§ 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations

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. 1964

   Revenue Act of 1964

   Pub. L. 88–272 title II § 235(a) · 78 Stat. 19

   Enacted · 26 U.S.C. § 1561

   Added Pub. L. 88–272, title II, § 235(a), Feb. 26, 1964, 78 Stat. 116

   Source evidence

   Code source credit
   Added Pub. L. 88–272, title II, § 235(a), Feb. 26, 1964, 78 Stat. 116

   Enacted provision · exact public law section
   (a) In General.— Subchapter B of chapter 6 (related rules for consolidated returns) is amended by adding at the end thereof the following new part: “PART II— CERTAIN CONTROLLED CORPORATIONS “Sec. 1561. Surtax exemptions in case of certain controlled corporations. “Sec. 1562. Privilege of groups to elect multiple surtax exemptions. “Sec. 1563. Definitions and special rules. “SEC. 1561. SURTAX EXEMPTIONS IN CASE OF CERTAIN CONTROLLED CORPORATIONS. “(a) General Rule.— If a corporation is a component member of a controlled group of corporations on a December 31, then for purposes of this subtitle the surtax exemption of such corporation for the taxable year which includes such December 31 shall be an amount equal to— “(1) $25,000 divided by the number of corporations which are component members of such group on such December 31, or “(2) if all such component members consent (at such time and in such manner as the Secretary or his delegate shall by regulations prescribe) to an apportionment plan, such portion of $25,000 as is apportioned to such member in accordance with such plan. The sum of the amounts apportioned under paragraph (2) among the component members of any controlled group shall not exceed $25,000. “(b) Certain Short Taxable Years.— If a corporation— “(1) has a short, taxable year which does not include a December 31, and “(2) is a component, member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle the surtax exemption of such corporation for such taxable year shall be an amount equal to $25,000 divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last Post, p. 120. day were substituted for December 31. “SEC. 1562. PRIVILEGE OF GROUPS TO ELECT MULTIPLE SURTAX EXEMPTIONS. “(a) Election of Multiple Surtax Exemptions.— “(1) In general.— A controlled group of corporations shall (subject to the provisions of this section) have the privilege of electing to have each of its component members make its returns without regard to section 1561. Such election shall be made with Ante, p. 116. respect to a specified December 31 and shall be valid only if— “(A) each corporation which is a component member of such group on such December 31, and “(B) each other corporation which is a component member of such group on any succeeding December 31 before the day on which the election is filed, consents to such election. “(2) Years for which effective.— An election by a controlled group of corporations under paragraph (1) shall be effective with respect to the taxable year of each component member of such group which includes the specified December 31, and each taxable year of each corporation which is a component member of such group (or a successor group) on a succeeding December 31 included within such taxable year, unless the election is terminated under subsection (c). “(3) Effect of election.— If an election by a controlled group of corporations under paragraph (1) is effective with respect to any taxable year of a corporation— “(A) section 1561 shall not apply to such corporation for such taxable year, but “(B) the additional tax imposed by subsection (b) shall apply to such corporation for such taxable year. “(b) Additional Tax Imposed.— “(1) General rule.— If an election under subsection (a)(1) by a controlled group of corporations is effective with respect to the taxable year of a corporation, there is hereby imposed for such taxable year on the taxable income of such corporation a tax equal to 6 percent of so much of such corporation’s taxable income for such taxable year as does not exceed $25,000. This paragraph shall not apply to the taxable year of a corporation if— “(A) such corporation is the only component member of such controlled group on the December 31 included in such corporation’s taxable year which has taxable income for a taxable year including such December 31, or “(B) such corporation’s surtax exemption is disallowed for such taxable year under any provision of this subtitle. “(2) Tax treated as imposed by section ii, etc.— If for the taxable year of a corporation a tax is imposed by section 11 on tile taxable income of such corporation, the additional tax imposed by this subsection shall be treated for purposes of this title as a tax imposed by section 11. If for the taxable year of a corporation a tax is imposed on the taxable income of such corporation which is computed under any other section by reference to section 11, the additional tax imposed by this subsection shall be treated for purposes of this title as imposed by such other section. “(3) Taxable income defined.— For purposes of this subsection, the term ‘taxable income’ means— “(A) in the case of a corporation subject to tax under section 68A Stat. 169, 170. 26 USC 511, 512. 511, its unrelated business taxable income (within the meaning of section 512); “(B) in the case of a life insurance company, its life insurance company taxable income (within the meaning of section 73 Stat. 115. 26 USC 802. 802(b)); “(C) in the case of a regulated investment company, its investment company taxable income (within the meaning of 26 USC 852. section 852(b) (2)); and “(D) in the case of a real estate investment trust, its real estate investment trust taxable income (within the meaning 74 Stat. 1006. 26 USC 857. of section 857(b) (2)). “(4) Special rules.— If for the taxable year an additional tax is imposed on the taxable income of a corporation by this subsection, Ante, p. 55. 26 USC 244. 26 USC 247. 73 Stat. 116. 26 USC 804. then sections 244 (relating to dividends received on certain preferred stock), 247 (relating to dividends paid on certain preferred stock of public utilities), 804(a) (3) (relating to deduction for partially tax-exempt interest in the case of a life insurance 26 USC 922. company), and 922 (relating to special deduction for Western Hemisphere trade corporations) shall be applied without regard to the additional tax imposed by this subsection. “(c) Termination of Election.— An election by a controlled group of corporations under subsection (a) shall terminate with respect to such group— “(1) Consent of the members.— If such group files a termination of such election with respect to a specified December 31, and— “(A) each corporation which is a component member of such group on such December 31, and “(B) each other corporation which is a component member of such group on any succeeding December 31 before the day on which the termination is filed, consents to such termination. “(2) Refusal by new member to consent.— If on December 31 of any year such group includes a component member which— “(A) on the immediately preceding January 1 was not a member of such group, and “(B) within the time and in the manner provided by regulations prescribed by the Secretary or his delegate, files a statement that it does not consent to the election. “(3) Consolidated returns.— If— “(A) a corporation is a component member (determined Post, pp. 120, 121. without regard to section 1563(b)(3)) of such group on a December 31 included within a taxable year ending on or after January 1, 1964, and ‘(B) such corporation is a member of an affiliated group of corporations which makes a consolidated return under this chapter (sec. 1501 and following) for such taxable year. 26 USC 1501 et seq. “(4) Controlled group no longer in existence.— If such Soup is considered as no longer in existence with respect to any December 31. Such termination shall be effective with respect to the December 31 referred to in paragraph (1) (A), (2), (3), or (4), as the case may be. “(d) Election After Termination.— If an election by a controlled group of corporations is terminated under subsection (c), such group (and any successor group) shall not be eligible to make an election under subsection (a) with respect to any December 31 before the sixth December 31 after the December 31 with respect to which such termination was effective. “(e) Manner and Time of Giving Consent and Making Election, Etc.— An election under subsection (a)(1) or a termination under subsection (c)(1) (and the consent of each member of a controlled group of corporations which is required with respect to such election or termination) shall be made in such manner as the Secretary or his delegate shall by regulations prescribe, and shall be made at any time before the expiration of 3 years after— “(1) in the case of such an election, the date when the income tax return for the taxable year of the component member of the controlled group which has the taxable year ending first, on or after the specified December 31 is required to be filed (without regard to any extensions of time), and “(2) in the case of such a termination, the specified December 31 with respect to which such termination was made. Any consent to such an election or termination, and a failure by a component member to file a statement that it does not consent to an election under this section, shall be deemed to be a consent to the application of subsection (g)(1) (relating to tolling of statute of limitations on assessment of deficiencies). “(f) Special Rules.— For purposes of this section— “(1) Continuing and successor controlled groups.— The determination of whether a controlled group of corporations— “(A) is considered as no longer in existence with respect to any December 31, or “(B) is a successor to another controlled group of corporations (and the effect of such determination with respect to any election or termination), shall be made under regulations prescribed by the Secretary or his delegate. For purposes of subparagraph (B), such regulations shall be based on the continuation (or termination) of predominant equitable ownership. “(2) Certain short taxable years.— If one or more corporations have short taxable years which do not include a December 31 and are component members of a controlled group of corporations with respect to such taxable years (determined by applying section 1563(b) as if the last day of each such taxable Post, pp. 120, 121. year were substituted for December 31), then an election by such group under this section shall apply with respect to such corporations with respect to such taxable years if— “(A) such election is in effect with respect to both the December 31 immediately preceding such taxable years and the December 31 immediately succeeding such taxable years, or “(B) such election is in effect with respect to the December 31 immediately preceding or succeeding such taxable years and each such corporation files a consent to the application of such election to its short taxable year at such tune and in such manner as the Secretary or his delegate shall prescribe by regulations. (g) tolling of Statute of Limitations.— In any case in which a controlled group of corporations makes an election or termination under this section, the statutory’ period— “(1) for assessment or any deficiency against a corporation which is a component member of such group for any taxable year, to the extent such deficiency is attributable to the application of this part, shall not expire before the expiration of one year after the date such election or termination is made; and “(2) for allowing or making credit or refund of any overpayment of tax by a corporation which is a component member of such group for any taxable year, to the extent such credit or refund is attributable to the application of this part, shall not expire before the expiration of one year after the date such election or termination is made. “SEC. 1563. DEFINITIONS AND SPECIAL RULES. “(a) Controlled Group of Corporations.— For purposes of this part, the term ‘controlled group of corporations’ means any group of— “(1) Parent-subsidiary controlled group.— One or more chains of corporations connected through stock ownership with a common parent corporation if— “(A) stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of each of the corporations, except the common parent corporation, is owned (within the meaning of subsection (d)(1)) by one or more of the other corporations; and “(B) the common parent corporation owns (within the meaning of subsection (d)(1)) stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of at least one of the other corporations, excluding, in computing such voting power or value, stock owned directly by such other corporations. “(2) Brother-sister controlled group.— Two or more corporations if stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of each of the corporations is owned (within the meaning of subsection (d) (2)) by one person who is an individual, estate, or trust. “(3) Combined group.— Three or more corporations each of which is a member of a group of corporations described in paragraph (1) or (2), and one of which— “(A) is a common parent corporation included in a group of corporations described in paragraph (1), and also “(B) is included in a group of corporations described in paragraph (2). “(4) Certain insurance companies.— Two or more insurance 73 Stat. 115. 26 USC 802. companies subject to taxation under section 802 which are members of a controlled group of corporations described in paragraph (1), (2), or (3). Such insurance companies shall be treated as a controlled group of corporations separate from any other corporations which are members of the controlled group of corporations described in paragraph (1), (2), or (3). “(b) Component Member.— “(1) General rule.— For purposes of this part, a corporation is a component member of a controlled group of corporations on a December 31 of any taxable year (and with respect to the taxable year which includes such December 31) if such corporation— “(A) is a member of such controlled group of corporations on the December 31 included in such year and is not treated as an excluded member under paragraph (2), or “(B) is not a member of such controlled group of corporations on the December 31 included in such year but is treated as an additional member under paragraph (3). “(2) Excluded members.— A corporation which is a member of a controlled group of corporations on December 31 of any taxable year shall be treated as an excluded member of such group for the taxable year including such December 31 if such corporation— “(A) is a member of such group for less than one-half the number of days in such taxable year which precede such December 31, “(B) is exempt from taxation under section 501(a) (except 68A Stat. 163, 169. 26 USC 501, 311. a corporation which is subject to tax on its unrelated business taxable income, under section 511) for such taxable year, “(C) is a foreign corporation subject to tax under section 881 for such taxable year, 26 USC 881. “(D) is an insurance company subject to taxation under section 802 or section 821 (other than an insurance company 73 Stat. 115; 76 Stat. 989. 26 USC 802, 821. which is a member of a controlled group described in subsection (a)(4)), or “(E) is a franchised corporation, as defined in subsection (f)(4). “(3) Additional members.— A corporation which— “(A) was a member of a controlled group of corporations at any time during a calendar year, “(B) is not a member of such group on December 31 of such calendar year, and “(C) is not described, with respect to such group, in subparagraph (B), (C), (D), or (E) of paragraph (2), shall be treated as an additional member of such group on December 31 for its taxable year including such December 31 if it was a member of such group for one-half (or more) of the number of days in such taxable year which precede such December 31. ‘(4) Overlapping groups.— If a corporation is a component member of more than one controlled group of corporations with respect to any taxable year, such corporation shall be treated as a component member of only one control1ed group. The determination as to the group of which such corporation is a component member shall be made under regulations prescribed by the Secretary or his delegate winch are consistent with the purposes of this part. “(c) Certain Stock Excluded.— “(1) General rule.— For purposes of this part, the term, ‘stock’ does not include— “(A) nonvoting stock which is limited and preferred as to dividends, “(B) treasury stock, and “(C) stock which is treated as ‘excluded stock’ under paragraph (2), “(2) Stock treated as ‘exceeded stock’.— “(A) Parent-subsidiary controlled group.— For purposes of subsection (a) (1), if a corporation (referred to in this paragraph as ‘parent corporation’) owns (within the meaning of subsections (d)(1) and (e)(4)), 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock in another corporation (referred to in this paragraph as ‘subsidiary corporation’), the following stock of the subsidiary corporation shall be treated as excluded stock— “(i) stock in the subsidiary corporation held by a trust which is part of a plan of deferred compensation for the benefit of the employees of the parent corporation or the subsidiary corporation, “(ii) stock in the subsidiary corporation owned by an individual (within the meaning of subsection (d)(2)) who is a principal stockholder or officer of the parent corporation. For purposes of this clause, the term ‘principal stockholder’ of a corporation means an individual who owns (within the meaning of subsection (d) (2)) 5 percent or more of the total combined voting power of all classes of stock entitled to vote or 5 percent or more of the total value of shares of all classes of stock in such corporation, or “(iii) stock in the subsidiary corporation owned (within the meaning of subsection (d)(2)) by an employee of the subsidiary corporation if such stock is subject to conditions which run in favor of such parent (or subsidiary) corporation and which substantially restrict or limit the employee’s right (or if the employee constructively owns such stock, the direct owner’s right) to dispose of such stock. “(B) Brother-sister controlled group.— For purposes of subsection (a)(2), if a person who is an individual, estate, or trust (referred to in this paragraph as ‘common owner’) owns (within the meaning of subsection (d)(2)), 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock in a corporation, the following stock of such corporation shall be treated as excluded stock— “(i) stock in such corporation held by an employees’ 68A Stat. 134, 163; 76 Stat. 809. 26 USC 401, 501. trust described in section 401(a) which is exempt from tax under section 501(a), if such trust is for the benefit of the employees of such corporation, or “(ii) stock in such corporation owned (within the meaning of subsection (d)(2)) by an employee of the corporation if such stock is subject to conditions which run in favor of such common owner (or such corporation) and which substantially restrict or limit the employee’s right (or if the employee constructively owns such stock, the direct owner’s right) to dispose of such stock. If a condition which limits or restricts the employee’s right (or the direct owner’s right) to dispose of such stock also applies to the stock held by the common owner pursuant to a bona fide reciprocal stock purchase arrangement, such condition shall not be treated as one which restricts or limits the employee’s right to dispose of such stock. “(d) Rules for Determining Stock Ownership.— “(1) Parent-subsidiary controlled group.— For purposes of determining whether a corporation is a member of a parent-subsidiary controlled group of corporations (within the meaning of subsection (a) (1)), stock owned by a corporation means— “(A) stock owned directly by such corporation, and “(B) stock owned with the application of subsection (e)(1). “(2) Brother-sister controlled group.— For purposes of determining whether a corporation is a member of a brother-sister controlled group of corporations (within the meaning of subsection (a) (2)), stock owned by a person who is an individual, estate, or trust means— “(A) stock owned directly by such person, and “(B) stock owned with the application of subsection (e). “(e) Constructive Ownership.— “(1) Options.— If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. “(2) Attribution from partnerships.— Stock owned, directly or indirectly, by or for a partnership shall be considered as owned by any partner having an interest of 5 percent or more in either the capital or profits of the partnership in proportion to his interest in capital or profits, whichever such proportion is the greater. “(3) Attribution from estates or trusts.— “(A) Stock owned, directly or indirectly, by or for an estate or trust shall be considered as owned by any beneficiary who has an actuarial interest of 5 percent or more in such stock, to the extent of such actuarial interest. For purposes of this subparagraph, the actuarial interest of each beneficiary shall be determined by assuming the maximum exercise of discretion by the fiduciary in favor of such beneficiary and the maximum use of such stock to satisfy his rights as a beneficiary. “(B) Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under subpart E of part I of subchapter J (relating to grantors 68A Stat. 226. 26 USC 671–678. and others treated as substantial owners) shall be considered as owned by such person. “(C) This paragraph shall not apply to stock owned by any employees’ trust described in section 401(a) which is 68A Stat. 134, 163; 76 Stat. 809. 26 USC 401, 501. exempt from tax under section 501 (a). “(4) Attribution from corporations.— Stock owned, directly or indirectly, by or for a corporation shall be considered as owned by any person who owns (within the meaning of subsection (d)) 5 percent or more in value of its stock in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation. “(5) Spouse.— An individual shall be considered as owning stock in a corporation owned, directly or indirectly, by or for his spouse (other than a spouse who is legally separated from the individual under a decree of divorce whether interlocutory or final, or a decree of separate maintenance), except in the case of a corporation with respect to which each of the following conditions is satisfied for its taxable year— “(A) The individual does not, at any time during such taxable year, own directly any stock in Such corporation; “(B) The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year; “(C) Not more than 50 percent of such corporation’s gross income for such taxable year was derived from royalties, rents, dividends, interest, and annuities; and “(D) Such stock in such corporation is not, at any time during such taxable year, subject to conditions which substantially restrict or limit the spouse’s right to dispose of such stock and which run in favor of the individual or his children who have not attained the age of 21 years. “(6) Children, grandchildren, parents, and grandparents.— “(A) Minor children.— An individual shall be considered as owning stock owned, directly or indirectly, by or for his children who have not attained the age of 21 years, and, if the individual has not attained the age of 21 years, the stock owned, directly or indirectly, by or for his parents. “(B) Adult children and grandchildren.— An individual who owns (within the meaning of subsection (d)(2), but without regard to this subparagraph) more than 50 percent of the total combined voting power of all classes of stock entitled to vote or more than 50 percent of the total value of shares of all classes of stock in a corporation shall be considered as owning the stock in such corporation owned, directly or indirectly, by or for his parents, grandparents, grandchildren, and children who have attained the age of 21 years. “(C) Adopted child.— For purposes of this section, a legally adopted child of an individual shall be treated as a child of such individual by blood. “(f) Other Definitions and Rules.— “(1) Employee defined.— For purposes of this section the term ‘employee’ has the same meaning such term is given in section 68A Stat. 452. 26 USC 3306. 3306(i). “(2) Operating rules.— “(A) In general.— Except as provided in subparagraph (B), stock constructively owned by a person by reason of the application of paragraph (1), (2), (3), (4), (5), or (6) of subsection (e) shall, for purposes of applying such paragraphs, be treated as actually owned by such person. “(B) Members of family.— Stock constructively owned by an individual by reason of the application of paragraph (5) or (6) of subsection (e) shall not be treated as owned by him for purposes of again applying such paragraphs in order to make another the constructive owner of such stock. “(3) Special rules.— For purposes of this section— “(A) If stock may be considered as owned by a person under subsection (e)(1) and under any other paragraph of subsection (e), it shall be considered as owned by him under subsection (e)(1). “(B) If stock is owned (within the meaning of subsection (d)) by two or more persons, such stock shall be considered as owned by the person whose ownership of such stock results in the corporation being a component member of a controlled group. If by reason of the preceding sentence, a corporation would (but for this sentence) become a component member of two controlled groups, it shall be treated as a component member of one controlled group. The determination as to the group of which such corporation is a component member shall be made under regulations prescribed by the Secretary or his delegate which are consistent with the purposes of this part. “(C) If stock is owned by a person within the meaning of subsection (d) and such ownership results in the corporation being a component member of a controlled group, such stock shall not be treated as excluded stock under subsection (c) (2), if by reason of treating such stock as excluded stock the result is that such corporation is not a component member of a controlled group of corporations. “(4) Franchised corporation.— If— “(A) a parent corporation (as defined in subsection (c) (2) (A)), or a common owner (as defined in subsection (c) (2) (B)), of a corporation which is a member of a controlled group of corporations is under a duty (arising out of a written agreement) to sell stock of such corporation (referred to in this paragraph as ‘franchised corporation’) which is franchised to sell the products of another member, or the common owner, of such controlled group; “(B) such stock is to be sold to an employee (or employees) of such franchised corporation pursuant to a bona fide plan designed to eliminate the stock ownership of the parent corporation or of the common owner in the franchised corporation; “(C) such plan— “(i) provides a reasonable selling price for such stock, and “(ii) requires that a portion of the employee’s share of the profits of such corporation (whether received as compensation or as a dividend) be applied to the purchase of such stock (or the purchase of notes, bonds, debentures or other similar evidence of indebtedness of such franchised corporation held by such parent corporation or common owner); “(D) such employee (or employees) owns directly more than 20 percent of the total value of shares of all classes of stock in such franchised corporation; “(E) more than 50 percent of the inventory of such franchised corporation is acquired from members of the controlled group, the common owner, or both; and “(F) all of the conditions contained in subparagraphs (A), (B), (C), (D), and (E) have been met for one-half (or more) of the number of days preceding the December 31 included within the taxable year (or if the taxable year does not include December 31, the last day of such year) of the franchised corporation, then such franchised corporation shall be treated as an excluded member of such group, under subsection (b)(2), for such taxable year.”

2. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title IV § 401(a)(1) · 83 Stat. 487

   Changed · 26 U.S.C. § 1561

   Pub. L. 91–172 provided, with respect to taxable years beginning after Dec. 31, 1974, that a controlled group of corporations is limited to one $25,000 surtax exemption under section 11(d), one $100,000 amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3), and one $25,000 amount for purposes of computing the limitation on the small business deduction of life insurance companies under sections 804(a)(4) and 809(d)(10)

   Source evidence

   Code amendment note
   Pub. L. 91–172 provided, with respect to taxable years beginning after Dec. 31, 1974, that a controlled group of corporations is limited to one $25,000 surtax exemption under section 11(d), one $100,000 amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3), and one $25,000 amount for purposes of computing the limitation on the small business deduction of life insurance companies under sections 804(a)(4) and 809(d)(10).

   Enacted provision · exact public law section
   (1) Section 1561 (relating to surtax exemptions in case of 78 Stat. 116. certain controlled corporations) is amended to read as follows: “SEC. 1561. LIMITATIONS ON CERTAIN MULTIPLE TAX BENEFITS IN THE CASE OF CERTAIN CONTROLLED CORPORATIONS. “(a) General Rule.— The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to— “(1) one $25,000 surtax exemption under section 11(d), 78 Stat. 25. “(2) one $100,000 amount for purposes of computing the accumulated earnings credit under section 535(c) (2) and (3), and 68A Stat. 180; 72 Stat. 1680. “(3) one $25,000 amount for purposes of computing the limitation on the small business deduction of life insurance companies under sections 804(a)(4) and 809(d)(10). 73 Stat. 115. The amount specified in paragraph (1) shall be divided equally among the component members of such group on such December 31 unless all of such component members consent (at such time and in such manner as the Secretary or his delegate shall by regulations prescribe) to an apportionment plan providing for an unequal allocation of such amount. The amounts specified in paragraphs (2) and (3) shall be divided equally among the component members of such group on such December 31 unless the Secretary or his delegate prescribes regulations permitting an unequal allocation of such amounts. “(b) Certain Short Taxable Years.— If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle— “(1) the surtax exemption under section 11(d), “(2) the amount to be used in computing the accumulated earnings 68A Stat. 180; 72 Stat. 1680. credit under section 535(c) (2) and (3), and “(3) the amount to be used in computing the limitation on the small business deduction of life insurance companies under sections 73 Stat. 115. 804(a)(4) and 809(d)(10), of such corporation for such taxable year shall be the amount specified in subsection (a)(1), (2), or (3), as the case may be, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding 78 Stat. 120. 26 USC 1563. sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.”

3. 1975

   Tax Reduction Act of 1975

   Pub. L. 94–12 § 303(c)(1) · 89 Stat. 26

   Substituted · 26 U.S.C. § 1561(a)(1)

   Pub. L. 94–12, § 303(c)(1), substituted “$50,000” for “$25,000”

   Target inherited from the preceding amendment note.

   Source evidence

   Code amendment note
   Pub. L. 94–12, § 303(c)(1), substituted “$50,000” for “$25,000”.

   Enacted provision · exact public law section
   (1) Paragraph (1) of section 1561(a) (as in effect for taxable years beginning after December 31, 1974) (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended by striking out “$25,000” and inserting 26 USC 11 note. in lieu thereof “$50,000”. In applying subsection (b)(2) of section 11, the first $25,000 of taxable income and the second $25,000 of taxable income shall each be allocated among the component members of a con trolled group of corporations in the same manner as the surtax exemption is allocated.

4. 1975

   Tax Reduction Act of 1975

   Pub. L. 94–12 § 304(b) · 89 Stat. 26

   Substituted · 26 U.S.C. § 1561(a)(2)

   Pub. L. 94–12, § 304(b), substituted “$150,000” for “$100,000”

   Source evidence

   Code amendment note
   Subsec. (a)(2). Pub. L. 94–12, § 304(b), substituted “$150,000” for “$100,000”.

   Enacted provision · exact public law section
   (b) Conforming Amendments.— Sections 243 (b)(3)(C)(i) (relating 26 USC 243. to qualifying dividends for purposes of the dividends received deduction), 1551 (a) (relating to disallowance of surtax exemption and 26 USC 1551. 26 USC 1561. accumulated earnings credit) and 1561(a)(2) (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) are each amended by striking out “$100,000” and inserting in lieu thereof “$150,000”.

5. 1975

   Revenue Adjustment Act of 1975

   Pub. L. 94–164 § 4(d)(1) · 89 Stat. 970

   Struck · 26 U.S.C. § 1561(a)(1)

   Pub. L. 94–164 struck out “$25,000” in par. (1) as par. (1) is in effect for taxable years ending after Dec. 31, 1975

   Source evidence

   Code amendment note
   Subsec. (a)(1). Pub. L. 94–164 struck out “$25,000” in par. (1) as par. (1) is in effect for taxable years ending after Dec. 31, 1975.

   Enacted provision · exact public law section
   (1) Section 1561 (a)(1) of such Code (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) as such section is in effect for taxable years ending after December 31, 1975, is amended by striking out “$25,000”. Section 962(c) of such Code (relating to surtax exemption for 26 USC 962. individuals electing to be subject to tax at corporate rates) as such section is in effect for taxable years ending after December 31, 1975, is amended by striking out “$25,000” and inserting in lieu thereof “the surtax exemption”.

6. 1976

   Pub. L. 94–455 title IX § 901(c)(1) · 90 Stat. 1520

   1. Inserted · 26 U.S.C. § 1561(a)

      Pub. L. 94–455, §§ 901(c)(1), 1906(b)(13)(A), inserted “In applying section 11(b)(2), the first $25,000 of taxable income and the second $25,000 of taxable income shall each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated” after “unequal allocation of such amounts”

   2. Struck · 26 U.S.C. § 1561(a)

      Pub. L. 94–455, §§ 901(c)(1), 1906(b)(13)(A), struck out “or his delegate” after “Secretary” in two places

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 94–455, §§ 901(c)(1), 1906(b)(13)(A), inserted “In applying section 11(b)(2), the first $25,000 of taxable income and the second $25,000 of taxable income shall each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated” after “unequal allocation of such amounts” and struck out “or his delegate” after “Secretary” in two places.

   Enacted provision · exact public law section
   (1) Section 1561(a) (relating to certain multiple tax benefits 26 USC 1561. in the case of certain controlled corporations) is amended by adding at the end thereof the following new sentence: “In applying section 11(b)(2), the first $25,000 of taxable income and the second $25,000 of taxable income shall each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated.”

7. 1976

   Pub. L. 94–455 § 1901(b)(1)(J)(v) · 90 Stat. 1520

   Substituted · 26 U.S.C. § 1561(a)(3)

   Pub. L. 94–455, § 1901(b)(1)(J)(v), substituted “804(a)(3)” for “804(a)(4)” after “under sections”

   Source evidence

   Code amendment note
   Subsec. (a)(3). Pub. L. 94–455, § 1901(b)(1)(J)(v), substituted “804(a)(3)” for “804(a)(4)” after “under sections”.

   Enacted provision · exact public law section
   (v) Section 1561(a)(3) is amended by striking out “sections 26 USC 1561. 804(a)(4)” and inserting in lieu thereof “sections 804 (a)(3)”.

8. 1978

   Pub. L. 95–600 § 301(b)(19)(A) · 92 Stat. 2763

   1. Substituted · 26 U.S.C. § 1561(a)

      Pub. L. 95–600, § 301(b)(19)(A), in par. (1) substituted “amounts in each taxable income bracket in the tax table in section 11(b) which do not aggregate more than the maximum amount in such bracket to which a corporation is not a component member of a controlled group is entitled” for “the surtax exemption under section 11(d)” in two places

   2. Substituted · 26 U.S.C. § 1561(a)

      Pub. L. 95–600, § 301(b)(19)(A), in par. (1) substituted “amounts” for “amount” in two places

   3. Struck · 26 U.S.C. § 1561(a)

      Pub. L. 95–600, § 301(b)(19)(A), in par. (1) struck out provision that in applying section 11(b)(2), the first $25,000 of taxable income and the second $25,000 of taxable income each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 95–600, § 301(b)(19)(A), in par. (1) substituted “amounts in each taxable income bracket in the tax table in section 11(b) which do not aggregate more than the maximum amount in such bracket to which a corporation is not a component member of a controlled group is entitled” for “the surtax exemption under section 11(d)” and in provisions following par. (3) substituted “amounts” for “amount” in two places and struck out provision that in applying section 11(b)(2), the first $25,000 of taxable income and the second $25,000 of taxable income each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated.

   Enacted provision · exact public law section
   (A) In general.— Subsection (a) of section 1561 (relating to 26 USC 1561. limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended— (i) by striking out paragraph (1) and inserting in lieu thereof the following: “(1) amounts in each taxable income bracket in the tax table in section 11(b) which do not aggregate more than the maximum amount in such bracket to which a corporation which is not a component member of a controlled group is entitled,”, (ii) by striking out “amount” each place it appears in the second sentence and inserting in lieu thereof “amounts”, and (iii) by striking out the last sentence.

9. 1978

   Pub. L. 95–600 § 301(b)(19)(B) · 92 Stat. 2763

   Substituted · 26 U.S.C. § 1561(b)(1)

   Pub. L. 95–600, § 301(b)(19)(B), substituted “the amount in each taxable income bracket in the tax table in section 11(b)” for “the surtax exemption under section 11(d)”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 95–600, § 301(b)(19)(B), substituted “the amount in each taxable income bracket in the tax table in section 11(b)” for “the surtax exemption under section 11(d)”.

   Enacted provision · exact public law section
   (B) Certain short taxable years.— Paragraph (1) of section 1561(b) (relating to certain short taxable years) is amended to read as follows: “(1) the amount in each taxable income bracket in the tax table insection 11(b),”.

10. 1978

    Pub. L. 95–600 § 703(j)(7) · 92 Stat. 2763

    Substituted · 26 U.S.C. § 1561(b)(3)

    Pub. L. 95–600, § 703(j)(7), substituted “804(a)(3)” for “804(a)(4)”

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 95–600, § 703(j)(7), substituted “804(a)(3)” for “804(a)(4)”.

    Enacted provision · exact public law section
    (7) Amendment of section 1561(b)(3).— Paragraph (3) of section 1561(b) is amended by striking out “804(a)(4)” and inserting in 26 USC 1561. lieu thereof “804(a)(3)”.

11. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 title II § 232(b)(3) · 95 Stat. 175

    Substituted · 26 U.S.C. § 1561(a)(2)

    Pub. L. 97–34 substituted “$250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B))” for “$150,000”

    Source evidence

    Code amendment note
    Subsec. (a)(2). Pub. L. 97–34 substituted “$250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B))” for “$150,000”.

    Enacted provision · exact public law section
    (3) Section 1561(a)(2) (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended by striking out “$150,000” and inserting in lieu thereof “$250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B))”.

12. 1982

    Pub. L. 97–248 § 259(b) · 96 Stat. 324

    1. Added · 26 U.S.C. § 1561(a)

       Pub. L. 97–248, § 259(b), added par. (4)

    2. Inserted · 26 U.S.C. § 1561(a)

       Pub. L. 97–248, § 259(b), inserted reference to par. (4) in text following par. (4)

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 97–248, § 259(b), added par. (4) and inserted reference to par. (4) in text following par. (4).

    Enacted provision · exact public law section
    (b) $1,000,000 Limitation to be Apportioned Among Members of Same Controlled Group.— Section 1561(a) (relating to limitations 26 USC 1561. on certain multiple tax benefits in the case of certain controlled corporations) is amended— (1) by striking out “and” at the end of paragraph (2), (2) by striking out the period at the end of paragraph (3) and inserting in lieu thereof a comma and “and”, (3) by inserting after paragraph (3) the following new paragraph: “(4) one $1,000,000 amount (adjusted as provided in section 809(f)(3)) for purposes of computing the limitation under paragraph (1) or (2) of section 809(f).”, and (4) by striking out “(2) and (3)” and inserting in lieu thereof “(2), (3), and (4)”.

13. 1982

    Pub. L. 97–248 § 259(c) · 96 Stat. 324

    1. Added · 26 U.S.C. § 1561(b)

       Pub. L. 97–248, § 259(c), added par. (4)

    2. Inserted · 26 U.S.C. § 1561(b)

       Pub. L. 97–248, § 259(c), inserted reference to subsec. (a)(4) in text following par. (4)

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 97–248, § 259(c), added par. (4) and inserted reference to subsec. (a)(4) in text following par. (4).

    Enacted provision · exact public law section
    (c) Conforming Amendments.— Section 1561(b) (relating to certain short taxable years) is amended— (1) by striking out “and” at the end of paragraph (2), (2) by striking out the comma at the end of paragraph (3) and inserting in lieu thereof a comma and “and”, (3) by inserting after paragraph (3) the following new paragraph: “(4) the amount (adjusted as provided in section 809(f)(3)) to be used in computing the limitation under paragraph (1) or (2) of section 809(f),”, and (4) by striking out “(2), or (3)” and inserting in lieu thereof “(2), (3), or (4)”.

14. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 211(b)(21)(A) · 98 Stat. 494

    1. Inserted · 26 U.S.C. § 1561(a)

       Pub. L. 98–369, § 211(b)(21)(A), inserted “and” at end of par. (1)

    2. Substituted · 26 U.S.C. § 1561(a)

       Pub. L. 98–369, § 211(b)(21)(A), substituted a period for the comma at end of par. (2)

    3. Struck · 26 U.S.C. § 1561(a)

       Pub. L. 98–369, § 211(b)(21)(A), struck out par. (3) which read as follows: “one $25,000 amount for purposes of computing the limitation on the small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and”

    4. Struck · 26 U.S.C. § 1561(a)

       Pub. L. 98–369, § 211(b)(21)(A), struck out par. (4) which read as follows: “one $1,000,000 amount (adjusted as provided in section 809(f)(3) for purposes of computing the limitation under paragraph (1) or (2) of section 809(f).”

    5. Substituted · 26 U.S.C. § 1561(a)

       Pub. L. 98–369, § 211(b)(21)(A), substituted “paragraph (2)” for “paragraphs (2), (3), and (4)” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 98–369, § 211(b)(21)(A), inserted “and” at end of par. (1), substituted a period for the comma at end of par. (2), struck out par. (3) which read as follows: “one $25,000 amount for purposes of computing the limitation on the small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and”, struck out par. (4) which read as follows: “one $1,000,000 amount (adjusted as provided in section 809(f)(3) for purposes of computing the limitation under paragraph (1) or (2) of section 809(f).”, and substituted “paragraph (2)” for “paragraphs (2), (3), and (4)” in concluding provisions.

    Enacted provision · exact public law section
    (A) Subsection (a) of section 1561 (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended— (i) by striking out paragraphs (3) and (4), by adding “and” at the end of paragraph (1), and by striking out the comma at the end of paragraph (2) and inserting in lieu thereof a period, and (ii) by striking out “paragraphs (2), (3), and (4)” in the last sentence and inserting in lieu thereof “paragraph (2)”.

15. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 66(b) · 98 Stat. 494

    Inserted · 26 U.S.C. § 1561(a)

    Pub. L. 98–369, § 66(b), inserted provision that notwithstanding paragraph (1), in applying last sentence of section 11(b) to such component members, the taxable income of all such component members shall be taken into account and any increase in tax under the last sentence shall be divided among such component members in the same manner as amounts under paragraph (1)

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 98–369, § 66(b), inserted provision that notwithstanding paragraph (1), in applying last sentence of section 11(b) to such component members, the taxable income of all such component members shall be taken into account and any increase in tax under the last sentence shall be divided among such component members in the same manner as amounts under paragraph (1).

    Enacted provision · exact public law section
    (b) Conforming Amendment.— Section 1561(a) (relating to limitations 26 USC 1561. on certain multiple tax benefits in the case of certain control corporations) is amended by adding at the end thereof the following new sentence: “Notwithstanding paragraph (1), in applying the last sentence of section 11(b) to such component members, the taxable income of all such component members shall be taken into account and any increase in tax under such last sentence shall be divided among such component members in the same manner as amounts under paragraph (1).”

16. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 211(b)(21)(B) · 98 Stat. 494

    1. Inserted · 26 U.S.C. § 1561(b)

       Pub. L. 98–369, § 211(b)(21)(B), inserted “and” at end of par. (1)

    2. Struck · 26 U.S.C. § 1561(b)

       Pub. L. 98–369, § 211(b)(21)(B), struck out par. (3) which read as follows: “the amount to be used in computing the limitation on the small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and”

    3. Struck · 26 U.S.C. § 1561(b)

       Pub. L. 98–369, § 211(b)(21)(B), struck out par. (4) which read as follows: “the amount (adjusted as provided in section 809(f)(3)) to be used in computing the limitation under paragraph (1) or (2) of section 809(f),”

    4. Substituted · 26 U.S.C. § 1561(b)

       Pub. L. 98–369, § 211(b)(21)(B), substituted “or (2)” for “, (2), (3), or (4)” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 98–369, § 211(b)(21)(B), inserted “and” at end of par. (1), struck out par. (3) which read as follows: “the amount to be used in computing the limitation on the small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and”, struck out par. (4) which read as follows: “the amount (adjusted as provided in section 809(f)(3)) to be used in computing the limitation under paragraph (1) or (2) of section 809(f),”, and substituted “or (2)” for “, (2), (3), or (4)” in concluding provisions.

    Enacted provision · exact public law section
    (B) Subsection (b) of section 1561 is amended— 26 USC 1561. (i) by striking out paragraphs (3) and (4) and by adding “and” at the end of paragraph (1), and (ii) by striking out “, (2), (3), or (4)” and inserting in lieu thereof “or (2)”.

17. 1986

    Pub. L. 99–499 title V § 516(b)(3) · 100 Stat. 1771

    1. Amended · 26 U.S.C. § 1561(a)

       Pub. L. 99–499, in subsec. (a) as amended by Pub. L. 99–514 above

    2. Substituted · 26 U.S.C. § 1561(a)

       Pub. L. 99–499, in subsec. (a) as added par. (4), and in concluding provisions substituted “, the amount specified in paragraph (3), and the amount specified in paragraph (4)” for “(and the amount specified in paragraph (3))”

    Unresolved: Pub. L. 99–499 was not found in the local Statutes at Large index.

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 99–499, in subsec. (a) as amended by Pub. L. 99–514 above, added par. (4), and in concluding provisions substituted “, the amount specified in paragraph (3), and the amount specified in paragraph (4)” for “(and the amount specified in paragraph (3))”.

18. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 title VII § 701(e)(2) · 100 Stat. 2085

    1. Added · 26 U.S.C. § 1561(a)

       Pub. L. 99–514 added par. (3), and in concluding provisions

    2. Substituted · 26 U.S.C. § 1561(a)

       Pub. L. 99–514 substituted “amounts specified in paragraph (1) (and the amount specified in paragraph (3))” for “amounts specified in paragraph (1)”

    3. Inserted · 26 U.S.C. § 1561(a)

       Pub. L. 99–514 inserted “In applying section 55(d)(3), the alternative minimum taxable income of all component members shall be taken into account and any decrease in the exemption amount shall be allocated to the component members in the same manner as under paragraph (3).”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 99–514 added par. (3), and in concluding provisions, substituted “amounts specified in paragraph (1) (and the amount specified in paragraph (3))” for “amounts specified in paragraph (1)” and inserted “In applying section 55(d)(3), the alternative minimum taxable income of all component members shall be taken into account and any decrease in the exemption amount shall be allocated to the component members in the same manner as under paragraph (3).”

    Enacted provision · exact public law section
    (2) Limitation in case of controlled corporations.— Subsection (a) of section 1561 (relating to limitations on certain multiple tax benefits in the case of certain controlled corporations) is amended— (A) by striking out “and” at the end of paragraph (1), by striking out the period at the end of paragraph (2) and inserting in lieu thereof “, and” and by inserting after paragraph (2) the following new paragraph: “(3) one $40,000 exemption amount for purposes of computing the amount of the minimum tax.”, (B) by striking out “amounts specified in paragraph (1)” and inserting in lieu thereof “amounts specified in paragraph (1) (and the amount specified in paragraph (3))”, and (C) by adding at the end thereof the following new sentence: “In applying section 55(d)(3), the alternative mini-mum taxable income of all component members shall be taken into account and any decrease in the exemption amount shall be allocated to the component members in the same manner as under paragraph (3).”

19. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 title II § 2004 · 102 Stat. 3342

    Substituted · 26 U.S.C. § 1561(a)

    Pub. L. 100–647 substituted “section 11(b)(1)” for “section 11(b)” in par. (1) and in penultimate sentence

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 100–647 substituted “section 11(b)(1)” for “section 11(b)” in par. (1) and in penultimate sentence.

    Enacted provision · exact public law section
    SEC. 2004. AMENDMENTS RELATED TO THE REVENUE ACT OF 1987. (a) Amendment Related to Section 10101 of the Act.— Section 26 USC 21 note. 10101(b) of the Revenue Act of 1987 is amended to read as follows: “(b) Effective Date.— “(1) In general.— The amendment made by subsection (a) shall apply to expenses paid in taxable years beginning after December 31, 1987. “(2) Special rule for cafeteria plans.— For purposes of section 125 of the Internal Revenue Code of 1986, a plan shall not be treated as failing to be a cafeteria plan solely because under the plan a participant elected before January 1, 1988, to receive reimbursement under the plan for dependent care assistance for periods after December 31, 1987, and such assistance included reimbursement for expenses at a camp where the dependent stays overnight.” (b) Amendments Related to Section 10102 of the Act.— (1) Subsection (h) of section 163 of the 1986 Code is amended by redesignating paragraph (6) as paragraph (5). (2) Clause (ii) of section 56(b)(1)(C) of the 1986 Code is amended by striking out “163(h)(6)” and inserting in lieu thereof “163(h)(5)”. (3) Paragraph (1) of section 56(e) of the 1986 Code is amended— (A) by striking out “substantially rehabilitating” and inserting in lieu thereof “substantially improving”, and (B) by striking out “or is paid” in subparagraph (A). (c) Amendment Related to Section 10103.— Paragraph (1) of section 10103(a) of the Revenue Act of 1987 is amended by inserting 26 USC 219 note. “in a plan established for its employees by the United States” after “participant”. (d) Amendments Related to Section 10202 of the Act.— (1) Subparagraph (A) of section 453(l)(1) of the 1986 Code, is amended by striking out “disposes of personal property” and inserting in lieu thereof “disposes of personal property of the same type”. (2) Section 453A of the 1986 Code is amended by adding at the end thereof the following new subsection: “(e) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations— “(1) disallowing the use of the installment method in whole or in part for transactions in which the rules of this section otherwise would be avoided through the use of related persons, pass-thru entities, or intermediaries, and “(2) providing that the sale of an interest in a partnership or other pass-thru entity will be treated as a sale of the proportionate share of the assets of the partnership or other entity.” (3) Paragraph (3) of section 10202(e) of the Revenue Act of 1987 is amended by adding at the end thereof the following new 26 USC 453 note. subparagraph: “(C) Certain dispositions deemed made on 1st day of taxable year.— If the taxpayer makes an election under subparagraph (A), in the case of the taxpayer’s 1st taxable year ending after December 31, 1986— “(i) dispositions after August 16, 1986, and before the 1st day of such taxable year shall be treated as made on such 1st day, and “(ii) subsections (b)(2)(B) and (c)(4) of section 453A of such Code shall be applied separately with respect to such dispositions by substituting for ‘$5,000,000’ the amount which bears the same ratio to $5,000,000 as the number of days after August 16, 1986, and before such 1st day bears to 365.” (4) Paragraph (2) of section 10202(e) of the Revenue Act of 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Certain rules made applicable.— For purposes of this paragraph, rules similar to the rules of paragraphs (4) and (5) of section 812(c) of the Tax Reform Act of 1986 (as added by the Technical and Miscellaneous Revenue Act of 1988) shall apply.” (5) Subsection (k) of section 453 of the 1986 Code is amended by striking out “and section 453A”. (6) Subparagraph (A) of section 10202(e)(2) of the Revenue Act 26 USC 453 note. of 1987 is amended by striking out “section 453A of the Internal Revenue Code of 1986” and inserting in lieu thereof “section 453(1)(1) of the Internal Revenue Code of 1986 as added by this section”. (7) Paragraph (2) of section 453A(b) of the 1986 Code is amended by striking out “for purposes of this paragraph” and inserting in lieu thereof “for purposes of this paragraph and subsection (c)(4)”. (8) Paragraph (3) of section 453A(b) of the 1986 Code is amended to read as follows: “(3) Exception for farm property.— An installment obligation shall not be treated as described in paragraph (1) if it arises from the disposition of any property used or produced in the trade or business of farming (within the meaning of section 2032A(e)(4)or (5).” (e) Amendments Related to Section 10206 of the Act.— (1) (A) Subsection (a) of section 444 of the 1986 Code is amended by striking out “as provided in subsections (b) and (c)” and inserting in lieu thereof “as otherwise provided in this section”, (B) Paragraph (3) of section 444(d) of the 1986 Code is amended to read as follows: “(3) Tiered structures, etc.— “(A) In general.— Except as otherwise provided in this paragraph— “(i) no election may be under subsection (a) with respect to any entity which is part of a tiered structure, and “(ii) an election under subsection (a) with respect to any entity shall be terminated if such entity becomes part of a tiered structure. “(B) Exceptions for structures consisting of certain entities with same taxable year.— Subparagraph (A) shall not apply to any tiered structure which consists only of partnerships or S corporations (or both) all of which have the same taxable year.” (C) Subparagraph (B) of section 444(d)(2) of the 1986 Code is amended by striking out “under subparagraph (A)” and inserting in lieu thereof “under subparagraph (A) or paragraph (3)(A)”. (2) (A) Section 444 of the 1986 Code is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection: “(f) Personal Service Corporation.— For purposes of this section, the term ‘personal service corporation’ has the meaning given to such term by section 441(1)(2).” (B) Subsection (f) of section 280H of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) “Personal service corporation.— The term ‘personal service corporation’ has the meaning given to such term by section 441(i)(2).” (3) Paragraph (2) of section 280H(f) of the 1986 Code is amended by striking out “section 296A(b)(2)” and inserting in lieu thereof “section 269A(b)(2) (as modified by section 441(i)(2))”. (4) (A) Paragraph (2) of section 7519(b) of the 1986 Code is amended to read as follows: “(2) the net required payment balance.” (B) Subsection (e) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Net required payment balance.— The term ‘net required payment balance’ means the excess (if any) of— “(A) the aggregate of the required payments under this section for all preceding applicable election years, over “(B) the aggregate amount allowable as a refund to the entity under subsection (c) for all preceding applicable election years.” (5) Subsection (c) of section 7519 of the 1986 Code is amended to read as follows: “(c) Refund of Payments.— “(1) In general.— If, for any applicable election year, the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), the entity shall be entitled to a refund of such excess for such year. “(2) Termination of elections, etc.— If— “(A) an election under section 444 is terminated effective with respect to any year, or “(B) the entity is liquidated during any year, the entity shall be entitled to a refund of the net required payment balance. “(3) Date on which refund payable.— Any refund under this subsection shall be payable on later of— “(A) April 15 of the calendar year following— “(i) in the case of the year referred to in paragraph (1), the calendar year in which it begins, “(ii) in the case of the year referred to in paragraph (2), the calendar year in which it ends, or “(B) the day 90 days after the day on which claim therefor is filed with the Secretary.” (6) Subsection (g) of section 7519 of the 1986 Code is amended by striking out “including regulations” and all that follows down through the period at the end thereof and inserting in lieu thereof “including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where— “(1) 2 or more applicable election years begin in the same calendar year, or “(2) the base year is a taxable year of less than 12 months.” (7) Subparagraph (B) of section 7519(d)(2) of the 1986 Code is amended by inserting before the period at the end thereof the following: “(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))”. (8) Subsection (d) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) Treatment of guaranteed payments.— “(A) In general.— Any guaranteed payment by a partnership shall not be treated as an applicable payment, and the amount of the net income of the partnership shall be determined by not taking such guaranteed payment into account. “(B) Guaranteed payment.— For purposes of subparagraph (A), the term ‘guaranteed payment’ means any payment referred to in section 707(c).” (9) Paragraph (4) of section 7519(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity’s net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.” (10) Subparagraphs (A) and (B) of section 7519(d)(2) of the 1986 Code are each amended by striking out “(other than credits)” and inserting in lieu thereof “(other than credits and tax-exempt income)”. (11) Paragraph (4) of section 10206(d) of the Revenue Act of 26 USC 444 note. 1987 is amended by adding at the end thereof the following new sentence: “The preceding sentence shall apply only in the case of an election under section 444 of such Code made for a taxable year beginning before 1989.” (12) Subparagraph (A) of section 444(d)(2) of the 1986 Code is amended by inserting “or otherwise terminates such election” before the period at the end of the first sentence thereof. (13) Paragraph (4) of section 444(b) of the 1986 Code is amended by striking out “the term” and inserting in lieu thereof “except as provided in regulations, the term”. (14) (A) Paragraph (4) of section 280H(f) of the 1986 Code is amended to read as follows: “(4) Adjusted taxable income.— The term ‘adjusted taxable income’ means taxable income determined without regard to— “(A) any amount paid to an employee-owner which is includible in the gross income of such employee-owner, and “(B) any net operating loss carryover to the extent such carryover is attributable to amounts described in subparagraph (A).” (B) Subparagraph (A) of section 7519(d)(3) of the 1986 Code is amended by striking out “or incurred”. (C) Subsections (c)(1)(A)(i) and (d)(1) of section 280H of the 1986 Code are each amended by striking out “or incurred”. (f) Amendments Related to Section 10211 of the Act.— (1) Paragraph (4) of section 7704(e) of the 1986 Code is amended by striking out “as may be required” and inserting in lieu thereof “or to pay such amounts as may be required”. (2) Paragraph (2) of section 10211(c) of the Revenue Act of 26 USC 7704 note. 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Coordination with passive-type income requirements.— In the case of an existing partnership, paragraph (1) of section 7704(c) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by substituting for ‘December 31, 1987’ the earlier of— “(i) December 31, 1997, or “(ii) the day (if any) as of which such partnership ceases to be treated as an existing partnership by reason of subparagraph (B).” (3) Paragraph (1) of section 7704(c) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.” (4) Paragraph (1) of section 7704(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of subparagraph (E), the term ‘mineral or natural resource’ means any product of a character with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).” (5) Paragraph (3) of section 7704(d) of the 1986 Code is amended to read as follows: “(3) Real property rent.— The term ‘real property rent’ means amounts which would qualify as rent from real property under section 856(d) if— “(A) such section were applied without regard to paragraph (2)(C) thereof (relating to independent contractor requirements), and “(B) stock owned, directly or indirectly, by or for a partner would not be considered as owned under section 318(a)(3)(A) by the partnership unless 5 percent or more (by value) of the interests in such partnership are owned, directly or indirectly, by or for such partner.” (g) Amendment Related to Section 10212 of the Act.— Subsection (k) of section 469 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(3) Coordination with subsection (g).— For purposes of subsection (g), a taxpayer shall not be treated as having disposed of his entire interest in an activity of a publicly traded partnership until he disposes of his entire interest in such partnership.” (h) Amendments Related to Section 10214 of the Act.— (1) Subparagraph (E) of section 514(c)(9) of the 1986 Code is amended by adding at the end thereof the following new clause: “(iii) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations which may provide for exclusion or segregation of items.” (2) Clause (i) of section 514(c)(9)(E) of the 1986 Code is amended by strikingout subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (ft), respectively. (i) Amendments Related to Section 10221 of the Act.— (1) Paragraph (2) of section 10221(e) of the Revenue Act of 1987 is amended by striking out “amendments made by subsection 26 USC 243 note. (b)” and inserting in lieu thereof “amendments made by subsection (c)”. (2) Subsection (b) of section 244 of the 1986 Code is amended by striking out “section 243(c)(4)” and inserting in lieu thereof “section 243(d)(4)”. (j) Amendments Related to Section 10222 of the Act.— (1) (A) Paragraph (1) of section 1503(e) of the 1986 Code is amended by striking out so much of such paragraph as precedes subparagraph (A) thereof and inserting in lieu thereof the following: “(1) In general.— Solely for purposes of determining gain or loss on the disposition of intragroup stock and the amount of any inclusion by reason of an excess loss account, in determining the adjustments to the basis of such intragroup stock on account of the earnings and profits of any member of an affiliated group for any consolidated year (and in determining the amount in such account)—” (B) Paragraph (2) of section 10222(a) of the Revenue Act of 26 USC 1503 note. 1987 is amended by adding at the end thereof the following new subparagraph: “(C) Treatment of certain excess loss accounts.— “(i) In general.— If— “(I) any disposition on or before December 15, 1987, of stock resulted in an inclusion of an excess loss account (or would have so resulted if the amendments made by paragraph (1) had applied to such disposition), and “(II) there is an unrecaptured amount with respect to such disposition, the portion of such unrecaptured amount allocable to stock disposed of in a disposition to which the amendment made by paragraph (1) applies shall be taken into account as negative basis. To the extent permitted by the Secretary of the Treasury or his delegate, the preceding sentence shall not apply to the extent the taxpayer elects to reduce its basis in indebtedness of the corporation with respect to which there would have been an excess loss account. “(ii) Special rules.— For purposes of this subparagraph— “(I) Unrecaptured amount.— The term ‘unrecaptured amount’ means the amount by which the inclusion referred to in clause (i)(I) would have been increased if the amendment made by paragraph (1) and applied to the disposition. “(II) Coordination with binding contract exception.— A disposition shall be treated as occurring on or before December 15, 1987, if the amendment made by paragraph (1) does not apply to such disposition by reason of subparagraph (B).” (2) Subsection (e) of section 1503 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(3) Adjustments.— Under regulations prescribed by the Secretary, proper adjustments shall be made in the application of paragraph (1)— “(A) in the case of any property acquired by the corporation before consolidation, for the difference between the adjusted basis of such property for purposes of computing taxable income and its adjusted basis for purposes of computing earnings and profits, and “(B) in the case of any property, for any basis adjustment under section 48(q).” (3) (A) Paragraph (2) of section 1503(e) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(C) Application of section 312(n) (7) not affected.— The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection.” (B) Subsection (e) of section 301 of the 1986 Code (as redesignated by section 106(e)(12) of this Act) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: “(3) Application of section 312(n) (7) not affected.— The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection ” (4) Subparagraph (B) of section 10222(b)(2) of the Revenue Act of 1987 is amended to read as follows: 26 USC 301 note. “(B) Exception.— The amendment made by paragraph (1) shall not apply for purposes of determining gain or loss on any disposition of stock after December 15, 1987, and before January 1, 1989, if such disposition is pursuant to a written binding contract, governmental order, letter of intent or preliminary agreement, or stock acquisition agreement, in effect on or before December 15, 1987.” (k) Amendments Related to Section 10223 of the Act.— (1) Subparagraph (D) of section 355(b)(2) of the 1986 Code is amended by striking out clauses (i) and (ii) and inserting in lieu thereof the following: “(i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the distributing corporation or otherwise) within the period described in subparagraph (B) and was not acquired by the distributing corporation directly (or through 1 or more corporations) within such period, or “(ii) was so acquired by any such corporation within such period, but, in each case in which such control was so acquired, it was so acquired, only by reason of transactions in which gain or loss was not recognized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period.” (2) Subparagraph (A) of section 304(b)(4) of the 1986 Code is amended by striking out “stock of 1 member” and Inserting in lieu thereof “stock from 1 member”. (3) Paragraph (2) of section 10223(d) of the Revenue Act of 1987 is amended by adding at the end thereof the following new 26 USC 304 note. subparagraph: “(D) Treatment of certain members of affiliated group.— “(i) In general.— For purposes of subparagraph (A), all corporations which were in existence on the designated date and were members of the same affiliated group which included the distributees on such date shall be treated as 1 distributee. “(ii) Limitation to stock held on designated date.— Clause (i) shall not exempt any distributionfrom the amendments made by this section if such distribution is with respect to stock not held by the distributee (determined without regard to clause (i)) on the designated date directly or indirectly through a corporation which goes out of existence in the transaction. “(iii) Designated date.— For purposes of this subparagraph, the term ‘designated date’ means the later of— “(I) December 15, 1987, or “(II) the date on which the acquisition meeting the requirements of subparagraph (A) occurred. (4) Subparagraph (B) of section 10223(d)(2) of the Revenue Act 26 USC 304 note. of 1987 is amended— (A) by striking out “before January 1, 1993” and inserting in lieu thereof “on or before March 31, 1988”, and (B) by striking out “before January 1, 1989,”. (l) Amendment Related to Section 10224 of the Act.— Sections 1201(a) and 1561(a) of the 1986 Code, and section 904(b)(3)(D)(ii) of the 1986 Code (as amended by section 106(b)(2) of this Act), are each amended by striking out “section 11(b)” and inserting in lieu thereof “section 11(b)(1)”. (m) Amendments Related to Section 10226 of the Act.— (1) (A) Subsection (a) of section 384 of the 1986 Code is amended to read as follows: “(a) General Rule.— If— “(1) (A) a corporation acquires directly (or through 1 or more other corporations) control of another corporation, or “(B) the assets of a corporation are acquired by another corporation in a reorganization described in subparagraph (A), (C), or (D) of section 368(a)(1), and “(2) either of such corporations is a gain corporation, income for any recognition period taxable year (to the extent attributable to recognized built-in gains) shall not be offset by any preacquisition loss (other than a preacquisition loss of the gain corporation).” (B) Subsection (c) of section 384 of the 1986 Code is amended by redesignating paragraph (4) as paragraph (8) and by inserting after paragraph (3) the following new paragraphs: “(4) Gain corporation.— The term ‘gain corporation’ means any corporation with a net unrealized built-in gain, “(5) Control.— The term ‘control’ means ownership of stock in a corporation which meets the requirements of section 1504(a)(2). “(6) Treatment of members of same group.— Except as provided in regulations and except for purposes of subsection (b), all corporations which are members of the same affiliated group immediately before the acquisition date shall be treated as 1 corporation. To the extent provided in regulations, section 1504 shall be applied without regard to subsection (b) thereof for purposes of the preceding sentence. “(7) Treatment of predecessors and successors.— Any reference in this section to a corporation shall include a reference to any predecessor or successor thereof.” (C) Paragraph (2) of section 384(c) of the 1986 Code is amended to read as follows: “(2) Acquisition date.— The term ‘acquisition date’ means “(A) in any case described in subsection (a)(1)(A), the date on which the acquisition of control occurs, or “(B) in any case described in subsection (a)(1)(B), the date of the transfer in the reorganization.” (D) Paragraph (1) of section 384(c) of the 1986 Code is amended by striking out “subsection (a)(2)” and inserting in lieu thereof “subsection (a)(1)(B)”. (2) Paragraph (2) of section 384(e) of the 1986 Code is amended by striking out “the gain corporation” and inserting in lieu thereof “a corporation”. (3) Subsection (b) of section 384 of the 1986 Code is amended to read as follows: “(b) Exception Where Corporations Under Common Control.— “(1) In general.— Subsection (a) shall not apply to the preacquisition loss of any corporation if such corporation and the gain corporation were members of the same controlled group at all times during the 5-year period ending on the acquisition date. “(2) Controlled group.— For purposes of this subsection, the term ‘controlled group’ means a controlled group of corporations (as defined in section 1563(a)); except that— “(A) ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears, “(B) the ownership requirements of section 1563(a) must be met both with respect to voting power and value, and “(C) the determination shall be made without regard to subsection (a)(4) of section 1563. “(3) Shorter period where corporations not in existence for 5 years.— If either of the corporations referred to in paragraph (1) was not in existence throughout the 5-year period referred to in paragraph (1), the period during which such corporation was in existence (or if both, the shorter of such periods) shall be substituted for such 5-year period.” (4) Section 384 of the 1986 Code is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Ordering Rules for Net Operating Losses, Etc.— “(1) Carryover rules.— If any preacquisition loss may not offset a recognized build-in gain by reason of this section, such gain shall not be taken into account in determining under section 172(b)(2) the amount of such loss which may be carried to other taxable years. A similar rule shall apply in the case of any excess credit or net capital loss limited by reason of subsection (d). “(2) Ordering rule for losses carried from same taxable year.— In any case in which— “(A) a preacquisition loss for any taxable year is subject to limitation under subsection (a), and “(B) a net operating loss from such taxable year is not subject to such limitation, taxable income shall be treated as having been offset 1st by the loss subject to such limitation.” (5) In any case where the acquisition date (as defined in 20 USC 384 note. section 384(c)(2) of the 1986 Code as amended by this subsection) is before March 31, 1988, the acquiring corporation may elect to have the amendments made by this subsection not apply. Such an election shall be made in such manner as the Secretary of the Treasury or his delegate shall prescribe and shall be made not later than the later of the due date (including extensions) for filing the return for the taxable year of the acquiring corporation in which the acquisition date occurs or the date 120 days after the date of the enactment of this Act. Such an election, once made, shall be irrevocable. (n) Amendments Related to Section 10227 of the Act.— Paragraph (4) of section 1363(d) of the 1986 Code (relating to recapture of LIFO benefits) is amended by adding at the end thereof the following new subparagraph: “(D) Not treated as member of affiliated group.— Except as provided in regulations, the corporation referred to in paragraph (1) shall not be treated as a member of an affiliated group with respect to the amount included in gross income under paragraph (1).” (o) Amendments Related to Section 10228 of the Act.— (1) (A) Subsection (a) of section 5881 of the 1986 Code is amended by striking out “gain realized by such person on such receipt” and inserting in lieu thereof “gain or other income of such person by reason of such receipt”. (B) (i) Subsection (b) of section 5881 of the 1986 Code is amended by striking out “a corporation to directly or indirectly acquire its stock” and inserting in lieu thereof “a corporation (or any person acting in concert with such corporation) to directly or indirectly acquire stock of such corporation”. (ii) The amendment made by clause (i) shall apply to transactions occurring on or after March 31, 1988. (C) Subsection (d) of section 5881 of the 1986 Code is amended— (i) by striking out “the gain” and inserting in lieu thereof “the gain or other income”, and (ii) by striking out “Gain Recognized” in the subsection heading and inserting in lieu thereof “Amount Recognized”. (2) Section 5881 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(e) Administrative Provisions.— For purposes of the deficiency procedures of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.” (p) Amendments Related to Section 10241 of the Act.— (1) Paragraph (1) of section 811(d) of the 1986 Code is amended by striking out “the prevailing State assumed interest rate for the contract” and inserting in lieu thereof “the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807 for the contract”. (2) Paragraph (2) of section 812(b) of the 1986 Code is amended by striking out the last sentence and inserting in lieu thereof the following: “In any case where neither the prevailing State assumed interest rate nor the applicable Federal interest rate is used, another appropriate rate shall be used for purposes of subparagraph (A).” (q) Amendments Related to Section 10242 of the Act.— (1) Subsection (h) of section 816 of the 1986 Code is amended by striking out “section 842(c)(1)(A)” and inserting in lieu thereof “section 842(b)(2)(B)(i)”. (2) (A) Subparagraph (B) of section 842(b)(3) of the 1986 Code is amended by striking out “held for the production of such income”. (B) Subparagraph (B) of section 842(b)(4) of the 1986 Code is amended by striking out “held for the production of investment income”. (3) Subparagraph (d) of section 842 of the 1986 Code is amended by striking out “and” at the end of paragraph (2), by striking out the period at the end of paragraph (3) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new paragraph: “(4) which may provide that, in the case of companies taxable under part II of this subchapter, determinations under subsection (b) will be made separately for categories of such companies established in such regulations.” (r) Amendment Related to Section 10301 of the Act.— Paragraph (3) of section 6655(g) of the 1986 Code is amended by striking the sentence following subparagraph (C) and inserting in lieu thereof the following: “In the case of any organization described in subparagraph (A), subsection (b)(2)(A) shall be applied by substituting ‘5th month’ for ‘3rd month’, and subsection (e)(2)(A) shall be applied by substituting ‘2 months’ for ‘3 months’ and in clause (i)(I), by substituting ‘4 months’ for ‘5 months’ in clause (i)(II), by substituting ‘7 months’ for ‘8 months’ in clause (i)(III), and by substituting ‘10 months’ for T1 months’ in clause (i)(IV)”. (s) Amendments Related to Section 10502 of the Act.— (1) Section 4093 of the 1986 Code is amended by redesignating subsections (d) and (e) as subsections (e) and (f), respectively, and by inserting after subsection (c) the following new subsection: “(d) Certain Aviation Fuel Sales.— Under regulations prescribed by the Secretary, the Leaking Underground Storage Tank Trust Fund financing rate under section 4091 shall not apply to aviation fuel sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221 (d)(3)).” (2) Subparagraph (B) of section 6427(1)(3) of the 1986 Code (relating to no refund of Leaking Underground Storage Tank Trust Fund financing tax) is amended by inserting “(except as supplies for vessels or aircraft within the meaning of section 4221(d)(3))” after “aircraft”. (3) Section 6427 of the 1986 Code is amended by redesignating the subsection (p) relating to gasoline used in noncommercial aviation during period rate reduction in effect and subsection (q) (relating to cross references) as subsections (q) and (r), respectively. (t) Amendments Related to Section 10512 of the Act.— (1) Section 5276 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(c) Exception for United States.— Subsection (a) shall not apply to any permit issued to an agency or instrumentality of the United States.” (2) Subsection (a) of section 5113 of the 1986 Code is amended— (A) by inserting “taxpaid wine bottling house,” after “bonded wine cellar,” each place it appears, and (B) by striking out “Distilled Spirits Plants, Bonded Wine Cellars, or Breweries” in the heading and inserting in lieu thereof “Controlled Premises”. (3) Section 5123 of the 1986 Code is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: “(c) Coordination of Taxes Under Section 5121.— No tax shall be imposed by section 5121(a) with respect to a person’s activities at any place during a year if such person has paid the tax imposed by section 5121(b) with respect to such place for such year.” (4) Section 5113 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Coordination of Taxes Under Section 5111.— No tax shall be imposed by section 5111(a) with respect to a person’s activities at any place during a year if such person has paid the tax imposed by section 5111(b) with respect to such place for such year.” (u) Effective Date.— Except as otherwise provided in this section, any amendment made by this section shall take effect as if included in the provisions of the Revenue Act of 1987 to which such amendment relates.

20. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 title I § 1703(f) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 1561(a)

    Pub. L. 104–188 in closing provisions substituted “last 2 sentences” for “last sentence” in two places

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 104–188 in closing provisions substituted “last 2 sentences” for “last sentence” in two places.

    Enacted provision · exact public law section
    (f) Amendment Related to Section 13221.— Sections 1201(a) and 1561(a) are each amended by striking “last sentence” each place it appears and inserting “last 2 sentences”.

21. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(12)(H)(ii) · 128 Stat. 4010

    Substituted · 26 U.S.C. § 1561(a)

    Pub. L. 113–295, § 221(a)(12)(H)(ii), substituted “and the amount specified in paragraph (3)” for “, the amount specified in paragraph (3), and the amount specified in paragraph (4)” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 113–295, § 221(a)(12)(H)(ii), substituted “and the amount specified in paragraph (3)” for “, the amount specified in paragraph (3), and the amount specified in paragraph (4)” in concluding provisions.

    Enacted provision · exact public law section
    (ii) by striking “, the amount specified in paragraph (3), and the amount specified in paragraph (4)” and inserting “and the amount specified in paragraph (3)”.

22. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(12)(H)(i) · 128 Stat. 4010

    1. Inserted · 26 U.S.C. § 1561(a)(2)(4)

       Pub. L. 113–295, § 221(a)(12)(H)(i), inserted “and” at end of par. (2)

    2. Substituted · 26 U.S.C. § 1561(a)(2)(4)

       Pub. L. 113–295, § 221(a)(12)(H)(i), substituted a period for “, and” at end of par. (3)

    3. Struck · 26 U.S.C. § 1561(a)(2)(4)

       Pub. L. 113–295, § 221(a)(12)(H)(i), struck out par. (4) which read as follows: “one $2,000,000 amount for purposes of computing the tax imposed by section 59A.”

    Source evidence

    Code amendment note
    Subsec. (a)(2) to (4). Pub. L. 113–295, § 221(a)(12)(H)(i), inserted “and” at end of par. (2), substituted a period for “, and” at end of par. (3), and struck out par. (4) which read as follows: “one $2,000,000 amount for purposes of computing the tax imposed by section 59A.”

    Enacted provision · exact public law section
    (i) by inserting “and” at the end of paragraph (2), by striking “, and” at the end of paragraph (3) and inserting a period, and by striking paragraph (4), and

23. 2017

    Pub. L. 115–97 § 13001(b)(6)(A) · 131 Stat. 2054

    Amended · 26 U.S.C. § 1561

    Pub. L. 115–97, § 13001(b)(6)(A), amended section generally. Prior to amendment, section related to limitations on certain multiple tax benefits in the case of certain controlled corporations

    Source evidence

    Code amendment note
    Pub. L. 115–97, § 13001(b)(6)(A), amended section generally. Prior to amendment, section related to limitations on certain multiple tax benefits in the case of certain controlled corporations.

    Enacted provision · exact public law section
    (A) Section 1561, as amended by section 12001, is amended to read as follows: “SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE OF CERTAIN CONTROLLED CORPORATIONS. “(a) In General.— The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to one $250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3). Such amount shall be divided equally among the component members of such group on such December 31 unless the Secretary prescribes regulations permitting an unequal allocation of such amount. “(b) Certain Short Taxable Years.— If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle, the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a) with respect to such group, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.” .

    Effective date note
    Amendment by section 12001(b)(16) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title. Amendment by section 13001(b)(6)(A) of Pub. L. 115–97 applicable to transfers made after Dec. 31, 2017, see section 13001(c)(3) of Pub. L. 115–97, set out as a note under section 11 of this title.

24. 2017

    Pub. L. 115–97 § 12001(b)(16)(B) · 131 Stat. 2054

    Struck · 26 U.S.C. § 1561(a)

    Pub. L. 115–97, § 12001(b)(16)(B), struck out at end “In applying section 55(d)(3), the alternative minimum taxable income of all component members shall be taken into account and any decrease in the exemption amount shall be allocated to the component members in the same manner as under paragraph (3).”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 115–97, § 12001(b)(16)(B), struck out at end “In applying section 55(d)(3), the alternative minimum taxable income of all component members shall be taken into account and any decrease in the exemption amount shall be allocated to the component members in the same manner as under paragraph (3).”

    Enacted provision · exact public law section
    (B) by striking the last sentence.

    Effective date note
    Amendment by section 12001(b)(16) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title. Amendment by section 13001(b)(6)(A) of Pub. L. 115–97 applicable to transfers made after Dec. 31, 2017, see section 13001(c)(3) of Pub. L. 115–97, set out as a note under section 11 of this title.

25. 2017

    Pub. L. 115–97 § 12001(b)(16)(A) · 131 Stat. 2054

    Struck · 26 U.S.C. § 1561(a)(3)

    Pub. L. 115–97, § 12001(b)(16)(A), struck out par. (3) which read as follows: “one $40,000 exemption amount for purposes of computing the amount of the minimum tax.”

    Source evidence

    Code amendment note
    Subsec. (a)(3). Pub. L. 115–97, § 12001(b)(16)(A), struck out par. (3) which read as follows: “one $40,000 exemption amount for purposes of computing the amount of the minimum tax.”

    Enacted provision · exact public law section
    (A) by inserting “and” at the end of paragraph (1), by striking “, and” at the end of paragraph (2) and inserting a period, and by striking paragraph (3), and

    Effective date note
    Amendment by section 12001(b)(16) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title. Amendment by section 13001(b)(6)(A) of Pub. L. 115–97 applicable to transfers made after Dec. 31, 2017, see section 13001(c)(3) of Pub. L. 115–97, set out as a note under section 11 of this title.

40 of 42 references resolved to an enrolled provision · 2 unresolved