Title 26 — Internal Revenue Code
Part III · Chapter 1 — Normal Taxes and Surtaxes
§ 357. Assumption of liability
Statutory text
General rule
Except as provided in subsections (b) and (c), if—
the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration, and
as part of the consideration, another party to the exchange assumes a liability of the taxpayer,
then such assumption shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351 or 361, as the case may be.
Tax avoidance purpose
In general
If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the assumption was made, it appears that the principal purpose of the taxpayer with respect to the assumption described in subsection (a)—
was a purpose to avoid Federal income tax on the exchange, or
if not such purpose, was not a bona fide business purpose,
then such assumption (in the total amount of the liability assumed pursuant to such exchange) shall, for purposes of section 351 or 361 (as the case may be), be considered as money received by the taxpayer on the exchange.
Burden of proof
In any suit or proceeding where the burden is on the taxpayer to prove such assumption is not to be treated as money received by the taxpayer, such burden shall not be considered as sustained unless the taxpayer sustains such burden by the clear preponderance of the evidence.
Liabilities in excess of basis
In general
In the case of an exchange—
to which section 351 applies, or
to which section 361 applies by reason of a plan of reorganization within the meaning of section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355,
if the sum of the amount of the liabilities assumed exceeds the total of the adjusted basis of the property transferred pursuant to such exchange, then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset, as the case may be.
Exceptions
Paragraph (1) shall not apply to any exchange—
to which subsection (b)(1) of this section applies, or
which is pursuant to a plan of reorganization within the meaning of section 368(a)(1)(G) where no former shareholder of the transferor corporation receives any consideration for his stock.
Certain liabilities excluded
In general
If a taxpayer transfers, in an exchange to which section 351 applies, a liability the payment of which either—
would give rise to a deduction, or
would be described in section 736(a),
then, for purposes of paragraph (1), the amount of such liability shall be excluded in determining the amount of liabilities assumed.
Exception
Subparagraph (A) shall not apply to any liability to the extent that the incurrence of the liability resulted in the creation of, or an increase in, the basis of any property.
Determination of amount of liability assumed
In general
For purposes of this section, section 358(d), section 358(h), section 361(b)(3), section 362(d), section 368(a)(1)(C), and section 368(a)(2)(B), except as provided in regulations—
a recourse liability (or portion thereof) shall be treated as having been assumed if, as determined on the basis of all facts and circumstances, the transferee has agreed to, and is expected to, satisfy such liability (or portion), whether or not the transferor has been relieved of such liability; and
except to the extent provided in paragraph (2), a nonrecourse liability shall be treated as having been assumed by the transferee of any asset subject to such liability.
Exception for nonrecourse liability
The amount of the nonrecourse liability treated as described in paragraph (1)(B) shall be reduced by the lesser of—
the amount of such liability which an owner of other assets not transferred to the transferee and also subject to such liability has agreed with the transferee to, and is expected to, satisfy; or
the fair market value of such other assets (determined without regard to section 7701(g)).
Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and section 362(d). The Secretary may also prescribe regulations which provide that the manner in which a liability is treated as assumed under this subsection is applied, where appropriate, elsewhere in this title.
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.
Aug. 16, 1954, ch. 736, 68A Stat. 116 · 68A Stat. 116
Enacted · 26 U.S.C. § 357
Aug. 16, 1954, ch. 736, 68A Stat. 116
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 116Public Law not identified
Substituted · 26 U.S.C. § 357(a)
Subsec. (a). Act June 29, 1956, § 2(1), substituted “371, or 374” for “or 371” in two places
Unresolved: No Public Law or Statutes at Large citation in the Code source.
Source evidence
Code amendment note
Subsec. (a). Act June 29, 1956, § 2(1), substituted “371, or 374” for “or 371” in two places.Public Law not identified
Substituted · 26 U.S.C. § 357(b)
Subsec. (b). Act June 29, 1956, § 2(1), substituted “371, or 374” for “or 371”
Unresolved: No Public Law or Statutes at Large citation in the Code source.
Source evidence
Code amendment note
Subsec. (b). Act June 29, 1956, § 2(1), substituted “371, or 374” for “or 371”.Public Law not identified
Substituted · 26 U.S.C. § 357(c)(2)(B)
Subsec. (c)(2)(B). Act June 29, 1956, § 2(2), substituted “371 or 374” for “371”
Unresolved: No Public Law or Statutes at Large citation in the Code source.
Source evidence
Code amendment note
Subsec. (c)(2)(B). Act June 29, 1956, § 2(2), substituted “371 or 374” for “371”.Pub. L. 95–600 title III § 365(a) · 92 Stat. 2763
Added · 26 U.S.C. § 357(c)(3)
Pub. L. 95–600 added par. (3)
Source evidence
Code amendment note
Subsec. (c)(3). Pub. L. 95–600 added par. (3).Enacted provision · exact public law section
(a) 26 USC 357. In General.— Subsection (c) of section 357 (relating to assumption of liability) is amended by adding at the end thereof the following new paragraph: “(3) Certain liabilities excluded.— “(A) In general.— If— “(i) the taxpayer’s taxable income is computed under the cash receipts and disbursements method of accounting, and “(ii) such taxpayer transfers, in an exchange to which 26 USC 351. section 351 applies, a liability which is either— “(I) an account payable payment of which would give rise to a deduction, or “(II) an amount payable which is described in 26 USC 736. section 736(a), then, for purposes of paragraph (1), the amount of such liability shall be excluded in determining the amount of liabilities assumed or to which the property transferred is subject. “(B) Exception.— Subparagraph (A) shall not apply to any liability to the extent that the incurrence of the liability resulted in the creation of, or an increase in, the basis of any property.”Technical Corrections Act of 1979
Pub. L. 96–222 title I § 103(a)(12) · 94 Stat. 194
Struck · 26 U.S.C. § 357(c)(3)(A)
Pub. L. 96–222 struck out requirement that only taxpayers who compute taxable income under the cash receipts and disbursements method of accounting are eligible to exclude certain liabilities in determining the amount of gain realized on a transfer to a controlled corporation and the requirement that the excluded liability must be an account payable
Source evidence
Code amendment note
Subsec. (c)(3)(A). Pub. L. 96–222 struck out requirement that only taxpayers who compute taxable income under the cash receipts and disbursements method of accounting are eligible to exclude certain liabilities in determining the amount of gain realized on a transfer to a controlled corporation and the requirement that the excluded liability must be an account payable.Enacted provision · exact public law section
(12) Amendment related to section 365 of the act.— Subparagraph 92 Stat. 2854. 26 USC 357. (A) of section 357(c)(3) (relating to liabilities in excess of basis) is amended to read as follows: “(A) In general.— If a taxpayer transfers, in an exchange to which section 351 applies, a liability the payment of which 26 USC 351. either— “(i) would give rise to a deduction, or “(ii) would be described in section 736(a), then, for purposes of paragraph (1), the amount of such liability shall be excluded in determining the amount of liabilities assumed or to which the property transferred is subject.”Pub. L. 96–589 § 4(h)(2) · 94 Stat. 3389
Added · 26 U.S.C. § 357(c)(2)(C)
Pub. L. 96–589 added subpar. (C)
Source evidence
Code amendment note
Subsec. (c)(2)(C). Pub. L. 96–589 added subpar. (C).Enacted provision · exact public law section
(2) Paragraph (2) of section 357(c) (relating to liabilities in 26 USC 357. excess of basis) is amended to read as follows: “(2) Exceptions.— Paragraph (1) shall not apply to any exchange— “(A) to which subsection (b)(1) of this section applies, “(B) to which section 371 or 374 applies, or “(C) which is pursuant to a plan of reorganization within the meaning of section 368(a)(1)(G) where no former shareholder of the transferor corporation receives any consideration for his stock.”Revenue Reconciliation Act of 1990
Pub. L. 101–508 § 11801(c)(8)(F)(i) · 104 Stat. 1388
Substituted · 26 U.S.C. § 357(a); 26 U.S.C. § 357(b)(1)
Pub. L. 101–508, § 11801(c)(8)(F)(i), substituted “351 or 361” for “351, 361, 371, or 374” wherever appearing
Source evidence
Code amendment note
Subsecs. (a), (b)(1). Pub. L. 101–508, § 11801(c)(8)(F)(i), substituted “351 or 361” for “351, 361, 371, or 374” wherever appearing.Enacted provision · exact public law section
(i) Section 357 is amended by striking “351, 361, 371, or 374” each place it appears and inserting “351 or 361”.Revenue Reconciliation Act of 1990
Pub. L. 101–508 § 11801(c)(8)(F)(ii) · 104 Stat. 1388
Inserted · 26 U.S.C. § 357(c)(2)
Pub. L. 101–508, § 11801(c)(8)(F)(ii), inserted “or” at end of subpar. (A)
Redesignated · 26 U.S.C. § 357(c)(2)
Pub. L. 101–508, § 11801(c)(8)(F)(ii), redesignated subpar. (C) as (B)
Struck · 26 U.S.C. § 357(c)(2)
Pub. L. 101–508, § 11801(c)(8)(F)(ii), struck out former subpar. (B) which read as follows: “to which section 371 or 374 applies, or”
Source evidence
Code amendment note
Subsec. (c)(2). Pub. L. 101–508, § 11801(c)(8)(F)(ii), inserted “or” at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “to which section 371 or 374 applies, or”.Enacted provision · exact public law section
(ii) Paragraph (2) of section 357(c) is amended by inserting “or” at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B).Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(d)(2) · 113 Stat. 127
Struck · 26 U.S.C. § 357(a)
Pub. L. 106–36, § 3001(d)(2), struck out “or acquisition” after “assumption” in concluding provisions
Source evidence
Code amendment note
Subsec. (a). Pub. L. 106–36, § 3001(d)(2), struck out “or acquisition” after “assumption” in concluding provisions.Enacted provision · exact public law section
(2) Section 357 of such Code is amended by striking “or 26 USC 357. acquisition” each place it appears in subsection (a) or (b).Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(a)(1) · 113 Stat. 127
Struck · 26 U.S.C. § 357(a)(2)
Pub. L. 106–36, § 3001(a)(1), struck out “, or acquires from the taxpayer property subject to a liability” before comma at end
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 106–36, § 3001(a)(1), struck out “, or acquires from the taxpayer property subject to a liability” before comma at end.Enacted provision · exact public law section
(1) Section 357.— Section 357(a)(2) of the Internal Revenue Code of 1986 (relating to assumption of liability) is amended 26 USC 357. by striking “, or acquires from the taxpayer property subject to a liability”.Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(d)(2) · 113 Stat. 127
Struck · 26 U.S.C. § 357(b)
Pub. L. 106–36, § 3001(d)(2), (3), struck out “or acquisition” after “assumption” wherever appearing
Struck · 26 U.S.C. § 357(b)
Pub. L. 106–36, § 3001(d)(2), (3), struck out “or acquired” after “liability assumed” in concluding provisions of par. (1)
Source evidence
Code amendment note
Subsec. (b). Pub. L. 106–36, § 3001(d)(2), (3), struck out “or acquisition” after “assumption” wherever appearing and struck out “or acquired” after “liability assumed” in concluding provisions of par. (1).Enacted provision · exact public law section
(2) Section 357 of such Code is amended by striking “or 26 USC 357. acquisition” each place it appears in subsection (a) or (b).Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(d)(4) · 113 Stat. 127
Struck · 26 U.S.C. § 357(c)(1)
Pub. L. 106–36, § 3001(d)(4), struck out “, plus the amount of the liabilities to which the property is subject,” after “liabilities assumed” in concluding provisions
Source evidence
Code amendment note
Subsec. (c)(1). Pub. L. 106–36, § 3001(d)(4), struck out “, plus the amount of the liabilities to which the property is subject,” after “liabilities assumed” in concluding provisions.Enacted provision · exact public law section
(4) Section 357(c)(1) of such Code is amended by striking “, plus the amount of the liabilities to which the property is subject,”.Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(d)(5) · 113 Stat. 127
Struck · 26 U.S.C. § 357(c)(3)(A)
Pub. L. 106–36, § 3001(d)(5), struck out “or to which the property transferred is subject” after “liabilities assumed” in concluding provisions
Source evidence
Code amendment note
Subsec. (c)(3)(A). Pub. L. 106–36, § 3001(d)(5), struck out “or to which the property transferred is subject” after “liabilities assumed” in concluding provisions.Enacted provision · exact public law section
(5) Section 357(c)(3) of such Code is amended by striking 26 USC 357. “or to which the property transferred is subject”.Miscellaneous Trade and Technical Corrections Act of 1999
Pub. L. 106–36 § 3001(b)(1) · 113 Stat. 127
Added · 26 U.S.C. § 357(d)
Pub. L. 106–36, § 3001(b)(1), added subsec. (d)
Source evidence
Code amendment note
Subsec. (d). Pub. L. 106–36, § 3001(b)(1), added subsec. (d).Enacted provision · exact public law section
(1) In general.— Section 357 of the Internal Revenue Code of 1986 is amended by adding at the end the following new 26 USC 357. subsection: “(d) Determination of Amount of Liability Assumed.— “(1) In general.— For purposes of this section, section 358(d), section 362(d), section 368(a)(1)(C), and section 368(a)(2)(B), except as provided in regulations— “(A) a recourse liability (or portion thereof) shall be treated as having been assumed if, as determined on the basis of all facts and circumstances, the transferee has agreed to, and is expected to, satisfy such liability (or portion), whether or not the transferor has been relieved of such liability; and “(B) except to the extent provided in paragraph (2), a nonrecourse liability shall be treated as having been assumed by the transferee of any asset subject to such liability. “(2) Exception for nonrecourse Liability.— The amount of the nonrecourse liability treated as described in paragraph (1)(B) shall be reduced by the lesser of— “(A) the amount of such liability which an owner of other assets not transferred to the transferee and also subject to such liability has agreed with the transferee to, and is expected to, satisfy; or “(B) the fair market value of such other assets (determined without regard to section 7701(g)). “(3) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and section 362(d). The Secretary may also prescribe regulations which provide that the manner in which a liability is treated as assumed under this subsection is applied, where appropriate, elsewhere in this title.”.Consolidated Appropriations Act, 2001
Pub. L. 106–554 § 1(a)(7)(tIII)(s309)(b) · 114 Stat. 2763
Inserted · 26 U.S.C. § 357(d)(1)
Pub. L. 106–554 inserted “section 358(h),” after “section 358(d),” in introductory provisions
Source evidence
Code amendment note
Subsec. (d)(1). Pub. L. 106–554 inserted “section 358(h),” after “section 358(d),” in introductory provisions.Enacted provision · exact public law section
(7) H.R. 5662, as introduced on December 14, 2000.Pub. L. 108–357 title VIII § 898(b) · 118 Stat. 1418
Inserted · 26 U.S.C. § 357(c)(1)(B)
Pub. L. 108–357 inserted “with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355” after “section 368(a)(1)(D)”
Source evidence
Code amendment note
Subsec. (c)(1)(B). Pub. L. 108–357 inserted “with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355” after “section 368(a)(1)(D)”.Enacted provision · exact public law section
(b) Liabilities in Excess of Basis.— Section 357(c)(1)(B) is amended by inserting “with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355” after “section 368(a)(1)(D)”.Effective date note
Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.Tax Technical Corrections Act of 2005
Pub. L. 109–135 title IV § 403(jj)(2) · 119 Stat. 2577
Inserted · 26 U.S.C. § 357(d)(1)
Pub. L. 109–135 inserted “section 361(b)(3),” after “section 358(h),”
Source evidence
Code amendment note
Subsec. (d)(1). Pub. L. 109–135 inserted “section 361(b)(3),” after “section 358(h),”.Enacted provision · exact public law section
(2) Paragraph (1) of section 357(d) is amended by inserting “section 361(b)(3),” after “section 358(h),”.Effective date note
Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.
17 of 21 references resolved to an enrolled provision · 1 partial · 3 unresolved
Editorial Notes
Amendments1956–2005 · 8 rounds
2005
Subsec. (d)(1). Pub. L. 109–135 inserted “section 361(b)(3),” after “section 358(h),”.
2004
Subsec. (c)(1)(B). Pub. L. 108–357 inserted “with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355” after “section 368(a)(1)(D)”.
2000
Subsec. (d)(1). Pub. L. 106–554 inserted “section 358(h),” after “section 358(d),” in introductory provisions.
1999
Subsec. (a). Pub. L. 106–36, § 3001(d)(2), struck out “or acquisition” after “assumption” in concluding provisions.
Subsec. (a)(2). Pub. L. 106–36, § 3001(a)(1), struck out “, or acquires from the taxpayer property subject to a liability” before comma at end.
Subsec. (b). Pub. L. 106–36, § 3001(d)(2), (3), struck out “or acquisition” after “assumption” wherever appearing and struck out “or acquired” after “liability assumed” in concluding provisions of par. (1).
Subsec. (c)(1). Pub. L. 106–36, § 3001(d)(4), struck out “, plus the amount of the liabilities to which the property is subject,” after “liabilities assumed” in concluding provisions.
Subsec. (c)(3)(A). Pub. L. 106–36, § 3001(d)(5), struck out “or to which the property transferred is subject” after “liabilities assumed” in concluding provisions.
Subsec. (d). Pub. L. 106–36, § 3001(b)(1), added subsec. (d).
1990
Subsecs. (a), (b)(1). Pub. L. 101–508, § 11801(c)(8)(F)(i), substituted “351 or 361” for “351, 361, 371, or 374” wherever appearing.
Subsec. (c)(2). Pub. L. 101–508, § 11801(c)(8)(F)(ii), inserted “or” at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “to which section 371 or 374 applies, or”.
1980
Subsec. (c)(2)(C). Pub. L. 96–589 added subpar. (C).
Subsec. (c)(3)(A). Pub. L. 96–222 struck out requirement that only taxpayers who compute taxable income under the cash receipts and disbursements method of accounting are eligible to exclude certain liabilities in determining the amount of gain realized on a transfer to a controlled corporation and the requirement that the excluded liability must be an account payable.
1978
Subsec. (c)(3). Pub. L. 95–600 added par. (3).
1956
Subsec. (a). Act , § 2(1), substituted “371, or 374” for “or 371” in two places.
Subsec. (b). Act , § 2(1), substituted “371, or 374” for “or 371”.
Subsec. (c)(2)(B). Act , § 2(2), substituted “371 or 374” for “371”.
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 898(c), , 118 Stat. 1649, provided that: “The amendments made by this section [amending this section and section 361 of this title] shall apply to transfers of money or other property, or liabilities assumed, in connection with a reorganization occurring on or after the date of the enactment of this Act [].”
Effective Date of 2000 Amendment
Amendment by Pub. L. 106–554 applicable to assumptions of liability after , see section 1(a)(7) [title III, § 309(d)] of Pub. L. 106–554, set out as a note under section 358 of this title.
Effective Date of 1999 Amendment
Amendment by Pub. L. 106–36 applicable to transfers after , see section 3001(e) of Pub. L. 106–36, set out as a note under section 351 of this title.
Effective Date of 1980 Amendments
Amendment by Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after , with exception permitting the debtor to make the amendment applicable to such cases or proceedings commencing after , see section 7(c)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.
Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.
Effective Date of 1978 Amendment
Pub. L. 95–600, title III, § 365(c), , 92 Stat. 2855, provided that: “The amendments made by subsections (a) and (b) [amending this section and section 358 of this title] shall apply to transfers occurring on or after the date of the enactment of this Act [].”
Savings Provision
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Credits
1954–2005 · 10 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 116
- 1956June 29, 1956, ch. 463, § 2, 70 Stat. 403
- 1978Pub. L. 95–600, title III, § 365(a), , 92 Stat. 2854
- 1980Pub. L. 96–222, title I, § 103(a)(12), , 94 Stat. 213
- 1980Pub. L. 96–589, § 4(h)(2), , 94 Stat. 3405
- 1990Pub. L. 101–508, title XI, § 11801(c)(8)(F), , 104 Stat. 1388–524
- 1999Pub. L. 106–36, title III, § 3001(a)(1), (b)(1), (d)(2)–(5), , 113 Stat. 181–184
- 2000Pub. L. 106–554, § 1(a)(7) [title III, § 309(b)], , 114 Stat. 2763, 2763A–638
- 2004Pub. L. 108–357, title VIII, § 898(b), , 118 Stat. 1649
- 2005Pub. L. 109–135, title IV, § 403(jj)(2), , 119 Stat. 2632.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 116; June 29, 1956, ch. 463, § 2, 70 Stat. 403; Pub. L. 95–600, title III, § 365(a), , 92 Stat. 2854; Pub. L. 96–222, title I, § 103(a)(12), , 94 Stat. 213; Pub. L. 96–589, § 4(h)(2), , 94 Stat. 3405; Pub. L. 101–508, title XI, § 11801(c)(8)(F), , 104 Stat. 1388–524; Pub. L. 106–36, title III, § 3001(a)(1), (b)(1), (d)(2)–(5), , 113 Stat. 181–184; Pub. L. 106–554, § 1(a)(7) [title III, § 309(b)], , 114 Stat. 2763, 2763A–638; Pub. L. 108–357, title VIII, § 898(b), , 118 Stat. 1649; Pub. L. 109–135, title IV, § 403(jj)(2), , 119 Stat. 2632.)