
4,950 
But less 
than 
$2,475 
2,500 
2,625 
2,550 
2.576 
2,600 
2,625 
2,650 
2.675 
2,700 
2,725 
2,750 
2,775 
2,800 
2,825 
2,850 
2,875 
2,900 
2,925 
2,950 
2,975 
3,000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,360 
3,400 
3,450 
3,600 
3,5.'iO 
3,600 
3, em 
3,700 
3,760 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,650 
4,600 
4.650 
4,700 
4,750 
4,800 
4.850 
4,900 
4.950 
6,000 
And the numl>er of exemptions is— 
1 
2 
3 
4 
6 
6 
Tor 
more 
The tax is— 
$236 
240 
244 
248 
253 
257 
261 
265 
270 
274 
278 
282 
287 
291 
295 
299 
304 
308 
312 
317 
322 
327 
333 
342 
350 
369 
367 
376 
385 
393 
402 
410 
419 
427 
436 
444 
453 
462 
470 
479 
487 
496 
504 
513 
521 
530 
538 
547 
556 
564 
573 
581 
590 
598 
607 
615 
624 
633 
641 
660 
668 
667 
$124 
128 
132 
136 
139 
143 
147 
151 
155 
169 
163 
167 
171 
175 
179 
183 
187 
191 
195 
199 
203 
207 
213 
221 
229 
238 
246 
255 
263 
272 
280 
289 
297 
306 
316 
324 
334 
343 
353 
362 
372 
381 
390 
399 
407 
416 
424 
433 
442 
460 
459 
467 
476 
484 
493 
501 
510 
519 
527 
536 
544 
553 
$23 
26 
30 
33 
37 
40 
44 
47 
51 
64 
58 
61 
65 
68 
72 
76 
79 
83 
87 
91 
94 
98 
104 
111 
119 
126 
134 
141 
149 
167 
165 
173 
181 
189 
197 
205 
213 
221 
229 
238 
246 
255 
263 
272 
280 
289 
297 
306 
316 
324 
334 
343 
353 
362 
372 
381 
391 
400 
410 
419 
429 
438 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
26 
32 
39 
46 
63 
60 
67 
74 
81 
89 
96 
104 
111 
119 
126 
134 
141 
149 
157 
165 
173 
181 
189 
197 
205 
213 
221 
229 
238 
246 
255 
263 
272 
280 
289 
297 
306 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
89 
96 
104 
111 
119 
126 
134 
141 
149 
167 
165 
173 
181 
189 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
31-667 0-65—12 
136 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
"Table 11—Head of Household 
'Taxable Years Beginning After December 31,1964 
[78 STAT. 
If adjusted gross 
Income is— 
At 
least 
$0 
900 
925 
960 
975 
1,000 
1,025 
1.050 
1,075 
1,100 
1.125 
1,160 
1,175 
1,200 
1,225 
1,250 
1,275 
1,300 
1,325 
1,350 
1,375 
1,400 
1,425 
1.460 
1,475 
1,500 
1,525 
1.650 
1,575 
1,600 
1.625 
1,650 
1.675 
1.700 
1,725 
1,750 
1,775 
1,800 
1,825 
1.850 
1,875 
1.900 
1,925 
1,950 
1,975 
?,000 
2,025 
2,050 
2,075 
2,100 
2,125 
2,150 
2,176 
2,200 
2,225 
2,250 
2,275 
2,300 
2,326 
2,350 
2,375 
2.400 
2, 425 
Uutless 
than 
$900 
925 
950 
975 
1.000 
1,025 
1,050 
1,076 
1,100 
1.125 
1.150 
1,175 
1,200 
1,225 
1,250 
1,275 
1,300 
1,325 
1,350 
1,375 
1,400 
1,425 
1,450 
1,475 
1,500 
1,526 
1,550 
1,675 
1,600 
1,625 
1,650 
1,676 
1,700 
1,725 
1,750 
1,775 
1,800 
1,825 
1,850 
1,875 
1,900 
1,925 
1,950 
1,975 
2,000 
2,025 
2,050 
2,076 
2,100 
2,125 
2,150 
2,175 
2,200 
2,226 
2,250 
2.275 
2,300 
2,325 
2,350 
2,375 
2,400 
2,425 
2,450 
And the number of 
exemptions is— 
1 
2 
3 
4 or 
more 
The tax Is— 
$0 
2 
6 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
51 
64 
58 
61 
65 
68 
72 
75 
79 
82 
86 
89 
93 
96 
100 
103 
107 
110 
114 
117 
121 
124 
128 
131 
135 
138 
142 
146 
150 
154 
158 
162 
166 
170 
174 
178 
182 
186 
190 
194 
198 
202 
206 
210 
214 
218 
222 
226 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
51 
54 
58 
61 
65 
68 
72 
75 
79 
82 
86 
89 
93 
96 
100 
103 
107 
110 
114 
117 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
16 
19 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted gross 
income Is— 
At 
least 
$2,450 
2,475 
2.500 
2.525 
2, 650 
2.675 
2,600 
2,625 
2,650 
2,676 
2,700 
2,725 
2,750 
2.775 
2,800 
2,825 
2,850 
2,875 
2,900 
2,926 
2,960 
2,975 
3,000 
3,0.50 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3.450 
3,500 
3,5.50 
3,600 
3,650 
3.700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,650 
4,600 
4,650 
4,700 
4,750 
4,800 
4,850 
4,900 
4,950 
But less 
than 
$2,475 
2,600 
2,525 
2,550 
2,675 
2,600 
2,625 
2.650 
2.676 
2,700 
2,725 
2,750 
2,775 
2,800 
2,825 
2,850 
2,876 
2,900 
2,926 
2,950 
2,976 
3,000 
3.050 
3,100 
3,150 
3,200 
3,250 
3,300 
3, 3.50 
3,400 
3,450 
3,500 
3,550 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3.950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,550 
4,600 
4.650 
4,700 
4,750 
4,800 
4,850 
4,900 
4,950 
5,000 
And the number of exemptions is— 
1 
2 
3 
4 
5 
6 
7or 
more 
The tax Is— 
$230 
234 
238 
242 
246 
250 
254 
258 
262 
266 
270 
274 
278 
282 
286 
290 
294 
298 
302 
307 
311 
316 
322 
330 
338 
346 
354 
363 
.371 
379 
387 
395 
403 
411 
419 
427 
435 
444 
4.52 
460 
468 
476 
484 
492 
,500 
£08 
516 
525 
533 
541 
549 
557 
565 
573 
581 
589 
597 
606 
614 
622 
6.30 
638 
$121 
124 
128 
131 
135 
138 
142 
146 
160 
164 
158 
162 
166 
170 
174 
178 
182 
186 
190 
194 
198 
202 
208 
216 
224 
232 
240 
248 
256 
264 
272 
280 
288 
296 
305 
314 
323 
332 
341 
350 
359 
368 
376 
,384 
392 
400 
40S 
417 
425 
433 
441 
449 
457 
465 
473 
481 
489 
498 
506 
514 
522 
530 
$23 
26 
30 
33 
37 
40 
44 
47 
51 
54 
68 
61 
65 
68 
72 
76 
79 
82 
86 
89 
93 
96 
102 
109 
116 
123 
130 
137 
144 
152 
160 
168 
176 
184 
192 
200 
208 
216 
224 
232 
240 
248 
256 
264 
272 
280 
288 
296 
305 
314 
323 
332 
341 
350 
359 
368 
377 
386 
395 
404 
413 
422 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
88 
95 
102 
109 
116 
123 
130 
137 
144 
152 
160 
168 
176 
184 
192 
200 
208 
216 
224 
232 
240 
248 
256 
264 
272 
280 
288 
296 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
30 
46 
53 
60 
67 
74 
81 
88 
95 
102 
109 
116 
123 
130 
137 
144 
152 
160 
168 
176 
184 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
"^ 
l^ 
39 
*s 
53 
00 
V. 
74 
81 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
78 STAT. ] 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
"Table III—Married Persons Filing JOINT Returns 
"Taxable Years Beginning After December 31,1964 
la? 
If adjusted Kross 
income is— 
At least 
$0 
1,600 
1,626 
1,6S0 
1.67S 
1,700 
1,725 
1.760 
1,778 
1,800 
1.825 
1.850 
1.875 
1,900 
1,026 
1.960 
1,975 
2,000 
2,026 
2,050 
2,075 
2,100 
2,12.") 
2,150 
2,175 
2.200 
2,225 
2,250 
2,275 
2,300 
2,325 
2,350 
2,375 
2.400 
2.425 
2,450 
2,475 
2,500 
2.525 
2,550 
2,575 
2.000 
2.625 
2,6.'^0 
2.r.76 
2,700 
2,726 
2,750 
2.775 
But less 
than 
$1,600 
1.626 
1.6.50 
1.676 
1.700 
1,726 
1,760 
1.776 
1.800 
1.825 
1,850 
1,875 
1,900 
1,925 
1,950 
1,975 
2,000 
2,025 
2,060 
2,075 
2,100 
2,125 
2.150 
2,175 
2,200 
2,225 
2,250 
2,275 
2.300 
2.326 
2,360 
2,375 
2,400 
2,425 
2,460 
2,475 
2,500 
2.525 
2,660 
2,575 
2,600 
2,625 
2.650 
2,675 
2,700 
2.725 
2.750 
2.775 
2.800 
And the number of 
exemptions is— 
2 
3 
4 or 
more 
The tax i»— 
$0 
2 
5 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
61 
64 
68 
61 
65 
68 
72 
75 
79 
82 
86 
89 
03 
06 
100 
103 
107 
110 
114 
117 
121 
124 
128 
131 
135 
138 
142 
146 
149 
1.53 
167 
161 
164 
168 
$0 
n 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
n 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
61 
64 
68 
61 
65 
68 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted Kross 
income is— 
At least 
$2,800 
2,826 
2,860 
2,875 
2,900 
2,926 
2,960 
2,076 
3,000 
3,060 
3,100 
3.160 
3,200 
3,260 
3,300 
3,360 
3,400 
3,4.50 
3,600 
3,650 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,060 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4.400 
4,460 
4,600 
4,560 
4,600 
4,650 
4,700 
4.760 
4.800 
4.860 
4,000 
4,050 
But less 
than 
$2,826 
2,850 
2,876 
2,000 
2,025 
2,950 
2,975 
3,000 
3,050 
3,100 
3,160 
3,200 
3,260 
3,300 
3,3.50 
3,400 
3,460 
3,600 
3,650 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,650 
4,600 
4,660 
4,700 
4,750 
4,800 
4,850 
4,900 
4.950 
5.000 
And the number 
2 
3 
4 
of exemptions is— 
6 
6 
7 or 
more 
The tax is— 
$172 
176 
179 
183 
187 
191 
194 
198 
204 
211 
219 
226 
234 
241 
249 
256 
264 
271 
279 
286 
294 
302 
310 
318 
326 
334 
342 
3.10 
358 
365 
372 
379 
386 
394 
401 
408 
416 
422 
430 
437 
444 
451 
459 
467 
474 
482 
400 
497 
$72 
76 
79 
82 
86 
89 
93 
06 
102 
100 
116 
123 
130 
137 
144 
161 
159 
166 
174 
181 
189 
196 
204 
211 
219 
226 
234 
241 
249 
2.5fi 
264 
271 
279 
286 
294 
.102 
310 
318 
326 
334 
342 
350 
358 
366 
374 
382 
390 
398 
$0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
53 
60 
67 
74 
81 
8S 
95 
102 
109 
116 
123 
130 
137 
144 
151 
159 
16fi 
174 
181 
189 
196 
204 
211 
219 
226 
234 
241 
249 
2.56 
264 
271 
279 
286 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
53 
60 
67 
74 
81 
88 
95 
102 
109 
116 
123 
130 
137 
144 
151 
159 
166 
174 
181 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
138 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
"Table IV—Man ied Persons Filing SEPARATE Returns 
''lO PERCENT STANDARD DEDUCTION 
'Taxable Years Beginning After December 31, 1964 
If adjusted 
tcross income is— 
At 
least 
$0 
675 
700 
72S 
750 
77S 
800 
825 
850 
875 
900 
925 
950 
975 
1,000 
1.025 
1,050 
1.075 
1.100 
1.125 
1.150 
1.175 
1,200 
1.225 
1.250 
1.275 
1.300 
1.325 
1.350 
1.375 
1.400 
1,425 
1,4.'^0 
1.475 
1.600 
1.625 
1.650 
1.575 
l.fiOO 
1.625 
1.650 
1.675 
1.700 
1,725 
1,750 
1.775 
1.800 
1,826 
1,850 
1,875 
1,900 
1,926 
1,950 
1,975 
2,000 
2,025 
2,050 
2,076 
2,100 
2,125 
2,150 
2,176 
2,200 
2,225 
2,260 
2,276 
2,300 
But 
less 
than 
$675 
700 
725 
750 
775 
800 
825 
8.50 
875 
900 
926 
9.50 
975 
1,000 
1,025 
1.0.50 
1,075 
1,100 
1.125 
1,150 
1.175 
1.200 
1.225 
1.250 
1.275 
1.300 
1.325 
1,350 
1.375 
1.400 
1.425 
1.450 
1.475 
1,500 
1,525 
1,550 
1.576 
l.fiOO 
1,626 
1,650 
1,675 
1.700 
1.726 
1.760 
1.776 
1.800 
1.826 
1.850 
1,876 
1.900 
1.925 
1,960 
1,975 
2.000 
2,026 
2,050 
2.076 
2.100 
2,125 
2,150 
2,175 
2,200 
2,225 
2.250 
2.276 
2,300 
2,325 
And the number of 
exemptions is— 
1 
$0 
3 
6 
9 
12 
16 
18 
22 
25 
28 
31 
34 
37 
40 
44 
47 
50 
53 
56 
69 
62 
66 
69 
72 
75 
79 
82 
86 
89 
92 
96 
99 
102 
106 
109 
113 
116 
119 
123 
126 
129 
133 
136 
140 
143 
146 
1.50 
1.54 
1.57 
161 
164 
168 
172 
175 
179 
182 
186 
190 
193 
197 
200 
204 
208 
211 
215 
218 
222 
2 
3 
4 or 
more 
The tox is— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
4 
7 
10 
13 
16 
19 
23 
26 
29 
32 
35 
38 
41 
45 
48 
61 
64 
57 
60 
64 
67 
70 
73 
77 
80 
83 
87 
90 
93 
97 
100 
104 
107 
110 
114 
117 
120 
124 
127 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
5 
8 
11 
14 
17 
20 
24 
27 
30 
33 
36 
39 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted 
gross income is— 
At 
least 
$2,326 
2,350 
2,375 
2,400 
2,426 
2,450 
2,475 
2,500 
2.525 
2,5.50 
2,575 
2,600 
2.626 
2.6.50 
2.675 
2,700 
2,725 
2,7.50 
2,775 
2.800 
2,825 
2,8.50 
2,875 
2.900 
2,925 
2,950 
2,975 
3.000 
3.0.50 
3,100 
3,150 
3,200 
3.250 
3,300 
3,3.50 
3,400 
3.450 
3,600 
3,650 
3,600 
3,650 
3,700 
3,750 
3,800 
3,860 
3,900 
3,960 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,450 
4,500 
4,550 
4,600 
4,650 
4,700 
4,750 
4,800 
4,860 
4,900 
4,950 
But 
less 
than 
$2.3,50 
2,376 
2,400 
2,426 
2,450 
2,475 
2,600 
2, .126 
2, .550 
2,575 
2,600 
2.625 
2,660 
2,676 
2,700 
2,725 
2,750 
2.776 
2,800 
2,825 
2.8.50 
2,875 
2,900 
2.925 
2,9.50 
2.975 
3.000 
3,050 
3,100 
3,150 
3,200 
3.250 
3,300 
3.3.50 
3,400 
3,450 
3,600 
3.650 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3,900 
3,960 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,460 
4, .500 
4,650 
4,600 
4,650 
4,700 
4,760 
4,800 
4,860 
4,900 
4,960 
6,000 
And the number 
1 
2 
3 
4 
of exemptions is 
5 
6 
The tax is— 
$226 
229 
233 
237 
241 
245 
249 
252 
256 
260 
264 
268 
272 
276 
279 
283 
287 
291 
294 
298 
302 
306 
310 
314 
318 
323 
327 
333 
342 
350 
359 
367 
376 
386 
393 
402 
410 
419 
427 
4.36 
444 
453 
462 
470 
479 
487 
496 
504 
613 
621 
630 
638 
647 
666 
564 
673 
681 
690 
598 
607 
616 
624 
633 
641 
650 
658 
667 
$131 
134 
137 
141 
144 
148 
161 
165 
158 
162 
166 
169 
173 
176 
180 
184 
187 
191 
194 
198 
202 
205 
209 
212 
216 
220 
223 
229 
236 
244 
252 
259 
267 
275 
282 
290 
298 
306 
313 
322 
330 
339 
348 
356 
365 
373 
382 
390 
399 
407 
416 
424 
433 
442 
450 
469 
467 
476 
484 
493 
601 
610 
619 
627 
636 
544 
653 
$43 
46 
49 
62 
55 
68 
61 
66 
68 
71 
74 
78 
81 
84 
88 
91 
95 
98 
101 
105 
108 
111 
115 
118 
122 
125 
128 
133 
140 
147 
154 
161 
169 
176 
183 
190 
197 
206 
212 
219 
226 
234 
242 
249 
267 
265 
272 
280 
287 
295 
303 
310 
.119 
328 
336 
346 
353 
362 
370 
379 
387 
396 
405 
413 
422 
430 
439 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
3 
6 
9 
12 
16 
18 
22 
25 
28 
31 
34 
37 
40 
45 
61 
C8 
64 
70 
77 
84 
91 
97 
104 
111 
118 
124 
131 
138 
145 
152 
1.59 
166 
173 
181 
188 
196 
202 
209 
217 
224 
231 
239 
247 
254 
262 
570 
277 
285 
293 
300 
308 
316 
325 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
6 
12 
18 
24 
30 
37 
43 
49 
66 
62 
68 
75 
82 
88 
96 
102 
109 
115 
122 
129 
136 
142 
149 
167 
164 
171 
178 
186 
193 
200 
207 
214 
221 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
3 
9 
16 
22 
28 
36 
41 
47 
64 
60 
66 
73 
79 
86 
93 
100 
106 
113 
120 
127 
7 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
7 
14 
20 
26 
33 
39 
8or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
78 STAT. ] 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
139 
"Table V—Married Persons Filing SEPARATE Returns 
"MINIMUM STANDARD DEDUCTION 
•Taxable Years Beginning After December 31,1%4 
If adjusted 
gross income is— 
At 
least 
S
O 
800 
825 
850 
875 
900 
925 
950 
975 
1,000 
1,025 
1,050 
1,075 
1,100 
1,125 
1,150 
1,175 
1,200 
1,225 
1,250 
1,275 
1,300 
1,325 
1,350 
1,375 
1,400 
1,425 
1,450 
1,475 
1,500 
1,525 
1.650 
1,675 
1,600 
1,625 
1,650 
1,676 
1,700 
1,725 
1.750 
1,776 
1,800 
1,825 
1,850 
1,876 
1,900 
1.926 
1.950 
1,976 
2,000 
2,025 
2,050 
2,076 
2,100 
2,125 
2,150 
2,175 
2,200 
2,226 
2,260 
2,276 
2,300 
2,325 
2,360 
2.376 
But 
less 
tlian 
$800 
826 
850 
875 
900 
925 
960 
975 
1,000 
1,025 
1,050 
1,076 
1,100 
1,125 
1,160 
1,176 
1,200 
1,226 
1,250 
1,276 
1,300 
1,325 
1,350 
1,375 
1,400 
1,426 
1,450 
1,475 
1,500 
1,525 
1,650 
1,575 
1,600 
1,625 
1,650 
1,675 
1,700 
1,725 
1,750 
1.776 
1.800 
1.825 
1,850 
1,876 
1.900 
1.926 
1.950 
1,975 
2,000 
2,026 
2,060 
2,076 
2.100 
2,125 
2,150 
2,176 
2.200 
2,225 
2,260 
2,276 
2,300 
2.326 
2.360 
2.376 
2.400 
And the naml>er of 
exemptions is— 
1 
$0 
2 
6 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
61 
64 
68 
61 
65 
68 
72 
76 
79 
83 
87 
91 
94 
98 
102 
106 
109 
113 
117 
121 
124 
128 
132 
136 
139 
143 
147 
161 
166 
159 
163 
167 
171 
176 
179 
183 
187 
191 
195 
199 
203 
207 
211 
215 
219 
223 
227 
231 
236 
240 
2 
The t 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
5 
9 
12 
16 
19 
23 
26 
30 
33 
37 
40 
44 
47 
61 
54 
58 
61 
66 
68 
72 
76 
79 
83 
87 
91 
94 
98 
102 
106 
109 
113 
117 
121 
124 
128 
3 
axls-
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
5 
9 
12 
16 
19 
23 
26 
4 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
If adjusted 
gross income is— 
At 
least 
$2,400 
2,426 
2,450 
2,475 
2,500 
2,526 
2,550 
2,676 
2,600 
2,625 
2,650 
2,676 
2,700 
2,726 
2,750 
2,775 
2,800 
2,825 
2,850 
2.876 
2,900 
2.926 
2,950 
2,975 
3,000 
3.060 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3.500 
3,650 
3,600 
3,650 
3,700 
3,750 
3,800 
3,850 
3.900 
3.950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,360 
4,400 
4,450 
4,500 
4,650 
4,600 
4,650 
4,700 
4,760 
4,800 
4,850 
4,900 
4,950 
But 
less 
than 
$2,426 
2,450 
2,475 
2,500 
2,525 
2,550 
2,676 
2,600 
2,625 
2,650 
2,676 
2,700 
2,726 
2,750 
2,775 
2,800 
2,826 
2,850 
2,876 
2,900 
2,925 
2,950 
2,975 
3,000 
3,050 
3,100 
3,150 
3,200 
3,250 
3,300 
3,350 
3,400 
3,450 
3,500 
3,550 
3,600 
3,660 
3.700 
3,750 
3,800 
3,850 
3,900 
3,950 
4,000 
4,050 
4,100 
4,150 
4,200 
4,250 
4,300 
4,350 
4,400 
4,460 
4,500 
4,550 
4,600 
4.650 
4.700 
4.750 
4.800 
4.850 
4.900 
4,960 
6,000 
And the number of exemptions is— 
1 
2 
3 
$244 
248 
253 
257 
261 
266 
270 
274 
278 
282 
287 
291 
296 
299 
304 
308 
312 
317 
322 
327 
331 
336 
341 
346 
353 
362 
372 
381 
391 
400 
410 
419 
429 
438 
448 
467 
467 
476 
486 
495 
505 
514 
524 
533 
543 
552 
662 
571 
681 
590 
600 
609 
619 
628 
638 
647 
657 
666 
676 
685 
696 
707 
718 
729 
$132 
136 
139 
143 
147 
151 
155 
159 
163 
167 
171 
175 
179 
183 
187 
191 
195 
199 
203 
207 
211 
216 
219 
223 
229 
238 
246 
255 
263 
272 
280 
289 
297 
306 
315 
324 
334 
343 
353 
362 
372 
381 
391 
400 
410 
419 
429 
438 
448 
457 
467 
476 
486 
496 
605 
614 
524 
533 
643 
662 
662 
671 
681 
690 
$30 
33 
37 
40 
44 
47 
61 
54 
58 
61 
65 
68 
72 
76 
79 
83 
87 
91 
94 
98 
102 
106 
109 
113 
119 
126 
134 
141 
149 
157 
165 
173 
181 
189 
197 
205 
213 
221 
229 
238 
246 
265 
263 
272 
280 
289 
297 
306 
316 
324 
334 
343 
363 
362 
372 
381 
391 
400 
410 
419 
429 
438 
448 
457 
4 
5 
6 
The tax is— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2 
6 
9 
12 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
89 
96 
104 
111 
119 
126 
134 
141 
149 
157 
165 
173 
181 
189 
197 
205 
213 
221 
229 
238 
246 
255 
263 
272 
280 
289 
297 
306 
315 
324 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
89 
96 
104 
111 
119 
126 
134 
141 
149 
157 
166 
173 
181 
189 
197 
205 
213 
221 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
46 
63 
60 
67 
74 
81 
89 
96 
104 
111 
119 
126 
7 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
4 
11 
18 
25 
32 
39 
8 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
a 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
u" 
26 use 4. 
Ante, p. 129 
26 use 3 
Anfe, p. 23. 
26 use 141 
140 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
(b) RULES FOR OPTIONAL T A X . — 
(1) HUSBAND OR WIFE FILING SEPARATE RETURNS.—Subsection 
68A Stat. 10. 
(c) of sectloii 4 (relating to rules for optional tax) is amended 
to read as lollows: 
"(c) HUSBAND OR W I F E FILING SEPARATE RETURN.— 
"(1) A husband or wife may not elect to pay the optional tax 
imposed by section 3 if the tax of the other spouse is determined 
XntZ'^/'ig. 
under section 1 on the basis of taxable income computed without 
26 use 1. 
regard to the standard deduction. 
"(2) Except as otherwise provided in this subsection, in the 
case of a husband or wife filing a separate return the tax imposed 
by section 3 shall be— 
"(A) for taxable years beginning in 1964, the lesser of the 
tax shown in Table IV or Table V of section 3(a), and 
"(B) for taxable years beginning after December 31,1964, 
the lesser of the tax shown in Table IV or Table V of section 
3(b). 
"(3) Neither Table V of section 3(a) nor Table V of section 
3(b) shall apply in the case of a husband or wife filing a separate 
return if the tax of the other spouse is determined with regard to 
the 10-percent standard deduction; except that an individual 
described in section 141(d) (2) may elect (under regulations pre-
scribed by the Secretary or his delegate)— 
"(A) to pay the tax shown in Table V of section 3(a) in 
lieu of the tax shown in Table IV of section 3(a), and 
"(B) to pay the tax shown in Table V of section 3(b) in 
lieu of the tax shown in Table IV of section 3(b). 
For purposes of this title, an election under the preceding sentence 
shall be treated as an election made under section 141(d) (2). 
"(4) For purposes of this subsection, determination of marital 
26 use 143. 
status shall be made under section 143.'' 
26 use 6014. 
^2) AMENDMENT OF SECTION 6014.—Section 6014(a) (relating 
to income tax return—tax not computed by taxpayer) is amended 
by adding at the end thereof the following new sentence: "In the 
ease of a married individual filing a separate return and electing 
the benefits of this subsection, neither Table V in section 3(a) nor 
Table V in section 3(b) shall apply." 
(3) TECHNICAL AMENDMENTS.— 
(A) Subsection (a) of section 4 (relating to rules for 
optional tax) is amended by striking out "table" and insert-
ing in lieu thereof "tables". 
Ante, p. 111. 
^g) Section 4(f) (relating to cross references) is amended 
by adding at the end thereof the following new paragraph: 
"(4) For nonapplicability of Table V in section 3(a) and Table 
V in section 3(b) in case where tax is not computed by taxpayer, 
see section 6014(a)." 
(c) EFFECTIVE DAITS.—Except for purposes of section 21 of the 
26 use 21. 
Internal Revenue ("ode of 1954 (relating to eli'ect of changes in rates 
during a taxable year), the amendments made by this section shall 
apply to taxable years beginning after December 31, 1963. 
SEC. 302. INCOME TAX COLLECTED AT SOURCE. 
(a) PERCENTA(}E METHOD OF WITHHOLDING.—Subsection (a) of sec-
tion 3402 (relating to rexiuirement of withholding) is amended by 
striking out "18 percent" and inserting in lieu thereof "'14 percent". 
(b) 
W A G E 
BRACKET W I T H H O L D I N G . — P a r a g r a p h (1) of section 
3402(c) (relating to wage bracket withholding) is amended to read 
as follows: 
"(1) A t the election of the employer with respect to any em-
ployee, the employer shall deduct and withhold upon the wages 
paid to such employee a tax determined in accordance with the 
26 use 3402. 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
141 
following tables, which shall be iu lieu of the tax required to be 
deducted and withheld under subsection (a) : 
"If the payroll period with respect to an employee is weekly— 
And the wages are— 
At least— 
$0 
$13 
$14 
$15 
$16 
$17 
$18... 
$19 
$20 
$21 
$22 
$23 
$24... 
$26... 
$26 
$27 
$28 
$29 
$30 
$31 
$32 
$33 
$34 
$36... 
$36. 
$37 
$38 
$39 
$40 
$41 
$42 
$43 
$44 
$45 
$46 
$47 
$48 
$49 
$50.. 
$61 
$62 
$53 
$54 
$66 
$66 
$67 
$68 
$69 
$60. 
$62 
$64 
$66 
$68... 
$70. 
$72 
$74 
$76 
$78 
$80 
$82 
$84 
$86 
$88 
$00 
$92 
$94 
$96 
$98 
$100 
$105 
$110 
$115 
$120 
$123 
$130 
$135 
$140 
$146 
$150 
$160 
$170-
$180 
$190 
$200 and ov 
But less 
than— 
$13 
$14 
$15 
$16 
$17 
$18 
$19. 
$20 
$21 
$22 
$23 
$24 
$26 
$26 
$27 
$28 
$29 
$30 
$31 
$32 
$33 
$34 
$35 
$36 
$37 
$38 
$39 
$40 
$41 
$42 
$43 
$44 
$45 
$46 
$47 
$48 
$49 
$50 
$51 
$52 
$53 
$54 
$55 
$56 
$57 
$58 
$59 
$60 
$62 
$64 
$66 
$68 
$70. 
$72 
$74 
$76 
$78 
$80 
$82 
$84 
$86 
$88 
$90. 
$92 
$94 
$96 
$98 
$100 
$105 
$110 
$115 
$120 
$125 
$130 
$135 
$140 
$145 
$]50 
$160 
$170 
$180. 
$190. 
$200 
0 
14% of 
wages 
$1.90 
2.00 
2.20 
2.30 
2.60 
2.60 
2.70 
2.90 
3.00 
3.20 
3.30 
3.40 
3.60 
3.70 
3.90 
4.00 
4.10 
4.30 
4.40 
4.60 
4.70 
4.80 
6.00 
5.10 
5.30 
5.40 
6.50 
6.70 
6.80 
6.00 
6.10 
6.20 
6.40 
6.60 
6.70 
6.80 
6.90 
7.10 
7.20 
7.40 
7.60 
7.60 
7.80 
7.90 
8.10 
8.20 
8.30 
8.50 
8.80 
9.10 
9.40 
9.70 
9.90 
10.20 
10.50 
10.80 
11.10 
11.30 
11.60 
11.90 
12.20 
12.50 
12.70 
13.00 
13.30 
13.60 
13.90 
14.40 
15.10 
15.80 
16.50 
17.20 
17.90 
18.60 
19.30 
20.00 
20.70 
21.70 
23.10 
24.60 
25.90 
27.30 
28.00 
And the number of withholding 
1 
$0 
.10 
.20 
.40 
.50 
.70 
.80 
.90 
1.10 
1.20 
1.40 
1.60 
1.60 
1.80 
1.90 
2.10 
2.20 
2.30 
2.50 
2.60 
2.80 
2.90 
3.00 
3.20 
3.30 
3.50 
3.60 
3.70 
3.00 
4.00 
4.20 
4.30 
4.40 
4.60 
4.70 
4.90 
6.00 
6.10 
5.30 
6.40 
6.60 
5.70 
5.80 
6.00 
6.10 
6.30 
6.40 
6.50 
6.70 
7.00 
7.30 
7.60 
7.90 
8.10 
8.40 
8.70 
9.00 
9.30 
9.50 
9.80 
10.10 
10.40 
10.70 
10.90 
11.20 
11.50 
11.80 
12.10 
12.60 
13.30 
14.00 
14.70 
15.40 
16.10 
16.80 
17.50 
18.20 
18.90 
19.90 
21.30 
22.70 
24.10 
26.60 
26.20 
2 
3 
4 
5 
exemptions claimed is— 
6 
7 
8 
The amount of income tax to be withheld shall be— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.10 
.30 
.40 
.60 
.70 
.80 
1.00 
1.10 
1.20 
1.40 
1.50 
1.70 
1.80 
1.90 
2.10 
2.20 
2.40 
2.60 
2.60 
2.80 
2.90 
3.10 
3.20 
3.30 
3.60 
3.60 
3.80 
3.90 
4.00 
4.20 
4.30 
4.60 
4.60 
4.70 
5.00 
6.20 
6.60 
6.80 
6.10 
6.40 
6.60 
6.90 
7.20 
7.60 
7.80 
8.00 
8.30 
8.60 
8.90 
9.20 
9.40 
9.70 
10.00 
10.30 
10.80 
11.50 
12.20 
12.90 
13.60 
14.30 
15.00 
16.70 
16.40 
17.10 
18.10 
19.60 
20.90 
22.30 
23.70 
1 
24.40 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.10 
.30 
.40 
.60 
.70 
.80 
1.00 
1.10 
1.30 
1.40 
1.60 
1.70 
1.80 
2.00 
2.10 
2.20 
2.40 
2.50 
2.70 
2.80 
2.90 
3.20 
3.40 
3.70 
4.00 
4.30 
4.60 
4.80 
6.10 
6.40 
6.70 
6.00 
6.20 
6.80 
6.80 
7.10 
7.40 
7.60 
7.90 
8.20 
8.50 
9.00 
9.70 
10.40 
11.10 
11.80 
12.60 
13.20 
13.90 
14.60 
16.30 
16.30 
17.70 
19.10 
20.50 
21.90 
4peroe 
22.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.20 
.30 
.60 
.60 
.70 
.90 
1.00 
1.20 
1.40 
1.60 
1.90 
2.20 
2.50 
2.80 
3.00 
3.30 
3.60 
3.90 
4.20 
4.40 
4.70 
6.00 
6.30 
6.60 
6.80 
6.10 
6.40 
6.70 
7.20 
7.90 
8.60 
9.30 
10.00 
10.70 
11.40 
12.10 
12.80 
13.50 
14.50 
15.90 
17.30 
18.70 
20.10 
at of 
the 
20.80 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.10 
.40 
.70 
1.00 
1.20 
1.60 
1.80 
2.10 
2.40 
2.60 
2.90 
3.20 
3.50 
3.80 
4.00 
4.30 
4.60 
4.90 
6.40 
6.10 
6.80 
7.50 
8.20 
8.00 
9.60 
10.30 
11.00 
11.70 
12.70 
14.10 
16.60 
16.90 
18.30 
excesa 
19.00 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.30 
.60 
.90 
1.10 
1.40 
1.70 
2.00 
2.30 
2.50 
2.80 
3.10 
3.60 
4.30 
5.00 
6.70 
6.40 
7.10 
7.80 
8.50 
9.20 
9.90 
10.90 
12.30 
13.70 
15.10 
16.50 
over $20 
17.20 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.20 
.50 
.70 
1.00 
1.30 
1.80 
2.60 
3.20 
3.90 
4.60 
, 6.30 
6.00 
6.70 
7.40 
8.10 
9.10 
10.60 
11.90 
13.30 
14.70 
A plus— 
15.40 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.70 
1.40 
2.10 
2.80 
3.60 
4.20 
4.90 
5.60 
6.30 
7.30 
8.70 
10.10 
11.60 
12.90 
13.60 
9 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.30 
1.00 
1.70 
2.40 
3.10 
3.80 
4.60 
5.50 
6.90 
8.30 
9.70 
11.10 
1 
11.80 
10 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.66 
1.30 
2.00 
2.70 
3.80 
5.20 
6.60 
8.00 
9.40 
10.10 
142 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
[78 STAT. 
"If the pasToll period with respect to an employee is biweekly— 
And the waces are— 
At least— 
$0 
$26 
-
$28-
$30— 
$32-
$34 
$36 
— 
$38 
. -
$40 
$42 
$44 
$46 
$48 
$50 
$52 
$54 
$56 
$58 
$64 
$66 
$68 
$70 
$72 
$76 
$78 
$80 
$82.. 
$84........ 
$86 
$88 
$90 
$ 9 2 . . — - -
$94 
$96 
$98 
$100.-—. 
$102.. 
$104-..— 
$106--..-. 
$108 
$110-.-— 
$112...—. 
$114 
$116 
$118-— — 
$128... 
$132 
$136 
$140 
$144 
$148 
$152 
$156 
$160 
$164 
$168 
$172 
$180 
$184 
$188 
$192 
$196 
$200. 
$210. 
$220 
$230 
$240 
$250 
$260 
$270 
$280 
$300 
$320. 
$340 
$360 
$380 
$400 and O
T 
Bat less 
than— 
$28 
$30 
$32 
$34 
$36 
$38 
$40 
$42 
$44. 
$46 
$48 
$50. 
$52 
$54 
$56 
$58. 
$60 
$62. 
$64 
$66 
$68. 
$70 
$72. 
$74. 
$76. 
$78_ 
$80. 
$82-
$84. 
$86. 
$88-
$90_ 
$92. 
$94. 
$96-
$98 
$100-
$102 
$104 
$106. 
$108 
$110 
$112 
-
$114 
$116 
$118 
$120 
$124 
$128 
$132 
$136 
$140 
$144 
$148 
$152 
$156 
$160 
$164 
$168 
$172 
$176 
$180 
$184 
$188 
$192 
$196 
$200 
$210 
$220 
$230 
$240 
$260 
$260 
$270 
$280 
$290-
$300 
$320 
$340 
$360 
$380 
$400 
er 
0 
14% of 
wages 
$3.80 
4.10 
4.30 
4.60 
4.90 
5.20 
5.50 
6.70 
6.00 
6.30 
6.60 
6.90 
7.10 
7.40 
7.70 
8.00 
8.30 
8.50 
8.80 
9.10 
9.40 
9.70 
9.90 
10.20 
10.50 
10.80 
11.10 
11.30 
11.60 
11.90 
12.20 
12.50 
12.70 
13.00 
13.30 
13.60 
13.90 
14.10 
14.40 
14.70 
15.00 
15.30 
16.50 
15.80 
16.10 
16.40 
16.70 
17.10 
17.60 
18.20 
18.80 
19.30 
19.90 
20.40 
21.00 
21.60 
22.10 
22.70 
23.20 
23.80 
24.40 
24.90 
25.60 
26.00 
26.60 
27.20 
27.70 
28.70 
30.10 
31.50 
32.90 
34.30 
35.70 
37.10 
38.50 
39.90 
41.30 
43.40 
46.20 
49.00 
61.80 
54.60 
56.00 
And the number of wtthholdlnn exemptions claimed Is 
1 
2 
3 
4 
6 
6 
7 
8 
The amount of income tax to be withheld shall be— 
$0 
.20 
.60 
.80 
1.00 
1.30 
1.60 
1.90 
2.20 
2.40 
2.70 
3.00 
3.30 
3.60 
3.80 
4.10 
4.40 
4.70 
5.00 
6.20 
6.60 
5.80 
6.10 
6.40 
6.60 
6.90 
7.20 
7.50 
7.80 
8.00 
8.30 
8.60 
8.90 
9.20 
9.40 
9.70 
10.00 
10.30 
10.60 
10.80 
11.10 
11.40 
11.70 
12.00 
12.20 
12.60 
12.80 
13.10 
13.60 
14.10 
14.60 
15.20 
15.70 
16.30 
16.90 
17.40 
18.00 
18.50 
19.10 
19.70 
20.20 
20.80 
21.30 
21.90 
22.50 
23.00 
23.60 
24.10 
25.10 
26.50 
27.90 
29.30 
30.70 
32.10 
33.50 
34.90 
36.30 
37.70 
39.80 
42.60 
45.40 
48.20 
61.00 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.20 
.60 
.80 
1.10 
1.40 
1.60 
1.90 
2.20 
2.60 
2.80 
3.00 
3.30 
3.60 
3.90 
4.20 
4.40 
4.70 
5.00 
6.30 
5.60 
5.80 
6.10 
6.40 
6.70 
7.00 
7.20 
7.60 
7.80 
8.10 
8.40 
8.60 
8.90 
9.20 
9.60 
9.90 
10..% 
11.00 
11.60 
12.10 
12.70 
13.30 
13.80 
14.40 
14.90 
15.50 
16.10 
16.60 
17.20 
17.70 
18.30 
18.90 
19.40 
20.00 
20.50 
21.50 
22.90 
24.30 
26.70 
27.10 
28.50 
29.90 
31.30 
32.70 
34.10 
36.20 
39.00 
41.80 
44.60 
47.40 
1 
52.40 
48.80 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.30 
.60 
.90 
1.10 
1.40 
1.70 
2.00 
2.30 
2.50 
2.80 
3.10 
3.40 
3.70 
3.90 
4.20 
4.50 
4.80 
6.10 
5.30 
6.60 
6.90 
6.30 
6.90 
7.40 
8.00 
8.60 
9.10 
9.70 
10.20 
10.80 
11.40 
11.90 
12.50 
13.00 
13. no 
14.20 
14.70 
15.30 
15.80 
16.40 
17.00 
17.90 
19.30 
20.70 
22.10 
23.50 
24.90 
26.30 
27.70 
29.10 
30.50 
32.60 
35.40 
38.20 
41.00 
43.80 
4perce 
46.20 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.10 
.30 
.60 
.90 
1.20 
1.60 
1.70 
2.00 
2.30 
2.70 
3.30 
3.80 
4.40 
5.00 
6.60 
6.10 
6.60 
7.20 
7.80 
8.30 
8.90 
9.40 
10.00 
10.60 
11.10 
11.70 
12.20 
12.80 
13.40 
14.30 
15.70 
17.10 
18.50 
19.90 
21.30 
22.70 
24.10 
25.60 
26.90 
29.00 
31.80 
34.60 
37.40 
40.20 
ntofthe 
41.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.30 
.80 
1.40 
1.90 
2.50 
3.10 
3.60 
4.20 
4.70 
6.30 
5.90 
6.40 
7.00 
7.50 
8.10 
8.70 
9.20 
9.80 
10.80 
12.20 
13.60 
15.00 
16.40 
17.80 
19.20 
20.60 
22.00 
23.40 
25.60 
28.30 
31.10 
33.90 
36.70 
exceas 
38.10 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
1.10 
1.70 
2.30 
2.80 
3.40 
3.90 
4.50 
5.10 
5.60 
6.20 
7.20 
8.60 
10.00 
11.40 
12.80 
14.20 
15.60 
17.00 
18.40 
19.80 
21.90 
24.70 
27.50 
30.30 
33.10 
over $40 
34.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.40 
.90 
1.60 
2.00 
2.60 
3.60 
5.00 
6.40 
7.80 
9.20 
10.60 
12.00 
13.40 
14.80 
16.20 
18.30 
21.10 
23.90 
26.70 
29.60 
0 plui— 
30.90 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1.40 
2.80 
4.20 
5.60 
7.00 
8.40 
9.80 
11.20 
12.60 
14.70 
17.60 
20.30 
23.10 
25.90 
27.30 
9 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
2.00 
3.40 
4.80 
6.20 
7.60 
9.00 
11.10 
13.90 
16.70 
19.50 
22.30 
23.70 
10 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
n 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1.20 
2.66 
4.00 
5.40 
7.60 
10.30 
13.10 
15. S
O 
18.70 
2a 10 
78 STAT. ] 
PUBLIC LAW 88-272-FEB. 26, 1964 
"If the payroll period with respect to an employee is semimonthly— 
143 
And the wages i 
And the number of withholding exemptions claimed is— 
At least— 
But less 
than— 
10 or 
more 
The amount of Income tax to be withheld shall I 
$0 
$28. 
$30. 
$32.. 
$34. 
$36. 
$38. 
$40. 
$42-
$44. 
$46. 
$48. 
$S0. 
$12. 
$M. 
$56. 
$.')8. 
$60. 
$62. 
$64. 
$68 
$70— 
$72 
$74-... 
$76— 
$78 
$80— 
$82 
$84— 
$86— 
$88— 
$90— 
$92— 
$94... 
$96... 
$98— 
$100-. 
$102.. 
$104.. 
$106.. 
$108.. 
$110.. 
$112.. 
$114.. 
$116-. 
$118.. 
$120-
$124.. 
$128.. 
$132.-
$136-. 
$140-. 
$144.. 
$148.. 
$152.. 
$156-
$160-
$164.. 
$168-
$172-. 
$176.. 
$180.. 
$184.-
$188-
$192-
$196.. 
$200-
$210.. 
$220.. 
$230-
$240-
$250.. 
$260.. 
$270.. 
$280-
$290.. 
$300-
$320.. 
$340.-
$360-
$400. 
$420. 
$440 
$460. 
$480. 
$28 
$30.... 
$32.... 
$34.... 
$36-... 
$38-... 
$40-... 
$42.... 
$ 4 4 — 
$46.... 
$48.... 
$50.... 
$62-... 
$54—. 
$56-... 
$58-... 
$60—. 
$62-... 
$64-... 
$66—. 
$68-... 
$70-.. 
$72..-. 
$74.... 
$76.... 
$78.... 
$80.... 
$82..-. 
$84—. 
$86.-.. 
$88-.. 
$90.... 
$92.... 
$94.... 
$ 9 6 — 
$ 9 8 — 
$100... 
$102... 
$104-. 
$106— 
$108... 
$110.-. 
$112... 
$114... 
$116... 
$118... 
$120-. 
$124-. 
$128... 
$132... 
$136... 
$140-. 
$144... 
$148... 
$152— 
$156-. 
$160-. 
$164-. 
$168— 
$172... 
$176... 
$180... 
$184... 
$188... 
$192... 
$196— 
$200— 
$210— 
$220... 
$230... 
$240— 
$260... 
$260... 
$270— 
$280-. 
$290... 
$300--. 
$320-. 
$340-. 
$360-. 
$380— 
$400... 
$420-.. 
$440-. 
$460-.. 
$480... 
$500... 
14% Of 
wages 
$4.10 
4.30 
4.60 
4.90 
5.20 
5.50 
5.70 
6.00 
6.30 
6.60 
6.90 
7.10 
7.40 
7.70 
8.00 
8.30 
8.50 
8.80 
9.10 
9.40 
9.70 
9.90 
10.20 
10.50 
10.80 
11.10 
11.30 
11.60 
11.90 
12.20 
12.50 
12.70 
13.00 
13.30 
13.60 
13.90 
14.10 
14.40 
14.70 
15.00 
15.30 
15.50 
15.80 
16.10 
16.40 
16.70 
17.10 
17.60 
18.20 
18.80 
19.30 
19.90 
20.40 
21.00 
21.60 
22.10 
22.70 
23.20 
23.80 
24.40 
24.90 
25.60 
26.00 
26.60 
27.20 
27.70 
28.70 
30.10 
31.50 
32.90 
34.30 
35.70 
37.10 
38.60 
39.90 
41.30 
43.40 
46.20 
49.00 
51.80 
64.60 
57.40 
60.20 
63.00 
65.80 
68.60 
$0 
.20 
.60 
.70 
1.00 
1.30 
1.60 
1.90 
2.10 
2.40 
2.70 
3.00 
3.30 
3.50 
3.80 
4.10 
4.40 
4.70 
4.90 
5.20 
5.50 
6.80 
6.10 
6.30 
6.60 
6.90 
7.20 
7.50 
7.70 
8.00 
8.30 
8.60 
8.90 
9.10 
9.40 
9.70 
10.00 
10.30 
10.60 
10.80 
11.10 
11.40 
11.70 
11.90 
12.20 
12.60 
12.80 
13.20 
13.80 
14.30 
14.90 
15.40 
16.00 
16.60 
17.10 
17.70 
18.20 
18.80 
19.40 
19.90 
20.60 
21.00 
21.60 
22.20 
22.70 
23.30 
23.80 
24.80 
26.20 
27.60 
29.00 
30.40 
31.80 
33.20 
34.60 
36.00 
37.40 
39.50 
42.30 
45.10 
47.90 
50.70 
53.50 
56.30 
69.10 
61.90 
64.70 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.20 
.50 
.80 
1.00 
1.30 
1.60 
1.90 
2.20 
2.40 
2.70 
3.00 
3.30 
3.60 
3.80 
4.10 
4.40 
4.70 
6.00 
6.20 
5.60 
6.80 
6.10 
6.40 
6.60 
6.90 
7.20 
7.60 
7.80 
8.00 
8.30 
8.60 
8.90 
9.30 
9.90 
10.40 
11.00 
11.60 
12.10 
12.70 
13.20 
13.80 
14.30 
14.90 
16.60 
16.00 
16.60 
17.10 
17.70 
18.30 
18.80 
19.40 
19.90 
20.90 
22.30 
23.70 
25.10 
26.50 
27.90 
29.30 
30.70 
32.10 
33.60 
36.60 
38.40 
41.20 
44.00 
46.80 
49.60 
52.40 
65.20 
68.00 
60.80 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.20 
.50 
.80 
1.10 
1.40 
1.60 
1.90 
2.20 
2.60 
2.80 
3.00 
3.30 
3.60 
3.90 
4.20 
4.40 
4.70 
6.00 
6.40 
6.00 
6.60 
7.10 
7.70 
8.20 
8.80 
9.30 
9.90 
10.50 
11.00 
11.60 
12.10 
12.70 
13.30 
13.80 
14.40 
14.90 
16.50 
16.10 
17.00 
18.40 
19.80 
21.20 
22.60 
24.00 
25.40 
26.80 
28.20 
29.60 
31.70 
34.60 
37.30 
40.10 
42.90 
46.70 
48.60 
61.30 
54.10 
56.90 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.30 
.50 
.80 
1.10 
1.50 
2.10 
2.60 
3.20 
3.80 
4.30 
4.90 
6.40 
6.0O 
6.60 
7.10 
7.70 
8.20 
8.80 
9.40 
0.90 
10.50 
11.00 
11.60 
12.20 
13.10 
14.50 
15.90 
17.30 
18.70 
20.10 
21.60 
22.90 
24.30 
26.70 
27.80 
30.60 
33.40 
36.20 
39.00 
41.80 
44.60 
47.40 
50.20 
53.00 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.40 
1.00 
1.60 
2.10 
2.70 
3.20 
3.80 
4.40 
4.90 
6.50 
6.00 
6.60 
7.20 
7.70 
8.30 
9.30 
10.70 
12.10 
13.60 
14.90 
16.30 
17.70 
19.10 
20.50 
21.90 
24.00 
26.80 
29.60 
32.40 
35.20 
38.00 
40.80 
43.60 
46.40 
49.20 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
1.00 
1.60 
2.10 
2.70 
3.30 
3.80 
4.40 
6.40 
6.80 
8.20 
9.60 
11.00 
12.40 
13.80 
16.20 
16.60 
18.00 
20.10 
22.90 
25.70 
28.60 
31.30 
34.10 
36.90 
39.70 
42.60 
45.30 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
1.60 
2.90 
4.30 
6.70 
7.10 
8.50 
9.90 
11.30 
12.70 
14.10 
16.20 
19.00 
21.80 
24.60 
27.40 
30.20 
33.00 
35.80 
38.60 
41.40 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.40 
1.80 
3.20 
4.60 
6.00 
7.40 
8.80 
10.20 
12.30 
15.10 
17.90 
20.70 
23.50 
26.30 
29.10 
31.90 
34.70 
37.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.70 
2.10 
3.50 
4.90 
6.30 
8.40 
11.20 
14.00 
16.80 
19.60 
22.40 
25.20 
28.00 
30.80 
33.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1.00 
2.40 
4.50 
7.30 
10.10 
12.90 
16.70 
18.60 
21.30 
24.10 
26.90 
29.70 
14 percent of the excess oyer $500 pins— 
$S00 and over. 
aOO 
66.10 
62.20 
68.30 
64.40 
60.60 
46.70 
42.80 
38.90 
35.00 
144 
PUBLIC LAW 88-272-FEB. 26, 1964 
[78 STAT. 
'If the payroll period with respect to an employee is monthly— 
A n d t h e wages are— 
A1 least— 
$0 
$s« 
$fin . 
$64 . 
$68 . 
$?-> .. 
$76 . 
$80 
$84 . 
$88 
$»2 . 
$B« 
$1110 
$104 
$108 
$112 
$116 
$120 
$124 
$128. 
$132 
$136 
$140 
$144 
$148 
$1S2 
$l.Vi 
$160 
$ir4 
$168 
$172 
$176 
$180 
$184 
$1K8 
$192 
$196 
«2(K1 
$20-1 
$208 
$212. 
$216 
$220.. 
. 
$224 
$228 
$232 
$236 
$240 
$248 
$2S6 
$264 
$272 
S280 
$288 
$296 
$304 
$312 
$320. 
$328 
$336 
$S44 
$3S2 
$360 
$368 
$376 
$384 
$3«2 
$400 
$420 
$440 
$460 
$480 
IWO 
$fi20 
$S40 
$.160 
$.'i80 
$600 
$640 
$680 
$720 
$760 
$800 
$840 
$880 
$920 
$960. 
$1,000 a n d ( 
But less 
than— 
$56 
$60 
$64 
$68 
$72 
$76 
$80 
$84 
$88 
$92 
$96 
$100 
$104 
$108 
$112 
$116 
$120 
$124 
$128 
$132 
$136 
$140 
$144 
$148 
. . . 
$152 
$156 
$160 
$164 
$168 
$172 
$176 
$180 
$184 
$188 
$192 
$196 
$200 
$2'M 
$208 
$212 
$216 
$220 
$224 
$228 
$232 
$236 
$240 
$248 
$256 
$264 
$272 
$280 
$288 
$296 
$304 
$312 
$320 
$328 
$336 
$344 
$352 
$360 
$368 
$376 
$384 
$392 
$400 
$420 
$440 
$460 
$480 
$.'500 
$520 
$540 
$560 
$.'i80 
$600 
$640 
$680 
$720 
$760 
$800 
$840 
$880 
$920 
$960 
. 
$1.000 
A n d the n u m b e r o f withholding e x e m p t i o n s claimed Is— 
0 
1 
14% of 
wages 
$8.10 
8.70 
9.20 
9.80 
10.40 
10.90 
11.50 
12.00 
12.60 
13.20 
13.70 
14.30 
14.80 
15.40 
16.00 
16.60 
17.10 
17.60 
18.20 
18.80 
19.30 
19.90 
20.40 
21.00 
21.60 
22.10 
22.70 
23.20 
23.80 
24.40 
24.90 
25.50 
26.00 
26.60 
27.20 
27.70 
28.30 
28.80 
29.40 
30.00 
30.50 
31.10 
31.60 
32.20 
32.80 
33.30 
34.20 
35.30 
36.40 
37.50 
38.60 
39.80 
40.90 
42.00 
43.10 
44.20 
4.5.40 
46.50 
47.60 
48.70 
49.80 
51.00 
52.10 
53.20 
54.30 
55.40 
57.40 
60.20 
63.00 
65.80 
68.60 
71.40 
74.20 
77.00 
79.80 
82.60 
86.80 
92.40 
98. (X) 
103.60 
109.20 
114.80 
120.40 
126.00 
131.60 
137.20 
$0 
.30 
.90 
1.50 
2.00 
2.60 
3.10 
3.70 
4.30 
4.80 
6.40 
S.90 
6.50 
7.10 
7.60 
8.20 
8.70 
9.30 
9.90 
10.40 
11.00 
11.60 
12.10 
12.70 
13.20 
13.80 
14.30 
14.90 
15.50 
16.00 
16.60 
17.10 
17.70 
18.30 
18.80 
19 40 
19.90 
20.60 
21.10 
21.60 
22.20 
22.70 
23.30 
23.90 
24.40 
26.00 
26.50 
26.40 
27.60 
28.60 
29.70 
30.90 
32.00 
33.10 
34.20 
36.30 
36. .
"
^
O 
37.60 
38.70 
39.80 
40.90 
42.10 
43.20 
44.30 
4.n. 40 
46.50 
47.70 
49.60 
62.40 
66.20 
68.00 
60.80 
63.60 
66.40 
69.20 
72.00 
74.80 
79.00 
84.60 
90.20 
96.80 
101.40 
107.00 
112.60 
118.20 
123.80 
129.40 
1 
140.00 1132.20 
2 
3 
4 
5 
6 
7 
8 
The amount of income tax to be withheld shall be— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.40 
1.00 
1.60 
2.10 
2.60 
3.20 
3.80 
4.30 
4.90 
5.40 
6.00 
6.60 
7.10 
7.70 
8.20 
8.80 
9.40 
9.90 
10.60 
11.00 
11.60 
12.20 
12.70 
13.30 
13.80 
14.40 
16.00 
16.50 
16.10 
16.60 
17.20 
17.80 
18.60 
19.70 
20.80 
22.00 
23.10 
24.20 
26.30 
26.40 
27.60 
28.70 
29.80 
30.90 
32.00 
33.20 
34.30 
35.40 
36.60 
37.60 
38.80 
39.90 
41.80 
44.60 
47.40 
60.20 
53.00 
65.80 
68.60 
61.40 
64.20 
67.00 
71.20 
76.80 
82.40 
88.00 
93.60 
99.20 
104.80 
110.40 
116.00 
121.60 
1 
124.40 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
1.00 
1.60 
2.10 
2.70 
3.30 
3.80 
4.40 
4.90 
6.60 
6.10 
6.60 
7.20 
7.70 
8.30 
8.90 
0.40 
10.00 
10.80 
11.00 
13.10 
14.20 
18.30 
16.40 
17.50 
18.70 
10.80 
20.00 
22.00 
23.10 
24.30 
26.40 
26.50 
27.60 
28.70 
29.00 
31.00 
32.10 
34.10 
36.00 
30.70 
42.60 
45.30 
48.10 
60.00 
53.70 
66.50 
69.30 
63.60 
69.10 
74.70 
80.30 
86.90 
91.60 
07.10 
102.70 
108.30 
113.00 
Ipercen 
116.70 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.60 
1.10 
1.60 
2.20 
3.00 
4.20 
5.30 
6.40 
7.60 
8.60 
0.80 
10.00 
12.00 
13.10 
14.20 
15.40 
16.50 
17.60 
18.70 
10.80 
21.00 
22.10 
23.20 
24.30 
26.30 
20.10 
31.00 
34.70 
37.50 
40.30 
43.10 
45.00 
48.70 
51.60 
66.70 
61.30 
66.90 
72.80 
78.10 
83.70 
89.30 
94.00 
100.50 
106.10 
tofthe 
108.00 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.00 
2.00 
3.10 
4.20 
'5.40 
6.50 
7.60 
8.70 
9.80 
11.00 
12.10 
13.20 
14.30 
15.40 
16.60 
18.60 
21.30 
24.10 
26.90 
29.70 
32.60 
36.30 
38.10 
40.90 
43.70 
47.90 
63.60 
69.10 
64.70 
70.30 
76.90 
81.60 
87.10 
92.70 
98.30 
excessc 
101.10 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.00 
2.10 
3.20 
4.30 
6.40 
6.80 
7.70 
8.80 
10.70 
13.60 
16.30 
10.10 
21.90 
24.70 
27.80 
30.30 
33.10 
36.90 
40.10 
45.70 
81.30 
69.90 
62.80 
68.10 
73.70 
79.30 
84.90 
90.60 
rer f 
1.0 
03.30 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1.00 
3.00 
6.80 
8.60 
11.40 
14.20 
17.00 
19.80 
22.60 
25.40 
28.20 
32.40 
38.00 
43.60 
49.20 
54.80 
60.40 
66.00 
71.60 
77.20 
82.80 
00 plus-
86.60 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.80 
3.60 
6.40 
0.20 
12.00 
14.80 
17.60 
20.40 
24.60 
30.20 
35.80 
41.40 
47.00 
52.60 
58.20 
63.80 
69.40 
76.00 
77.80 
< 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1.40 
4.20 
7.00 
0.80 
12.60 
16.80 
22.40 
28.00 
33.60 
30.20 
44.80 
50.40 
56.00 
61.60 
67.20 
70.00 
10 or 
more 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
2.00 
4.80 
0.00 
14.60 
20.20 
25.80 
31.40 
37.00 
42.60 
48.20 
63.80 
60.40 
62.20 
78 STAT. ] 
PUBLIC L
A
W 88-272-FEB. 26, 1964 
145 
'If the payroll period with respect to an employee is a daily payroll period or a 
miscellaneous payroll period— 
And the wages 
divided by (he num-
ber of days in such 
period are— 
At ieast— 
$0 
$2.00 
$2.25 
$2.S0 
$2.75 
$3.00 
$3.25 
$3.50 
$3.76 
$4 00 
$4.25 
$4.50 
$4.75 
$5.00 
$.V25 
$5.50 
$5.75 
$6.00 
$6.25 
$6.60 
$6.75 
$7.00 
$7.25 
$7.50 
$7.75 
$8.00 
$8.2.'> 
$8.50 
$8.7.'i 
$9.00 
$9.25 
$9.60 
$10.00 
$10.50 
$11.00 
$11.50 
$12.00 
$12.60 
$13.00 
$13.60 
$14.00 
$14.50 
$16.00 
$16.60 
$16.00 
$16.60 
$17.00 
$17.60 
$18.00 
$18.60 
$19.00 
$19.60 
$20.00 
$21.00 
$22.00 
$23.00 
$24.00 
$26.00 
$26.00 
$27.00 
$28.00 
$29.00 
But less 
than— 
$2.00 
$2.26 
$2.60 
$2.76 
$3.00 
$3.25 
$3.50 
$3.75 
$4.00 
$4.26 
$4.60 
$4.75 
$6.00 
$5.26 
$5.50 
$5.76 
$6.00 
$6.25 
$6.60 
$6.76 
$7.00 
$7.26 
$7.60 
$7.75 
$8.00 
$8.25 
$8.50 
$8.75 
$9.00 
$9.25 
$9.60 
$9.76 
$10.00 
$10.60 
$11.00.— 
$11.60...-
$12.00 
$12.60.... 
$13.00.... 
$13.60.... 
$14.00.... 
$14.60 
$16.00 
$16.60 
$16.00.... 
$16.60 
$17.00.... 
$17.60.... 
$18.00 
$18.60 
$19.00.... 
$19.60 
$20.00.... 
$21.00.... 
$22.00 
$23.00.... 
$24.00.... 
$26.00 
$26.00 
$27.00 
$28.00 
$29.00 
$30.00 
$30 and ovt 
jr 
0 
And the number of withholding exemptions claimed is— 
1 
2 
3 
4 
6 
6 
7 
8 
9 
10 or 
more 
The amount of tax to l>e withheld shall be the followinc amount multiplied by 
14% of 
w8ges 
$.30 
.35 
.36 
.40 
.46 
.46 
.60 
.65 
.60 
,60 
.66 
.70 
.70 
.76 
,80 
.80 
.86 
.90 
.95 
.95 
1.00 
1.05 
1.05 
1.10 
1.15 
1.16 
1.20 
1.25 
1.30 
1.30 
1.35 
1.40 
1.45 
1.60 
1.60 
1.66 
1.70 
1.80 
1.86 
1.96 
2.00 
2.05 
2.16 
2.20 
2.30 
2.36 
2.40 
2.60 
2.66 
2.66 
2.70 
2.76 
2.86 
3.00 
3.15 
3.30 
3.45 
3.65 
3.70 
3.85 
4.00 
4.16 
4.20 
$0 
,06 
.10 
.10 
.16 
,20 
.20 
.26 
.30 
.30 
,36 
,40 
.46 
.45 
.60 
.65 
.55 
,60 
,66 
,66 
,70 
,75 
.80 
.80 
.85 
.90 
.90 
.96 
1.00 
1.00 
1.06 
1.10 
1.16 
1.20 
1.25 
1.30 
1.40 
1.45 
1.65 
1.60 
1.65 
1.76 
1.80 
1.90 
1.96 
2.00 
2.10 
2.16 
2.26 
2.30 
2.35 
2.45 
2.60 
2.60 
2.76 
2.90 
3.06 
3.15 
3.30 
3.45 
3.60 
3.76 
3.85 
3.95 
$0 
0 
0 
0 
0 
0 
0 
0 
.05 
.06 
.10 
.16 
.15 
.20 
.26 
.30 
.30 
.35 
.40 
.40 
.46 
.50 
.50 
.55 
.60 
.65 
.65 
.70 
.76 
.76 
.80 
.86 
.85 
.90 
1.00 
1.05 
1.16 
1.20 
1.26 
1.36 
1.40 
1.60 
1.66 
1.60 
1.70 
1.75 
1.85 
1.90 
1.95 
2.05 
2.10 
2.20 
2.26 
2.36 
2.60 
2.65 
2.80 
2.90 
3.06 
3.20 
3.35 
3.60 
3.60 
3.70 
the numl>er of days In such period— 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.10 
.16 
.16 
.20 
.26 
.26 
.30 
.36 
.35 
.40 
.46 
.50 
.50 
.65 
.60 
.60 
.65 
.76 
.80 
.90 
.95 
1.00 
1.10 
1.16 
1.26 
1.30 
1.36 
1.46 
1.60 
1.60 
1.65 
1.70 
1.80 
1.86 
1.95 
2.00 
2.10 
2.26 
2.40 
2.60 
2.66 
2.80 
2.96 
3.10 
3.20 
3.36 
14percc 
3.46 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.10 
.10 
.15 
.20 
.20 
.25 
.30 
.30 
.35 
.40 
.60 
.65 
.60 
.70 
.76 
.86 
.90 
.96 
1.05 
1.10 
1.20 
1.25 
1.30 
1.40 
1.46 
1.66 
1.60 
1.66 
1.75 
1.85 
2.00 
2.16 
2.26 
2.40 
2.55 
2.70 
2.86 
2.95 
3.10 
nt of th 
3.20 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.05 
.10 
.16 
.26 
.30 
.35 
.46 
.60 
.60 
.66 
.70 
.80 
.85 
.96 
1.00 
1.05 
1.16 
1.20 
1.30 
1.36 
1.40 
1.60 
1.60 
1.76 
1.86 
2.00 
2.15 
2.30 
2.45 
2.65 
2.70 
2.86 
eexcesi 
2.00 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.10 
.20 
.26 
.30 
.40 
.45 
.66 
.60 
.66 
.76 
.80 
.90 
.95 
1.00 
1.10 
1.16 
1.26 
1.36 
1.60 
1.60 
1.76 
1.90 
2.05 
2.20 
2.30 
2.46 
2.60 
over $3 
2.66 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.05 
.15 
.20 
.30 
.35 
.40 
.50 
.66 
.66 
.70 
.75 
.85 
.90 
1.00 
1.10 
1.20 
1.35 
1.60 
1.66 
1.80 
1.90 
2.06 
2.20 
2.36 
Opius— 
2.40 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.10 
.16 
.26 
.30 
.36 
.45 
.60 
.60 
.65 
.70 
.80 
.96 
1.10 
1.25 
1.40 
1.60 
1.66 
1.80 
1.95 
2.10 
2.16 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.10 
.20 
.26 
.30 
.40 
.46 
.66 
.70 
.85 
1.00 
1.15 
1.26 
1.40 
1.66 
1.70 
1.86 
1.90 
$0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
.06 
.15 
.20 
.30 
,46 
.60 
.75 
.86 
1.00 
1.16 
1.30 
1.46 
1.66 
1.66" 
146 
PUBLIC LAW 88-273-FEB. 28, 1964 
[78 STAT. 
68A Stat. 357; 
75 Stat. 536. 
26 u s e 1441. 
Effective date. 
(c) WITHHOLDING f
>
F TAX ON CERTAIN Nt)NKESii)ENT ALIKXS.—Sub-
sections (a) and (b) of section 1441 (relating to witliliokling of tax 
on nonresident aliens) are amended by striking out "18 percent" and 
inserting in lieu thereof "14 percent". 
(d) EFFECTIVB DATES.—^The amendments made by subsections (a) 
and (b) of this section shall apply with respect to remuneration paid 
after the seventh day following the date of the enactment of this Act. 
The amendment made by subsection (c) of this section shall apply with 
respect to payments made after the seventh day following the dnte 
of the enactment of this Act. 
Approved February 26, 1964. 
February 28, 1964 
[S. 298] 
Public Law 88-273 
AN ACT 
To amend the Small Business Investment Act of 1958. 
Small Business 
Investment Act 
Amendmen ts of 
1963. 
7 2 Stat. 69 2; 
75 Stat. 752. 
15 u s e 682. 
Borrowing 
power. 
15 u s e 683. 
Assistance; 
limitations. 
15 u s e 686. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assemhled^ That this Act may 
be cited as the "Small Business Investment Act Amendments of 1963". 
SEC. 2. The second sentence of section 302(a) of the Small Business 
Investment Act of 1958 is amended by striking out "$400,000" and 
inserting in lieu thereof "$700,000", by striking out "three years" and 
inserting in lieu thereof "five years", and by striking out "1961" and 
inserting in lieu thereof "1963". 
SEC. 3. Section 303(b) of the Small Business Investment Act of 
1958 is amended to read as follows: 
"(b) To encourage the formation and growth of small business 
investment companies, the Administration is authorized (but only to 
the extent that the necessary funds are not available to the company 
involved from private sources on reasonable terms) to lend funds to 
such companies either directly or by loans made or effected in coop-
eration with banks or other lending institutions through a^eements 
to participate on an immediate or deferred (standby) basis. 
Such 
loans shall bear interest at such rate (in no case lower than the average 
investment yield, as determined by the Secretary of the Treasury, on 
marketable obligations of the United States outstanding at the time of 
the loan involved) and contain such other terms as the Administration 
may fix, and shall be subject to the following restrictions and 
limitations: 
" (1) The total amount of obligations of any one company which 
may be purchased and outstanding at any one time by the Admin-
istration under this subsection (including commitments to pur-
chase such obligations) shall not exceed 50 per centum of the paid-
in capital and surplus of such company or $4,000,000, whichever is 
less. 
" (2) All loans made under this subsection (b) shall be of such 
sound value as reasonably to assure repayment." 
SEC. 4. Section 306 of the Small Business Investment Act of 1958 is 
amended to read as follows: 
(( 
AGGREGATE LIMITATIONS 
"SEC. 306. Without the approval of the Administration, the aggre-
gate amount of obligations and securities acquired and for which com-
mitments may be issued by any small business investment company