§ 269A. Personal service corporations formed or availed of to avoid or evade income tax

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. 1982

   Pub. L. 97–248 title II § 250(a) · 96 Stat. 324

   Enacted · 26 U.S.C. § 269A

   Added Pub. L. 97–248, title II, § 250(a), Sept. 3, 1982, 96 Stat. 528

   Source evidence

   Code source credit
   Added Pub. L. 97–248, title II, § 250(a), Sept. 3, 1982, 96 Stat. 528

   Enacted provision · exact public law section
   (a) In general.— Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding after section 269 the following new section: “SEC. 269A. PERSONAL SERVICE CORPORATIONS FORMED OR AVAILED OF TO AVOID OR EVADE INCOME TAX. “(a) General Rule.— If— “(1) substantially all of the services of a personal service corporation are performed for (or on behalf of) 1 other corporation, partnership, or other entity, and “(2) the principal purpose for forming, or availing of, such personal service corporation is the avoidance or evasion of Federal income tax by reducing the income of, or securing the benefit of any expense, deduction, credit, exclusion, or other allowance for, any employee-owner which would not otherwise be available, then the Secretary may allocate all income, deductions, credits, exclusions, and other allowances between such personal service corporation and its employee-owners, if such allocation is necessary to prevent avoidance or evasion of Federal income tax or clearly to reflect the income of the personal service corporation or any of its employee-owners. “(b) Definitions.— For purposes of this section— “(1) Personal service corporation.— The term ‘personal service corporation’ means a corporation the principal activity of which is the performance of personal services and such services are substantially performed by employee-owners. “(2) Employee-owner.— The term ‘employee-owner’ means any employee who owns, on any day during the taxable year, more than 10 percent of the outstanding stock of the personal service corporation. For purposes of the preceding sentence, section 318 shall apply, except that ‘5 percent’ shall be substituted for ‘50 percent’ in section 318(a)(2)(C). “(3) Related persons.— All related persons (within the meaning of section 103(b)(6)(C)) shall be treated as 1 entity.”

2. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XIII § 1301(j)(4) · 100 Stat. 2085

   Substituted · 26 U.S.C. § 269A(b)(3)

   Pub. L. 99–514 substituted “section 144(a)(3)” for “section 103(b)(6)(C)”

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 99–514 substituted “section 144(a)(3)” for “section 103(b)(6)(C)”.

   Enacted provision · exact public law section
   (4) Sections 269A(b)(3), 414(m)(5), 414(n)(6), and 4988(c)(2) (defining related person) are each amended by striking out “section 103(b)(6)(C)” and inserting in lieu thereof “section 144(a)(3)”.

   Effective date note
   Amendment by Pub. L. 99–514 applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 of Pub. L. 99–514, set out as an Effective Date; Transitional Rules note under section 141 of this title.

2 of 2 references resolved to an enrolled provision