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119th Congress

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119th Congress

Title 26 — Internal Revenue Code

Part III · Chapter 1 — Normal Taxes and Surtaxes

§ 105. Amounts received under accident and health plans

Statutory text

(a)

Amounts attributable to employer contributions

Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer.

(b)

Amounts expended for medical care

Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) if such amounts are paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for expenses incurred by him for the medical care (as defined in section 213(d)) of the taxpayer, his spouse, his dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.

(c)

Payments unrelated to absence from work

Gross income does not include amounts referred to in subsection (a) to the extent such amounts—

(1)

constitute payment for the permanent loss or loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and

(2)

are computed with reference to the nature of the injury without regard to the period the employee is absent from work.

[(d) Repealed. Pub. L. 98–21, title I, § 122(b), , 97 Stat. 87]

(e)

Accident and health plans

For purposes of this section and section 104—

(1)

amounts received under an accident or health plan for employees, and

(2)

amounts received from a sickness and disability fund for employees maintained under the law of a State or the District of Columbia,

shall be treated as amounts received through accident or health insurance.

(f)

Rules for application of section 213

For purposes of section 213(a) (relating to medical, dental, etc., expenses) amounts excluded from gross income under subsection (c) shall not be considered as compensation (by insurance or otherwise) for expenses paid for medical care.

(g)

Self-employed individual not considered an employee

For purposes of this section, the term “employee” does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).

(h)

Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan

(1)

In general

In the case of amounts paid to a highly compensated individual under a self-insured medical reimbursement plan which does not satisfy the requirements of paragraph (2) for a plan year, subsection (b) shall not apply to such amounts to the extent they constitute an excess reimbursement of such highly compensated individual.

(2)

Prohibition of discrimination

A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if—

(A)

the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and

(B)

the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals.

(3)

Nondiscriminatory eligibility classifications

(A)

In general

A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits—

(i)

70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or

(ii)

such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated individuals.

(B)

Exclusion of certain employees

For purposes of subparagraph (A), there may be excluded from consideration—

(i)

employees who have not completed 3 years of service;

(ii)

employees who have not attained age 25;

(iii)

part-time or seasonal employees;

(iv)

employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and

(v)

employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

(4)

Nondiscriminatory benefits

A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants.

(5)

Highly compensated individual defined

For purposes of this subsection, the term “highly compensated individual” means an individual who is—

(A)

one of the 5 highest paid officers,

(B)

a shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or

(C)

among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants).

(6)

Self-insured medical reimbursement plan

The term “self-insured medical reimbursement plan” means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance.

(7)

Excess reimbursement of highly compensated individual

For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a self-insured medical reimbursement plan is—

(A)

in the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B)), the amount reimbursed under the plan to the employee with respect to such benefit, and

(B)

in the case of benefits (other than benefits described in subparagraph (A)) paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction—

(i)

the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and

(ii)

the denominator of which is the total amount reimbursed to all employees under the plan for such plan year.

In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A).

(8)

Certain controlled groups, etc.

All employees who are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.

(9)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.

(10)

Time of inclusion

Any amount paid for a plan year that is included in income by reason of this subsection shall be treated as received or accrued in the taxable year of the participant in which the plan year ends.

(i)

Sick pay under Railroad Unemployment Insurance Act

Notwithstanding any other provision of law, gross income includes benefits paid under section 2(a) of the Railroad Unemployment Insurance Act for days of sickness; except to the extent such sickness (as determined in accordance with standards prescribed by the Railroad Retirement Board) is the result of on-the-job injury.

(j)

Special rule for certain governmental plans

(1)

In general

For purposes of subsection (b), amounts paid (directly or indirectly) to a qualified taxpayer from an accident or health plan described in paragraph (2) shall not fail to be excluded from gross income solely because such plan, on or before , provides for reimbursements of health care expenses of a deceased employee’s beneficiary (other than an individual described in paragraph (3)(B)).

(2)

Plan described

An accident or health plan is described in this paragraph if such plan is funded by a medical trust that is established in connection with a public retirement system or established by or on behalf of a State or political subdivision thereof and that—

(A)

has been authorized by a State legislature, or

(B)

has received a favorable ruling from the Internal Revenue Service that the trust’s income is not includible in gross income under section 115 or 501(c)(9).

(3)

Qualified taxpayer

For purposes of paragraph (1), with respect to an accident or health plan described in paragraph (2), the term “qualified taxpayer” means a taxpayer who is—

(A)

an employee, or

(B)

the spouse, dependent (as defined for purposes of subsection (b)), or child (as defined for purposes of such subsection) of an employee.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

  1. Aug. 16, 1954, ch. 736, 68A Stat. 30 · 68A Stat. 30

    Enacted · 26 U.S.C. § 105

    Aug. 16, 1954, ch. 736, 68A Stat. 30

    Source evidence

    Code source credit
    Aug. 16, 1954, ch. 736, 68A Stat. 30

  2. Self-Employed Individuals Tax Retirement Act of 1962

    Pub. L. 87–792 § 7(e) · 76 Stat. 809

    Added · 26 U.S.C. § 105(g)

    Pub. L. 87–792 added subsec. (g)

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 87–792 added subsec. (g).

    Enacted provision · exact public law section
    (e) Amounts Received Under Accident and Health Plans.— Section 105 of the Internal Revenue Code of 1954 (relating to amounts 26 USC 105. received under accident and health plans) is amended by adding at the end thereof the following new subsection: “(g) Self-Employed Individual Not Considered an Employee.— For purposes of this section, the term ‘employee’ does not include an individual who is an employee within the meaning of section 401 (c)(1)(relating to self-employed individuals).”

  3. Revenue Act of 1964

    Pub. L. 88–272 title II § 205(a) · 78 Stat. 19

    Substituted · 26 U.S.C. § 105(d)

    Pub. L. 88–272 substituted provisions stating that “The preceding sentence shall not apply to amounts attributable to the first 30” days if the amounts exceed 75 percent of regular weekly wages, and if they do not exceed said 75 percent, the first sentence of this subsection shall not apply to the extent the amounts exceed $75 weekly and shall not apply to amounts attributable to the first 7 calendar days unless the employee is hospitalized for injury or sickness for at least 1 day in such period, for provisions stating that said “preceding sentence” did not apply in cases of sickness, to amounts attributable to the first 7 days unless the employee was hospitalized for sickness for at least 1 day during such period

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 88–272 substituted provisions stating that “The preceding sentence shall not apply to amounts attributable to the first 30” days if the amounts exceed 75 percent of regular weekly wages, and if they do not exceed said 75 percent, the first sentence of this subsection shall not apply to the extent the amounts exceed $75 weekly and shall not apply to amounts attributable to the first 7 calendar days unless the employee is hospitalized for injury or sickness for at least 1 day in such period, for provisions stating that said “preceding sentence” did not apply in cases of sickness, to amounts attributable to the first 7 days unless the employee was hospitalized for sickness for at least 1 day during such period.

    Enacted provision · exact public law section
    (a) Wage Continuation Plans.— The second sentence of section 68A Stat. 30. 26 USC 105. 105(d) (relating to wage continuation plans) is amended to read as follows: “The preceding sentence shall not apply to amounts attributable 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 30 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 the employee is hospitalized on account of personal injuries or sickness for at least one day during such period.”

  4. Pub. L. 94–455 § 505(a) · 90 Stat. 1520

    1. Substituted · 26 U.S.C. § 105(d)

      Pub. L. 94–455, § 505(a), substituted provisions relating to an exclusion of up to $5,200 a year for taxpayers retiring on disability prior to age 65; dollar-for-dollar phase out of exclusion for adjusted annual gross income (including disability income) in excess of $15,000; requirement that married couple must file joint return; defined “permanent and total disability” and “joint return”;

    2. Inserted · 26 U.S.C. § 105(d)

      Pub. L. 94–455, § 505(a), inserted special rule for coordination with section 72 of this title for provisions relating to wage continuation plans

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 94–455, § 505(a), substituted provisions relating to an exclusion of up to $5,200 a year for taxpayers retiring on disability prior to age 65; dollar-for-dollar phase out of exclusion for adjusted annual gross income (including disability income) in excess of $15,000; requirement that married couple must file joint return; defined “permanent and total disability” and “joint return”; and inserted special rule for coordination with section 72 of this title for provisions relating to wage continuation plans.

    Enacted provision · exact public law section
    (a) Sick Pay.— Subsection (d) of section 105 (relating to amounts excluded from gross income under wage continuation plans) is amended to read as follows: “(d) Certain Disability Payments.— “(1) In general.— In the case of a taxpayer who— “(A) has not attained age 65 before the close of the taxable year, and “(B) retired on disability and, when he retired, was permanently and totally disabled, gross income does not include amounts referred to in subsection (a) if such amounts constitute wages or payments in lieu of wages for a period during which the employee is absent from work on account of permanent and total disability. “(2) Limitation.— This subsection shall not apply to the extent that the amounts referred to in paragraph (1) exceed a weekly rate of $100. “(3) Phaseout over $15,000.— If the adjusted gross income of the taxpayer for the taxable year (determined without regard to this subsection) exceeds $15,000, the amount which but for this paragraph would be excluded under this subsection for the taxable year shall be reduced by an amount equal to tire excess of the adjusted gross income (as so determined) over $15,000. “(4) Married couple must file joint return.— Except in the ease of a husband and wife who live apart, at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the exclusion provided by this subsection shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year. For purposes of this subsection, marital status shall be determined under section 143. “(5) Permanent and total disability defined.— For purposes of this subsection, an individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require. “(6) Joint return.— For purposes of this subsection, the term ‘joint return’ means the joint return of a husband and wife made under section 6013. “(7) Coordination with section 72.— In the case of an individual described in subparagraphs (A) and (B) of paragraph (1), for purposes of section 72 the annuity starting date shall not be deemed to occur before the beginning of the taxable year in which the taxpayer attains age 65, or before the beginning of an earlier taxable year for which the taxpayer makes an irrevocable election not to seek the benefits of this subsection for such year and all subsequent years.”

  5. Pub. L. 94–455 § 1901(c)(2) · 90 Stat. 1520

    Struck · 26 U.S.C. § 105(e)(2)

    Pub. L. 94–455, § 1901(c)(2), struck out “a territory” after “of a State”

    Source evidence

    Code amendment note
    Subsec. (e)(2). Pub. L. 94–455, § 1901(c)(2), struck out “a territory” after “of a State”.

    Enacted provision · exact public law section
    (2) Sections 105(e)(2), 273, and 454(b)(2) are each amended by striking out a Territory.”.

  6. Pub. L. 95–600 § 701 · 92 Stat. 2763

    Redesignated · 26 U.S.C. § 105(d)(4)

    Pub. L. 95–600, § 701 (c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (5)(A) and (C)

    Source evidence

    Code amendment note
    Subsec. (d)(4). Pub. L. 95–600, § 701 (c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (5)(A) and (C).

    Enacted provision · exact public law section
    SEC. 701. TECHNICAL AMENDMENTS TO INCOME TAX PROVISIONS AND ADMINISTRATIVE PROVISIONS. (a) Amendments Relating to Retention of Prior Law for Retirement Income Credit Under Section 37(e).— (1) Clarification that spouse under age 65 must have public retirement system income.— Paragraph (2) of section 37(e) (relating to election of prior law with respect to public retirement system income) is amended by striking out “who has not attained age 65 before the close of the taxable year” and inserting in lieu thereof “who has not attained age 65 before the close of the taxable year (and whose gross income includes income described in paragraph (4)(B))”. (2) Clarification that qualifying services must have been performed by taxpayer or spouse.— Subparagraph (B) of section 37(e)(4) (defining retirement income) is amended by inserting “and who performed the services giving rise to the pension or annuity (or is the spouse of the individual who performed the services)” after “before the close of the taxable year”. (3) Disregard of community property laws.— Subsection (c) of section 37 (relating to election of prior law with respect to public retirement system income) is amended— (A) by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph: “(8) Community property laws not applicable.— In the case of a joint return, this subsection shall be applied without regard to community property laws.”, (B) by striking out “paragraph (8)(A)” in paragraph (4)(B) and inserting in lieu thereof “paragraph (9)(A)”; and (C) by striking out “paragraph (8)(B)” in paragraph (5)(B) and inserting in lieu thereof “paragraph (9)(B)”. (4) 26 USC 37 note. Effective dates.— (A) The amendments made by paragraphs (1) and (2) shall apply to taxable years beginning after December 31, 1975. (B) The amendments made by paragraph (3) shall apply to taxable years beginning after December 31, 1977. (b) Amendments Relating to the Minimum Tax.— (1) 26 USC 57. Special rules for minimum tax in the case of subchapters corporations and personal holding companies.— (A) Paragraph (1) of section 57(a) (relating to adjusted itemized deductions) is amended by striking out “An amount” and inserting in lieu thereof “In the case of an individual, an amount”. (B) The last sentence of section 57(a) (relating to items of tax preference) is amended by striking out “Paragraphs (1), (3), and” and inserting in lieu thereof “Paragraphs (3) and”. (2) 26 USC 58. Division of $ 10,000 amount among members of controlled groups.— Subsection (b) of section 58 (relating to members of controlled groups) is amended to read as follows: “(b) Members of Controlled Groups.— In the case of a controlled 26 USC 1563. 26 USC 56. group of corporations (as defined in section 1563(a)), the $10,000 amount specified in section 56 shall be divided among the component members of such group in proportion to their respective regular tax deductions (within the meaning of section 56(c)) for the taxable year.” (3) Computation of adjusted itemized deductions in the case of estates and trusts.— Paragraph (2) of section 57(b) (relating to computation of adjusted itemized deductions in the case of estates and trusts) is amended to read as follows: “(2) Special rules for estates and trusts.— “(A) In general.— In the case of an estate or trust, for purposes of paragraph (1) of subsection (a), the amount of the adjusted itemized deductions for any taxable year is the amount by which the sum of the deductions for the taxable year other than— “(i) the deductions allowable in arriving at adjusted gross income, “(ii) the deduction for personal exemption provided by 26 USC 642. section 642(b), “(iii) the deduction for casualty losses described in 26 USC 165. section 165(c)(3), “(iv) 26 USC 651. the deductions allowable under section 651(a), 26 USC 661, 691. 661(a), or 691(c), and “(v) the deductions allowable to a trust under section 26 USC 642. 642(c) to the extent that a corresponding amount is included in the gross income of the beneficiary under 26 USC 662. section 662(a)(1) for the taxable year of the beneficiary with which or within which the taxable year of the trusts ends, exceeds 60 percent (but does not exceed 100 percent) of the adjusted gross income of the estate or trust for the taxable year. “(B) Determination of adjusted gross income.— For purposes of this paragraph, the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that— “(i) the deductions for costs paid or incurred in connection with the administration of the estate or trust, and “(ii) to the extent provided in subparagraph (C), the deductions under section 642(c), 26 USC 642. shall be treated as allowable in arriving at adjusted gross income. “(C) Treatment of certain charitable contributions.— For purposes of this paragraph, the following deductions under section 642(c) (relating to deductions for amounts paid or permanently set aside for charitable purposes) shall be treated as deductions allowable in arriving at adjusted gross income: “(i) deductions allowable to an estate, “(ii) deductions allowable to a trust all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B), 26 USC 170. “(iii) deductions allowable to a trust which is a pooled income fund within the meaning of section 642(c)(5), “(iv) deductions allowable to a trust which are attributable to transfers to the trust before January 1, 1977, and “(v) deductions allowable to a trust, all of the income interest of which is devoted solely to one or more of the purposes described in section 170(c)(2)(B), which are attributable to transfers pursuant to a will or pursuant to an inter vivos trust in which the grantor had the power to revoke at the date of his death.” (4) Section 691(c) deduction not taken into account for determining adjusted itemized deductions.— Paragraph (1) of section 57(b) is amended by striking out “and” at the end of subparagraph (C), by inserting “and” at the end of subparagraph (D), and by inserting after subparagraph (D) the following new subparagraph: “(E) the deduction allowable under section 691(c),”. 26 USC 691. (5) Effective date.— The amendments made by this subsection 26 USC 57 note. shall take effect as if included in the amendments made by section 301 of the Tax Reform Act of 1976. 26 USC 301. (c) Sick Pay.— (1) In general.— Section 105(d) is amended by striking out 26 USC 105. paragraphs (4) and (6), by redesignating paragraph (5) as paragraph (4) and paragraph (7) as paragraph (6), and by inserting after paragraph (4) the following new paragraph: “(5) Special rules for married couples.— “(A) Married couple must file joint return.— Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the exclusion provided by this subsection shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year. “(B) Application of paragraphs (2) and (3).— In the case of a joint return— “(i) paragraph (2) shall be applied separately with respect to each spouse, but “(ii) paragraph (3) shall be applied with respect to their combined adjusted gross income. “(C) Determination of marital status.— For purposes of this subsection, marital status shall be determined under 26 USC 143. section 143(a). “(D) Joint return defined.— For purposes of this subsection, the term ‘joint return’ means the joint return of a 26 USC 6013. husband and wife made under section 6013.” (2) 26 USC 105 note. Conforming amendments.— (A) 26 USC 505. Subsection (c)(3) of section 505 of the Tax Reform Act of 1976 (relating to disability retirement) is amended by striking 26 USC 105. out “section 105(d)(5)” and inserting in lieu thereof “section 105(d)(4)”. (B) 26 USC 105 note. Subsections (c) and (e)(1) of section 301 of the Tax Reduction and Simplification Act of 1977 (relating to effective date of changes in the exclusion for sick pay) are each 26 USC 105. amended by striking out “section 105(d)(7)” and inserting in lieu thereof “section 105(d)(6)”. (3) 26 USC 105 note. Effective date.— (A) The amendments made by paragraphs (1) and (2)(A) shall take effect as if included in section 105(d) of the 26 USC 105. 26 USC 505. Internal Revenue Code of 1954 as such section was amended by section 505(a) of the Tax Reform Act of 1976. (B) The amendments made by paragraph (2)(B) shall take effect as if included in section 301 of the Tax Reduction and 26 USC 105 notes. Simplification Act of 1977. (d) Net Operating Losses.— (1) 26 USC 172. Amendment of section 172(b)(1)(B).— The second sentence of subparagraph (B) of section 172(b)(1) (relating to years to which net operating losses may be carried) is amended by striking out “and (F)” and inserting in lieu thereof “(F), and (G)”. (2) 26 USC 172 note. Effective date.— The amendment made by paragraph (1) shall apply to losses incurred in taxable years ending after December 31, 1975. (e) 26 USC 189 note. Effective Date for Fiscal Year Taxpayers for Construction Period Interest and Taxes.— Paragraph (1) of section 201(c) of the 26 USC 201. Tax Reform Act of 1976 is amended to read as follows: “(1) in the case of nonresidential real property, if the construction period begins on or after the first day of the first taxable year beginning after December 31, 1975,”. (f) Clarification of Provisions Providing Tax Incentives To Encourage the Preservation of Historic Structures.— (1) Definition of certified historic structures.— Subsection 26 USC 191. (d) of section 191 (relating to amortization of certain rehabilitation expenditures for certified historic structures) is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively, and by striking out paragraph (1) and inserting in lieu thereof the following new paragraphs: “(1) Certified historic structure.— The term ‘certified historic structure’ means a building or structure which is of a character subject to the allowance for depreciation provided in 26 USC 167. section 167 and which— “(A) is listed in the National Register, or “(B) is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary as being of historic significance to the district. “(2) Registered historic district.— The term ‘registered historic district’ means— “(A) any district listed in the National Register, and “(B) any district— “(i) which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and “(ii) which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.” (2) Amendment of cross references.— Subsection (g) of section 191 (relating to cross references) is amended to read as 26 USC 191. follows: “(1) For rules relating to the listing of buildings, structures, and historic districts in the National Register, see the Act entitled ‘An Act to establish a program for the preservation of additional historic properties throughout the Nation, and for other purposes’, approved October 15, 1966 (16 U.S.C. 470 et seq.). “(2) For special rules with respect to certain gain derived from the disposition of property the adjusted basis of which is determined with regard to this section, see sections 1245 and 1250.” (3) Special rules for recapture of amortization deduction.— (A) Paragraph (2) of section 1245(a) (relating to gain from 26 USC 1245. dispositions of certain depreciable property) is amended— (i) by striking out “190, or 191” the first place it appears and inserting in lieu thereof “or 190” and (ii) by striking out “190, or 191” the second and third place it appears and inserting in lieu thereof “190, or (in the case of property described in paragraph (3)(C)) 191”. (B) Subparagraph (D) of section 1245(a)(3) (relating to gain from dispositions of certain depreciable property) is amended by striking out “190, or 191” and inserting in lieu thereof “or 190”. (C) Paragraph (3) of section 1250(b) (relating to depreciation 26 USC 1250. adjustments) is amended by striking out “190 or 191” and inserting in lieu thereof “or 190”. (D) Paragraph (2) of section 57(a) (relating to items of tax 26 USC 57. preference) is amended by inserting “or 191” after “167(k)”. (E) Paragraph (4) of section 1250(b) (relating to definition of additional depreciation) is amended— (i) by inserting “or amortization” after “depreciation” the second and third places it appears, and (ii) by inserting “or 191” after “167(k)” each place it appears. (4) Straight line method in certain cases.— Subsection (n) of section 167 is amended to read as follows: “(n) Straight Line Method in Certain Cases.— “(1) In general.— In the case of any property in whole or in part constructed, reconstructed, erected, or used on a site which was, on or after June 30, 1976, occupied by a certified historic structure (or by any structure in a registered historic district) which is demolished or substantially altered after such date— “(A) subsections (b), (j), (k), and (1) shall not apply, and “(B) the term ‘reasonable allowance’ as used in subsection (a) means only an allowance computed under the straight line method. The preceding sentence shall not apply if the last substantial alteration of the structure is a certified rehabilitation. “(2) Exceptions.— The limitations imposed by this subsection shall not apply— “(A) to personal property, and “(B) in the case of demolition or substantial alteration of a structure located in a registered historic district, if— “(i) such structure was not a certified historic structure, “(ii) the Secretary of the Interior certified to the Secretary that such structure is not of historic significance to the district, and “(iii) if the certification referred to in clause (ii) occurs after the beginning of the demolition or substantial alteration of such structure, the taxpayer certifies to the Secretary that, at the beginning of such demolition or substantial alteration, he in good faith was not aware of the requirements of clause (ii). “(3) Definitions.— For purposes of this subsection, the terms ‘certified historic structure’, ‘registered historic district’, and ‘certified rehabilitation’ have the respective meanings given 26 USC 191. such terms by section 191(d).” (5) Demolition of certain historic structures.— Subsection (b) of section 280B (relating to special rule for registered historic districts) is amended to read as follows: “(b) 26 USC 280B. Special Rule for Registered Historic Districts.— For purposes of this section, any building or other structure located in a registered historic district (as defined in section 191(d)(2)) shall be treated as a certified historic structure unless the Secretary of the Interior has certified that such structure is not a certified historic structure, and that such structure is not of historic significance to the district, and if such certification occurs after the beginning of the demolition of such structure, the taxpayer has certified to the Secretary that, at the time of such demolition, he in good faith was not aware of the certification requirement by the Secretary of the Interior.” (6) Substantially rehabilitated historic property.— (A) 26 USC 167. Paragraph (1) of section 167(o) (relating to substantially rehabilitated historic property) is amended by inserting “(other than property with respect to which an amortization deduction has been allowea to the taxpayer under 26 USC 191. section 191)” after “substantially rehabilitated historic property”. (B) 26 USC 167.26 USC 191. Paragraph (2) of section 167(o) is amended by striking out “section 191(d)(3)” and inserting in lieu thereof “section 191(d)(4)”. (7) Amortization allowable to persons with certain lease interests.— Section 191(f) (relating to treatment of life tenants and remaindermen) is amended to read as follows: “(f) Special Rules for Certain Interests.— “(1) Life tenant and remainderman.— In the case of property held by one person for life with remainder to another person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be allowable to the life tenant. “(2) Certain lessees.— “(A) In general.— In the case of a lessee of a certified historic structure who has expended amounts in connection with the certified rehabilitation of such structure which are properly chargeable to capital account, the deduction under this section shall be allowable to such lessee with respect to such amounts. “(B) Amortizable basis.— For purposes of subsection (a), the amortizable basis of such lessee shall not exceed the sum of the amounts described in subparagraph (A). “(C) Limitation.— Subparagraph (A) shall apply only if on the date of the certified rehabilitation is completed, the remaining term of the lease (determined without regard to any renewal periods) extends— “(i) beyond the last day of the useful life (determined without regard to this section) of the improvements for which the amounts described in subparagraph (A) were expended, and “(ii) for not less than 30 years.”. (8) Effective date.— The amendments made by this subsection 26 USC 191 note. shall take effect as if included in the respective provisions of the Internal Revenue Code of 1954 to which such amendments relate, as such provision were added to such Code, or amended, by section 2124 of the Tax Reform Act of 1976. 26 USC 191. (g) Foreign Conventions.— (1) Deductions not disallowed to employer where employee includes amounts in gross income.— Subparagraph (D) of section 274(h)(6) (relating to application of subsection to employer as 26 USC 274. well as to traveler) is amended to read as follows: “(D) Subsection to apply to employer as well as to traveler.— “(i) Except as provided in clause (ii), this subsection shall apply to deductions otherwise allowable under section 162 or 212 to any person, whether or not such 26 USC 162, 212. person is the individual attending the foreign convention. For the purposes of the preceding sentence such person shall be treated, with respect to each individual, as having selected the same 2 foreign conventions as were selected by such individual. “(ii) This subsection shall not deny a deduction to any person other than the individual attending the foreign convention with respect to any amount paid by such person to or on behalf of another person if includible in the gross income of such other person. The preceding sentence shall not apply if such amount is required to be included in any information return filed by such person under part III of subchapter A of chapter 61 and is not so 26 USC 6031 et seq. included.” (2) Individuals residing in foreign countries.— Section 274(h)(6) is amended by adding at the end thereof the following 26 USC 274. new subparagraph: “(E) Individuals residing in foreign countries.— For purposes of this subsection, in the case of an individual citizen of the United States who establishes to the satisfaction of the Secretary that he was a bona fide resident of a foreign country at the time that he attended a convention in such foreign country, such individual’s attendance at such convention shall not be considered as attendance at a foreign convention.”. (3) 26 USC 274. Technical amendment.— The first sentence of section 274(h)(3) is amended by striking out “more than, one-half” and inserting in lieu thereof “at least one-half”. (4) 26 USC 274 note. Effective date.— The amendments made by this subsection shall apply to conventions beginning after December 31, 1976. (h) Rental of Former Principal Residence.— (1) 26 USC 280A. In general.— Subsection (d) of section 280A (relating to use of residence for personal purposes) is amended by adding at the end thereof the following new paragraph: “(3) Rental of principal residence.— “(A) In general.— For purposes of applying subsection (c)(5) to deductions allocable to a qualified rental period, a taxpayer shall not be considered to have used a dwelling unit for personal purposes for any day during the taxable year which occurs before or after a qualified rental period described in subparagraph (B)(i), or before a qualified rental period described in subparagraph (B)(ii), if with respect to such day such unit constitutes the principal residence 26 USC 1034. (within the meaning of section 1034) of the taxpayer. “(B) Qualified rental period.— For purposes of subparagraph (A), the term ‘qualified rental period’ means a consecutive period of— “(i) 12 or more months which begins or ends in such taxable year, or “(ii) less than 12 months which begins in such taxable year and at the end of which such dwelling unit is sold or exchanged, and for which such unit is rented to a person other than a 26 USC 267. member of the family (as defined in section 267(c)(4)) of the taxpayer, or is held for rental, at a fair rental.” (2) 26 USC 280A note.26 USC 280A.26 USC 601.26 USC 337. Effective date.— The amendment made by paragraph (1) shall take effect as if included in section 280A of the Internal Revenue Code of 1954, as such provision was added to such Code by section 601(a) of the Tax Reform Act of 1976. (i) Clarification of Last Sentence of Section 337(c)(2).— (1) In general.— Subsection (c) of section 337 (relating to limitations on application of section 337) is amended by striking out the last sentence of paragraph (2) and by adding at the end of such subsection the following new paragraph: “(3) Special rule for affiliated group.— “(A) In general.— Paragraph (2) shall not apply to a sale or exchange by a corporation (hereinafter in this paragraph referred to as the ‘selling corporation’) if— “(i) within the 12-month period beginning on the date of the adoption of a plan of complete liquidation by the selling corporation, the selling corporation and each distributee corporation is completely liquidated, and “(ii) none of the complete liquidations referred to in clause (i) is a liquidation with respect to which section 333 applies. 26 USC 333. “(B) Definitions.— For purposes of subparagraph (A)— “(i) The term ‘distributee corporation’ means a corporation in the chain of includible corporations to which the selling corporation or a corporation above the selling corporation in such chain makes a distribution in complete liquidation within the 12-month period referred to in subparagraph (A)(i). “(ii) The term ‘chain of includible corporation’ includes, in the case of any distribution, any corporation which (at the time of such distribution) is in a chain of includible corporations for purposes of section 1504(a) 26 USC 1504. (determined without regard to the exceptions contained in section 1504(b)). Such term includes, where appropriate, the common parent corporation.” (2) Effective date.— The amendment made by paragraph (1) 26 USC 337 note. shall apply to sales or exchanges made pursuant to a plan of complete liquidation adopted after December 31, 1975. (j) Certain Transactions Involving 2 or More Investment Companies.— (1) Amendments of section 368(a)(2)(f).— (A) The first sentence of clause (iii) of section 368(a)(2)(F) is amended— (i) by striking out “more than 50 percent” and inserting in lieu thereof “50 percent or more”; and (ii) by striking out “more than 80 percent” and inserting in lieu thereof “80 percent or more.” (B) The first sentence of clause (vi) of section 368(a)(2)(F) is amended by striking out “is not diversified within the meaning” and inserting in lieu thereof “does not meet the requirements”. (C) The second sentence of such clause (vi) is amended to read as follows: “If such investment company acquires stock of another corporation in a reorganization described in section 368(a)(1)(B), clause (i) shall be applied to the shareholders of such investment company as though they had exchanged with such other corporation all of their stock in such company for stock having a fair market value equal to the fair market value of their stock of such investment company immediately after the exchange.” (D) Subparagraph (F) of section 368(a)(2) is amended by adding at the end thereof the following new clauses: “(vii) For purposes of clauses (ii) and (iii), the term ‘securities’ includes obligations of State and local governments, commodity futures contracts, shares of regulated investment companies and real estate investment trusts, and other investments constituting a security within the meaning of the Investment Company Act of 1940(15 U.S.C. 80a–2(36)). “(viii) In applying paragraph (3) of section 267(b) in 26 USC 267. respect of any transaction to which this subparagraph applies, the reference to a personal holding company in such paragraph (3) shall be treated as including a reference to an investment company and the determination of whether a corporation is an investment company shall be made as of the time immediately before the transaction instead of with respect to the taxable year referred to in such paragraph (3).” (2) 26 USC 368 note. Effective dates.— (A) Except as provided in subparagraphs (B) and (C), the amendments made by paragraph (1) shall apply as if 26 USC 368. included in section 368(a)(2)(F) of the Internal Revenue Code of 1954 as added by section 2131(a) of the Tax Reform Act of 1976. (B) Clause (viii) of section 368(a)(2)(F) of the Internal Revenue Code of 1954 (as added by paragraph (D) shall apply only with respect to losses sustained after September 26, 1977. (C) Clause (vii) of section 368(a)(2)(F) of the Internal Revenue Code of 1954 (as added by paragraph (1)) shall apply only with respect to transfers made after September 26, 1977. (k) At Risk Provisions.— (1) 26 USC 465 note. Clerical amendment to effective date.— Subparagraph (A) of section 204(c)(3) of the Tax Reform Act of 1976 is amended by striking out “section 465(c)(1)(B)” and inserting in lieu thereof “section 465(c)(1)(C)”. (2) 26 USC 465. Clarification of section 465(d).— Subsection (d) of section 465 (defining loss for purposes of the at risk provisions) is amended by striking out “(determined without regard to this section)” and inserting in lieu thereof “(determined without regard to the first sentence of subsection (a))”. (3) 26 USC 465 note. Effective date.— The amendments made by this subsection shall take effect on October 4, 1976. (l) Amendments Relating to Use of Accrual Accounting for Farming.— (1) Automatic 10-year adjustment period for farming corporations required to use accrual accounting.— Paragraph 26 USC 447. (3) of section 447(f) (relating to coordination with section 481) is amended— (A) by striking out “(except as otherwise provided in such regulations)”, and (B) by inserting “(or the remaining taxable years where there is a stated future life of less than 10 taxable years)” after “10 taxable years”. (2) 26 USC 447 note. Automatic 10-year adjustment for farming syndicates changing to accrual accounting.— If— (A) 26 USC 464. a farming syndicate (within the meaning of section 464(c) of the Internal Revenue Code of 1954) was in existence on December 31, 1975, and (B) such syndicate elects an accrual method of accounting (including the capitalization of preproductive period 26 USC 447. expenses described in section 447(b) of such Code) for a taxable year beginning before January 1, 1979, then such election shall be treated as having been made with the consent of the Secretary of the Treasury or his delegate and, under regulations prescribed by the Secretary of the Treasury or his delegate, the net amount of the adjustments required by 26 USC 481. section 481(a) of such Code to be taken into account by the taxpayer in computing taxable income shall be taken into account in each of the 10 taxable years (or the remaining taxable years where there is a stated future life of less than 10 taxable years) beginning with the year of change. (3) Extending family attribution to spouse in the farming syndicate rules.— (A) Subparagraph (E) of section 464(c)(2) (defining farming 26 USC 464. syndicate) is amended by striking out “(within the meaning of section 267(c)(4))” and inserting in lieu thereof “(or a 26 USC 267. spouse of any such member)”. (B) Paragraph (2) of section 464(c) is amended by adding at the end thereof the following new sentence: “For purposes of subparagraph (E), the term ‘family’ has the meaning given to such term by section 267(c)(4).” (4) Effective date.— The amendment made by paragraphs (1) 26 USC 447 note. and (3) shall take effect as if included in section 447 or 464 (as the case may be) of the Internal Revenue Code of 1954 at the time of 26 USC 447, 464. the enactment of such sections. (m) Extension of Certain Provisions to Foreign Personal Holding Companies.— (1) Section 189.— Subsection (a) of section 189 (relating to 26 USC 189. amortization of real property construction period interest and taxes) is amended— (A) by striking out “an electing small business corporation (within the meaning of section 1371(b)), or personal holding 26 USC 1371. 26 USC 542. company (within the meaning of section 542),”; and 26 USC 542. (B) by adding at the end thereof the following new sentence: “For purposes of this section, an electing small business corporation (as defined in section 1371(b)), a personal holding company (as defined in section 542), and a foreign personal holding company (as defined in section 552) shall be 26 USC 552. treated as an individual.” (2) Section 280.— Subsection (a) of section 280 (relating to 26 USC 280. certain expenditures incurred in production of films, books, records, or similar property) is amended— (A) by striking out “Except in the case of a corporation (other than an electing small business corporation (as defined in section 1371(b)) or a personal holding company (as defined in section 542) and except” and inserting in lieu thereof “In the case of an individual, except”; and (B) by adding at the end thereof the following new sentence: “For purposes of this section, an electing small business corporation (as defined in section 1371(b)), a personal holding company (as defined in section 542), and a foreign personal holding company (as defined in section 552) shall be 26 USC 552. treated as an individual.” (3) Effective dates.— (A) The amendments made by paragraph (1) shall take 26 USC 189 note. effect as if included in the amendment made by section 201(a) of the Tax Reform Act of 1976. 26 USC 189. 26 USC 280 note. (B) The amendments made by paragraph (2) shall take effect as if included in the amendment made by section 210(a) of the Tax Reform Act of 1976. (n) Definition of Condominium Management Association.— (1) In general.— Paragraph (2) of section 528(c) (defining 26 USC 528. condominium management association) is amended by striking out “as residences” and inserting in lieu thereof “by individuals for residences”. (2) Effective date.— The amendment made by paragraph (1) 26 USC 528 note. shall apply to taxable years beginning after December 31, 1973. (o) Definition of Personal Holding Company.— (1) 26 USC 542 note.26 USC 542. In general.— The last sentence of section 542(a)(2) of the Internal Revenue Code of 1954 (relating to stock ownership requirement) shall not apply in the case of an organization or trust organized or created before July 1, 1950, if at all times on or after July 1, 1950, and before the close of the taxable year such organization or trust has owned all of the common stock and at least 80 percent of the total number of shares of all other classes of stock of the corporation. (2) 26 USC 542 note. Effective date.— The provisions of paragraph (1) shall apply with respect to taxable years beginning after December 31, 1976. (p) Special Rule for Gain on Property Transferred to Trust at Less Than Fair Market Value.— (1) Additional tax to apply only to recognized gains.— (A) In general.— Subsections (a)(1), (a)(2), and (b)(1) of 26 USC 644. section 644 (relating to special rule for gain on property transferred to trust at less than fair market value) are each amended by striking out “gain realized” each place it appears and inserting in lieu thereof “gain recognized”. (B) Special rule for substituted basis property.— Subsection (d) of section 644 (relating to special rule for short sales) is amended to read as follows: “(d) Special Rules.— “(1) Short sales.— If the trust sells the property referred to in subsection (a) in a short sale within the 2-year period referred to in such subsection, such 2-year period shall be extended to the date of the closing of such short sale. “(2) Substituted basis property.— For purposes of this section, in the case of any property held by the trust which has a basis determined in whole or in part by reference to the basis of any other property which was transferred to the trust— “(A) the initial transfer of such property in trust by the transferor shall be treated as having occurred on the date of the initial transfer in trust of such other property, “(B) subsections (a)(1)(B) and (b)(2) shall be applied by taking into account the fair market value and the adjusted basis of such other property, and “(C) the amount determined under subsection (b)(2) with respect to such other property shall be allocated (under regulations prescribed by the Secretary) among such other property and all properties held by the trust which have a basis determined in whole or in part by reference to the basis of such other property.” (2) Treatment of net operating losses, capital losses, etc., which may affect transferor’s tax in other years.— Section 644(a)(2) (relating to additional tax on gain on property transferred to trust at less than fair market value) is amended by adding at the end thereof the following new sentence: “The determination of tax under clause (i) of subparagraph (A) shall be made by not taking into account any carryback, and by not taking into account any loss or deduction to the extent that such loss or deduction may be carried by the transferor to any other taxable year.” (3) Technical amendment.— Paragraph (1) of section 644(f) is amended by striking out “subsection (a)” and inserting in lieu thereof “subsection (a) (other than the 2-year requirement of paragraph (1)(A) thereof)”. (4) Conforming amendment to revision of section 644.— Section 1402(b)(1) of the Tax Reform Act of 1976 (relating to holding period for long-term capital gains treatment) is amended by striking out subparagraph (K) thereof. (5) Effective dates.— (A) Except as provided in subparagraph (B), the amendment made by this subsection shall apply to transfers in trust made after May 21, 1976. (B) The amendment made by paragraph (4) shall take effect on October 4, 1976. (q) Allowance of Foreign Tax Credit for Accumulation Distributions.— (1) Special rules for foreign trust.— (A) Subsection (d) of section 665 is amended to read as 26 USC 665. follows: “(d) Taxes Imposed on the Trust.— For purposes of this subpart— “(1) In general.— The term ‘taxes imposed on the trust’ means the amount of the taxes which are imposed for any taxable year of the trust under this chapter (without regard to this subpart or subpart A of part IV of subchapter A) and which, under regulations prescribed by the Secretary, are properly allocable to the undistributed portions of distributable net income and gains in excess of losses from sales or exchanges of capital assets. The amount determined in the preceding sentence shall be reduced by any amount of such taxes deemed distributed under section 666 (b) and (c) or 669 (d) and (e) to any beneficiary. 26 USC 666, 669. “(2) Foreign trusts.— In the case of any foreign trust, the term ‘taxes imposed on the trust’ includes the amount, reduced as provided in the last sentence of paragraph (1), of any income, war profits, and excess profits taxes imposed by any foreign country or possession of the United States on such foreign trust which, as determined under paragraph (1), are so properly allocable.” (B) Section 667 is amended by adding at the end thereof the following new subsection: “(d) Special Rules for Foreign Trust.— “(1) Foreign tax deemed paid by beneficiary.— “(A) In general.— In determining the increase in tax under subsection (b)(1)(D) for any computation year, the taxes described in section 665(d)(2) which are deemed distributed under section 666 (b) or (c) and added under subsection (b)(1)(C) to the taxable income of the beneficiary for any computation year shall, except as provided in subparagraphs (B) and (C), be treated as a credit against the increase in tax for such computation year under subsection (b)(1)(D). “(B) Deduction in lieu of credit.— If the beneficiary did not choose the benefits of subpart A of part III of subchapter N with respect to the computation year, the beneficiary may in lieu of treating the amounts described in subparagraph (A) (without regard to subparagraph (C)) as a credit may treat such amounts as a deduction in computing the beneficiary’s taxable income under subsection (b)(1)(C) for the computation year. “(C) Limitation on credit; retention of character.— “(i) Limitation on credit.— For purposes of determining under subparagraph (A) the amount treated as a credit for any computation year, the limitations under subpart A of part III of subchapter N shall be applied separately with respect to amounts added under subsection (b)(1)(C) to the taxable income of the beneficiary for such computation year. For purposes of computing the increase in tax under subsection (b)(1)(D) for any computation year for which the beneficiary did not choose the benefits of subpart A of part III of subchapter N, the beneficiary shall be treated as having chosen such benefits for such computation year. “(ii) Retention of character.— The items of income, deduction, and credit of the Trust shall retain their 26 USC 904. character (subject to the application of section 904(f)(5)) to the extent necessary to apply this paragraph. “(D) Computation year.— For purposes of this paragraph, the term ‘computation year’ means any of the three taxable years remaining after application of subsection (b)(1)(B).”. (C) 26 USC 667. The last sentence of section 667(b)(1) is amended by inserting “(other than the amount of taxes described in Ante, p. 2909. 26 USC 904. section 665(d)(2))” after “taxes”. (2) Recapture of overall foreign loss.— Section 904(f) is amended by adding at the end thereof the following new paragraph: “(5) Accumulation distributions of foreign trust.— For purposes of this chapter, in the case of amounts of income from sources without the United States which are treated under 26 USC 666. section 666 (without regard to subsections (b) and (c) thereof if the taxpayer chose to take a deduction with respect to the amounts 26 USC 667. described in such subsections under section 667(d)(1)(B)) as having been distributed by a foreign trust in a preceding taxable year, that portion of such amounts equal to the amount of any overall foreign loss sustained by the beneficiary in a year prior to the taxable year of the beneficiary in which such distribution is received from the trust shall be treated as income from sources within the United States (and not income from sources without the United States) to the extent that such loss was not used under this subsection in prior taxable years, or in the current taxable year, against other income of the beneficiary.”. (3) Effective dates.— (A) 26 USC 665 note. The amendments made by paragraph (1) shall apply to distributions made in taxable years beginning after December 31, 1975. (B) 26 USC 904 note.26 USC 904.26 USC 904. The amendments made by paragraph (2) shall take effect as if included in section 904(f) of the Internal Revenue Code of 1954, as such provision was added to such Code by section 1032(a) of the Tax Reform Act of 1976. (r) Retention of Character of Amounts Distributed From Accumulation Trust to Nonresident Auens and Foreign Corporations.— (1) 26 USC 667. In general.— Section 667 (relating to treatment of amounts deemed distributed by trust in preceding years) is amended by adding at the end thereof the following new subsection: “(e) Retention of Character of Amounts Distributed From Accumulation Trust to Nonresident Auens and Foreign Corporations.— In the case of a distribution from a trust to a nonresident alien individual or to a foreign corporation, the first sentence of subsection (a) shall be applied as if the reference to the determination 26 USC 662. of character under section 662(b) applied to all amounts instead of just to tax-exempt interest.” (2) Effective date.— The amendment made by paragraph (1) 26 USC 667 note. shall apply to distributions made in taxable years beginning after December 31, 1975. (s) Exempt Interest Dividends of Regulated Investment Companies.— (1) Treatment of tax-exempt interest for purposes of the 90-percent and 30-percent tests.— Subsection (b) of section 851 26 USC 851. (relating to limitations on the definition of regulated investment company) is amended by adding at the end thereof the following new sentence: “For purposes of paragraphs (2) and (3), amounts excludable from gross income under section 103(a)(1) shall be 26 USC 103. treated as included in gross income.” (2) Losses attributable to tax-exempt interest where stock is held less than 31 days.— Paragraph (4) of section 852(b) 26 USC 852. (relating to loss on sale or exchange of stock held less than 31 days) is amended to read as follows: “(4) Loss on sale or exchange of stock held less than 31 days.— “(A) Loss attributable to capital gain dividend.— If— “(i) under subparagraph (B) or (D) of paragraph (3) a shareholder of a regulated investment company is required, with respect to any share, to treat any amount as a long-term capital gain, and “(ii) such share is held by the taxpayer for less than 31 days, then any loss (to the extent not disallowed under subparagraph (B)) on the sale or exchange of such share shall, to the extent of the amount described in clause (i), be treated as a long-term capital loss. “(B) Loss attributable to exempt-interest dividend.— If— “(i) a shareholder of a regulated investment company receives an exempt-interest dividend with respect to any share, and “(ii) such share is held by the taxpayer for less than 31 days, then any loss on the sale or exchange of such share shall, to the extent of the amount of such exempt-interest dividend, be disallowed. “(C) Determination of holding periods.— For purposes of this paragraph, the rules of section 246(c)(3) shall apply in 26 USC 246. determining whether any share of stock has been held for less them 31 days; except that ‘30 days’ shall be substituted for the number of days specified in subparagraph (B) of section 246(C)(3).” (3) Effective date.— The amendments made by this section 26 USC 851 note. shall apply to taxable years beginning after December 31, 1975. (t) Amendments Relating to Real Estate Investment Trusts.— (1) Annual accounting period.— Section 859 (relating to 26 USC 859. adoption of annual accounting period), as redesignated by the Act, is further amended to read as follows: “SEC. 859. ADOPTION OF ANNUAL ACCOUNTING PERIOD. “For purposes of this subtitle— “(1) a real estate investment trust shall not change to any accounting period other than the calendar year, and “(2) a corporation, trust, or association may not elect to be a real estate investment trust for any taxable year beginning after October 4, 1976, unless its accounting period is the calendar year. Paragraph (2) shall not apply to a corporation, trust, or association which was considered to be a real estate investment trust for any taxable year beginning on or before October 4, 1976.” (2) 26 USC 856. Amendment of section 856(c)(3)(d).— Subparagraph (D) of section 856(c)(3) is amended by inserting “(other than gain from prohibited transactions)” after “and gain”. (3) Excise tax on reft undistributed income.— (A) 26 USC 6501. Paragraph (3) of section 6501(e) (relating to limitations on assessment and collection) is amended by striking out “or 43” and inserting in lieu thereof “43, or 44”. (B) 26 USC 275. Subsection (b) of section 1605 of the Tax Reform Act of 1976 (relating to technical amendments) is amended by striking out paragraph (1) thereof. (C) 26 USC 6212. Subparagraph (D) of section 1605(b)(5) of the Tax Reform Act of 1976 is amended to read as follows: “(D) 26 USC 4971. by striking out ‘of chapter 43 tax for the same taxable years,’ in subsection (c)(1) and inserting in lieu thereof ‘of 26 USC 4971, 4981. chapter 43 tax for the same taxable year, of chapter 44 tax for the same taxable year,’.” (4) Correction of cross reference.— Subparagraph (B) of 26 USC 859. section 859(b)(2) is amended by striking out “section 6601(c)” and inserting in lieu thereof “section 6601(b)”. (5) 26 USC 859 note. Effective date.— The amendments made by this subsection shall take effect on October 4, 1976. (u) Amendments Relating to Treatment of Foreign Income.— (1) Foreign tax credits not disallowed on certain distributions made by possessions corporations.— (A) 26 USC 901. In general.— Paragraph (1) of section 901(g) (relating to certain taxes paid with respect to distributions from possessions corporations) is amended to read as follows: “(1) In general.— For purposes of this chapter, any tax of a foreign country or possession of the United States which is paid or accrued with respect to any distribution from a corporation— “(A) to the extent that such distribution is attributable to periods during which such corporation is a possessions corporation, and “(B) (i) if a dividends received deduction is allowable with respect to such distribution under part VIII of subchapter B, or “(ii) to the extent that such distribution is received in connection with a liquidation or other transaction with respect to which gain or loss is not recognized, shall not be treated as income, war profits, or excess profits taxes paid or accrued to a foreign country or possession of the United States, and no deduction shall be allowed under this title with respect to any amount so paid or accrued.” (B) Definition of possessions corporation.— Paragraph (2) of section 901(g) (defining possessions corporation) is amended— (i) 26 USC 931. by striking out “or during which section 931” and inserting in lieu thereof “, during which section 931”, and (ii) by inserting before the period at the end thereof the following: “, or during which section 957(c) applied to such corporation”. (C) Effective dates.— The amendment made by subparagraph 26 USC 901 note. (A) shall apply as if included in section 901(g) of the Internal Revenue Code of 1954 as added by section 1051(d)(2) 26 USC 901. of the Tax Reform Act of 1976. The amendments made by subparagraph (B) shall apply to distributions made after the date of the enactment of this Act in taxable years ending after such date. (2) Foreign tax credit adjustments for capital gains.— (A) In general.— Paragraph (2) of section 904(b) (relating to treatment of capital gains for purposes of the foreign tax credit limitation) is amended by striking out “For purposes of subsection (a)—” and inserting in lieu thereof “For purposes of this section—”. (B) Source rule.— Subparagraph (C) of section 904(b)(3) is amended by striking out “For purposes of this paragraph, there” and inserting in lieu thereof “There”. (C) Source rule for liquidations of certain foreign corporations.— Paragraph (3) of section 904(b) (relating to source rules for gain from the sale of certain personal property) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (O the following new subparagraph: “(D) Gain from liquidation of certain foreign corporations.— Subparagraph (C) shall not apply with respect to a distribution in liquidation of a foreign corporation to which part II of subchapter C applies if such corporation derived less than 50 percent of its gross income from sources within the United States for the 3-year period ending with the close of such corporation’s taxable year immediately preceding the year during which the distribution occurred.” (D) Effective date.— The amendments made by this paragraph 26 USC 904 note. shall apply to taxable years beginning after December 31, 1975. (3) Treatment of certain capital loss carryovers and carrybacks for purposes of the limitation on credit for foreign taxes.— (A) In general.— Clause (iii) of section 904(b)(2)(A) (relating 26 USC 904. to treatment of capital gains of corporations for purposes of the foreign tax credit limitation) is amended by striking out “any net capital loss” and inserting in lieu thereof “for purposes of determining taxable income from sources without the United States, any net capital loss (and any amount which is a short-term capital loss under section 1212(a))”. 26 USC 1212. 26 USC 904 note. (B) Effective date.— The amendment made by subparagraph (A) shall apply to taxable years beginning after December 31, 1975. (4) Treatment of capital loss carryovers for purposes of foreign loss recapture.— (A) In general.— Subparagraph (a) of section 904(f)(2) 26 USC 904. (defining overall foreign loss) is amended by striking out “or any capital loss carrybacks and carryovers to such year under section 1212”. 26 USC 1212. (B) Foreign oil related losses.— Subparagraph (A) of section 904(f)(4) (relating to determination of foreign oil 26 USC 904. 26 USC 907. related loss where section 907 applies) is amended by striking out “or any capital loss carrybacks and carryovers to 26 USC 1212. such year under section 1212”. (C) 26 USC 904 note. Effective date.— The amendments made by this paragraph shall apply— (i) to overall foreign losses sustained in taxable years beginning after December 31, 1975, and (ii) to foreign oil related losses sustained in taxable years ending after December 31, 1975. (5) Effective date for recapture of foreign oil related losses.— (A) 26 USC 904 note. In general.— Paragraph (1) of section 1032(c) of the Tax Reform Act of 1976 is amended to read as follows: “(1) In general.— Except as provided in paragraphs (2), (3), and (5), the amendment made by subsection (a) shall apply to losses sustained in taxable years beginning after December 31, 1975. The amendment made by subsection (b)(1) shall apply to taxable years beginning after December 31, 1975. The amendment made by subsection (b)(2) shall apply to losses sustained in taxable years ending after December 31, 1975.” (B) 26 USC 904 note. Foreign oil related losses.— Subsection (c) of section 1032 of the Tax Reform Act of 1976 is amended by adding at the end thereof the following new paragraph: “(5) Foreign oil related losses.— The amendment made by subsection (a) shall apply to foreign oil related losses sustained in taxable years ending sifter December 31, 1975.” (6) 26 USC 904 note. Transitional rules for certain mining operations.— The second sentence of paragraph (2) of section 1031(c) of the Tax Reform Act of 1976 is amended to read as follows: “In the case of a loss sustained in a taxable year beginning before January 1, 1979, by any corporation to which this paragraph applies, if 26 USC 904. section 904(a)(1) of such Code (as in effect before the enactment of this Act) applies with respect to such taxable year, the provisions of section 904(f) of such Code shall be applied with respect to such loss under the principles of such section 904(a)(1).” (7) Transitional rules for recapture of certain foreign losses.— (A) 26 USC 904 note. Computation of deficit in earnings and profits for purposes of the recapture of certain foreign losses.— Paragraph (4) of section 1032(c) of the Tax Reform Act of 1976 (relating to limitation based on deficit in earnings and profits for purposes of the recapture of foreign losses) is amended by adding at the end thereof the following new sentence: “For purposes of the preceding sentence, there shall be taken into account only earnings and profits of the corporation which (A) were accumulated in taxable years of the corporation beginning after December 31, 1962, and during the period in which the stock of such corporation from which the loss arose was held by the taxpayer and (B) are attributable to such stock.” (B) Recapture of possession losses during transitional period where taxpayer is on a per-country basis.— (i) 26 USC 904 note. Subsection (c) of section 1032 of the Tax Reform Act of 1976 (relating to effective dates for recapture of foreign losses) is amended by adding at the end thereof the following new paragraph: “(6) Recapture of possession losses during transitional period where taxpayer is on a per-country basis.— “(A) Application of paragraph.— This paragraph shall apply if— “(i) the taxpayer sustained a loss in a possession of the United States in a taxable year beginning after December 31, 1975, and before January 1, 1979, “(ii) such loss is attributable to a trade or business engaged in by the taxpayer in such possession on January 1, 1976, and “(iii) the taxpayer chooses to have the benefits of subpart A of part III of subchapter N apply for such taxable year and section 904(a)(1) of the Internal Revenue Code of 1954 (as in effect before the enactment of 26 USC 904. this Act) applies with respect to such taxable year. “(B) No recapture during transition period.— In any case to which this paragraph applies, for purposes of determining the liability for tax of the taxpayer for taxable years beginning before January 1, 1979, section 904(0 of the Internal Revenue Code of 1954 shall not apply with respect to the loss described in subparagraph (A)(i). “(C) Recapture of loss after the transition period.— In any case to which this paragraph applies— “(i) for purposes of determining the liability for tax of the taxpayer for taxable years beginning after December 31, 1978, section 904(0 of the Internal Revenue Code of 1954 shall be applied with respect to the loss described in subparagraph (A)(i) under the principles of section 904(a)(1) of such Code (as in effect before the enactment of this Act); but “(ii) in the case of any taxpayer and any possession, the aggregate amount to which such section 904(0 applies by reason of clause (i) shall not exceed the sum of the net incomes of all affiliated corporations from such possession for taxable years of such affiliated corporations beginning after December 31, 1975, and before January 1, 1979. “(D) Taxpayers not engaged in trade on business on January 1, 1976.— In any case to which this paragraph applies but for the fact that the taxpayer was not engaged in a trade or business in such possession on January 1, 1976, for purposes of determining the liability for tax of the taxpayer for taxable years beginning before January 1, 1979; if section 904(a)(1) of such Code (as in effect before the enactment of this Act) applies with respect to such taxable year, the provisions of section 904(f) of such Code shall be applied with respect to the loss described in subparagraph (A)(i) under the principles of such section 904(a)(1). “(E) Affiliated corporation defined.— For purposes of subparagraph (C)(ii), the term ‘affiliated corporation’ means a corporation which, for the taxable year for which the net income is being determined, was not a member of the same affiliated group (within the meaning of section 1504 of the Internal Revenue Code of 1954) as the taxpayer but would 26 USC 1504. have been a member of such group but for the application of subsection (b) of such section 1504.” (ii) 26 USC 904 note. Paragraph (3) of section 1031(c) of the Tax Reform Act of 1976 is amended by striking out the last sentence. (8) Limitations on foreign tax credit where individual has foreign oil and gas extraction income.— (A) Reduction in foreign tax credit for certain individuals having foreign oil and gas extraction income.— 26 USC 907. Subsection (a) (as amended by this Act) of section 907 (relating to special rules in case of foreign oil and gas income) is further amended to read as follows: “(a) Reduction in Amount Allowed as Foreign Tax Under Section 901.— In applying section 901, the amount of any oil and gas extraction taxes paid or accrued (or deemed to have been paid) during the taxable year which would (but for this subsection) be taken into account for purposes of section 901 shall be reduced by the amount (if any) by which the amount of such taxes exceeds the product of— “(1) the amount of the foreign oil and gas extraction income for the taxable year, “(2) multiplied by— “(A) in the case of a corporation, the percentage which is 26 USC 11. equal to the highest rate of tax specified under section 11(b), or “(B) in the case of an individual, a fraction the numerator of which is the tax against which the credit under section 26 USC 901. 901(a) is taken and the denominator of which is the taxpayer’s entire taxable income.” (B) 26 USC 904. Application of section 904 separately to foreign oil related income of individuals.— Subsection (b) of section 26 USC 907, 904. 907 (relating to application of section 904 limitation) is amended to read as follows: “(b) Application of Section 904 Limitation.— The provisions of section 904 shall be applied separately with respect to— “(1) foreign oil related income, and “(2) other taxable income.” (C) Technical amendment.— Paragraph (4) of section 26 USC 904. 904(f) (relating to recapture of overall foreign loss) is amended by striking out “In the case of a corporation to 26 USC 907. which section 907(b)(1) applies” and inserting in lieu thereof “In making the separate computation under this subsection with respect to foreign oil related income which is required by section 907(b)”. (D) 26 USC 907 note. Effective dates.— (i) The amendments made by this paragraph shall apply, in the case of individuals, to taxable years ending after December 31, 1974, and, in the case of corporations, to taxable years ending after December 31, 1976. (ii) In the case of any taxable year ending after December 31, 1975, with respect to foreign oil related income (within the meaning of section 907(c) of the 26 USC 907. 26 USC 904. Internal Revenue Code of 1954), the overall limitation provided by section 904(a)(2) of such Code shall apply and the per-country limitation provided by section 904(a)(1) of such Code shall not apply. (9) Effective date for disallowance of foreign tax credit for certain production-sharing contracts.— The second sentence of paragraph (3) of section 1035(c) of the Tax Reform Act of 1976 (relating to tax credit for production-sharing contracts) is amended to read as follows: “A contract described in the preced-ing sentence shall be taken into account under paragraph (1) only with respect to amounts (A) paid or accrued to the foreign government before January 1, 1978, and (B) attributable to income earned before such date.” (10) Foreign taxes attributable to section 911 exclusion.— (A) In general.— The last sentence of section 911(a) (relating to earned income from sources without the United States) is amended to read as follows: “An individual shall not be allowed as a deduction from his gross income any deductions (other than those allowed by section 151, 26 USC 151. relating to personal exemptions), to the extent that such deductions are properly allocable to or chargeable against amounts excluded from gross income under this subsection. For purposes of this title, the amount of the income, war profits, and excess profits taxes paid or accrued by any individual to a foreign country or possession of the United States for any taxable year shall be reduced by an amount determined by multiplying the amount of such taxes by a fraction— “(A) the numerator of which is the tax determined under subsection (d) (1) (B), and “(B) the denominator of which is the sum of the amount referred to in subparagraph (A), plus the limitation imposed for the taxable year by section 904(a).”. 26 USC 904. 26 USC 911 note. (B) Effective date.— The amendment made by subparagraph (A) shall apply to taxable years beginning after December 31, 1976. (11) Sale of assets by a possessions corporation.— (A) In general.— Subsection (a) of section 936 (relating to 26 USC 936. Puerto Rico and possession tax credit) is amended by redesignating paragraph (2) as paragraph (3) and by amending so much of paragraph (1) as precedes subparagraph (A) thereof to read as follows: “(1) In general.— Except as provided in paragraph (3), if a domestic corporation elects the application of this section and if the conditions of both subparagraph (A) and subparagraph (B) of paragraph (2) are satisfied, there shall be allowed as a credit against the tax imposed by this chapter an amount equal to the portion of the tax which is attributable to the sum of— “(A) the taxable income, from sources without the United States, from— “(i) the active conduct of a trade or business within a possession of the United States, or “(ii) the sale or exchange of substantially all of the assets used by the taxpayer in the active conduct of such trade or business, and “(B) the qualified possession source investment income. “(2) Conditions which must be satisfied.— The conditions referred to iq paragraph (1) are:”. (B) Income from sale of carryover basis property not taken into account.— (i) Subsection (d) of section 936 (relating to definitions) is amended by adding at the end thereof the following new paragraph: “(3) Carryover basis property.— “(A) In general.— Income from the sale or exchange of any asset the basis of which is determined in whole or in part by reference to its basis in the hands of another person shall not be treated as income described in subparagraph (A) or (B) of subsection (a)(1). “(B) Exception for possessions corporations, etc.— For purposes of subparagraph (A), the holding of any asset by another person shall not be taken into account if throughout the period for which such asset was held by such person 26 USC 931, 957. section 931, this section, or section 957(c) applied to such person.”. (ii) The heading of such subsection (d) is amended to read as follows: “(d) Definitions and Special Rules.—”. (C) 26 USC 936 note.26 USC 936. Effective date.— The amendments made by this paragraph shall apply as if included in section 936 of the Internal Revenue Code of 1954 at the time of its addition by section 1051(b) of the Tax Reform Act of 1976. (12) 26 USC 995 note. Gain on disposition of stock in a disc.— (A) Delay in effective date.— Paragraph (4) of section 1101(g) of the Tax Reform Act of 1976 (relating to effective date for amendment relating to gain or disposition of DISC stock) is amended by striking out “December 31, 1975” and inserting in lieu thereof “December 31, 1976”. (B) Technical amendment.— Paragraph (1) of section 26 USC 995. 995(c) (relating to gain on disposition of stock in a DISC) is amended by adding at the end thereof the following new sentence: “Subparagraph (C) shall not apply if the person receiving the stock in the disposition has a holding period for the stock which includes the period for which the stock was held by the shareholder disposing of such stock.” (C) 26 USC 995 note. Effective date.— The amendment made by subparagraph (B) shall apply to dispositions made after December 31, 1976, in taxable years ending after such date. (13) Limitation on partner’s tax where partner receives amount treated as sale of section 1248 stock.— (A) In general.— Section 751 (relating to unrealized receivables and inventory items) is amended by adding at the end thereof the following new subsection: “(e) Limitation on Tax Attributable to Deemed Sales of Section 1248 Stock.— For purposes of applying this section and sections 731, 736, and 741 to any amount resulting from the reference to section 1248(a) in the second sentence of subsection (c), in the case of an individual, the tax attributable to such amount shall be limited in the manner provided by subsection (b) of section 1248 (relating to gain from certain sales or exchanges of stock in certain foreign corporation).” (B) 26 USC 736. Cross reference.— Section 736 (relating to payments to a retiring partner or a deceased partner’s successor in interest) is amended by adding at the end thereof the following new subsection: “(c) Cross Reference.— “For limitation on the tax attributable to certain gain connected with section 1248 stock, see section 751(e).” (C) 26 USC 751 note. Effective date.— The amendments made by this paragraph shall apply to transfers beginning after October 9, 1975, and to sales, exchanges, and distributions taking place after such date. (14) Excise tax on transfers of property to foreign persons to avoid federal income tax.— (A) Transfers involving estates.— Section 1491 (relating 26 USC 1491. to tax on transfers to avoid income tax) is amended by striking out “trust” each place it appears therein and inserting in lieu thereof “estate or trust”. (B) Clarification of paragraph (3) of section 1492.— Paragraph (3) of section 1492 (relating to nontaxable transfers) 26 USC 1492. 26 USC 1491 note. is amended to read as follows: “(3) To a transfer described in section 367; or”. (C) Effective date.— The amendments made by this paragraph shall apply to transfers after October 2, 1975. (15) Election to treat nonresident alien individual as resident of the united states.— (A) Provisions affected by election.— Paragraph (1) of section 6013(g) (relating to election to treat nonresident alien 26 USC 6013. individual as resident of the United States) is amended to read as follows: “(1) In general.— A nonresident alien individual with respect to whom this subsection is in effect for the taxable year shall be treated as a resident of the United States— “(A) for purposes of chapters 1 and 5 for all of such taxable 26 USC 1 et seq., 1491 et seq. year, and “(B) for purposes of chapter 24 (relating to wage withholding) for payments of wages made during such taxable year.” (B) Conforming amendment.— Paragraph (5) of section 6013(g) (relating to termination of election by Secretary) is 26 USC 6013. amended by striking out “chapter 1” and inserting in lieu thereof “chapters 1 and 5”. (C) Year of residency.— Paragraph (1) of section 6013(h) (relating to return for year nonresident alien becomes resident) is amended— (i) by striking out “chapter 1” and inserting in lieu thereof “chapters 1 and 5”, and 26 USC 1 et seq., 1491 et seq. (ii) by inserting before the period at the end thereof the following: “, and for purposes of chapter 24 (relating 26 USC 3401 et seq. to wage withholding) for payments of wages made during such taxable year”. (D) Certain amounts withheld under chapter 3 treated as overpayments of tax.— Subsection (b) of section 6401 (relating to excessive credits) is amended by adding at 26 USC 6401. the end thereof the following new sentence: “For purposes of the preceding sentence, any credit allowed under paragraph (1) of section 32 (relating to withholding of tax on nonresident 26 USC 32. aliens and on foreign corporations) to a nonresident alien individual for a taxable year with respect to which an election under section 6013 (g) or (h) is in effect shall be 26 USC 6013. 26 USC 31. 26 USC 6013 note. treated as an amount allowable as a credit under section 31.” (E) Effective dates.— The amendments made by this paragraph— (i) to the extent that they relate to chapter 1 or 5 of the Internal Revenue Code of 1954, shall apply to taxable 26 USC 1 et seq., 1491 et seq. years ending on or after December 31, 1975, and (ii) to the extent that they relate to wage withholding under chapter 24 of such Code, shall apply to remuneration 26 USC 3401 et seq. paid on or after the first day of the first month which begins more than 90 days after the date of the enactment of this Act. (16) Nonresident alien individual allowed to be treated as resident of the united states.— (A) 26 USC 6013. In general.— Paragraph (2) of section 6013(g) (relating to election to treat nonresident alien individual as resident of the United States) is amended by striking out “who, at the time an election was made under this subsection,” and inserting in lieu thereof “who, at the close of the taxable year for which an election under this subsection was made,”. (B) 26 USC 6013 note. Effective date.— The amendment made by subparaKaph (A) shall apply to taxable years beginning after December 31, 1975. (v) Amendment of Section 1239(a).— (1) 26 USC 1239. In general.— Subsection (a) of section 1239 (relating to gain from sale of depreciable property between certain related tax-payers) is amended by striking out “subject to the allowance for depreciation provided in section 167” and inserting in lieu thereof “of a character which is subject to the allowance for 26 USC 167. 26 USC 1239 note. 26 USC 1239. depreciation provided in section 167”. (2) Effective date.— The amendment made by paragraph (1) shall apply as if included in the amendment made to section 1239 of the Internal Revenue Code of 1954 by section 2129(a) of the Tax Reform Act of 1976. (w) Recapture of Depreciation on Player Contracts.— (1) 26 USC 1245. In general.— Subparagraph (C) of section 1245(a)(4) (defining previously unrecaptured depreciation with respect to contracts transferred) is amended to read as follows: (C) Previously unrecaptured depreciation with respect to contracts transferred.— For purposes of subparagraph (A)(ii), the term ‘previously unrecaptured depreciation’ means the amount of any deduction allowed or allowable to the taxpayer transferor for the depreciation of any contracts involved in such transfer.” (2) Recapture of depreciation with respect to initial contracts.— Subparagraph (B) of section 1245(a)(4) (defining previously unrecaptured depreciation with respect to initial contracts) is amended— (A) by inserting “attributable to periods after December 31, 1975,” after “depreciation” in clause (i), (B) by inserting “incurred after December 31, 1975,” after “losses” in clause (i), and (C) by inserting “described in clause (i)” after “amounts” in clause (ii). (3) 26 USC 1245 note. Effective date.— The amendments made by this subsection shall apply to transfers of player contracts in connection with any sale or exchange of a franchise after December 31, 1975. (x) Treatment of Pensions and Annuities for 50-Percent Maximum Rate on Personal Service Income.— (1) 26 USC 1348. In general.— Subparagraph (A) of section 1348(b)(1) (defining personal service income) is amended by striking out “pension or annuity” and inserting in lieu thereof “pension or annuity which arises from an employer-employee relationship or from tax-deductible contributions to a retirement plan”. (2) Technical amendment.— The last sentence of section 1348(b) is amended by striking out “earned income” and inserting in lieu thereof “personal service income”. (3) Effective date.— The amendments made by this section 26 USC 1348 note. shall apply to taxable years beginning after December 31, 1976. (y) Changes in the Subchapter S Provisions.— (1) Grantor trust may be treated as permitted shareholder after decedent’s death; grantor or grantor trust must be individual.— Paragraph (1) of subsection (e) of section 1371 (as redesignated by this Act) is amended to read as follows: “(1) (A) A trust all of which is treated as owned by the grantor 26 USC 1371. (who is an individual who is a citizen or resident of the United States) under subpart E of part I of subchapter J of this chapter. “(B) A trust which was described in subparagraph (A) immediately before the death of the grantor and which continues in existence after such death, but only for the 60-day period beginning on the day of the grantor’s death. If a trust is described in the preceding sentence and if the entire corpus of the trust is includible in the gross estate of the grantor, the preceding sentence shall be applied by substituting ‘2-year period’ for ‘60- day period’.” (2) Effective date.— The amendment made by paragraph (1) 26 USC 1371 note. shall apply to taxable years beginning after December 31, 1976. (z) Withholding of Federal Taxes on Certain Individuals Engaged in Fishing.— (1) In general.— Section 1207(f)(4) of the Tax Reform Act of 26 USC 3121 note. 1976 (relating to effective date of provisions relating to withholding on certain individuals engaged in fishing) is amended by striking out “December 31, 1971” each place it appears and inserting in lieu thereof “December 31, 1954”. (2) Effective date.— The amendments made by paragraph (1) 26 USC 3121 note. shall take effect on October 4, 1976. (aa) Withdrawals From Individual Retirement Accounts, Etc.— (1) In general.— The last sentence of section 4973(b) (relating 26 USC 4973. to excess contributions to individual retirement accounts, etc.) is amended by striking out “solely because of employer contributions to a plan or contract described in section 219(b)(2)” and 26 USC 219. inserting in lieu thereof “solely because of ineligibility under section 219(b)(2) or section 220(b)(3)”. 26 USC 219, 220. (2) Effective date.— The amendment made by paragraph (1) shall apply as if included in section 1501 of the Tax Reform Act of 26 USC 4973 note. 1976 at the time of the enactment of such Act. (bb) Amendments Relating to Disclosure of Tax Returns.— (1) Disclosure of mailing address for purposes of collecting certain student loans.— (A) Subsection (m) of section 6103 (relating to disclosure of 26 USC 6103. taxpayer identity information) is amended to read as follows: “(m) Disclosure of Taxpayer Identity Information.— “(1) Tax refunds.— The Secretary may disclose taxpayer identity information to the press and other media for purposes of notifying persons entitled to tax refunds when the Secretary, after reasonable effort and lapse of time, has been unable to locate such persons. “(2) Federal claims.— Upon written request, the Secretary may disclose the mailing address of a taxpayer to officers and employees of an agency personally and directly engaged in, and solely for their use in, preparation for any administrative or judicial proceeding (or investigation which may result in such a proceeding) pertaining to the collection or compromise of a Federal claim against such taxpayer in accordance with the provisions of section 3 of the Federal Claims Collection Act of 31 USC 952. 1966. “(3) National institute for occupational safety and health.— Upon written request, the Secretary may disclose the mailing address of taxpayers to officers and employees of the National Institute for Occupational Safety and Health solely for the purpose of locating individuals who are, or may have been, exposed to occupational hazards in order to determine the status of their health or to inform them of the possible need for medical care and treatment. “(4) Individuals who have defaulted on student loans.— “(A) In general.— Upon written request by the Commissioner of Education, the Secretary may disclose the mailing address of any taxpayer who has defaulted on a loan made from the student loan fund established under part E of title 20 USC 1088 et seq. IV of the Higher Education Act of 1965 for use only for purposes of locating such taxpayer for purposes of collecting such loan. “(B) Disclosure to institutions.— Any mailing address disclosed under subparagraph (A) may be disclosed by the Commissioner of Education to any educational institution with which he has an agreement under part E of title IV of the Higher Education Act of 1965 only for use by officers, employees or agents of such institution whose duties relate to the collection of student loans for purposes of locating individuals who have defaulted on student loans made by such institution pursuant to such agreement for purposes of collecting such loans.” (B) 26 USC 6103. Paragraph (3) of section 6103(a) is amended by inserting “, subsection (m)(4)(B),” after “subsection (e)(1)(D)(iii)”. (C) 26 USC 7213. Paragraph (2) of section 7213(a) (relating to penalties for unauthorized disclosure of information) is amended— (i) by striking out “or any local” and inserting in lieu thereof “, any local”; (ii) by inserting “, or any educational institution” after “enforcement agency”; and (iii) 26 USC 6103. by striking out “section 6103(d) or (1)(6)” and inserting in lieu thereof “subsection (d), (1)(6), or (m)(4)(B) of section 6103”. (2) Disclosure of tax return information regarding special fuel excise taxes.— Subsection (d) of section 6103 (relating to disclosure to State tax officials) is amended by inserting “31,” after “24,”. (3) Return information other than taxpayer return information.— Paragraph (2) of section 6103(i) (relating to return information other than taxpayer return information) is amended by adding at the end thereof the following new sentence: “For purposes of this paragraph, the name and address of the tax-payer shall not be treated as taxpayer return information.” (4) Disclosure of return information concerning possible criminal activities.— Paragraph (3) of section 6103(i) (relating to disclosure of return information concerning possible criminal activities) is amended by adding at the end thereof the following new sentence: “For purposes of the preceding sentence, the name and address of the taxpayer shall not be treated as taxpayer return information if there is return information (other than taxpayer return information) which may constitute evidence of a violation of Federal criminal laws.” (5) Disclosure under tax conventions.— Section 6103(k)(4) 26 USC 6103. (relating to disclosure of return information under income tax conventions) is amended— (A) by striking out “income” in the caption thereof, (B) by inserting “or gift and estate tax” after “income tax”, and (C) by inserting or other convention relating to the exchange of tax information,” after “convention” the first place it appears. (6) Criminal penalty for unauthorized disclosure of information.— Section 7213(a) (relating to unauthorized disclosure of 26 USC 7213. information) is amended— (A) by striking out “to disclose” in paragraphs (1), (2), and (5) and inserting in lieu thereof “willfully to disclose”, (B) by striking out “to thereafter print or publish” in paragraph (3) and inserting in lieu thereof “thereafter will-fully to print or publish”, and (C) by striking out “to offer” in paragraph (4) and inserting in lieu thereof “willfully to offer”. (7) No civil liability for good faith but erroneous interpretation of disclosure requirements.— Section 7217 (relating to civil damages for unauthorized disclosure of return and return information) is amended— (A) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively; (B) by inserting after subsection (a) the following new subsection: “(b) No Liability for Good Faith but Erroneous Interpretation.— No liability shall arise under this section with respect to any disclosure which results from a good faith, but erroneous, interpretation of section 6103.”; and 26 USC 6103. (C) by striking out “An action” in subsection (d) (as so redesignated) and inserting in lieu thereof “Period for Bringing Action.—An action”. (8) Effective dates.— (A) Except as provided in subparagraph (B), the amendments made by this subsection shall take effect January 1, 1977. (B) The amendments made by paragraph (7) shall apply with respect to disclosures made after the date of the enactment of this Act. (cc) Amendments Relating to Income Tax Return Preparers.— (1) Negotiation of checks by bank.— Subsection (f) of section 6695 (relating to negotiation of check) is amended by adding at 26 USC 6695. the end thereof the following new sentence: “The preceding sentence shall not apply with respect to the deposit by a bank (within the meaning of section 581) of the full amount of the 26 USC 581. check in the taxpayer’s account in such bank for the benefit of the taxpayer.” (2) Definition.— Clause (iii) of section 7701(a)(36)(B) (relating 26 USC 7701. to exceptions from the definition of income tax return preparer) is amended to read as follows: “(iii) prepares as a fiduciary a return or claim for refund for any person, or”. (3) 26 USC 6695 note. Effective date.— The amendments made by this subsection shall apply to documents prepared after December 31, 1976. (dd) Clarification of Declaratory Judgment Provisions With Respect to Revocations of or Other Changes in the Qualifications of Certain Organizations.— (1) 26 USC 7476. Qualification of certain retirement plans.— Subsection (a) of section 7476 (relating to declaratory judgments relating to qualification of certain retirement plans) is amended by adding at the end thereof the following new sentence: “For purposes of this section, a determination with respect to a continuing qualification includes any revocation of or other change in a qualification.” (2) 26 USC 7428. Classification of organizations under section 50(c)(s), etc.— Subsection (a) of section 7428 (relating to declaratory judgments relating to status and classification of organizations 26 USC 501. under section 501(c)(3), etc.) is amended by adding at the end thereof the following new sentence: “For purposes of this section, a determination with respect to a continuing qualification or continuing classification includes any revocation of or other change in a qualification or classification.” (3) 26 USC 7476 note. Effective date.— The amendments made by paragraphs (1) and (2) shall take effect as if included in section 7476 or 7428 of 26 USC 7476, 7428. the Internal Revenue Code of 1954 (as the case may be) at the respective times such sections were added to such Code. (ee) Contributions of Certain Government Publications.— (1) 26 USC 1231. In general.— Paragraph (1) of section 1231(b) (relating to definition of property used in trade or business) is amended— (A) by striking out “or” at the end of subparagraph (B), (B) by striking out the period at the end of subparagraph (C) and inserting in lieu thereof a comma and “or”, and (C) by adding at the end thereof the following new subparagraph: “(D) a publication of the United States Government (including the Congressional Record) which is received from the United States Government, or any agency thereof, other than by purchase at the price at which it is offered for sale to the public, and which is held by a taxpayer described in 26 USC 1221. paragraph (6) of section 1221.”. (2) 26 USC 1231 note. Effective date.— The amendment made by paragraph (1) shall apply with respect to sales, exchanges, and contributions made after October 4, 1976. (ff) Exemption for Light-Duty Truck Parts.— (1) 26 USC 4063. In general.— Section 4063 (relating to exemption of motor vehicles and parts) is amended by adding at the end thereof the following new subsection: “(e) Parts for Light-Duty Trucks.— The tax imposed by section 4061(b) shall not apply to the sale by the manufacturer, producer, or importer of any article which is to be resold by the purchaser on or in connection with the first retail sale of a light-duty truck, as described 26 USC 4061. in section 4061(a)(2), or which is to be resold by the purchaser to a second purchaser for resale by such second purchaser on or in connection with the first retail sale of a light-duty truck.” (2) Conforming amendments.— (A) 26 USC 4221.26 USC 4063. Section 4221(c) (relating to manufacturer relieved from liability in certain cases) is amended by inserting “4063(e),” after “4063(b),”. (B) Section 4222(d) (relating to registration in the case of 26 USC 4222. 26 USC 4063. tax-free sales) is amended by inserting “4063(e),” after 26 USC 4063. “4063(b),”. (3) Effective date.— The amendments made by this subsection 26 USC 4063 note. shall take effect on the first day of the first calendar month note-beginning more than 20 days after the date of the enactment of this Act.

  7. Pub. L. 95–600 § 701(c)(1) · 92 Stat. 2763

    1. Added · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), added heading and subpar. (B)

    2. Redesignated · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), redesignated former par. (4) as subpars. (A) and (C)

    3. Added · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), adding subpar. (C) heading

    4. Substituted · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), substituting “section 143(a)” for “section 143”;

    5. Redesignated · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), redesignated former par. (6) as subpar. (D)

    6. Inserted · 26 U.S.C. § 105(d)(5)

      Pub. L. 95–600, § 701(c)(1), inserting “defined” in heading

    Source evidence

    Code amendment note
    Subsec. (d)(5). Pub. L. 95–600, § 701(c)(1), added heading and subpar. (B), redesignated former par. (4) as subpars. (A) and (C), adding subpar. (C) heading and substituting “section 143(a)” for “section 143”; and redesignated former par. (6) as subpar. (D), inserting “defined” in heading.

    Enacted provision · exact public law section
    (1) In general.— Section 105(d) is amended by striking out 26 USC 105. paragraphs (4) and (6), by redesignating paragraph (5) as paragraph (4) and paragraph (7) as paragraph (6), and by inserting after paragraph (4) the following new paragraph: “(5) Special rules for married couples.— “(A) Married couple must file joint return.— Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the exclusion provided by this subsection shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year. “(B) Application of paragraphs (2) and (3).— In the case of a joint return— “(i) paragraph (2) shall be applied separately with respect to each spouse, but “(ii) paragraph (3) shall be applied with respect to their combined adjusted gross income. “(C) Determination of marital status.— For purposes of this subsection, marital status shall be determined under 26 USC 143. section 143(a). “(D) Joint return defined.— For purposes of this subsection, the term ‘joint return’ means the joint return of a 26 USC 6013. husband and wife made under section 6013.”

  8. Pub. L. 95–600 § 701(c)(1) · 92 Stat. 2763

    Redesignated · 26 U.S.C. § 105(d)(6); 26 U.S.C. § 105(d)(7)

    Pub. L. 95–600, § 701(c)(1), redesignated par. (7) as (6). Former par. (6) redesignated (5)(D)

    Source evidence

    Code amendment note
    Subsec. (d)(6), (7). Pub. L. 95–600, § 701(c)(1), redesignated par. (7) as (6). Former par. (6) redesignated (5)(D).

    Enacted provision · exact public law section
    (1) In general.— Section 105(d) is amended by striking out 26 USC 105. paragraphs (4) and (6), by redesignating paragraph (5) as paragraph (4) and paragraph (7) as paragraph (6), and by inserting after paragraph (4) the following new paragraph: “(5) Special rules for married couples.— “(A) Married couple must file joint return.— Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the exclusion provided by this subsection shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year. “(B) Application of paragraphs (2) and (3).— In the case of a joint return— “(i) paragraph (2) shall be applied separately with respect to each spouse, but “(ii) paragraph (3) shall be applied with respect to their combined adjusted gross income. “(C) Determination of marital status.— For purposes of this subsection, marital status shall be determined under 26 USC 143. section 143(a). “(D) Joint return defined.— For purposes of this subsection, the term ‘joint return’ means the joint return of a 26 USC 6013. husband and wife made under section 6013.”

  9. Pub. L. 95–600 § 366(a) · 92 Stat. 2763

    Added · 26 U.S.C. § 105(h)

    Pub. L. 95–600, § 366(a), added subsec. (h)

    Source evidence

    Code amendment note
    Subsec. (h). Pub. L. 95–600, § 366(a), added subsec. (h).

    Enacted provision · exact public law section
    (a) General Rule.— Section 105 (relating to accident and health 26 USC 105. plans) is amended by adding at the end thereof the following: “(h) Amount Paid to Highly Compensated Individuals Under a Discriminatory Self-Insured Medical Expense Reimbursement Plan.— “(1) In general.— In the case of amounts paid to a highly compensated individual under a self-insured medical reimbursement plan which does not satisfy the requirements of paragraph (2) for a plan year, subsection (b) shall not apply to such amounts to the extent they constitute an excess reimbursement of such highly compensated individual. “(2) Prohibition of discrimination.— A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if— “(A) the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and “(B) the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals. “(3) Nondiscriminatory eligibility classifications.— “(A) In general.— A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits— “(i) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or “(ii) such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated participants. “(B) Exclusion of certain employees.— For purposes of subparagraph (A), there may be excluded from consideration— “(i) employees who have not completed 3 years of service; “(ii) employees who have not attained age 25; “(iii) part-time or seasonal employees; “(iv) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and “(v) employees who are nonresident aliens and who receive no earned income (within the meaning of section 26 USC 911. 911(b)) from the employer which constitutes income from sources within the United States (within the meaning 26 USC 861. of section 861(a)(3)). “(4) Nondiscriminatory benefits.— A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants. “(5) Highly compensated individual defined.— For purposes of this subsection, the term ‘highly compensated individual’ means an individual who is— “(A) one of the 5 highest paid officers, “(B) a shareholder who owns (with the application of 26 USC 318. section 318) more than 10 percent in value of the stock of the employer, or “(C) among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants). “(6) Self-insured medical reimbursement plan.— The term ‘self-insured medical reimbursement plan’ means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance. “(7) Excess reimbursement of highly compensated individual.— For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a self-insured medical reimbursement plan is— “(A) in the case of a benefit available to a highly compensated individual but not to a broad cross-section of employees, the amount reimbursed under the plan to the employee with respect to such benefit, and “(B) in the case of benefits (other than benefits described in subparagraph (A) paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction— “(i) the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and “(ii) the denominator of which is the total amount reimbursed to all employees under the plan for such plan year. In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A). “(8) Certain controlled groups.— All employees who are treated as employed by a single employer under subsection (b) or (c) of section 414 shall be treated as employed by a single 26 USC 414. employer for purposes of this section. “(9) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section. “(10) Time of inclusion.— Any amount paid for a plan year that is included in income by reason of this subsection shall be treated as received or accrued in the taxable year of the participant in which the plan year ends.”

  10. Technical Corrections Act of 1979

    Pub. L. 96–222 § 103(a)(13)(B) · 94 Stat. 194

    Substituted · 26 U.S.C. § 105(h)(3)(A)

    Pub. L. 96–222, § 103(a)(13)(B), substituted “highly compensated individuals” for “highly compensated participants”

    Source evidence

    Code amendment note
    Subsec. (h)(3)(A). Pub. L. 96–222, § 103(a)(13)(B), substituted “highly compensated individuals” for “highly compensated participants”.

    Enacted provision · exact public law section
    (B) Clarification of nondiscriminatory eligibility classifications.— Clause (ii) of section 105(h)(3)(A) is 26 USC 105. amended by striking out “highly compensated participants” and inserting in lieu thereof “highly compensated individuals”.

  11. Technical Corrections Act of 1979

    Pub. L. 96–222 § 103(a)(13)(C) · 94 Stat. 194

    Substituted · 26 U.S.C. § 105(h)(7)(A)

    Pub. L. 96–222, § 103(a)(13)(C), substituted “highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B))” for “a highly compensated individual but not to a broad cross-section of employees”

    Source evidence

    Code amendment note
    Subsec. (h)(7)(A). Pub. L. 96–222, § 103(a)(13)(C), substituted “highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B))” for “a highly compensated individual but not to a broad cross-section of employees”.

    Enacted provision · exact public law section
    (C) Clarification of excess reimbursement of highly compensated individuals.— Subparagraph (A) of section 105(h)(7) is amended to read as follows: “(A) in the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B)), the amount reimbursed under the plan to the employee with respect to such benefit, and”.

  12. Pub. L. 96–613 § 5(b)(1) · 94 Stat. 3579

    1. Substituted · 26 U.S.C. § 105(h)(8)

      Pub. L. 96–613 and Pub. L. 96–605 made identical amendments by substituting in heading “controlled groups, etc.” for “controlled groups”

    2. Substituted · 26 U.S.C. § 105(h)(8)

      Pub. L. 96–613 and Pub. L. 96–605 made identical amendments by substituting in heading “subsection (b), (c), or (m) of section 414” for “subsection (b) or (c) of section 414”

    Source evidence

    Code amendment note
    Subsec. (h)(8). Pub. L. 96–613 and Pub. L. 96–605 made identical amendments by substituting in heading “controlled groups, etc.” for “controlled groups”, and by substituting in text “subsection (b), (c), or (m) of section 414” for “subsection (b) or (c) of section 414”.

    Enacted provision · exact public law section
    (1) Paragraph (8) of section 105(h) (relating to amount paid to 26 USC 105. highly compensated individuals under a discriminatory self- insured medical expense reimbursement plan) is amended— (A) by striking out “subsection (b) or (c) of section 414” and inserting in lieu thereof “subsection (b), (c), or (m) of section 414”, and (B) by striking out “controlled groups” in the paragraph heading and inserting in lieu thereof “controlled groups, etc.”.

  13. Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 103(c)(2) · 95 Stat. 175

    Substituted · 26 U.S.C. § 105(d)(3)

    Pub. L. 97–34, § 103(c)(2), substituted “this subsection and section 221” for “this subsection” in parenthetical provision

    Source evidence

    Code amendment note
    Subsec. (d)(3). Pub. L. 97–34, § 103(c)(2), substituted “this subsection and section 221” for “this subsection” in parenthetical provision.

    Enacted provision · exact public law section
    (2) Subsection (d)(3) of section 105 (relating to amounts received under accident and health plans) is amended by inserting “and section 221” after “subsection” the first place it appears.

  14. Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 111(b)(4) · 95 Stat. 175

    Substituted · 26 U.S.C. § 105(h)(3)(B)(v)

    Pub. L. 97–34, § 111(b)(4), substituted “section 911(d)(2)” for “section 911(b)”

    Source evidence

    Code amendment note
    Subsec. (h)(3)(B)(v). Pub. L. 97–34, § 111(b)(4), substituted “section 911(d)(2)” for “section 911(b)”.

    Enacted provision · exact public law section
    (4) Sections 37(e)(9)(B), 63(e)(2), 105(h)(3)(B)(v), 410(b)(3)(C), 879(a)(1), 1303(c)(2), and 1304(c)(3) are each amended by striking out “section 911(b)” each place it appears and inserting in lieu Ante, p. 190. thereof “section 911(d)(2)”.

  15. Pub. L. 97–248 title II § 202(b)(3)(C) · 96 Stat. 324

    Substituted · 26 U.S.C. § 105(b)

    Pub. L. 97–248 substituted “section 213(d)” for “section 213(e)”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 97–248 substituted “section 213(d)” for “section 213(e)”.

    Enacted provision · exact public law section
    (C) Subsection (b) of section 105 is amended by striking 26 USC 105. out “section 213(e)” and inserting in lieu thereof “section 213(d)”.

  16. Pub. L. 98–21 title I § 122(b) · 97 Stat. 65

    Struck · 26 U.S.C. § 105(d)

    Pub. L. 98–21 struck out subsec. (d) which provided that no deduction or credit would be allowed with respect to any expenditure which is properly associated with any amount excluded from gross income under subsec. (a)

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 98–21 struck out subsec. (d) which provided that no deduction or credit would be allowed with respect to any expenditure which is properly associated with any amount excluded from gross income under subsec. (a).

    Enacted provision · exact public law section
    (b) Repeal of Exclusion for Certain Disability Payments.— Subsection (d) of section 105 of such Code (relating to certain disability 26 USC 105. payments) is hereby repealed.

  17. Railroad Retirement Solvency Act of 1983

    Pub. L. 98–76 title II § 241(a) · 97 Stat. 411

    Added · 26 U.S.C. § 105(i)

    Pub. L. 98–76 added subsec. (i)

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 98–76 added subsec. (i).

    Enacted provision · exact public law section
    (a) General Rule.— Section 105 of the Internal Revenue Code of 26 USC 105. 1954 (relating to amounts received under accident and health plans) is amended by adding at the end thereof the following new subsection: “(i) Sick Pay Under Railroad Unemployment Insurance Act.— Notwithstanding any other provision of law, gross income includes benefits paid under section 2(a) of the Railroad Unemployment 45 USC 352. Insurance Act for days of sickness; except to the extent such sickness (as determined in accordance with standards prescribed by the Railroad Retirement Board) is the result of on-the-job injury.”

  18. Tax Reform Act of 1984

    Pub. L. 98–369 div. A title IV § 423(b)(2) · 98 Stat. 494

    Inserted · 26 U.S.C. § 105(b)

    Pub. L. 98–369 inserted “Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 98–369 inserted “Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.”

    Enacted provision · exact public law section
    (2) Subsection (b) of section 105 is amended by adding at the end thereof the following new sentence: “Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.”

  19. Tax Reform Act of 1986

    Pub. L. 99–514 § 1301(j)(9) · 100 Stat. 2085

    Repealed · 26 U.S.C. § 105(d)(5)(C)

    Pub. L. 99–514, § 1301(j)(9), which directed that subpar. (C) be amended by substituting “section 7703(a)” for “section 143(a)”, could not be executed because subsec. (d) was previously repealed by Pub. L. 98–21. See 1983 Amendment note below

    Source evidence

    Code amendment note
    Subsec. (d)(5)(C). Pub. L. 99–514, § 1301(j)(9), which directed that subpar. (C) be amended by substituting “section 7703(a)” for “section 143(a)”, could not be executed because subsec. (d) was previously repealed by Pub. L. 98–21. See 1983 Amendment note below.

    Enacted provision · exact public law section
    (9) Sections 105(d)(5)(C) and 879(c)(3) are each amended by striking out “section 143(a)” and inserting in lieu thereof “section 7703(a)”.

  20. Tax Reform Act of 1986

    Pub. L. 99–514 § 1151(c)(2) · 100 Stat. 2085

    1. Redesignated · 26 U.S.C. § 105(h); 26 U.S.C. § 105(i)

      Pub. L. 99–514, § 1151(c)(2), redesignated subsec. (i) as (h)

    2. Struck · 26 U.S.C. § 105(h); 26 U.S.C. § 105(i)

      Pub. L. 99–514, § 1151(c)(2), struck out former subsec. (h) which related to amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan

    Source evidence

    Code amendment note
    Subsecs. (h), (i). Pub. L. 99–514, § 1151(c)(2), redesignated subsec. (i) as (h) and struck out former subsec. (h) which related to amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan.

    Enacted provision · exact public law section
    (2) Discriminatory self-insured medical expense reimbursement plans.— Section 105 (relating to amounts received under accident and health plans) is amended by striking out subsection (h) and by redesignating subsection (i) as subsection (h).

  21. Pub. L. 101–140 title II § 203(a)(1) · 103 Stat. 830

    Amended · 26 U.S.C. § 105(h); 26 U.S.C. § 105(i)

    Pub. L. 101–140 amended subsecs. (h) and (i) to read as if amendments by Pub. L. 99–514, § 1151(c)(2), had not been enacted, see 1986 Amendment note below

    Source evidence

    Code amendment note
    Subsecs. (h), (i). Pub. L. 101–140 amended subsecs. (h) and (i) to read as if amendments by Pub. L. 99–514, § 1151(c)(2), had not been enacted, see 1986 Amendment note below.

    Enacted provision · exact public law section
    (1) Each provision of law amended by subsection (b), (c), (d)(1), or (g) of section 1151 of the Tax Reform Act of 1986 is amended to read as if the amendments made by such subsection had not been enacted.

  22. Working Families Tax Relief Act of 2004

    Pub. L. 108–311 title II § 207(9) · 118 Stat. 1166

    Inserted · 26 U.S.C. § 105(b); 26 U.S.C. § 105(c)(1)

    Pub. L. 108–311 inserted “, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof” after “section 152”

    Source evidence

    Code amendment note
    Subsecs. (b), (c)(1). Pub. L. 108–311 inserted “, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof” after “section 152”.

    Enacted provision · exact public law section
    (9) Subsections (b) and (c)(1) of section 105 are amended by inserting “, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof” after “section 152”.

  23. Worker, Retiree, and Employer Recovery Act of 2008

    Pub. L. 110–458 title I § 124(a) · 122 Stat. 5092

    Added · 26 U.S.C. § 105(j)

    Pub. L. 110–458 added subsec. (j)

    Source evidence

    Code amendment note
    Subsec. (j). Pub. L. 110–458 added subsec. (j).

    Enacted provision · exact public law section
    (a) In General.— Section 105 of the 1986 Code 26 USC 105. (relating to amounts received under accident and health plans) is amended by adding at the end the following new subsection: “(j) Special Rule for Certain Governmental Plans.— “(1) In general.— For purposes of subsection (b), amounts paid (directly or indirectly) to the taxpayer from an accident or health plan described in paragraph (2) shall not fail to be excluded from gross income solely because such plan, on or before January 1, 2008, provides for reimbursements of health care expenses of a deceased plan participant’s beneficiary. “(2) Plan described.— An accident or health plan is described in this paragraph if such plan is funded by a medical trust that is established in connection with a public retirement system and that— “(A) has been authorized by a State legislature, or “(B) has received a favorable ruling from the Internal Revenue Service that the trust’s income is not includible in gross income under section 115.” .

  24. Health Care and Education Reconciliation Act of 2010

    Pub. L. 111–152 title I § 1004(d)(1) · 124 Stat.1029

    1. Substituted · 26 U.S.C. § 105(b)

      Pub. L. 111–152 substituted “his dependents” for “and his dependents”

    2. Inserted · 26 U.S.C. § 105(b)

      Pub. L. 111–152 inserted “, and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27” after “thereof)”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 111–152 substituted “his dependents” for “and his dependents” and inserted “, and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27” after “thereof)”.

    Enacted provision · exact public law section
    (1) Exclusion of amounts expended for medical care.— The first sentence of section 105(b) of the Internal Revenue Code of 1986 26 USC 105. (relating to amounts expended for medical care) is amended— (A) by striking “and his dependents” and inserting “his dependents”; and (B) by inserting before the period the following: “, and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27”.

  25. Tax Technical Corrections Act of 2014

    Pub. L. 113–295 div. A title II § 221(a)(16) · 128 Stat. 4010

    Struck · 26 U.S.C. § 105(f)

    Pub. L. 113–295 struck out “or (d)” after “subsection (c)”

    Source evidence

    Code amendment note
    Subsec. (f). Pub. L. 113–295 struck out “or (d)” after “subsection (c)”.

    Enacted provision · exact public law section
    (16) Accident and health plans.— Section 105(f) is amended by striking “or (d)”.

  26. Energy and Water Development and Related Agencies Appropriations Act, 2016

    Pub. L. 114–113 § 305(a) · 129 Stat. 2242

    1. Substituted · 26 U.S.C. § 105(j)(1)

      Pub. L. 114–113, § 305(a), substituted “a qualified taxpayer” for “the taxpayer”

    2. Substituted · 26 U.S.C. § 105(j)(1)

      Pub. L. 114–113, § 305(a), substituted “deceased employee’s beneficiary (other than an individual described in paragraph (3)(B))” for “deceased plan participant’s beneficiary”

    Source evidence

    Code amendment note
    Subsec. (j)(1). Pub. L. 114–113, § 305(a), substituted “a qualified taxpayer” for “the taxpayer” and “deceased employee’s beneficiary (other than an individual described in paragraph (3)(B))” for “deceased plan participant’s beneficiary”.

    Enacted provision · exact public law section
    Sec. 305. None of the funds made available in this title may be used to approve critical decision-2 or critical decision-3 under Department of Energy Order 413.3B, or any successive departmental guidance, for construction projects where the total project cost exceeds $100,000,000, until a separate independent cost estimate has been developed for the project for that critical decision.

    Effective date note
    Pub. L. 114–113, div. Q, title III, § 305(d), Dec. 18, 2015, 129 Stat. 3089, provided that: “The amendments made by this section [amending this section] shall apply to payments after the date of the enactment of this Act [Dec. 18, 2015].”

  27. Energy and Water Development and Related Agencies Appropriations Act, 2016

    Pub. L. 114–113 § 305(c)(1) · 129 Stat. 2242

    Inserted · 26 U.S.C. § 105(j)(2)

    Pub. L. 114–113, § 305(c)(1), inserted “or established by or on behalf of a State or political subdivision thereof” after “public retirement system” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (j)(2). Pub. L. 114–113, § 305(c)(1), inserted “or established by or on behalf of a State or political subdivision thereof” after “public retirement system” in introductory provisions.

    Enacted provision · exact public law section
    Sec. 305. None of the funds made available in this title may be used to approve critical decision-2 or critical decision-3 under Department of Energy Order 413.3B, or any successive departmental guidance, for construction projects where the total project cost exceeds $100,000,000, until a separate independent cost estimate has been developed for the project for that critical decision.

    Effective date note
    Pub. L. 114–113, div. Q, title III, § 305(d), Dec. 18, 2015, 129 Stat. 3089, provided that: “The amendments made by this section [amending this section] shall apply to payments after the date of the enactment of this Act [Dec. 18, 2015].”

  28. Energy and Water Development and Related Agencies Appropriations Act, 2016

    Pub. L. 114–113 § 305(c)(2) · 129 Stat. 2242

    Inserted · 26 U.S.C. § 105(j)(2)(B)

    Pub. L. 114–113, § 305(c)(2), inserted “or 501(c)(9)” after “section 115”

    Source evidence

    Code amendment note
    Subsec. (j)(2)(B). Pub. L. 114–113, § 305(c)(2), inserted “or 501(c)(9)” after “section 115”.

    Enacted provision · exact public law section
    Sec. 305. None of the funds made available in this title may be used to approve critical decision-2 or critical decision-3 under Department of Energy Order 413.3B, or any successive departmental guidance, for construction projects where the total project cost exceeds $100,000,000, until a separate independent cost estimate has been developed for the project for that critical decision.

    Effective date note
    Pub. L. 114–113, div. Q, title III, § 305(d), Dec. 18, 2015, 129 Stat. 3089, provided that: “The amendments made by this section [amending this section] shall apply to payments after the date of the enactment of this Act [Dec. 18, 2015].”

  29. Energy and Water Development and Related Agencies Appropriations Act, 2016

    Pub. L. 114–113 § 305(b) · 129 Stat. 2242

    Added · 26 U.S.C. § 105(j)(3)

    Pub. L. 114–113, § 305(b), added par. (3)

    Source evidence

    Code amendment note
    Subsec. (j)(3). Pub. L. 114–113, § 305(b), added par. (3).

    Enacted provision · exact public law section
    Sec. 305. None of the funds made available in this title may be used to approve critical decision-2 or critical decision-3 under Department of Energy Order 413.3B, or any successive departmental guidance, for construction projects where the total project cost exceeds $100,000,000, until a separate independent cost estimate has been developed for the project for that critical decision.

    Effective date note
    Pub. L. 114–113, div. Q, title III, § 305(d), Dec. 18, 2015, 129 Stat. 3089, provided that: “The amendments made by this section [amending this section] shall apply to payments after the date of the enactment of this Act [Dec. 18, 2015].”

  30. Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 div. U title IV § 401(a)(36) · 132 Stat. 348

    Substituted · 26 U.S.C. § 105(h)(7)(B)

    Pub. L. 115–141 substituted “subparagraph (A))” for “subparagraph (A)” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (h)(7)(B). Pub. L. 115–141 substituted “subparagraph (A))” for “subparagraph (A)” in introductory provisions.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

39 of 40 references resolved to an enrolled provision · 1 partial

Editorial Notes

References in Text

Section 2(a) of the Railroad Unemployment Insurance Act, referred to in subsec. (i), is classified to section 352(a) of Title 45, Railroads.

Amendments1962–2018 · 17 rounds

2018

Subsec. (h)(7)(B). Pub. L. 115–141 substituted “subparagraph (A))” for “subparagraph (A)” in introductory provisions.

2015

Subsec. (j)(1). Pub. L. 114–113, § 305(a), substituted “a qualified taxpayer” for “the taxpayer” and “deceased employee’s beneficiary (other than an individual described in paragraph (3)(B))” for “deceased plan participant’s beneficiary”.

Subsec. (j)(2). Pub. L. 114–113, § 305(c)(1), inserted “or established by or on behalf of a State or political subdivision thereof” after “public retirement system” in introductory provisions.

Subsec. (j)(2)(B). Pub. L. 114–113, § 305(c)(2), inserted “or 501(c)(9)” after “section 115”.

Subsec. (j)(3). Pub. L. 114–113, § 305(b), added par. (3).

2014

Subsec. (f). Pub. L. 113–295 struck out “or (d)” after “subsection (c)”.

2010

Subsec. (b). Pub. L. 111–152 substituted “his dependents” for “and his dependents” and inserted “, and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27” after “thereof)”.

2008

Subsec. (j). Pub. L. 110–458 added subsec. (j).

2004

Subsecs. (b), (c)(1). Pub. L. 108–311 inserted “, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof” after “section 152”.

1989

Subsecs. (h), (i). Pub. L. 101–140 amended subsecs. (h) and (i) to read as if amendments by Pub. L. 99–514, § 1151(c)(2), had not been enacted, see 1986 Amendment note below.

1986

Subsec. (d)(5)(C). Pub. L. 99–514, § 1301(j)(9), which directed that subpar. (C) be amended by substituting “section 7703(a)” for “section 143(a)”, could not be executed because subsec. (d) was previously repealed by Pub. L. 98–21. See 1983 Amendment note below.

Subsecs. (h), (i). Pub. L. 99–514, § 1151(c)(2), redesignated subsec. (i) as (h) and struck out former subsec. (h) which related to amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan.

1984

Subsec. (b). Pub. L. 98–369 inserted “Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.”

1983

Subsec. (d). Pub. L. 98–21 struck out subsec. (d) which provided that no deduction or credit would be allowed with respect to any expenditure which is properly associated with any amount excluded from gross income under subsec. (a).

Subsec. (i). Pub. L. 98–76 added subsec. (i).

1982

Subsec. (b). Pub. L. 97–248 substituted “section 213(d)” for “section 213(e)”.

1981

Subsec. (d)(3). Pub. L. 97–34, § 103(c)(2), substituted “this subsection and section 221” for “this subsection” in parenthetical provision.

Subsec. (h)(3)(B)(v). Pub. L. 97–34, § 111(b)(4), substituted “section 911(d)(2)” for “section 911(b)”.

1980

Subsec. (h)(3)(A). Pub. L. 96–222, § 103(a)(13)(B), substituted “highly compensated individuals” for “highly compensated participants”.

Subsec. (h)(7)(A). Pub. L. 96–222, § 103(a)(13)(C), substituted “highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B))” for “a highly compensated individual but not to a broad cross-section of employees”.

Subsec. (h)(8). Pub. L. 96–613 and Pub. L. 96–605 made identical amendments by substituting in heading “controlled groups, etc.” for “controlled groups”, and by substituting in text “subsection (b), (c), or (m) of section 414” for “subsection (b) or (c) of section 414”.

1978

Subsec. (d)(4). Pub. L. 95–600, § 701 (c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (5)(A) and (C).

Subsec. (d)(5). Pub. L. 95–600, § 701(c)(1), added heading and subpar. (B), redesignated former par. (4) as subpars. (A) and (C), adding subpar. (C) heading and substituting “section 143(a)” for “section 143”; and redesignated former par. (6) as subpar. (D), inserting “defined” in heading.

Subsec. (d)(6), (7). Pub. L. 95–600, § 701(c)(1), redesignated par. (7) as (6). Former par. (6) redesignated (5)(D).

Subsec. (h). Pub. L. 95–600, § 366(a), added subsec. (h).

1976

Subsec. (d). Pub. L. 94–455, § 505(a), substituted provisions relating to an exclusion of up to $5,200 a year for taxpayers retiring on disability prior to age 65; dollar-for-dollar phase out of exclusion for adjusted annual gross income (including disability income) in excess of $15,000; requirement that married couple must file joint return; defined “permanent and total disability” and “joint return”; and inserted special rule for coordination with section 72 of this title for provisions relating to wage continuation plans.

Subsec. (e)(2). Pub. L. 94–455, § 1901(c)(2), struck out “a territory” after “of a State”.

1964

Subsec. (d). Pub. L. 88–272 substituted provisions stating that “The preceding sentence shall not apply to amounts attributable to the first 30” days if the amounts exceed 75 percent of regular weekly wages, and if they do not exceed said 75 percent, the first sentence of this subsection shall not apply to the extent the amounts exceed $75 weekly and shall not apply to amounts attributable to the first 7 calendar days unless the employee is hospitalized for injury or sickness for at least 1 day in such period, for provisions stating that said “preceding sentence” did not apply in cases of sickness, to amounts attributable to the first 7 days unless the employee was hospitalized for sickness for at least 1 day during such period.

1962

Subsec. (g). Pub. L. 87–792 added subsec. (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, § 305(d), , 129 Stat. 3089, provided that: “The amendments made by this section [amending this section] shall apply to payments after the date of the enactment of this Act [].”

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective , subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2008 Amendment

Pub. L. 110–458, title I, § 124(b), , 122 Stat. 5115, provided that: “The amendment made by subsection (a) [amending this section] shall apply to payments before, on, or after the date of the enactment of this Act [].”

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–311 applicable to taxable years beginning after , see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–140 effective as if included in section 1151 of Pub. L. 99–514, see section 203(c) of Pub. L. 101–140, set out as a note under section 79 of this title.

Effective Date of 1986 Amendment

Amendment by section 1151(c)(2) of Pub. L. 99–514 applicable, with certain qualifications and exceptions, to years beginning after , see section 1151(k) of Pub. L. 99–514, as amended, set out as a note under section 79 of this title.

Amendment by section 1301(j)(9) of Pub. L. 99–514 applicable to bonds issued after , except as otherwise provided, see sections 1311 to 1318 of Pub. L. 99–514, set out as an Effective Date; Transitional Rules note under section 141 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to taxable years beginning after , see section 423(d) of Pub. L. 98–369, set out as a note under section 2 of this title.

Effective Date of 1983 Amendment

Pub. L. 98–76, title II, § 241(b), , 97 Stat. 430, provided that: “The amendment made by subsection (a) [amending this section] shall apply to amounts received after , in taxable years ending after such date.”

Amendment by Pub. L. 98–21 applicable to taxable years beginning after , except that if an individual’s annuity starting date was deferred under subsec. (d)(6) as in effect the day before , such deferral shall end on the first day of such individual’s first taxable year beginning after , see section 122(d) of Pub. L. 98–21 set out as a note under section 22 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to taxable years beginning after , see section 202(c) of Pub. L. 97–248, set out as a note under section 213 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to taxable years beginning after , see sections 103(d) and 115 of Pub. L. 97–34, set out as notes under sections 62 and 911, respectively, of this title.

Effective Date of 1980 Amendment

Amendments by Pub. L. 96–605 and 96–613 applicable to years ending after , except in the case of a plan in existence on , where amendments applicable to plan years beginning after , see section 201(c) of Pub. L. 96–605 and section 5(c) of Pub. L. 96–613, set out as a note under section 414 of this title.

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Pub. L. 95–600, title III, § 366(b), , 92 Stat. 2857, as amended by Pub. L. 96–222, title I, § 103(a)(13)(D), , 94 Stat. 213, provided that: “The amendment made by this section [amending this section] shall apply to amounts reimbursed after . For purposes of applying such amendment, there shall not be taken into account any amount reimbursed before .”

Pub. L. 95–600, title VII, § 701(c)(3), , 92 Stat. 2900, as amended by Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:

“(A)

The amendments made by paragraphs (1) and (2)(A) [amending this section and provisions set out as a note under this section] shall take effect as if included in section 105(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] as such section was amended by section 505(a) of the Tax Reform Act of 1976.

“(B)

The amendments made by paragraph (2)(B) [amending provisions set out as notes under this section] shall take effect as if included in section 301 of the Tax Reduction and Simplification Act of 1977 [Pub. L. 95–30, title III, § 301, , 91 Stat. 152].”

Effective Date of 1976 Amendment

Pub. L. 94–455, title V, § 505(f), as added by Pub. L. 95–30, title III, § 301(a), , 91 Stat. 151, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after .”

Amendment by section 1901(c)(2) of Pub. L. 94–455 applicable with respect to taxable years beginning after , see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, § 205(b), , 78 Stat. 38, provided that: “The amendment made by subsection (a) [amending this section] shall apply to amounts attributable to periods of absence commencing after .”

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–792 applicable to taxable years beginning after , see section 8 of Pub. L. 87–792, set out as a note under section 22 of this title.

Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990

No monies appropriated by Pub. L. 101–136 to be used to implement or enforce section 1151 of Pub. L. 99–514 or the amendments made by such section, see section 528 of Pub. L. 101–136, set out as a note under section 89 of this title.

Revocation of Election

Pub. L. 95–30, title III, § 301(c), , 91 Stat. 151, as amended by Pub. L. 95–600, title VII, § 701(c)(2)(B), , 92 Stat. 2900; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that: “Any election made under section 105(d)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] or under section 505(d) of the Tax Reform Act of 1976 [set out below] for a taxable year beginning in 1976 may be revoked (in such manner as may be prescribed by regulations) at any time before the expiration of the period for assessing a deficiency with respect to such taxable year (determined without regard to subsection (d) of this section) [set out below].”

Period for Assessing Deficiency

Pub. L. 95–30, title III, § 301(d), , 91 Stat. 152, provided that: “In the case of any revocation made under subsection (c) [set out above], the period for assessing a deficiency with respect to any taxable year affected by the revocation shall not expire before the date which is 1 year after the date of the making of the revocation, and, notwithstanding any law or rule of law, such deficiency, to the extent attributable to such revocation, may be assessed at any time during such 1-year period.”

Effective Date of Changes in Exclusion for Sick Pay

Pub. L. 95–30, title III, § 301(e), , 91 Stat. 152, as amended by Pub. L. 95–600, title VII, § 701(c)(2)(B), , 92 Stat. 2900; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:

“The amendments made by this section [enacting and amending provisions set out as notes under this section] shall take effect on , but shall not apply—

“(1)

with respect to any taxpayer who makes or has made an election under section 105(d)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] or under section 505(d) of the Tax Reform Act of 1976 [set out below] (as such sections were in effect before the enactment of this Act []) for a taxable year beginning in 1976, if such election is not revoked under subsection (c) of this section [set out above], and

“(2)

with respect to any taxpayer (other than a taxpayer described in paragraph (1)) who has an annuity starting date at the beginning of a taxable year beginning in 1976 by reason of the amendments made by section 505 of the Tax Reform Act of 1976 [amending this section and section 104 of this title and enacting provisions set out as notes under this section] (as in effect before the enactment of this Act []), unless such person elects (in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have such amendments apply.”

Special Rule for Existing Permanent and Total Disability Cases

Pub. L. 94–455, title V, § 505(c), , 90 Stat. 1567, as amended by Pub. L. 95–30, title III, § 301(b)(1), (2), , 91 Stat. 151; Pub. L. 95–600, title VII, § 701(c)(2)(A), , 92 Stat. 2900; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:

“In the case of any individual who—

“(1)

retired before ,

“(2)

either retired on disability or was entitled to retire on disability, and

“(3)

on , or , was permanently and totally disabled (within the meaning of section 105(d)(4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]),

such individual shall be deemed to have met the requirements of section 105(d)(1)(B) of such Code (as amended by subsection (a) of this section).”

Special Rule for Coordination With Section 72 of This Title

Pub. L. 94–455, title V, § 505(d), , 90 Stat. 1568, as amended by Pub. L. 95–30, title III, § 301(b)(3)–(5), , 91 Stat. 151; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:

“In the case of an individual who—

“(1)

retired on disability before , and

“(2)

on , or , was entitled to exclude any amount with respect to such retirement disability from gross income under section 105(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954],

for purposes of section 72 the annuity starting date shall not be deemed to occur before the beginning of the taxable year in which the taxpayer attains age 65, or before the beginning of an earlier taxable year for which the taxpayer makes an irrevocable election not to seek the benefits of such section 105(d) for such year and all subsequent years.”

Credits

1954–2018 · 21 acts
  1. 1954Aug. 16, 1954, ch. 736, 68A Stat. 30
  2. 1962Pub. L. 87–792, § 7(e), , 76 Stat. 829
  3. 1964Pub. L. 88–272, title II, § 205(a), , 78 Stat. 38
  4. 1976Pub. L. 94–455, title V, § 505(a), title XIX, § 1901(c)(2), , 90 Stat. 1566, 1803
  5. 1978Pub. L. 95–600, title III, § 366(a), title VII, § 701(c)(1), , 92 Stat. 2855, 2899
  6. 1980Pub. L. 96–222, title I, § 103(a)(13)(B), (C), , 94 Stat. 213
  7. 1980Pub. L. 96–605, title II, § 201(b)(1), , 94 Stat. 3527
  8. 1980Pub. L. 96–613, § 5(b)(1), , 94 Stat. 3581
  9. 1981Pub. L. 97–34, title I, §§ 103(c)(2), 111(b)(4), , 95 Stat. 188, 194
  10. 1982Pub. L. 97–248, title II, § 202(b)(3)(C), , 96 Stat. 421
  11. 1983Pub. L. 98–21, title I, § 122(b), , 97 Stat. 87
  12. 1983Pub. L. 98–76, title II, § 241(a), , 97 Stat. 430
  13. 1984Pub. L. 98–369, div. A, title IV, § 423(b)(2), , 98 Stat. 800
  14. 1986Pub. L. 99–514, title XI, § 1151(c)(2), title XIII, § 1301(j)(9), , 100 Stat. 2503, 2658
  15. 1989Pub. L. 101–140, title II, § 203(a)(1), , 103 Stat. 830
  16. 2004Pub. L. 108–311, title II, § 207(9), , 118 Stat. 1177
  17. 2008Pub. L. 110–458, title I, § 124(a), , 122 Stat. 5114
  18. 2010Pub. L. 111–152, title I, § 1004(d)(1), , 124 Stat. 1035
  19. 2014Pub. L. 113–295, div. A, title II, § 221(a)(16), , 128 Stat. 4039
  20. 2015Pub. L. 114–113, div. Q, title III, § 305(a)–(c), , 129 Stat. 3088
  21. 2018Pub. L. 115–141, div. U, title IV, § 401(a)(36), , 132 Stat. 1186.
Show as published

(Aug. 16, 1954, ch. 736, 68A Stat. 30; Pub. L. 87–792, § 7(e), , 76 Stat. 829; Pub. L. 88–272, title II, § 205(a), , 78 Stat. 38; Pub. L. 94–455, title V, § 505(a), title XIX, § 1901(c)(2), , 90 Stat. 1566, 1803; Pub. L. 95–600, title III, § 366(a), title VII, § 701(c)(1), , 92 Stat. 2855, 2899; Pub. L. 96–222, title I, § 103(a)(13)(B), (C), , 94 Stat. 213; Pub. L. 96–605, title II, § 201(b)(1), , 94 Stat. 3527; Pub. L. 96–613, § 5(b)(1), , 94 Stat. 3581; Pub. L. 97–34, title I, §§ 103(c)(2), 111(b)(4), , 95 Stat. 188, 194; Pub. L. 97–248, title II, § 202(b)(3)(C), , 96 Stat. 421; Pub. L. 98–21, title I, § 122(b), , 97 Stat. 87; Pub. L. 98–76, title II, § 241(a), , 97 Stat. 430; Pub. L. 98–369, div. A, title IV, § 423(b)(2), , 98 Stat. 800; Pub. L. 99–514, title XI, § 1151(c)(2), title XIII, § 1301(j)(9), , 100 Stat. 2503, 2658; Pub. L. 101–140, title II, § 203(a)(1), , 103 Stat. 830; Pub. L. 108–311, title II, § 207(9), , 118 Stat. 1177; Pub. L. 110–458, title I, § 124(a), , 122 Stat. 5114; Pub. L. 111–152, title I, § 1004(d)(1), , 124 Stat. 1035; Pub. L. 113–295, div. A, title II, § 221(a)(16), , 128 Stat. 4039; Pub. L. 114–113, div. Q, title III, § 305(a)–(c), , 129 Stat. 3088; Pub. L. 115–141, div. U, title IV, § 401(a)(36), , 132 Stat. 1186.)

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