§ 424. Definitions and special rules

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 § 221(a) · 78 Stat. 19

   Enacted · 26 U.S.C. § 424

   Added Pub. L. 88–272, title II, § 221(a), Feb. 26, 1964, 78 Stat. 71, § 425

   Source evidence

   Code source credit
   Added Pub. L. 88–272, title II, § 221(a), Feb. 26, 1964, 78 Stat. 71, § 425

   Enacted provision · exact public law section
   (a) In General.— Part II of subchapter D of chapter 1 is amended to read as follows: “PART II— CERTAIN STOCK OPTIONS “Sec. 421. General rules. “Sec. 422. Qualified stock options. “Sec. 423. Employee stock purchase plans. “Sec. 424. Restricted stock options. “Sec. 425. Definitions and special rules. “SEC. 421. GENERAL RULES. “(a) Effect of Qualifying Transfer.— If a share of stock is transferred to an individual in a transfer in respect of which the requirements of section 422 (a), 423(a), or 424(a) are met— Post, pp. 64, 67 69. “(1) except as provided in section 422(c) (1), no income shall result at the time of the transfer of such share to the individual upon his exercise of the option with respect to such share; “(2) no deduction under section 162 (relating to trade or 26 USC 162. business expenses) shall be allowable at any time to the employer corporation, a parent or subsidiary corporation of such corporation, or a corporation issuing or assuming a stock option in a transaction to which section 425(a) applies, with respect to the Post, p. 71. share so transferred; and “(3) no amount other than the price paid under the option shall be considered as received by any of such corporations for the share so transferred. “(b) Effect of Disqualifying Disposition.— If the transfer of a share of stock to an individual pursuant to his exercise of an option would otherwise meet the requirements of section 422(a), 423(a), or 424(a) except that there is a failure to meet any of the holding period requirements of section 422(a) (1), 423(a) (1), or 424(a) (1), then any increase in the income of such individual or deduction from the income of his employer corporation for the taxable year in which such exercise occurred attributable to such disposition, shall be treated as an increase in income or a deduction from income in the taxable year of such individual or of such employer corporation in which such disposition occurred. “(c) Exercise by Estate.— “(1) In general.— If an option to which this part applies is exercised after the death of the employee by the estate of the decedent, or by a person who acquired the right to exercise such option by bequest or inheritance or by reason of the death of the decedent, the provisions of subsection (a) shall apply to the same extent as if the option had been exercised by the decedent, except that— “(A) the holding period and employment requirements of sections 422(a), 423(a), and 424(a) shall not apply, and “(B) any transfer by the estate of stock acquired shall be considered a disposition of such stock for purposes of sections Post, pp. 67, 69. 423(c) and 424(c) (1). “(2) Deduction for estate tax.— If an amount, is required to be included under section 422(c) (1), 423(c), or 424(c) (1) in gross income of the estate of the deceased employee or of a person described in paragraph (1), there shall be allowed to the estate or such person a deduction with respect to the estate tax attributable to the inclusion in the taxable estate of the deceased employee of the net value for estate tax purposes of the option. For this purpose, the deduction shall be determined under section 68A Stat. 235. 26 USC 591. 691(c) as it the option acquired from the deceased employee were an item of gross income in respect of the decedent under section 691 and as if the amount includible in gross income under section 422(c)(1), 423(c), or 424(c) (1) were an amount included in gross income under section 691 in respect of such item of gross income. “(3) Basis of shares acquired.— In the case of a share of stock acquired by the exercise of an option to which paragraph (1) applies— “(A) the basis of such share shall include so much of the basis of the option as is attributable to such share; except that the basis of such share shall be reduced by the excess (if any) of (i) the amount which would have been includible in gross income under section 422(c) (1), 423(c), or 424(c) (1) if the employee had exercised the option on the date of his death and had held the share acquired pursuant to such exercise at the time of his death, over (ii) the amount which is includible in gross income under such section; and “(B) the last sentence of sections 422(c) (1), 423(c), and 424(c)(1) shall apply only to the extent that the amount includible in gross income under such sections exceeds so much of the basis of the option as is attributable to such share. “SEC. 422. QUALIFIED STOCK OPTIONS. “(a) In General.— Subject to the provisions of subsection (c) (1), Ante, p. 63. section 421(a) shall apply with respect to the transfer of a share of stock to an individual pursuant to his exercise of a qualified stock option if— “(1) no disposition of such share is made by such individual within the 3-year period beginning on the day after the day of the transfer of such share, and “(2) at all times during the period beginning with the date of the granting of the option and ending on the day 3 months before the date of such exercise, such individual was an employee of either the corporation granting such option, a parent or subsidiary corporation of such corporation, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which section 425(a) Post, p. 71. applies. “(b) Qualified Stock Option.— For purposes of this part, the term ‘qualified stock option’ means an option granted to an individual after December 31, 1963 (other than a restricted stock option granted pursuant to a contract described in section 424(c)(3)(A)), for any Post, p. 69. reason connected with his employment by a corporation, if granted by the employer corporation or its parent or subsidiary corporation, to purchase stock of any of such corporations, but only if— “(1) the option is granted pursuant to a plan which includes the aggregate number of shares which may be issued under options, and the employees (or class of employees) eligible to receive options, and which is approved by the stockholders of the granting corporation within 12 months before or after the date such plan is adopted; “(2) such option is granted within 10 years from the date such plan is adopted, or the date such plan is approved by the stockholders, whichever is earlier; “(3) such option by its terms is not exercisable after the expiration of 5 years from the date such option is granted; “(4) except as provided in subsection (c)(1), the option price is not less than the fair market value of the stock at the time such option is granted; “(5) such option by its terms is not exercisable while there is outstanding (within the meaning of subsection (c)(2)) any qualified stock option (or restricted stock option) which was granted, before the granting of such option, to such individual to purchase stock in his employer corporation or in a corporation which (at the time of the granting of such option) is a parent or subsidiary corporation of the employer corporation, or in a predecessor corporation of any of such corporations; “(6) such option by its terms is not transferable by such individual otherwise than by will or the laws of descent and distribution, and is exercisable, during his lifetime, only by him; and “(7) such individual, immediately after such option is granted, does not own stock possessing more than 5 percent of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation; except that it the equity capital of such corporation or corporations (determined at the time the option is granted) is less than $2,000,000, then, for purposes of applying the limitation of this paragraph, there shall be added to such 5 percent the percentage (not higher than 5 percent) which bears the same ratio to 5 percent as the difference between such equity capital and $2,000,000 bears to $1,000,000. “(c) Special Rules.— “(1) Exercise of option when price is less than value of stock.— If a share of stock is transferred pursuant to the exercise by an individual of an option which fails to qualify as a qualified stock option under subsection (b) because there was a failure in an attempt, made in good faith, to meet the requirement of subsection (b) (4), the requirement of subsection (b) (4) shall be considered to have been met, but there shall be included as compensation (and not as gain upon the sale or exchange of a capital asset) in his gross income for the taxable year in which such option is exercised, an amount equal to the lesser of— “(A) 150 percent of the difference between the option price and the fair market value of the share at the time the option was granted, or “(B) the difference between the option price and the fair market value of the share at the time of such exercise. The basis of the share acquired shall be increased by an amount equal to the amount included in his gross income under this paragraph in the taxable year in which the exercise occurred. “(2) Certain options treated as outstanding.— For purposes of subsection (b)(5)— “(A) any restricted stock option which is not terminated before January 1, 1965, and “(B) any qualified stock option granted after December 31, 1963, shall be treated as outstanding until such option is exercised in full or expires by reason of the lapse of time. For purposes of the preceding sentence, a restricted stock option granted before January 1, 1964, shall not be Created as outstanding for any period before the first day on which (under the terms of such option) it may be exercised, “(3) Options granted to certain shareholders.— For purposes of subsection (b)(7)— “(A) the term ‘equity capital’ means— “(i) in the case of one corporation, the sum of its money and other property (in an amount equal to the adjusted basis of such property for determining gain), less the amount of its indebtedness (other than indebtedness to shareholders), and “(ii) in the case of a group of corporations consisting of a parent and its subsidiary corporations, the sum of the equity capital of each of such corporations adjusted, under regulations prescribed by the Secretary or his delegate, to eliminate the effect of intercorporate ownership and transactions among such corporations; “(B) the rules of section 425(d) shall apply in determining the stock ownership of the individual; and “(C) stock which the individual may purchase under outstanding options shall be treated as stock owned by such individual. If an individual is granted an option which permits him to purchase stork in excess of the limitation of subsection (b)(7) (determined by applying the rules of this paragraph), such option shall be treated as meeting the requirement of subsection (b) (7) to the extent that such individual could, if the option were fully exercised at the time of grant, purchase stock under such option without exceeding such limitation. The portion of such option which is treated as meeting the requirement of subsection (b) (7) shall be deemed to be that portion of the option which is first exercised. “(4) Certain disqualifying dispositions where amount realized is less than value at exercise.— If— “(A) an individual who has acquired a share of stock by the exercise of a qualified stock option makes a disposition of such share within the 3-year period described in subsection (a)(1), and “(B) such disposition is a sale or exchange with respect to which a loss (if sustained) would be recognized to such individual, then the amount which is includible in the gross income of such individual, and the amount which is deductible from the income of his employer corporation, as compensation attributable to the exercise of such option shall not exceed the excess (if any) of the amount realized on such sale or exchange over the adjusted basis of such share. “(5) Certain transfers by insolvent individuals.— If an insolvent individual holds a share of stock acquired pursuant to his exercise of a qualified stock option, and if such share is transferred to a trustee, receiver, or other similar fiduciary, in any proceeding under the Bankruptcy Act, or any other similar insolvency 30 Stat. 544; 52 Stat. 840. 11 USC 1 note. proceeding, neither such transfer, nor any other transfer of such share for the benefit of his creditors in such proceeding, shall constitute a ‘disposition of such share’ for purposes of subsection (a) (1). “(6) Application of subsection (b)(5) where options are for stock of same class in same corporation.— The requirement of subsection (b) (5) shall be considered to have been met in the case of any option (referred to in this paragraph as ‘new option’) granted to an individual if— “(A) the new option and all outstanding options referred to in subsection (b)(5) are to purchase stock of the same class in the same corporation, and “(B) the new option by its terms is not exercisable while there is outstanding (within the meaning of paragraph (2)) any qualified stock option (or restricted stock option) which was granted, before the granting of the new option, to such individual to purchase stock in such corporation at a price (determined as of the date of grant of the new option) higher than the option price of the new option. “SEC. 423. EMPLOYEE STOCK PURCHASE PLANS. “(a) General Rule.— Section 421(a) shall apply with respect to Ante, p. 63. the transfer of a share of stock to an individual pursuant to his exercise of an option granted after December 31, 1963 (other than a restricted stock option granted pursuant to a plan described in section 424(c)(3)(B)), under an employee stock purchase plan (as defined Post, p. 69. in subsection (b)) if— “(1) no disposition of such share is made by him within 2 years after the date of the granting of the option nor within 6 months after the transfer of such share to him; and “(2) at all times during the period beginning with the date of the granting of the option and ending on the day 3 months before the date of such exercise, he is an employee of the corporation granting such option, a parent or subsidiary corporation of such corporation, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which section 425(a) applies. Post, p. 71. “(b) Employee Stock Purchase Plan.— For purposes of this part, the term ‘employee stock purchase plan’ means a plan which meets the following requirements: “(1) the plan provides that options are to be granted only to employees of the employer corporation or of its parent or subsidiary corporation to purchase stock in any such corporation; “(2) such plan is approved by the stockholders of the granting corporation within 12 months before or after the date such plan is adopted; “(3) under the terms of the plan, no employee can be granted an option if such employee, immediately after the option is granted, owns stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation. For purposes of this paragraph, the rules of section 425(d) shall apply in determining the stock ownership of an individual, and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee; “(4) under the terms of the plan, options are to be granted to all employees of any corporation whose employees are granted any of such options by reason of their employment by such corporation, except that there may be excluded— “(A) employees who have been employed less than 2 years, “(B) employees whose customary employment is 20 hours or less per week, “(C) employees whose customary employment is for not more than 5 months in any calendar year, and “(D) officers, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees; “(5) under the terms of the plan, all employees granted such options shall have the same rights and privileges, except that the amount of stock which may be purchased by any employee under such option may bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees, and the plan may provide that no employee may purchase more than a maximum amount of stock fixed under the plan; “(6) under the terms of the plan, the option price is not less than the lesser of— “(A) an amount equal to 85 percent of the fair market value of the stock at the time such option is granted, or “(B) an amount which under the terms of the option may not be less than 85 percent of the fair market value of the stock at the time such option is exercised; “(7) under the terms of the plan, such option cannot be exercised after the expiration of— “(A) 5 years from the date such option is granted if, under the terms of such plan, the option price is to be not less than 85 percent of the fair market value of such stock at the time of the exercise of the option or “(B) 27 months from the date such option is granted, if the option price is not determinable in the manner described in subparagraph (A); “(8) under the terms of the plan, no employee may be granted an option which permits his rights to purchase stock under all such plans of his employer corporation and its parent and subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. For purposes of this paragraph— “(A) the right to purchase stock under an option accrues when the option (or any portion thereof) first becomes exercisable during the calendar year; “(B) the right to purchase stock under an option accrues at the rate provided m the option, but in no case may such rate exceed $25,000 of fair market value of such stock (determined at the time such option is granted) for any one calendar year; and “(C) a right to purchase stock which has accrued under one option granted pursuant to the plan may not be carried over to any other option; and “(9) under the terms of the plan, such option is not transferable by such individual otherwise than by will or the laws of descent and distribution, and is exercisable, during his lifetime, only by him. For purposes of paragraphs (3) to (9), inclusive, where additional terms are contained in an offering made under a plan, such additional terms shall, with respect to options exercised under such offering, be treated as a part of the terms of such plan. “(c) Special Rule Where Option Price Is Between 85 Percent and 100 Percent of Value of Stock.— If the option price of a share of stock acquired by an individual pursuant to a transfer to which subsection (a) applies was less than 100 percent of the fair market value of such share at the time such option wits granted, then, in the event of any disposition of such share by him which meets the holding period requirements of subsection (a), or in the event of his death (whenever occurring) while owning such share, there shall be included as compensation (and not as gain upon the sale or exchange of a capital asset) in his gross income, for the taxable year in which falls the date of such disposition or for the taxable year closing with his death, whichever applies, an amount equal to the lesser of— “(1) the excess of the fair market value of the share at the time of such disposition or death over the amount paid for the share under the option, or “(2) the excess of the fair market value of the share at the time the option was granted over the option price. If the option price is not fixed or determinable at the time the option is granted, then for purposes of this subsection, the option price shall be determined as if the option were exercised at such time. In the case of the disposition of such share by the individual, the basis of the share in his hands at the time of such disposition shall be increased by an amount equal to the amount so includible in his gross income. “SEC. 424. RESTRICTED STOCK OPTIONS. “(a) In General.— Section 421(a) shall apply with respect to the Ante, p. 63. transfer of a share of stock to an individual pursuant to his exercise after 1949 of a restricted stock option, if— “(1) no disposition of such share is made by him within 2 years from the date of the granting of the option nor within 6 months after the transfer of such share to him, and “(2) at the time he exercises such option— “(A) he is an employee of either the corporation granting such option, a parent or subsidiary corporation of such corporation, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which section 425(a) applies, or Post, p. 71. “(B) he ceased to be an employee of such corporations within the 3-month period preceding the time of exercise. “(b) Restricted Stock Option.— For purposes of this part, the term ‘restricted stock option means an option granted after February 26, 1945, and before January 1, 1964 (or, if it meets the requirements of subsection (c) (3), an option granted after December 31, 1963), to an individual, for any reason connected with his employment by a corporation, if granted by the employer corporation or its parent or subsidiary corporation, to purchase stock of any of such corporations, but only if— “(1) at the time such option is granted— “(A) the option price is at least 85 percent of the fair market value at such time of the stock subject to the option, or “(B) in the case of a variable price option, the option price (computed as if the option had been exercised when granted) is at least 85 percent, of the fair market value of the stock at the time such option is granted; “(2) such option by its terms is not transferable by such individual otherwise than by will or the laws of descent and distribution, and is exercisable, during his lifetime, only by him; “(3) such individual, at the time the option is granted, does not own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation. This paragraph shall not apply if at the time such option is granted the option price is at least 110 percent of the fair market value of the stock subject to the option, and such option either by its terms is not exercisable after the expiration of 5 years from the date such option is granted or is exercised within one year after August 16, 1954. For purposes Post, p. 71. of this paragraph, the provisions of section 425(d) shall apply in determining the stock ownership of an individual; and “(4) such option by its terms is not exercisable after the expiration of 10 veal’s from the date such option is granted, if such option has been granted on or after June 22, 1954. “(c) Special Rules.— “(1) Options under which option price is between 85 percent and 95 percent of value of stock.— If no disposition of a share of stock acquired by an individual on his exercise after 1949 of a restricted stock option is made by him within 2 years from the date of the granting of the option nor within 6 months after the transfer of such share to him, but, at the time the restricted stock option was granted, the option price (computed under subsection (b) (1)) was less than 95 percent of the fair market value at such time of such share, then, in the event of any disposition of such share by him, or in the event of his death (whenever occurring) while owning such share, there shall be included as compensation (and not as gain upon the sale or exchange of a capital asset) in his gross income, for the taxable year in which falls the date of such disposition or for the taxable year closing with his death, whichever applies— “(A) in the case of a share of stock acquired under an option qualifying under subsection (b)(1)(A), an amount equal to the amount (if any) by which the option price is exceeded by the lesser of— “(i) the fair market value of the share at the time of such disposition or death, or “(ii) the fair market value of the share at the time the option was granted; or “(B) in the case of stock acquired under an option qualify mg under subsection (b)(1)(B), an amount equal to the lesser of— “(i) the excess of the fair market value of the share at the time of such disposition or death over the price paid under the option, or “(ii) the excess of the fair market value of the share at the time the option was granted over the option price (computed as if, the option had been exercised at such time). In the case of a disposition of such share by the individual, the basis of the share in his hands at the time of such disposition shall be increased by an amount equal to the amount so includible in his gross income. “(2) Variable price option.— For purposes of subsection (b) (1), the term ‘variable price option’ means an option under which the purchase price of the stock is fixed or determinable under a formula in which the only variable is the fair market value of the stock at any time during a period of 6 months which includes the time the option is exercised; except that in the case of options granted after September 30, 1958, such term does not include any such option in which such formula provides for determining such price by reference to the fair market value of the stock at any time before the option is exercised if such value may be greater than the average fair market value of the stock during the calendar month in which the option is exercised. “(3) Certain options granted after December 31, 1963.— For purposes of subsection (b), an option granted after December 31, 1963, meets the requirements of this paragraph if granted pursuant to— “(A) a binding written contract entered into before January 1, 1964, or “(B) a written plan adopted and approved before January 1, 1964, which (as of January 1, 1964, and as of the date of the granting of the option)— “(i) met the requirements of paragraphs (4) and (5) of section 423 (b), or Ante, p. 67. “(ii) was being administered in a way which did not discriminate in favor of officers, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees. “SEC. 425. DEFINITIONS AND SPECIAL RULES. “(a) Corporate Reorganizations, Liquidations, Etc.— For purposes of this part, the term ‘issuing or assuming a stock option in a transaction to which section 425(a) applies means a substitution of a new option for the old option, or an assumption of the old option, by an employer corporation, or a parent or subsidiary of such corporation, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation, if— “(1) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares, and “(2) the new option or the assumption of the old option does not give the employee additional benefits which he did not have under the old option. For purposes of this subsection, the parent-subsidiary relationship shall be determined at the time of any such transaction under this subsection. “(b) Acquisition of New Stock.— For purposes of this part, if stock is received by an individual in a distribution to which section 305, 354, 355, 356, or 1036 (or so much of section 1031 as relates to 68A Stat. 90. 26 USC 305, 354, 355, 356, 1036, 1031. section 1036) applies, and such distribution was made with respect to stock transferred to him upon his exercise of the option, such stock shall be considered as having been transferred to him on his exercise of such option. A similar rule shall be applied in the case of a series of such distributions. “(c) Disposition.— “(1) In general.— Except as provided in paragraph (2), for purposes of this part, the term ‘disposition’ includes a sale, exchange, gift, or a transfer of legal title, but does not include— “(A) a transfer from a decedent to an estate or a transfer by bequest or inheritance; “(B) an exchange to which section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies; or “(C) a mere pledge or hypothecation. “(2) Joint tenancy.— The acquisition of a share of stock in the name of the employee and another jointly with the right of survivorship or a subsequent transfer of a share of stock into such joint ownership shall not be deemed a disposition, but a termination of such joint tenancy (except to the extent such employee acquires ownership of such stock) shall be treated as a disposition by him occurring at the time such joint tenancy is terminated. “(d) Attribution of Stock Ownership.— For purposes of this part, in applying the percentage limitations of sections 422(b)(7), Ante, pp. 64, 67, 69. 423(b) (3), and 424(b)(3)— “(1) the individual with respect to whom such limitation is being determined shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and “(2) stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. “(e) Parent Corporation.— For purposes of this part, the term ‘parent corporation’ means any corporation (other than the employer corporation) in an unbroken chain of corporations ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent, or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. “(f) Subsidiary Corporation.— For purposes of this part, the term Subsidiary corporation’ means any corporation (other than the employer corporation) in an unbroken chain of corporations beginning with the employer corporation if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. “(g) Special Rule for Applying Subsections (e) and (f).— In applying subsections (e) and (f) for purposes of section 422(a) (2), 423(a)(2), and 424(a)(2), there shall be substituted for the term ‘employer corporation’ wherever it appeal’s in subsections (e) and (f) the term ‘grantor corporation’, or the term ‘corporation issuing or Ante, p. 71. assuming a stock option in a transaction to which section 425(a) applies’, as the case may be. “(h) Modification, Extension, or Renewal of Option.— “(1) In general.— For purposes of this part, if the terms of any option to purchase stock are modified, extended, or renewed, such modification, extension, or renewal shall be considered as the granting of a new option. “(2) Special rules for sections 423 and 424 options.— “(A) In the case of the transfer of stock pursuant to the exercise of an option to which section 423 or 424 applies and which has been so modified, extended, or renewed, then, except as provided in subparagraph (B), the fair market, value of such stock at the time of the granting of such option shall be considered as whichever of the following is the highest: “(i) the fair market, value of such stock on the date of the original granting of the option, “(ii) the fair market value of such stock on the date of the making of such modification, extension, or renewal, or “(iii) the fair market value of such stock at the time of the making of any intervening modification, extension, or renewal. “(B) Subparagraph (A) shall not apply with respect to a modification, extension, or renewal of a restricted stock option before January 1, 1964 (or after December 31, 1963, if made pursuant to a binding written contract entered into before January 1, 1964), if the aggregate of the monthly average fair market values of the stock subject to the option for the 12 consecutive calendar months before the date of the modification, extension, or renewal, divided by 12, is an amount less than 80 percent of the fair market value of such stock on the date of the original granting of the option or the date of the making of any intervening modification, extension, or renewal, whichever is the highest. “(3) Definition of modification.— The term ‘modification’ means any change in the terms of the option which gives the employee additional benefits under the option, but such term shall not include a change in the terms of the option— “(A) attributable to the issuance or assumption of an option under subsection (a); “(B) to permit the option to qualify under sections 422(b) (6),423(b)(9), and 424(b)(2); or Ante, pp. 64, 67, 69. “(C) in the case of an option not immediately exercisable in full, to accelerate the time at which the option may be exercised. If a restricted stock option is exercisable after the expiration of 10 years from the date such option is granted, subparagraph (B) shall not apply unless the terms of the option are also changed to make it not exercisable after the expiration of such period. “(i) Stockholder Approval.— For purposes of this part, if the grant of an option is subject, to approval by stockholders, the date of grant of the option shall be determined as if the option had not been subject to such approval. “(j) Cross References.— “For provisions requiring the reporting of certain acts with respect to a qualified stock option, options granted under employer stock purchase plans, or a restricted stock option, see section 6039.”

2. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 251(b)(2) · 95 Stat. 175

   Inserted · 26 U.S.C. § 424(d)

   Pub. L. 97–34, § 251(b)(2), inserted reference to section 422A(b)(6)

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 97–34, § 251(b)(2), inserted reference to section 422A(b)(6).

   Enacted provision · exact public law section
   (2) Section 425(d) (relating to attribution of stock ownership) is 26 USC 425. amended by inserting “422A(b)(6),” after “422(b)(7),”.

3. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 251(b)(3) · 95 Stat. 175

   Inserted · 26 U.S.C. § 424(g)

   Pub. L. 97–34, § 251(b)(3), inserted reference to section 422A(a)(2)

   Source evidence

   Code amendment note
   Subsec. (g). Pub. L. 97–34, § 251(b)(3), inserted reference to section 422A(a)(2).

   Enacted provision · exact public law section
   (3) Section 425(g) (relating to special rules) is amended by inserting “422A(a)(2),” after “422(a)(2),”.

4. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 251(b)(4) · 95 Stat. 175

   Inserted · 26 U.S.C. § 424(h)(3)(B)

   Pub. L. 97–34, § 251(b)(4), inserted reference to section 422A(b)(5)

   Source evidence

   Code amendment note
   Subsec. (h)(3)(B). Pub. L. 97–34, § 251(b)(4), inserted reference to section 422A(b)(5).

   Enacted provision · exact public law section
   (4) Section 425(h)(3)(B) (relating to definition of modification) is amended by inserting “422A(b)(5),” after “422(b)(6),”.

5. 1983

   Pub. L. 97–448 § 102(j)(6)(B) · 96 Stat. 2365

   Substituted · 26 U.S.C. § 424(c)(1)

   Pub. L. 97–448, § 102(j)(6)(B), substituted “paragraphs (2) and (3)” for “paragraph (2)”

   Source evidence

   Code amendment note
   Subsec. (c)(1). Pub. L. 97–448, § 102(j)(6)(B), substituted “paragraphs (2) and (3)” for “paragraph (2)”.

   Enacted provision · exact public law section
   (B) 26 USC 425. paragraph (1) of section 425(c) is amended by striking out “paragraph (2)” and inserting in lieu thereof “paragraphs (2) and (3)”.

6. 1983

   Pub. L. 97–448 § 102(j)(6)(A) · 96 Stat. 2365

   Added · 26 U.S.C. § 424(c)(3)

   Pub. L. 97–448, § 102(j)(6)(A), added par. (3)

   Source evidence

   Code amendment note
   Subsec. (c)(3). Pub. L. 97–448, § 102(j)(6)(A), added par. (3).

   Enacted provision · exact public law section
   (A) subsection (c) of section 425 (defining disposition) is amended by adding at the end thereof the following new paragraph: “(3) Special rule where incentive stock is acquired through use of other statutory option stock.— “(A) Nonrecognition sections not to apply.— If— “(i) there is a transfer of statutory option stock in connection with the exercise of any incentive stock option, and “(ii) the applicable holding period requirements (under section 422(a)(1), 422A(a)(1), 423(a)(1), or 424(a)(1)) are not met before such transfer, then no section referred to in subparagraph (B) of paragraph (1) shall apply to such transfer. “(B) Statutory option stock.— For purpose of subparagraph (A), the term ‘statutory option stock’ means any stock acquired through the exercise of a qualified stock option, an incentive stock option, an option granted under an employee stock purchase plan, or a restricted stock option.”, and

7. 1983

   Pub. L. 97–448 § 102(j)(5) · 96 Stat. 2365

   Inserted · 26 U.S.C. § 424(j)

   Pub. L. 97–448, § 102(j)(5), inserted reference to an incentive stock option

   Source evidence

   Code amendment note
   Subsec. (j). Pub. L. 97–448, § 102(j)(5), inserted reference to an incentive stock option.

   Enacted provision · exact public law section
   (5) Subsection (j) of section 425 (relating to cross references) is 26 USC 425. amended by inserting “an incentive stock option,” after “qualified stock option,”.

8. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 div. A title V § 555(b) · 98 Stat. 494

   Struck · 26 U.S.C. § 424(h)(3)(B)

   Pub. L. 98–369 struck out reference to section 422A(b)(5)

   Source evidence

   Code amendment note
   Subsec. (h)(3)(B). Pub. L. 98–369 struck out reference to section 422A(b)(5).

   Enacted provision · exact public law section
   (b) Modification of Incentive Stock Options— Subparagraph 26 USC 425. (B) of section 425(h)(3) (relating to modifications) is amended by striking out “422A(b)(5),”.

9. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1018 · 102 Stat. 3342

   1. Amended · 26 U.S.C. § 424(c)(1)

      Pub. L. 100–647, § 1018(l)(2), as amended by Pub. L. 101–239

   2. Substituted · 26 U.S.C. § 424(c)(1)

      Pub. L. 100–647, § 1018(l)(2), as substituted “paragraphs (2), (3), and (4)” for “paragraphs (2) and (3)”

   Source evidence

   Code amendment note
   Subsec. (c)(1). Pub. L. 100–647, § 1018(l)(2), as amended by Pub. L. 101–239, substituted “paragraphs (2), (3), and (4)” for “paragraphs (2) and (3)”.

   Enacted provision · exact public law section
   SEC. 1018. AMENDMENTS REL ATED TO TITLE XVIII OF THE REFORM ACT. (a) Amendment Related to Section 1801 of the Reform Act.— Clause (iii) of section 1801(a)(2)(A) of the Reform Act is amended to 26 USC 168 note. read as follows: “(iii) a person became a partner in such partnership (or a beneficiary in such trust) after its formation but before September 26, 1985,”. (b) Amendments Related to Section 1802 of the Reform Act.— (1) The last sentence of section 31(g)(17)(I) of the Tax Reform Act of 1984, as added by section 1802(a)(10)(G) of the Reform Act, 26 USC 168 note. is amended— (A) by striking out “Registry of Deeds” each place it appears and inserting in lieu thereof “Register of Deed”, and (B) by striking out “May 7, 1985” and inserting in lieu thereof “May 7, 1984”. (2) Subparagraph (E) of section 168(j)(9) of the 1986 Code (as amended by section 1802(a)(2) of the Reform Act and as in effect before the amendments made by section 201 of the Reform Act) is amended— (A) by striking out “this paragraph” in clauses (i) and (iiXI) and inserting in lieu thereof “this paragraph and paragraph (8)”, and (B) by striking out clause (iii) and inserting in lieu thereof the following: “(iii) Tax-exempt controlled entity.— “(I) In general.— The term “tax-exempt controlled entity” means any corporation (which is not a tax-exempt entity determined without regard to this subparagraph and paragraph (4 KE)) if 50 percent or more (in value) of the stock in such corpora-tion is held by 1 or more tax-exempt entities (other than a foreign person or entity). “(II) Only 5-percent shareholders taken into account in case of publicly traded stock.— For purposes of subclause (I), in the case of a corporation the stock of which is publicly traded on an established securities market, stock held by a tax-exempt entity shall not be taken into account unless such entity holds at least 5 percent (in value) of the stock in such corporation. For purposes of this subclause, related entities (within the meaning of paragraph (7)) shall be treated as 1 entity. “(III) Section 318 to apply.— For purposes of this clause, a tax-exempt entity shall be treated as holding stock which it holds through application of section 318 (determined without regard to the 50-percent limitation contained in subsection (a)(2)(C) thereof).” (c) Amendment Related to Section 1803 of the Reform Act.— (1) Subparagraph (A) of section 1803(a)(8) of the Reform Act is amended by striking out “September 27, 1985” and inserting in lieu thereof “December 31, 1985”. (2) Subsection (c) of section 1278 of the 1986 Code is amended by inserting before the period “, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments”. (3) Section 1278(b) of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Basis adjustment.— The basis of any bond in the hands of the taxpayer shall be increased by the amount included in gross income pursuant to this subsection.” (d) Amendments Related to Section 1804 of the Reform Act.— (1) Paragraph (3) of section 1804(b) of the Reform Act is amended by striking out “Paragraph (3) of section 54” and inserting “Paragraph (3) of section 54(d)”. (2) Clause (i) of section 54(d)(3)(D) of the Tax Reform Act of 26 USC 311 note. 1984 is amended by striking out “subtitle D of title VI” and inserting “subtitle D of title VI of the Tax Reform Act of 1986”. (3) Clause (ii) of section 54(d)(3)(D) of the Tax Reform Act of 1984 (as added by section 1804(b)(3) of the Tax Reform Act of 1986) is amended— (A) by striking out “December 9, 1968,” each place it appears and inserting in lieu thereof “December 10, 1968,”, and (B) by striking out “October 5, 1981” and inserting in lieu thereof “March 2, 1978,”. (4) Subsection (b) of section 312 of the 1986 Code is amended by striking out “of any property” and inserting in lieu thereof “of any property (other than an obligation of such corporation)”. (5) (A) Section 361 of the 1986 Code is amended to read as follows: “SEC. 361. NONRECOGNITION OF GAIN OR LOSS TO CORPORATIONS; TREATMENT OF DISTRIBUTIONS. “(a) General Rule.— No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. “(b) Exchanges Not Solely in Kind.— “(1) Gain.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then— “(A) Property distributed.— If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but “(B) Property not distributed.— If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized. The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed. “(2) Loss.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. “(3) Treatment of transfers to creditors.— For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). “(c) Treatment of Distributions.— “(1) In general.— Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization on the distribution to its shareholders of property in pursuance of the plan of reorganization. “(2) Distributions of appreciated property.— “(A) In general.— If— “(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and “(ii) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation), then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value. “(B) Qualified property.— For purposes of this subsection, the term ‘qualified property’ means— “(i) any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or “(ii) any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange. “(C) Treatment of liabilities.— If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability. “(3) Treatment of certain transfers to creditors.— For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization. “(4) Coordination with other provisions.— Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).” (B) Section 358 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Definition of Nonrecognition Property in Case of Section 361 Exchange.— For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.” (C) Section 355 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(c) Taxability of Corporation on Distribution.— Section 311 shall apply to any distribution— “(1) to which this section (or so much of section 356 as relates to this section) applies, and “(2) which is not in pursuance of a plan of reorganization, in the same manner as if such distribution were a distribution to which subpart A of part I applies; except that subsection (b) of section 311 shall not apply to any distribution of stock or securities in the controlled corporation.” (D) Subsection (c) of section 336 of the 1986 Code (as amended by section 631 of the Reform Act) is amended to read as follows: “(c) Exception for Liquidations Which Are Part of a Reorganization.— “For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4),” (E) Subsection (a) of section 311 of the 1986 Code is amended by striking out “distribution, with respect to its stock,” and inserting in lieu thereof “distribution (not in complete liquidation) with respect to its stock”. (F) The table of sections for subpart C of part III of subchapter C of chapter 1 of the 1986 Code is amended by striking out the item relating to section 361 and inserting in lieu thereof the following new item: “Sec. 361. Nonrecognition of gain or loss to corporations; treatment of distributions.” (G) Effective with respect to transfers on or after June 21, 1988, section 351 of the 1986 Code is amended by redesignating subsection (0 as subsection (g) and by inserting after subsection: (e) the following new subsection: “(f) Treatment of Controlled Corporation.— If— “(1) property is transferred to a corporation (hereinafter in this subsection referred to as the ‘controlled corporation’) in an exchange with respect to which gain or loss is not recognized (in whole or in part) to the transferor under this section, and “(2) such exchange is not in pursuance of a plan of reorganization, section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies.” (6) Subparagraph (A) of section 280G(b)(5) of the 1986 Code is amended— (A) in clause (i) by striking out “section 1361(b))” and inserting in lieu thereof “section 1361(b) but without regard to paragraph (1)(C) thereof)”, and (B) by adding at the end thereof the following: “Stock described in action 1504(a)(4) shall not be taken into ac-count under clause ((j)(1) if the payment does not adversely affect the shareholder’s redemption and liquidation rights.” (7) Subparagraph (B) of section 280G(b)(5) of the 1986 Code (relating to shareholder approval requirements) is amended by adding at the end thereof the following new sentence: “The regulations prescribed under subsection (e) shall include regulations providing for the application of this subparagraph in the case of shareholders which are not individuals (including the treatment of non voting interests in an entity which is a shareholder) and where an entity holds a de minimis amount of stock in the corporation.” (8) Paragraph (5) of section 2800(d) of the 1986 Code is amended by striking out “officer or any member” and inserting in lieu thereof “officer of any member”. (9) Paragraph (3) of section 338(e) of the 1986 Code is amended by striking out “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)” and inserting in lieu thereof “which meet the requirements of section 1504(a)(2)”. (10) (A) Paragraph (7) of section 1504(b) of the 1986 Code is amended to read as follows: “(7) A DISC (as defined in section 992(a)(1)).” (B) Section 1504 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Special Rule for Certain Amounts Derived From a Corporation Previously Treated as a DISC.— In determining the consolidated taxable income of an affiliated group for any taxable year beginning after December 31, 1984, a corporation which had been a DISC and which would otherwise be a member of such group shall not be treated as such a member with respect to— “(1) any distribution (or deemed distribution) of accumulated DISC income which was not treated as previously taxed income under section 805(b)(2)(A) of the Tax Reform Act of 1984, and “(2) any amount treated as received under section 805(b)(3) of such Act.” (e) Provision Related to Section 1806 of the Reform Act.— If— (1) on a return for the 1st taxable year of the trusts involved beginning after March 1, 1984, 2 or more trusts were treated as a single trust for purposes of the tax imposed by chapter 1 of the Internal Revenue Code of 1954. (2) such trusts would have been required to be so treated but for the amendment made by section 1806(b) of the Reform Act, and (3) such trusts did not accumulate any income during such taxable year and did not make any accumulation distributions during such taxable year, then, notwithstanding the amendment maße by section 1806(b) of the Reform Act, such trusts shall be treated as one trust for purposes of such taxable year. (f) Amendments Related to Section 1807 of the Reform Act.— (1) Paragraphs (1)(A) and (2)(E) of section 468B(d) of the 1986 Code are each amended by striking out “the taxpayer” and inserting in lieu thereof “the taxpayer (or any related person)”. (2) Subparagraph (A) of section 468B(d)(2) of the 1986 Code is amended to read as follows: “(A) which is established pursuant to a court order and which extinguishes completely the taxpayer’s tort liability with respect to claims described in subparagraph (D),”. (3) Clause (i) of section 1807(a)(6)(C) of the Reform Act is amended to read as follows: “(i) any portion of such fund which is established pursuant to a court order and with qualified payments, which meets the requirements of subparagraphs (C) and (D) of section 468B(d)(2) of the Internal Revenue Code of 1954 (as added by this paragraph), and with respect to which an election is made under subparagraph (F) thereof, shall be treated as a designated settlement fund for purposes of section 468B of such Code,”. (4) Paragraph (2) of section 468B(b) of the 1986 Code is amended— (A) by striking out “the corporation,” and inserting in lieu thereof “a corporation.”, and (B) by striking out “no other” and inserting in lieu thereof “No other”. (5) (A) Section 468B of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Clarification of Taxation of Certain Funds.— Nothing in any provision of law shall be construed as providing that an escrow account, settlement fund, or similar fund is not subject to current Regulations. income tax. The Secretary shall prescribe regulations providing for the taxation of any such account or fund whether as a grantor trust or otherwise.” (B) Subparagraph (D) of section 1807(a)(7) of the Reform Act is hereby repealed. (g) Amendments Related to Section 1810 of the Reform Act.— (1) Paragraph (5) of section 1810(a) of the Reform Act is amended by striking out “section 125(b)(5)” each place it appears and inserting in lieu thereof “section 121(b)(5)”. (2) Section 133(d)(3)(B)(iii) of the Tax Reform Act of 1984, as 26 USC 959 note. amended by section 1810(1)(2) of the Reform Act, is amended by striking out “Tax Reform Act of 1985” and inserting in lieu thereof “Tax Reform Act of 1986”. (3) Clause (iv) of section 7701(b)(5)(A) of the 1986 Code is amended by striking out “section 274(k)(2)” and inserting in lieu thereof “section 274(c)(1)(B)”. (h) Amendment Related to Section 1821 of the Reform Act.— (1) Subsection (e) of section 812 of the 1986 Code (relating to dividends from certain subsidiaries not included in gross investment income) is amended to read as follows: “(e) Dividends From Certain Subsidiaries Not Included in Gross Investment Income.— “(1) In general.— For purposes of this section, the term ‘gross investment income’ shall not include any dividend received by the life insurance company which is a 100 percent dividend. “(2) 100 percent dividend defined.— “(A) In general— Except as provided in subparagraphs (B) and (C), the term ‘100 percent dividend’ means any dividend if the percentage used for purposes of determining the deduction allowable under section 243, 244, or 245(b) is 100 percent. “(B) Certain dividends out of tax-exempt interest, etc.— The term ‘100 percent dividend’ does not include any distribution by a corporation to the extent such distribution is out of tax-exempt interest or out of dividends which are not 100 percent dividends (determined with the application of this subparagraph). “(C) Certain dividends received by foreign corporations.— The term 100 percent dividends’ does not include any dividend described in section 805(a)(4)(E) (relating to certain dividends in the case of foreign corporations).” (2) The amendment made by paragraph (1) shall take effect as Effective date. 26 USC 812 note. if included in the amendments made by section 211 of the Tax Reform Act of 1984. (i) Amendment Related to Section 1822 of the Reform Act.— Clause (i) of section 216(b)(4)(C) of the Tax Reform Act of 1984 (relating to section 818(c) elections made by certain acquired companies) is amended by striking out “clause (i)” and inserting in lieu 26 USC 801 note. thereof “subclause (I)”. (j) Amendment Related to Section 1825 of the Reform Act.— Paragraph (4) of sectioo 1825(a) of the Reform Act (relating to amendments related to section 221 of the Tax Reform Act of 1984) is 26 USC 7702 note. amended by striking out “Section 7702(e)(2)” and inserting in lieu thereof “Effective with respect to contracts entered into after October 22, 1986, section 7702(e)(2)”. (k) Amendments Related to Section 1826 of the Reform Act.— (1) Paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “or” at the end of subparagraph (B), by striking out the period at the end of subparagraph (Q and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(D) which is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment).” (2) The paragraph heading of paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “annuity contracts which are part of qualified plans” and inserting in lieu thereof “certain annuity contracts”. (l) Amendments Related to Section 1842 of the Reform Act. (1) Subsection (c) of section 425 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Transfers between spouses or incident to divorce.— In the case of any transfer described in subsection (a) of section 1041— “(A) such transfer shall not be treated as a disposition for purposes of this part, and “(B) the same tax treatment under this part with respect to the transferred property shall apply to the transferee as would have applied to the transferor.” (2) Paragraph (1) of section 425(c) of the 1986 Code is amended by striking out “paragraph (2) and (3)” and inserting in lieu thereof “paragraphs (2), (3), and (4)”. (3) Effective with respect to transfers after June 21, 1988, subsection (d) of section 1041 of the 1986 Code is amended— (A) by striking out “Paragraph (1) of subsection (a)” and inserting in lieu thereof “Subsection (a)”, and (B) by striking out “the spouse” and inserting in lieu thereof “the spouse (or former spouse)”. (m) Amendments Related to Section 1866 of the Reform Act.— (1) Section 1866 of the Reform Act is amended by striking out “obligation issued to refund” and inserting in lieu thereof “obligation (or series of obligations) issued to refund”. (2) (A) Paragraph (1) of section 1866 of the Reform Act is amended to read as follows: (2) the average maturity of the issue of which the refunding obligation is a part does not exceed the average maturity of the obligations to be refunded by such issue,”. (B) Section 1866 of the Reform Act is amended by adding at the end thereof the following new sentence: “For purposes of paragraph (1), average maturity shall be determined in accordance with subsection (b)(14)(B)(i) of such Code.” (3) Paragraph (4) of section 1866 of the Reform Act is amended by striking out “30 days” and inserting in lieu thereof “90 days”. (4) Section 1866 of the Reform Act is amended by adding “and” at the end of paragraph (2), by striking out paragraph (3), and by redesignating paragraph (4) as paragraph (3). (5) A refunding obligation issued before July 1, 1987, shall be treated as meeting the requirement of paragraph (1) of section 1866 of the Reform Act if such obligation met the requirement of such paragraph as enacted by the Reform Act. (n) Amendments Related to Section 1869 of the Reform Act.— (1) Clause (ii) of section 1869(c)(3)(A) of the Reform Act is amended by striking out “pursuant to the exercise of eminent domain” and inserting in lieu thereof “(by a governmental unit having the power to exercise eminent domain)”. (2) Subparagraph (C) of section 1869(c)(3) of the Reform Act is amended by inserting “(or similar issues)” after “resulting from the issue”. (o) Amendments Related to Section 1875 of the Reform Act.— (1) Clause (ii) of section 6230(a)(2)(A) of the 1986 Code is amended by striking out “nonpartnership items” and inserting in lieu thereof “nonpartnership items (other than by reason of section 6231(b)(1)(C))”. (2) Subsection (g) of section 1246 of the 1986 Code (as redesignated by this Act) is amended by striking out “1248(g)(3)” and inserting in lieu thereof “1248(g)(2)”. (3) Subsection (f) of section 6229 of the 1986 Code is amended Contracts. by adding at the end thereof the following new sentence: “The period described in the preceding sentence (including any extension period under this sentence) may be extended with respect to any partner by agreement entered into by the Secretary and such partner.” (p) Amendment Related to Section 1878 of the Reform Act.— Paragraph (1) of section 852(e) of the 1986 Code is amended by striking out “subsection (a)(3)” and inserting in lieu thereof “subsection (a)(2)”. (q) Amendments Related to Section 1879 of the Reform Act.— (1) Subclause (II) of section 28(b)(2)(A)(ii) of the 1986 Code is amended to read as follows: “(II) before the date on which an application with respect to such drug is approved under section 505(b) or 507 of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Service Act; and”. (2) The last sentence of section 1361(d)(3) of the 1986 Code is amended by striking out “treated as a separate trust under section 663(c)” and inserting in lieu thereof “within the meaning of section 663(c)”. (3) Subsection (p) of section 1879 of the Reform Act is 26 USC 83 note. amended— (A) by striking out “Subsection (a)” in paragraph (2) and inserting “Paragraph (1)”, and (B) by striking out “subsection (a)” each place it appears in paragraphs (2) and (3) and inserting in lieu thereof “paragraph (1)”. (4) (A) Subsection (d) of section 1286 of the 1986 Code is amended to read as follows: “(d) Special Rules for Tax-Exempt Obligations.— “(1) In general.— In the case of any tax-exempt obligation (as defined in section 1275(a)(3)) from which 1 or more coupons have been stripped— “(A) the amount of the original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon— “(i) shall be treated as original issue discount on a tax-exempt obligation to the extent such discount does not exceed the tax-exempt portion of such discount, and “(ii) shall be treated as original issue discount on an obligation which is not a tax-exempt obligation to the extent such discount exceeds the tax-exempt portion of such discount, “(B) subsection (b)(1)(A) shall not apply, and “(C) subsection (b)(2) shall be applied by increasing the basis of the bond or coupon by the sum of— “(i) the interest accrued but not paid before such bond or coupon was disposed of (and not previously reflected in basis), plus “(ii) the amount included in gross income under subsection (b)(1)(B). “(2) Tax-exempt portion.— For purposes of paragraph (1), the tax-exempt portion of the original issue discount determined under subsection (a) is the excess of— “(A) the amount referred to in subsection (a)(1), over “(B) an issue price which would produce a yield to maturity as of the purchase date equal to the lower of— “(i) the coupon rate of interest on the obligation from which the coupons were separated, or “(ii) the yield to maturity (on the basis of the purchase price) of the stripped obligation or coupon. The purchaser of any stripped obligation or coupon may elect to apply clause (i) by substituting ‘original yield to maturity or for ‘coupon rate of interest on’.” (B) (i) Except as provided in clause (ii), the amendment made by subparagraph (A) shall apply to any purchase or sale after June 10, 1987, of any stripped tax-exempt obligation or stripped coupon from such an obligation. (ii) If— (I) any person held any obligation or coupon in stripped form on June 10, 1987, and (II) such obligation or coupon was held by such person on such date for sale in the ordinary course of such person’s trade or business, the amendment made by subparagraph (A) shall not apply to any sale of such obligation or coupon by such person and shall not apply to any such obligation or coupon while held by another person who purchased such obligation or coupon from the person referred to in subclause (I). (5) Clause (ii) of section 368(a)(2)(F) of the 1986 Code is amended— (A) by striking out the two parenthetical phrases in the first sentence, and (B) by adding at the end thereof the following new sentence: “For purposes of this clause, a person holding stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause shall, except as provided in regulations, be treated as holding its proportionate share of the assets held by such company or trust.’ (r) Amendments Related to Section 1895 of the Reform Act.— (1) Subsection (b) of section 1895 of the Reform Act is amended by striking out paragraphs (1) and (2). (2) (A) Clause (ii) of section 3121(u)(2)(B) of the 1986 Code is amended by striking out “or” at the end of subclause (IV), by striking out the period at the end of subclause (V) and inserting in lieu thereof ‘, or”, and by inserting after subclause (V) the following new subclause: “(VI) by an individual in a position described in section 1402(c)(2)(E).” (B) The amendment made by subparagraph (A) shall apply to services performed after March 31, 1986. (s) Miscellaneous Provisions.— (1) Subsection (a) of section 8021 of the 1986 Code is amended by striking out “6103(d)” and inserting in lieu thereof “6103(f)”. (2) (A) Section 2503 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Treatment of Certain Loans of Artworks.— “(1) In general.— For purposes of this subtitle, any loan of a Loans. qualified work of art shall not be treated as a transfer (and the value of such qualified work of art shall be determined as if such loan had not been made) if— “(A) such loan is to an organization described in section 501(c)(3) and exempt from tax under section 501(c) (other than a private foundation), and “(B) the use of such work by such organization is related to the purpose or function constituting the basis for its exemption under section 501. “(2) Definitions.— For purposes of this section— “(A) Qualified work of art.— The term ‘qualified work of art’ means any archaeological, historic, or creative tangible personal property. “(B) Private foundation.— The term ’private foundation’ has the meaning given such term by section 509, except that such term shall not include any private operating foundation (as defined in section 4942(j)(3)).” (B) The amendment made by subparagraph (A) shall apply to 26 USC 2503 note. loans after July 31, 1969. (3) (A) Subparagraph (B) of section 1563(d)(1) of the 1986 Code is amended by striking out “subsection (e)(i)” and inserting in lieu thereof “paragraphs (1), (2), and (3) of subsection (e)” (B) The amendment made by subparagraph (A) shall apply to 26 USC 1563 note. taxable years beginning after the date of the enactment of this Act. (t) Additional Amendments Related to Pension Plans.— (1) Amendments related to section 1826 of the reform act— (A) Section 72(s)(7) of the 1986 Code is amended by striking out “primary annuity” and inserting in lieu thereof “primary annuitant”. (B) Section 72(q)(2)(B) of the 1986 Code is amended by striking out the last parenthesis. (C) Section 419A(f)(5) of the 1986 Code is amended by striking out “accounts” and inserting in lieu thereof “account”. (D) Section 1826(c) of the Reform Act is amended by 26 USC 72 note. striking out “made” and inserting in lieu thereof “commencing”. (2) Amendments related to section 1851 of the reform act.— (A) Section 1851(a) of the Reform Act is amended by 26 USC 419A. striking out paragraph (4) thereof. (B) Subclause (II) of section 512(a)(3)(E)(ii) of the 1986 Code is amended, (i) by striking out “subclause (11)” and inserting in lieu thereof “subclause (I)”, and (ii) by striking out the comma at the end thereof and inserting in lieu thereof a period. (C) Section 419(a)(1) of the 1986 Code is amended by striking out “subchapter” and inserting in lieu thereof “chapter”. (D) Subparagraph (B) of section 1851(a)(3) of the Reform Act is amended by inserting “, section 505, and section 4976(b)(1)(B)” after “section 26 USC 419A note. 419A”. (3) Amendments related to section 1852 of the reform act.— (A) Paragraph (4) of section 1852(a) of the Reform Act is amended by adding at the end thereof the following new subparagraph: “(C) An individual whose required beginning date would, but for the amendment made by subparagraph (A), occur after December 31, 1986, but whose required beginning date after such amendment occurs before January 1, 1987, shall be treated as if such individual had become a 5-percent owner during the plan year ending in 1986,” (B) Section 1852(h)(2) of the Reform Act is amended by striking out “section 416(1)” and inserting in lieu thereof “section 415(1)”. (C) Section 1852(h)(1) of the Reform Act is amended by striking out “Subsection” and inserting in lieu thereof “Effective for years beginning after December 31, 1985, su bssction * (D) Subparagraph (E) of section 408(d)(3) of the 1986 Code is amended by striking out “subparagraph” and inserting in lieu thereof “paragraph”, (4) Amendments related to section 1854 of the reform act.— (A) Section 404(k) of the 1986 Code is amended by striking out “avoidance” in the 4th sentence and inserting in lieu thereof “evasion”. (B) Section 409(h)(2) of the 1986 Code (relating to plan may distribute cash) is amended by striking out “section 409(o)” and inserting in lieu thereof “paragraph (1)(B)”. (C) Subparagraph (C) of section 409(n)(3) of the 1986 Code (defining nonallocation period) is amended to read as fol-lows: “(C) Nonallocation period.— The term ‘nonallocation period’ means the period beginning on the date of the sale of the qualified securities and ending on the later of— “(i) the date which is 10 years after the date of sale, or “(ii) the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.” (D) Subparagraph (A) of section 1042(c)(4) of the 1986 Code (defining qualified replacement property) is amended by inserting “(as in effect immediately before the Tax Reform Act of 1986)” after “section 954(c)(3)”. (E) Clause (i) of section 1042(c)(4)(B) of the 1986 Code (relating to operating corporation) is amended by striking out “placement period” and inserting in lieu thereof “replacement period”. (F) Section 1854(a)(3)(B) of the Reform Act is amended by striking out “1042(b)(3)” and inserting in lieu thereof “1042(b)”. (G) Subparagraph (C) of section 1854(a)(3) of the Reform 26 USC 409 note. Act is amended to read as follows: “(C) (i) Except as provided in clause (ii), the amendments made by this paragraph shall apply to sales of securities after the date of the enactment of this Act. “(ii) A taxpayer or executor may elect to have section 1042(b)(3) of the Internal Revenue Code of 1954 (as in effect before the amendment made by subparagraph (B)) apply to sales before the date of the enactment of this Act as if such section included the last sentence of section 409(n)(1) of the Internal Revenue Code of 1986 (as added by subparagraph (A)).” (H) Section 409(e)(5) of the 1986 Code is amended by striking out “(2) or”. (5) Amendment related to section 1875 of the reform act.— Section 1875(c)(6)(B) of the Reform Act is amended by 26 USC 404. striking out “and section 405(c)”. (6) Amendment related to section 1879 of the reform act.— Subparagraph (B) of section 125(c)(2) of the 1986 Code (relating to exception for cash and deferred arrangements) is amended by inserting “or rural electric cooperative plan (within the meaning of section 401(k)(7))” after “stock bonus plan”. (7) Amendments related to section 1895 of the reform act.— (A) Section 106(b)(1) of the 1986 Code (relating to exception for highly compensated individuals where plan fails to provide certain continuation coverage) is amended— (i) by striking out “any amount contributed by an employer” and inserting in lieu thereof “any employer-provided coverage”, and (ii) by striking out “to a group” and inserting in lieu thereof “under a group”. (B) Section 1895(d)(5)(A) of the Reform Act is amended by 26 USC 162. striking out “section 162(k)(2)” and inserting in lieu thereof “section 162(k)(5)”. (8) Amendments related to section 1898 of the reform act.— (A) Subparagraph (G) of section 402(a)(6) of the 1986 Code (relating to treatment of potential future vesting), as added by section 1898(a)(3) of the Reform Act, is redesignated as subparagraph (I). (B) Subparagraph (A) of section 411(a)(11) of the 1986 Code is amended by striking out “vested” and inserting in lieu thereof “nonforfeitable. (C) Section 402(f)(1) of the 1986 Code is amended by striking out “a eligible” and inserting in lieu thereof “an eligible”. (D) Section 1899A of the Reform Act is amended by 26 USC 415. striking out paragraph (13). (E) Subparagraph (B) of section 414(p)(4) of the 1986 Code is amended— (i) by striking out “means earlier of and inserting in lieu thereof “means the earlier of’, and (ii) by striking out “in” each place it appears. (F) Section 414(p)(10) of the 1986 Code (relating to waiver of certain distribution requirements) is amended by inserting “, 403(b),” after “section 401”. (G) Section 414(p)(9) of the 1986 Code is amended by Contracts. adding at the end thereof the following new sentence: “For purposes of this title, except as provided in regulations, any distribution from an annuity contract under section 403(b) pursuant to a qualified domestic relations order shall be treated in the same manner as a distribution from a plan to which section 401(a)(13) applies.” (u) Additional Clerical Amendments.— (1) Paragraph (5) of section 104(b) of the Reform Act is amended by striking out “1222(b)” and inserting in lieu thereof “1122(b)”. (2) The amendment made by section 122(c)(2) of the Reform Act shall be applied as if it also struck out the comma at the end of section 274(b)(1)(B) of the 1986 Code. (3) Clause (i) of section 280F(b)(3)(B) of the 1986 Code is amended by striking out “recovery deductions” and inserting in lieu thereof “depreciation deductions”. (4) Subparagraph (A) of section 803(b)(3) of the Reform Act is amended by inserting closing quotation marks after “section 189)” and by striking out the closing quotation marks following “subpa ragraph (B)”. (5) Paragraph (1) of section 823(b) of the Reform Act is amended to read as follows: “(1) Paragraph (5) of section 461(h), as amended by section 805(c)(5), is amended by striking out subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).” (6) The amendment made by section 1122(b)(2)(BXiii) of the Reform Act shall be applied as if it struck out “Initial separate tax”. (7) The amendment made by section 1122(b)(2)(C) of the Reform Act shall be applied as if it did not strike out “the” (8) Paragraph (2) of section 72((j)(2) of the 1986 Code is amended by striking out the period at the end of subparagraph (D) and inserting in lieu thereof a comma. (9) Subparagraph (A) of section 417(e)(3) of the 1986 Code is amended by striking out “subclause (II)” and inserting in lieu thereof ^clause (ii)** (10) Subparagraph (A) of section 246(c)(1) of the 1986 Code is amended by striking out “Which” and inserting in lieu thereof “which”. (11) Subsection (a) of section 164 of the 1986 Code is amended by striking out “the GST tax” and inserting in lieu thereof “The GST tax”. (12) Subparagraph (B) of section 1851(a)(6) of the Reform Act is amended by striking out “Subsection (b)” and inserting in lieu thereof “Subsection (a)”. (13) (A) Paragraph (1) of section 1878(e) of the Reform Act is amended by striking out “last sentence of section 514(c)(6)(B) (relating to exceptions)” and inserting in lieu thereof “second to the last sentence of section 514(c)(6)(B) (as amended by paragraph (3))”. (B) Paragraph (3) of section 1878(e) of the Reform Act is amended by striking out “is amended” and inserting in lieu thereof “, and the last sentence of such section, are amended”. (14) Paragraph (23) of section 501(c) of the 1986 Code is amended by striking out “any association” and inserting in lieu (15) Paragraph (1) of section 501(c) of the 1986 Code is amended by striking out “any corporation organized” and inserting in lieu thereof “Any corporation organized” (16) The table of chapters for subtitle E of the 1986 Code is amended by inserting “smokeless tobacco,” after “cigarettes,” in the item relating to chapter 52. (17) Paragraph (4) of section 3321(c) of the 1986 Code is amended by adding a period at the end thereof. (18) Paragraph (3) of section 521(b) of the Superfund Revenue Act of 1986 is amended by striking out “Paragraph (1) of section 26 USC 9506. 9506(b)” and inserting in lieu thereof “Subsection (b) of section 9506”. (19) Paragraph (2) of section 5054(a) of the 1986 Code is amended by adding a period at the end thereof. (20) Paragraph (3) of section 9507(b) of the 1986 Code is amended by striking out “Deep Water” each place it appears and inserting in lieu thereof “Deepwater”. (21) Subparagraph (I) of section 231(d)(3) of the Reform Act is 26 USC 6511. amended by striking out “section 6511(d)(6)” and inserting in lieu thereof “section 6511(d)(4)”. (22) Subsection (a) of section 1016 of the 1986 Code is amended by striking out all that follows paragraph (20) and inserting in lieu thereof the following: “(21) to the extent provided in section 48(q), in the case of expenditures with respect to which a credit has been allowed under section 38; “(22) for amounts allowed as deductions under section 59(e) (relating to optional 10-year writeoff of certain tax preferences); “(23) to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends); and “(24) in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d).” (23) Paragraph (1) of section 7518(g) of the 1986 Code is amended by striking out “not qualified withdrawal” and inserting in lieu thereof “not a qualified withdrawal”. (24) The table of sections for part IV of subchapter P of chapter 1 of the 1986 Code is amended by striking out the item relating to section 1254 and inserting in lieu thereof the following: “Sec. 1254. Gain from disposition of interest in oil, gas, geothermal, or other mineral properties.” (25) Paragraph (1) of section 453(f) of the 1986 Code is amended by striking out “subsection (g)” and inserting in lieu thereof “subsections (g)”. (26) Paragraph (8) of section 453(0 of the 1986 Code is amended by striking out “payment to be” and inserting in lieu thereof “payments to be”, (27) Subparagraph (B) of section 668(b)(1) of the Reform Act is 26 USC 858. amended by striking out “section 856” and inserting in lieu thereof “section 858” (28) The second to the last sentence of section 857(b)(3)(C) of the 1986 Code is amended by striking out “such capital loss such” and inserting in lieu thereof “such capital loss shall”. (29) Subsection (a) of section 669 of the Reform Act is amended 26 USC 856 note. by striking out “this part” and inserting in lieu thereof “this subtitle”. (30) The table of parts for subchapter M of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Part IV. Real estate mortgage investment conduits.” (31) Subsection (c) of section 1277 of the 1986 Code is amended by inserting a closing parenthesis after “section 585(a)(2)”. (32) The table of parts for subchapter L of chapter 1 of the 1986 Code is amended by striking out the items relating to parts II, m, and IV and inserting in lieu thereof the following: “Part II. Other insurance companies. “Part III. Provisions of general application .” (33) Paragraph (7) of section 6051(a) of the 1986 Code is amended by adding a comma at the end thereof. (34) Paragraph (14) of section 1114(b) of the Reform Act is amended— (A) by striking out “section 501(c)(17)” and inserting in lieu thereof “section 501(c)(17)(A)”, and (B) by striking out “duties consists” and inserting in lieu thereof “duties consist”. (35) Subparagraph (O of section 3121(v)(3) of the 1986 Code is amended by striking out “Saving” and inserting in lieu thereof “Savings”. (36) Paragraph (4) of section 6652(k) of the 1986 Code is amended by striking out “or section 6678” and inserting in lieu thereof “or part II of subchapter B of this chapter”. (37) The table of sections for part I of subchapter N of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 865. Source rules for personal property sales.” (38) The amendment made by section 1221(b)(3)(B) of the Reform Act shall be construed as striking out paragraph (3) of section 954(e) of the 1986 Code. (39) The heading of section 861(a)(6) of the 1986 Code is amended by striking out “personal property” and inserting in lieu thereof “inventory property”. (40) Subsection (a) of section 1296 of the 1986 Code is amended by inserting a comma after “this subpart”. (41) Subsection (b) of section 7703 of the 1986 Code is amended by striking out “section 151(e)(3)” and inserting in lieu thereof “section 151(c)(3)”. (42) Paragraph (3) of section 1404(c) of the Reform Act is amended by striking out “section 6601” and inserting in lieu thereof “section 6601(b)”. (43) Subsection (a) of section 2611 of the 1986 Code is amended by striking out “mean” and inserting in lieu thereof “means”. (44) Subparagraph (D) of section 3406(h)(5) of the 1986 Code is amended by adding a period at the end thereof. (45) The table of sections for part III of subchapter C of chapter 76 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 7475. Practice fee.” (46) The paragraph added to section 1276(b) of the 1986 Code by section 1803(a)(13)(A)(ii) of the Reform Act is amended— (A) by inserting “(3)” before “Special” in the paragraph heading, (B) by inserting a 1 em dash after “payments.” in the heading, and (C) by adding a period at the end thereof. (47) Subparagraph (C) of section 809(d)(4) of the 1986 Code is amended by striking out “the Secretary—” and inserting in lieu thereof “The Secretary—”. (48) Subsection (f) of section 7872 of the 1986 Code is amended by redesignating the paragraph (11) added by section 1854 of the Reform Act as paragraph (12). (49) Paragraph (5) of section 761 l(i) of the 1986 Code is amended by striking out “the title” and inserting in lieu thereof “this title”. (50) Section 13303(a) of Public Law 99–272 is amended (in the matter proposed to be inserted in section 3306(c) of the Internal Revenue Code of 1954), effective as of the date of its enactment, by inserting a comma immediately after “1988”. (51) Subsection (f) of section 6511 of the 1986 Code is amended— (A) by striking out “chapter 42” in the text and inserting in lieu thereof “section 4912, chapter 42,”, and (B) by striking out “Certain Chapter 43 Taxes” in the subsection heading and inserting in lieu thereof “Similar Taxes”. (52) Section 2503(e)(2)(B) of the 1986 Code is amended by striking out “section 213(e)” and inserting in lieu thereof “section 213(d)”.

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1018 · 102 Stat. 3342

    Added · 26 U.S.C. § 424(c)(4)

    Pub. L. 100–647, § 1018(l)(1), added par. (4)

    Source evidence

    Code amendment note
    Subsec. (c)(4). Pub. L. 100–647, § 1018(l)(1), added par. (4).

    Enacted provision · exact public law section
    SEC. 1018. AMENDMENTS REL ATED TO TITLE XVIII OF THE REFORM ACT. (a) Amendment Related to Section 1801 of the Reform Act.— Clause (iii) of section 1801(a)(2)(A) of the Reform Act is amended to 26 USC 168 note. read as follows: “(iii) a person became a partner in such partnership (or a beneficiary in such trust) after its formation but before September 26, 1985,”. (b) Amendments Related to Section 1802 of the Reform Act.— (1) The last sentence of section 31(g)(17)(I) of the Tax Reform Act of 1984, as added by section 1802(a)(10)(G) of the Reform Act, 26 USC 168 note. is amended— (A) by striking out “Registry of Deeds” each place it appears and inserting in lieu thereof “Register of Deed”, and (B) by striking out “May 7, 1985” and inserting in lieu thereof “May 7, 1984”. (2) Subparagraph (E) of section 168(j)(9) of the 1986 Code (as amended by section 1802(a)(2) of the Reform Act and as in effect before the amendments made by section 201 of the Reform Act) is amended— (A) by striking out “this paragraph” in clauses (i) and (iiXI) and inserting in lieu thereof “this paragraph and paragraph (8)”, and (B) by striking out clause (iii) and inserting in lieu thereof the following: “(iii) Tax-exempt controlled entity.— “(I) In general.— The term “tax-exempt controlled entity” means any corporation (which is not a tax-exempt entity determined without regard to this subparagraph and paragraph (4 KE)) if 50 percent or more (in value) of the stock in such corpora-tion is held by 1 or more tax-exempt entities (other than a foreign person or entity). “(II) Only 5-percent shareholders taken into account in case of publicly traded stock.— For purposes of subclause (I), in the case of a corporation the stock of which is publicly traded on an established securities market, stock held by a tax-exempt entity shall not be taken into account unless such entity holds at least 5 percent (in value) of the stock in such corporation. For purposes of this subclause, related entities (within the meaning of paragraph (7)) shall be treated as 1 entity. “(III) Section 318 to apply.— For purposes of this clause, a tax-exempt entity shall be treated as holding stock which it holds through application of section 318 (determined without regard to the 50-percent limitation contained in subsection (a)(2)(C) thereof).” (c) Amendment Related to Section 1803 of the Reform Act.— (1) Subparagraph (A) of section 1803(a)(8) of the Reform Act is amended by striking out “September 27, 1985” and inserting in lieu thereof “December 31, 1985”. (2) Subsection (c) of section 1278 of the 1986 Code is amended by inserting before the period “, including regulations providing proper adjustments in the case of a bond the principal of which may be paid in 2 or more payments”. (3) Section 1278(b) of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Basis adjustment.— The basis of any bond in the hands of the taxpayer shall be increased by the amount included in gross income pursuant to this subsection.” (d) Amendments Related to Section 1804 of the Reform Act.— (1) Paragraph (3) of section 1804(b) of the Reform Act is amended by striking out “Paragraph (3) of section 54” and inserting “Paragraph (3) of section 54(d)”. (2) Clause (i) of section 54(d)(3)(D) of the Tax Reform Act of 26 USC 311 note. 1984 is amended by striking out “subtitle D of title VI” and inserting “subtitle D of title VI of the Tax Reform Act of 1986”. (3) Clause (ii) of section 54(d)(3)(D) of the Tax Reform Act of 1984 (as added by section 1804(b)(3) of the Tax Reform Act of 1986) is amended— (A) by striking out “December 9, 1968,” each place it appears and inserting in lieu thereof “December 10, 1968,”, and (B) by striking out “October 5, 1981” and inserting in lieu thereof “March 2, 1978,”. (4) Subsection (b) of section 312 of the 1986 Code is amended by striking out “of any property” and inserting in lieu thereof “of any property (other than an obligation of such corporation)”. (5) (A) Section 361 of the 1986 Code is amended to read as follows: “SEC. 361. NONRECOGNITION OF GAIN OR LOSS TO CORPORATIONS; TREATMENT OF DISTRIBUTIONS. “(a) General Rule.— No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. “(b) Exchanges Not Solely in Kind.— “(1) Gain.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then— “(A) Property distributed.— If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but “(B) Property not distributed.— If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized. The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed. “(2) Loss.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. “(3) Treatment of transfers to creditors.— For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). “(c) Treatment of Distributions.— “(1) In general.— Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization on the distribution to its shareholders of property in pursuance of the plan of reorganization. “(2) Distributions of appreciated property.— “(A) In general.— If— “(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and “(ii) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation), then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value. “(B) Qualified property.— For purposes of this subsection, the term ‘qualified property’ means— “(i) any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or “(ii) any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange. “(C) Treatment of liabilities.— If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability. “(3) Treatment of certain transfers to creditors.— For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization. “(4) Coordination with other provisions.— Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).” (B) Section 358 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Definition of Nonrecognition Property in Case of Section 361 Exchange.— For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.” (C) Section 355 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(c) Taxability of Corporation on Distribution.— Section 311 shall apply to any distribution— “(1) to which this section (or so much of section 356 as relates to this section) applies, and “(2) which is not in pursuance of a plan of reorganization, in the same manner as if such distribution were a distribution to which subpart A of part I applies; except that subsection (b) of section 311 shall not apply to any distribution of stock or securities in the controlled corporation.” (D) Subsection (c) of section 336 of the 1986 Code (as amended by section 631 of the Reform Act) is amended to read as follows: “(c) Exception for Liquidations Which Are Part of a Reorganization.— “For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4),” (E) Subsection (a) of section 311 of the 1986 Code is amended by striking out “distribution, with respect to its stock,” and inserting in lieu thereof “distribution (not in complete liquidation) with respect to its stock”. (F) The table of sections for subpart C of part III of subchapter C of chapter 1 of the 1986 Code is amended by striking out the item relating to section 361 and inserting in lieu thereof the following new item: “Sec. 361. Nonrecognition of gain or loss to corporations; treatment of distributions.” (G) Effective with respect to transfers on or after June 21, 1988, section 351 of the 1986 Code is amended by redesignating subsection (0 as subsection (g) and by inserting after subsection: (e) the following new subsection: “(f) Treatment of Controlled Corporation.— If— “(1) property is transferred to a corporation (hereinafter in this subsection referred to as the ‘controlled corporation’) in an exchange with respect to which gain or loss is not recognized (in whole or in part) to the transferor under this section, and “(2) such exchange is not in pursuance of a plan of reorganization, section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies.” (6) Subparagraph (A) of section 280G(b)(5) of the 1986 Code is amended— (A) in clause (i) by striking out “section 1361(b))” and inserting in lieu thereof “section 1361(b) but without regard to paragraph (1)(C) thereof)”, and (B) by adding at the end thereof the following: “Stock described in action 1504(a)(4) shall not be taken into ac-count under clause ((j)(1) if the payment does not adversely affect the shareholder’s redemption and liquidation rights.” (7) Subparagraph (B) of section 280G(b)(5) of the 1986 Code (relating to shareholder approval requirements) is amended by adding at the end thereof the following new sentence: “The regulations prescribed under subsection (e) shall include regulations providing for the application of this subparagraph in the case of shareholders which are not individuals (including the treatment of non voting interests in an entity which is a shareholder) and where an entity holds a de minimis amount of stock in the corporation.” (8) Paragraph (5) of section 2800(d) of the 1986 Code is amended by striking out “officer or any member” and inserting in lieu thereof “officer of any member”. (9) Paragraph (3) of section 338(e) of the 1986 Code is amended by striking out “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)” and inserting in lieu thereof “which meet the requirements of section 1504(a)(2)”. (10) (A) Paragraph (7) of section 1504(b) of the 1986 Code is amended to read as follows: “(7) A DISC (as defined in section 992(a)(1)).” (B) Section 1504 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Special Rule for Certain Amounts Derived From a Corporation Previously Treated as a DISC.— In determining the consolidated taxable income of an affiliated group for any taxable year beginning after December 31, 1984, a corporation which had been a DISC and which would otherwise be a member of such group shall not be treated as such a member with respect to— “(1) any distribution (or deemed distribution) of accumulated DISC income which was not treated as previously taxed income under section 805(b)(2)(A) of the Tax Reform Act of 1984, and “(2) any amount treated as received under section 805(b)(3) of such Act.” (e) Provision Related to Section 1806 of the Reform Act.— If— (1) on a return for the 1st taxable year of the trusts involved beginning after March 1, 1984, 2 or more trusts were treated as a single trust for purposes of the tax imposed by chapter 1 of the Internal Revenue Code of 1954. (2) such trusts would have been required to be so treated but for the amendment made by section 1806(b) of the Reform Act, and (3) such trusts did not accumulate any income during such taxable year and did not make any accumulation distributions during such taxable year, then, notwithstanding the amendment maße by section 1806(b) of the Reform Act, such trusts shall be treated as one trust for purposes of such taxable year. (f) Amendments Related to Section 1807 of the Reform Act.— (1) Paragraphs (1)(A) and (2)(E) of section 468B(d) of the 1986 Code are each amended by striking out “the taxpayer” and inserting in lieu thereof “the taxpayer (or any related person)”. (2) Subparagraph (A) of section 468B(d)(2) of the 1986 Code is amended to read as follows: “(A) which is established pursuant to a court order and which extinguishes completely the taxpayer’s tort liability with respect to claims described in subparagraph (D),”. (3) Clause (i) of section 1807(a)(6)(C) of the Reform Act is amended to read as follows: “(i) any portion of such fund which is established pursuant to a court order and with qualified payments, which meets the requirements of subparagraphs (C) and (D) of section 468B(d)(2) of the Internal Revenue Code of 1954 (as added by this paragraph), and with respect to which an election is made under subparagraph (F) thereof, shall be treated as a designated settlement fund for purposes of section 468B of such Code,”. (4) Paragraph (2) of section 468B(b) of the 1986 Code is amended— (A) by striking out “the corporation,” and inserting in lieu thereof “a corporation.”, and (B) by striking out “no other” and inserting in lieu thereof “No other”. (5) (A) Section 468B of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Clarification of Taxation of Certain Funds.— Nothing in any provision of law shall be construed as providing that an escrow account, settlement fund, or similar fund is not subject to current Regulations. income tax. The Secretary shall prescribe regulations providing for the taxation of any such account or fund whether as a grantor trust or otherwise.” (B) Subparagraph (D) of section 1807(a)(7) of the Reform Act is hereby repealed. (g) Amendments Related to Section 1810 of the Reform Act.— (1) Paragraph (5) of section 1810(a) of the Reform Act is amended by striking out “section 125(b)(5)” each place it appears and inserting in lieu thereof “section 121(b)(5)”. (2) Section 133(d)(3)(B)(iii) of the Tax Reform Act of 1984, as 26 USC 959 note. amended by section 1810(1)(2) of the Reform Act, is amended by striking out “Tax Reform Act of 1985” and inserting in lieu thereof “Tax Reform Act of 1986”. (3) Clause (iv) of section 7701(b)(5)(A) of the 1986 Code is amended by striking out “section 274(k)(2)” and inserting in lieu thereof “section 274(c)(1)(B)”. (h) Amendment Related to Section 1821 of the Reform Act.— (1) Subsection (e) of section 812 of the 1986 Code (relating to dividends from certain subsidiaries not included in gross investment income) is amended to read as follows: “(e) Dividends From Certain Subsidiaries Not Included in Gross Investment Income.— “(1) In general.— For purposes of this section, the term ‘gross investment income’ shall not include any dividend received by the life insurance company which is a 100 percent dividend. “(2) 100 percent dividend defined.— “(A) In general— Except as provided in subparagraphs (B) and (C), the term ‘100 percent dividend’ means any dividend if the percentage used for purposes of determining the deduction allowable under section 243, 244, or 245(b) is 100 percent. “(B) Certain dividends out of tax-exempt interest, etc.— The term ‘100 percent dividend’ does not include any distribution by a corporation to the extent such distribution is out of tax-exempt interest or out of dividends which are not 100 percent dividends (determined with the application of this subparagraph). “(C) Certain dividends received by foreign corporations.— The term 100 percent dividends’ does not include any dividend described in section 805(a)(4)(E) (relating to certain dividends in the case of foreign corporations).” (2) The amendment made by paragraph (1) shall take effect as Effective date. 26 USC 812 note. if included in the amendments made by section 211 of the Tax Reform Act of 1984. (i) Amendment Related to Section 1822 of the Reform Act.— Clause (i) of section 216(b)(4)(C) of the Tax Reform Act of 1984 (relating to section 818(c) elections made by certain acquired companies) is amended by striking out “clause (i)” and inserting in lieu 26 USC 801 note. thereof “subclause (I)”. (j) Amendment Related to Section 1825 of the Reform Act.— Paragraph (4) of sectioo 1825(a) of the Reform Act (relating to amendments related to section 221 of the Tax Reform Act of 1984) is 26 USC 7702 note. amended by striking out “Section 7702(e)(2)” and inserting in lieu thereof “Effective with respect to contracts entered into after October 22, 1986, section 7702(e)(2)”. (k) Amendments Related to Section 1826 of the Reform Act.— (1) Paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “or” at the end of subparagraph (B), by striking out the period at the end of subparagraph (Q and inserting in lieu thereof “, or”, and by adding at the end thereof the following new subparagraph: “(D) which is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment).” (2) The paragraph heading of paragraph (5) of section 72(s) of the 1986 Code is amended by striking out “annuity contracts which are part of qualified plans” and inserting in lieu thereof “certain annuity contracts”. (l) Amendments Related to Section 1842 of the Reform Act. (1) Subsection (c) of section 425 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Transfers between spouses or incident to divorce.— In the case of any transfer described in subsection (a) of section 1041— “(A) such transfer shall not be treated as a disposition for purposes of this part, and “(B) the same tax treatment under this part with respect to the transferred property shall apply to the transferee as would have applied to the transferor.” (2) Paragraph (1) of section 425(c) of the 1986 Code is amended by striking out “paragraph (2) and (3)” and inserting in lieu thereof “paragraphs (2), (3), and (4)”. (3) Effective with respect to transfers after June 21, 1988, subsection (d) of section 1041 of the 1986 Code is amended— (A) by striking out “Paragraph (1) of subsection (a)” and inserting in lieu thereof “Subsection (a)”, and (B) by striking out “the spouse” and inserting in lieu thereof “the spouse (or former spouse)”. (m) Amendments Related to Section 1866 of the Reform Act.— (1) Section 1866 of the Reform Act is amended by striking out “obligation issued to refund” and inserting in lieu thereof “obligation (or series of obligations) issued to refund”. (2) (A) Paragraph (1) of section 1866 of the Reform Act is amended to read as follows: (2) the average maturity of the issue of which the refunding obligation is a part does not exceed the average maturity of the obligations to be refunded by such issue,”. (B) Section 1866 of the Reform Act is amended by adding at the end thereof the following new sentence: “For purposes of paragraph (1), average maturity shall be determined in accordance with subsection (b)(14)(B)(i) of such Code.” (3) Paragraph (4) of section 1866 of the Reform Act is amended by striking out “30 days” and inserting in lieu thereof “90 days”. (4) Section 1866 of the Reform Act is amended by adding “and” at the end of paragraph (2), by striking out paragraph (3), and by redesignating paragraph (4) as paragraph (3). (5) A refunding obligation issued before July 1, 1987, shall be treated as meeting the requirement of paragraph (1) of section 1866 of the Reform Act if such obligation met the requirement of such paragraph as enacted by the Reform Act. (n) Amendments Related to Section 1869 of the Reform Act.— (1) Clause (ii) of section 1869(c)(3)(A) of the Reform Act is amended by striking out “pursuant to the exercise of eminent domain” and inserting in lieu thereof “(by a governmental unit having the power to exercise eminent domain)”. (2) Subparagraph (C) of section 1869(c)(3) of the Reform Act is amended by inserting “(or similar issues)” after “resulting from the issue”. (o) Amendments Related to Section 1875 of the Reform Act.— (1) Clause (ii) of section 6230(a)(2)(A) of the 1986 Code is amended by striking out “nonpartnership items” and inserting in lieu thereof “nonpartnership items (other than by reason of section 6231(b)(1)(C))”. (2) Subsection (g) of section 1246 of the 1986 Code (as redesignated by this Act) is amended by striking out “1248(g)(3)” and inserting in lieu thereof “1248(g)(2)”. (3) Subsection (f) of section 6229 of the 1986 Code is amended Contracts. by adding at the end thereof the following new sentence: “The period described in the preceding sentence (including any extension period under this sentence) may be extended with respect to any partner by agreement entered into by the Secretary and such partner.” (p) Amendment Related to Section 1878 of the Reform Act.— Paragraph (1) of section 852(e) of the 1986 Code is amended by striking out “subsection (a)(3)” and inserting in lieu thereof “subsection (a)(2)”. (q) Amendments Related to Section 1879 of the Reform Act.— (1) Subclause (II) of section 28(b)(2)(A)(ii) of the 1986 Code is amended to read as follows: “(II) before the date on which an application with respect to such drug is approved under section 505(b) or 507 of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Service Act; and”. (2) The last sentence of section 1361(d)(3) of the 1986 Code is amended by striking out “treated as a separate trust under section 663(c)” and inserting in lieu thereof “within the meaning of section 663(c)”. (3) Subsection (p) of section 1879 of the Reform Act is 26 USC 83 note. amended— (A) by striking out “Subsection (a)” in paragraph (2) and inserting “Paragraph (1)”, and (B) by striking out “subsection (a)” each place it appears in paragraphs (2) and (3) and inserting in lieu thereof “paragraph (1)”. (4) (A) Subsection (d) of section 1286 of the 1986 Code is amended to read as follows: “(d) Special Rules for Tax-Exempt Obligations.— “(1) In general.— In the case of any tax-exempt obligation (as defined in section 1275(a)(3)) from which 1 or more coupons have been stripped— “(A) the amount of the original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon— “(i) shall be treated as original issue discount on a tax-exempt obligation to the extent such discount does not exceed the tax-exempt portion of such discount, and “(ii) shall be treated as original issue discount on an obligation which is not a tax-exempt obligation to the extent such discount exceeds the tax-exempt portion of such discount, “(B) subsection (b)(1)(A) shall not apply, and “(C) subsection (b)(2) shall be applied by increasing the basis of the bond or coupon by the sum of— “(i) the interest accrued but not paid before such bond or coupon was disposed of (and not previously reflected in basis), plus “(ii) the amount included in gross income under subsection (b)(1)(B). “(2) Tax-exempt portion.— For purposes of paragraph (1), the tax-exempt portion of the original issue discount determined under subsection (a) is the excess of— “(A) the amount referred to in subsection (a)(1), over “(B) an issue price which would produce a yield to maturity as of the purchase date equal to the lower of— “(i) the coupon rate of interest on the obligation from which the coupons were separated, or “(ii) the yield to maturity (on the basis of the purchase price) of the stripped obligation or coupon. The purchaser of any stripped obligation or coupon may elect to apply clause (i) by substituting ‘original yield to maturity or for ‘coupon rate of interest on’.” (B) (i) Except as provided in clause (ii), the amendment made by subparagraph (A) shall apply to any purchase or sale after June 10, 1987, of any stripped tax-exempt obligation or stripped coupon from such an obligation. (ii) If— (I) any person held any obligation or coupon in stripped form on June 10, 1987, and (II) such obligation or coupon was held by such person on such date for sale in the ordinary course of such person’s trade or business, the amendment made by subparagraph (A) shall not apply to any sale of such obligation or coupon by such person and shall not apply to any such obligation or coupon while held by another person who purchased such obligation or coupon from the person referred to in subclause (I). (5) Clause (ii) of section 368(a)(2)(F) of the 1986 Code is amended— (A) by striking out the two parenthetical phrases in the first sentence, and (B) by adding at the end thereof the following new sentence: “For purposes of this clause, a person holding stock in a regulated investment company, a real estate investment trust, or an investment company which meets the requirements of this clause shall, except as provided in regulations, be treated as holding its proportionate share of the assets held by such company or trust.’ (r) Amendments Related to Section 1895 of the Reform Act.— (1) Subsection (b) of section 1895 of the Reform Act is amended by striking out paragraphs (1) and (2). (2) (A) Clause (ii) of section 3121(u)(2)(B) of the 1986 Code is amended by striking out “or” at the end of subclause (IV), by striking out the period at the end of subclause (V) and inserting in lieu thereof ‘, or”, and by inserting after subclause (V) the following new subclause: “(VI) by an individual in a position described in section 1402(c)(2)(E).” (B) The amendment made by subparagraph (A) shall apply to services performed after March 31, 1986. (s) Miscellaneous Provisions.— (1) Subsection (a) of section 8021 of the 1986 Code is amended by striking out “6103(d)” and inserting in lieu thereof “6103(f)”. (2) (A) Section 2503 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Treatment of Certain Loans of Artworks.— “(1) In general.— For purposes of this subtitle, any loan of a Loans. qualified work of art shall not be treated as a transfer (and the value of such qualified work of art shall be determined as if such loan had not been made) if— “(A) such loan is to an organization described in section 501(c)(3) and exempt from tax under section 501(c) (other than a private foundation), and “(B) the use of such work by such organization is related to the purpose or function constituting the basis for its exemption under section 501. “(2) Definitions.— For purposes of this section— “(A) Qualified work of art.— The term ‘qualified work of art’ means any archaeological, historic, or creative tangible personal property. “(B) Private foundation.— The term ’private foundation’ has the meaning given such term by section 509, except that such term shall not include any private operating foundation (as defined in section 4942(j)(3)).” (B) The amendment made by subparagraph (A) shall apply to 26 USC 2503 note. loans after July 31, 1969. (3) (A) Subparagraph (B) of section 1563(d)(1) of the 1986 Code is amended by striking out “subsection (e)(i)” and inserting in lieu thereof “paragraphs (1), (2), and (3) of subsection (e)” (B) The amendment made by subparagraph (A) shall apply to 26 USC 1563 note. taxable years beginning after the date of the enactment of this Act. (t) Additional Amendments Related to Pension Plans.— (1) Amendments related to section 1826 of the reform act— (A) Section 72(s)(7) of the 1986 Code is amended by striking out “primary annuity” and inserting in lieu thereof “primary annuitant”. (B) Section 72(q)(2)(B) of the 1986 Code is amended by striking out the last parenthesis. (C) Section 419A(f)(5) of the 1986 Code is amended by striking out “accounts” and inserting in lieu thereof “account”. (D) Section 1826(c) of the Reform Act is amended by 26 USC 72 note. striking out “made” and inserting in lieu thereof “commencing”. (2) Amendments related to section 1851 of the reform act.— (A) Section 1851(a) of the Reform Act is amended by 26 USC 419A. striking out paragraph (4) thereof. (B) Subclause (II) of section 512(a)(3)(E)(ii) of the 1986 Code is amended, (i) by striking out “subclause (11)” and inserting in lieu thereof “subclause (I)”, and (ii) by striking out the comma at the end thereof and inserting in lieu thereof a period. (C) Section 419(a)(1) of the 1986 Code is amended by striking out “subchapter” and inserting in lieu thereof “chapter”. (D) Subparagraph (B) of section 1851(a)(3) of the Reform Act is amended by inserting “, section 505, and section 4976(b)(1)(B)” after “section 26 USC 419A note. 419A”. (3) Amendments related to section 1852 of the reform act.— (A) Paragraph (4) of section 1852(a) of the Reform Act is amended by adding at the end thereof the following new subparagraph: “(C) An individual whose required beginning date would, but for the amendment made by subparagraph (A), occur after December 31, 1986, but whose required beginning date after such amendment occurs before January 1, 1987, shall be treated as if such individual had become a 5-percent owner during the plan year ending in 1986,” (B) Section 1852(h)(2) of the Reform Act is amended by striking out “section 416(1)” and inserting in lieu thereof “section 415(1)”. (C) Section 1852(h)(1) of the Reform Act is amended by striking out “Subsection” and inserting in lieu thereof “Effective for years beginning after December 31, 1985, su bssction * (D) Subparagraph (E) of section 408(d)(3) of the 1986 Code is amended by striking out “subparagraph” and inserting in lieu thereof “paragraph”, (4) Amendments related to section 1854 of the reform act.— (A) Section 404(k) of the 1986 Code is amended by striking out “avoidance” in the 4th sentence and inserting in lieu thereof “evasion”. (B) Section 409(h)(2) of the 1986 Code (relating to plan may distribute cash) is amended by striking out “section 409(o)” and inserting in lieu thereof “paragraph (1)(B)”. (C) Subparagraph (C) of section 409(n)(3) of the 1986 Code (defining nonallocation period) is amended to read as fol-lows: “(C) Nonallocation period.— The term ‘nonallocation period’ means the period beginning on the date of the sale of the qualified securities and ending on the later of— “(i) the date which is 10 years after the date of sale, or “(ii) the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.” (D) Subparagraph (A) of section 1042(c)(4) of the 1986 Code (defining qualified replacement property) is amended by inserting “(as in effect immediately before the Tax Reform Act of 1986)” after “section 954(c)(3)”. (E) Clause (i) of section 1042(c)(4)(B) of the 1986 Code (relating to operating corporation) is amended by striking out “placement period” and inserting in lieu thereof “replacement period”. (F) Section 1854(a)(3)(B) of the Reform Act is amended by striking out “1042(b)(3)” and inserting in lieu thereof “1042(b)”. (G) Subparagraph (C) of section 1854(a)(3) of the Reform 26 USC 409 note. Act is amended to read as follows: “(C) (i) Except as provided in clause (ii), the amendments made by this paragraph shall apply to sales of securities after the date of the enactment of this Act. “(ii) A taxpayer or executor may elect to have section 1042(b)(3) of the Internal Revenue Code of 1954 (as in effect before the amendment made by subparagraph (B)) apply to sales before the date of the enactment of this Act as if such section included the last sentence of section 409(n)(1) of the Internal Revenue Code of 1986 (as added by subparagraph (A)).” (H) Section 409(e)(5) of the 1986 Code is amended by striking out “(2) or”. (5) Amendment related to section 1875 of the reform act.— Section 1875(c)(6)(B) of the Reform Act is amended by 26 USC 404. striking out “and section 405(c)”. (6) Amendment related to section 1879 of the reform act.— Subparagraph (B) of section 125(c)(2) of the 1986 Code (relating to exception for cash and deferred arrangements) is amended by inserting “or rural electric cooperative plan (within the meaning of section 401(k)(7))” after “stock bonus plan”. (7) Amendments related to section 1895 of the reform act.— (A) Section 106(b)(1) of the 1986 Code (relating to exception for highly compensated individuals where plan fails to provide certain continuation coverage) is amended— (i) by striking out “any amount contributed by an employer” and inserting in lieu thereof “any employer-provided coverage”, and (ii) by striking out “to a group” and inserting in lieu thereof “under a group”. (B) Section 1895(d)(5)(A) of the Reform Act is amended by 26 USC 162. striking out “section 162(k)(2)” and inserting in lieu thereof “section 162(k)(5)”. (8) Amendments related to section 1898 of the reform act.— (A) Subparagraph (G) of section 402(a)(6) of the 1986 Code (relating to treatment of potential future vesting), as added by section 1898(a)(3) of the Reform Act, is redesignated as subparagraph (I). (B) Subparagraph (A) of section 411(a)(11) of the 1986 Code is amended by striking out “vested” and inserting in lieu thereof “nonforfeitable. (C) Section 402(f)(1) of the 1986 Code is amended by striking out “a eligible” and inserting in lieu thereof “an eligible”. (D) Section 1899A of the Reform Act is amended by 26 USC 415. striking out paragraph (13). (E) Subparagraph (B) of section 414(p)(4) of the 1986 Code is amended— (i) by striking out “means earlier of and inserting in lieu thereof “means the earlier of’, and (ii) by striking out “in” each place it appears. (F) Section 414(p)(10) of the 1986 Code (relating to waiver of certain distribution requirements) is amended by inserting “, 403(b),” after “section 401”. (G) Section 414(p)(9) of the 1986 Code is amended by Contracts. adding at the end thereof the following new sentence: “For purposes of this title, except as provided in regulations, any distribution from an annuity contract under section 403(b) pursuant to a qualified domestic relations order shall be treated in the same manner as a distribution from a plan to which section 401(a)(13) applies.” (u) Additional Clerical Amendments.— (1) Paragraph (5) of section 104(b) of the Reform Act is amended by striking out “1222(b)” and inserting in lieu thereof “1122(b)”. (2) The amendment made by section 122(c)(2) of the Reform Act shall be applied as if it also struck out the comma at the end of section 274(b)(1)(B) of the 1986 Code. (3) Clause (i) of section 280F(b)(3)(B) of the 1986 Code is amended by striking out “recovery deductions” and inserting in lieu thereof “depreciation deductions”. (4) Subparagraph (A) of section 803(b)(3) of the Reform Act is amended by inserting closing quotation marks after “section 189)” and by striking out the closing quotation marks following “subpa ragraph (B)”. (5) Paragraph (1) of section 823(b) of the Reform Act is amended to read as follows: “(1) Paragraph (5) of section 461(h), as amended by section 805(c)(5), is amended by striking out subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).” (6) The amendment made by section 1122(b)(2)(BXiii) of the Reform Act shall be applied as if it struck out “Initial separate tax”. (7) The amendment made by section 1122(b)(2)(C) of the Reform Act shall be applied as if it did not strike out “the” (8) Paragraph (2) of section 72((j)(2) of the 1986 Code is amended by striking out the period at the end of subparagraph (D) and inserting in lieu thereof a comma. (9) Subparagraph (A) of section 417(e)(3) of the 1986 Code is amended by striking out “subclause (II)” and inserting in lieu thereof ^clause (ii)** (10) Subparagraph (A) of section 246(c)(1) of the 1986 Code is amended by striking out “Which” and inserting in lieu thereof “which”. (11) Subsection (a) of section 164 of the 1986 Code is amended by striking out “the GST tax” and inserting in lieu thereof “The GST tax”. (12) Subparagraph (B) of section 1851(a)(6) of the Reform Act is amended by striking out “Subsection (b)” and inserting in lieu thereof “Subsection (a)”. (13) (A) Paragraph (1) of section 1878(e) of the Reform Act is amended by striking out “last sentence of section 514(c)(6)(B) (relating to exceptions)” and inserting in lieu thereof “second to the last sentence of section 514(c)(6)(B) (as amended by paragraph (3))”. (B) Paragraph (3) of section 1878(e) of the Reform Act is amended by striking out “is amended” and inserting in lieu thereof “, and the last sentence of such section, are amended”. (14) Paragraph (23) of section 501(c) of the 1986 Code is amended by striking out “any association” and inserting in lieu (15) Paragraph (1) of section 501(c) of the 1986 Code is amended by striking out “any corporation organized” and inserting in lieu thereof “Any corporation organized” (16) The table of chapters for subtitle E of the 1986 Code is amended by inserting “smokeless tobacco,” after “cigarettes,” in the item relating to chapter 52. (17) Paragraph (4) of section 3321(c) of the 1986 Code is amended by adding a period at the end thereof. (18) Paragraph (3) of section 521(b) of the Superfund Revenue Act of 1986 is amended by striking out “Paragraph (1) of section 26 USC 9506. 9506(b)” and inserting in lieu thereof “Subsection (b) of section 9506”. (19) Paragraph (2) of section 5054(a) of the 1986 Code is amended by adding a period at the end thereof. (20) Paragraph (3) of section 9507(b) of the 1986 Code is amended by striking out “Deep Water” each place it appears and inserting in lieu thereof “Deepwater”. (21) Subparagraph (I) of section 231(d)(3) of the Reform Act is 26 USC 6511. amended by striking out “section 6511(d)(6)” and inserting in lieu thereof “section 6511(d)(4)”. (22) Subsection (a) of section 1016 of the 1986 Code is amended by striking out all that follows paragraph (20) and inserting in lieu thereof the following: “(21) to the extent provided in section 48(q), in the case of expenditures with respect to which a credit has been allowed under section 38; “(22) for amounts allowed as deductions under section 59(e) (relating to optional 10-year writeoff of certain tax preferences); “(23) to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends); and “(24) in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d).” (23) Paragraph (1) of section 7518(g) of the 1986 Code is amended by striking out “not qualified withdrawal” and inserting in lieu thereof “not a qualified withdrawal”. (24) The table of sections for part IV of subchapter P of chapter 1 of the 1986 Code is amended by striking out the item relating to section 1254 and inserting in lieu thereof the following: “Sec. 1254. Gain from disposition of interest in oil, gas, geothermal, or other mineral properties.” (25) Paragraph (1) of section 453(f) of the 1986 Code is amended by striking out “subsection (g)” and inserting in lieu thereof “subsections (g)”. (26) Paragraph (8) of section 453(0 of the 1986 Code is amended by striking out “payment to be” and inserting in lieu thereof “payments to be”, (27) Subparagraph (B) of section 668(b)(1) of the Reform Act is 26 USC 858. amended by striking out “section 856” and inserting in lieu thereof “section 858” (28) The second to the last sentence of section 857(b)(3)(C) of the 1986 Code is amended by striking out “such capital loss such” and inserting in lieu thereof “such capital loss shall”. (29) Subsection (a) of section 669 of the Reform Act is amended 26 USC 856 note. by striking out “this part” and inserting in lieu thereof “this subtitle”. (30) The table of parts for subchapter M of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Part IV. Real estate mortgage investment conduits.” (31) Subsection (c) of section 1277 of the 1986 Code is amended by inserting a closing parenthesis after “section 585(a)(2)”. (32) The table of parts for subchapter L of chapter 1 of the 1986 Code is amended by striking out the items relating to parts II, m, and IV and inserting in lieu thereof the following: “Part II. Other insurance companies. “Part III. Provisions of general application .” (33) Paragraph (7) of section 6051(a) of the 1986 Code is amended by adding a comma at the end thereof. (34) Paragraph (14) of section 1114(b) of the Reform Act is amended— (A) by striking out “section 501(c)(17)” and inserting in lieu thereof “section 501(c)(17)(A)”, and (B) by striking out “duties consists” and inserting in lieu thereof “duties consist”. (35) Subparagraph (O of section 3121(v)(3) of the 1986 Code is amended by striking out “Saving” and inserting in lieu thereof “Savings”. (36) Paragraph (4) of section 6652(k) of the 1986 Code is amended by striking out “or section 6678” and inserting in lieu thereof “or part II of subchapter B of this chapter”. (37) The table of sections for part I of subchapter N of chapter 1 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 865. Source rules for personal property sales.” (38) The amendment made by section 1221(b)(3)(B) of the Reform Act shall be construed as striking out paragraph (3) of section 954(e) of the 1986 Code. (39) The heading of section 861(a)(6) of the 1986 Code is amended by striking out “personal property” and inserting in lieu thereof “inventory property”. (40) Subsection (a) of section 1296 of the 1986 Code is amended by inserting a comma after “this subpart”. (41) Subsection (b) of section 7703 of the 1986 Code is amended by striking out “section 151(e)(3)” and inserting in lieu thereof “section 151(c)(3)”. (42) Paragraph (3) of section 1404(c) of the Reform Act is amended by striking out “section 6601” and inserting in lieu thereof “section 6601(b)”. (43) Subsection (a) of section 2611 of the 1986 Code is amended by striking out “mean” and inserting in lieu thereof “means”. (44) Subparagraph (D) of section 3406(h)(5) of the 1986 Code is amended by adding a period at the end thereof. (45) The table of sections for part III of subchapter C of chapter 76 of the 1986 Code is amended by adding at the end thereof the following new item: “Sec. 7475. Practice fee.” (46) The paragraph added to section 1276(b) of the 1986 Code by section 1803(a)(13)(A)(ii) of the Reform Act is amended— (A) by inserting “(3)” before “Special” in the paragraph heading, (B) by inserting a 1 em dash after “payments.” in the heading, and (C) by adding a period at the end thereof. (47) Subparagraph (C) of section 809(d)(4) of the 1986 Code is amended by striking out “the Secretary—” and inserting in lieu thereof “The Secretary—”. (48) Subsection (f) of section 7872 of the 1986 Code is amended by redesignating the paragraph (11) added by section 1854 of the Reform Act as paragraph (12). (49) Paragraph (5) of section 761 l(i) of the 1986 Code is amended by striking out “the title” and inserting in lieu thereof “this title”. (50) Section 13303(a) of Public Law 99–272 is amended (in the matter proposed to be inserted in section 3306(c) of the Internal Revenue Code of 1954), effective as of the date of its enactment, by inserting a comma immediately after “1988”. (51) Subsection (f) of section 6511 of the 1986 Code is amended— (A) by striking out “chapter 42” in the text and inserting in lieu thereof “section 4912, chapter 42,”, and (B) by striking out “Certain Chapter 43 Taxes” in the subsection heading and inserting in lieu thereof “Similar Taxes”. (52) Section 2503(e)(2)(B) of the 1986 Code is amended by striking out “section 213(e)” and inserting in lieu thereof “section 213(d)”.

11. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 title VII § 7811(m)(6) · 103 Stat. 2106

    Changed · 26 U.S.C. § 424(c)(1)

    Pub. L. 101–239 made technical correction to Pub. L. 100–647, § 1018(l)(2), see 1988 Amendment note below

    Source evidence

    Code amendment note
    Subsec. (c)(1). Pub. L. 101–239 made technical correction to Pub. L. 100–647, § 1018(l)(2), see 1988 Amendment note below.

    Enacted provision · exact public law section
    (6) Paragraph (2) of section 1018(1) of the 1988 Act is amended by striking “paragraph (2) and (3)” and inserting “paragraphs (2) and (3)”

12. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(A)(i) · 104 Stat. 1388

    Changed · 26 U.S.C. § 424

    Pub. L. 101–508, § 11801(c)(9)(A)(i), renumbered section 425 of this title as this section

    Source evidence

    Code amendment note
    Pub. L. 101–508, § 11801(c)(9)(A)(i), renumbered section 425 of this title as this section.

    Enacted provision · exact public law section
    (i) Section 422A is redesignated as section 422 and section 425 is redesignated as section 424.

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

13. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(i) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 424(a)

    Pub. L. 101–508, § 11801(c)(9)(F)(i), substituted “424(a)” for “425(a)”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 101–508, § 11801(c)(9)(F)(i), substituted “424(a)” for “425(a)”.

    Enacted provision · exact public law section
    (i) by striking “425(a)” in subsection (a) and inserting “424(a)”

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

14. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(ii) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 424(c)(3)(A)(ii)

    Pub. L. 101–508, § 11801(c)(9)(F)(ii), substituted “422(a)(1) or 423(a)(1)” for “422(a)(1), 422A(a)(1), 423(a)(1), or 424(a)(1)”

    Source evidence

    Code amendment note
    Subsec. (c)(3)(A)(ii). Pub. L. 101–508, § 11801(c)(9)(F)(ii), substituted “422(a)(1) or 423(a)(1)” for “422(a)(1), 422A(a)(1), 423(a)(1), or 424(a)(1)”.

    Enacted provision · exact public law section
    (ii) by striking “422(a)(D, 422A(a)(D, 423(a)(D, or 424(a)(l)” in subsection (c)(3)(A)(ii) and inserting “422(a)(1) or 423(a)(D”,

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

15. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(iii) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 424(d)

    Pub. L. 101–508, § 11801(c)(9)(F)(iii), substituted “422(b)(6) and 423(b)(3)” for “422(b)(7), 422A(b)(6), 423(b)(3), and 424(b)(3)”

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 101–508, § 11801(c)(9)(F)(iii), substituted “422(b)(6) and 423(b)(3)” for “422(b)(7), 422A(b)(6), 423(b)(3), and 424(b)(3)”.

    Enacted provision · exact public law section
    (iii) by striking “422(b)(7), 422A(b)(6), 423(b)(3), and 424(b)(3)” in subsection (d) and inserting “422(b)(6) and 423(b)(3)”,

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

16. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(iv) · 104 Stat. 1388

    1. Substituted · 26 U.S.C. § 424(g)

       Pub. L. 101–508, § 11801(c)(9)(F)(iv), substituted “422(a)(2) and 423(a)(2)” for “422(a)(2), 422A(a)(2), 423(a)(2), and 424(a)(2)”

    2. Substituted · 26 U.S.C. § 424(g)

       Pub. L. 101–508, § 11801(c)(9)(F)(iv), substituted “424(a)” for “425(a)”

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 101–508, § 11801(c)(9)(F)(iv), substituted “422(a)(2) and 423(a)(2)” for “422(a)(2), 422A(a)(2), 423(a)(2), and 424(a)(2)” and “424(a)” for “425(a)”.

    Enacted provision · exact public law section
    (iv) in subsection (g)— (I) by striking “422(a)(2)( 422A(a)(2), 423(a)(2), and 424(a)(2)” and inserting “422(a)(2) and 423(a)(2)”, and (II) by striking “425(a)” and inserting “424(a)”, and

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

17. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(v)(I) · 104 Stat. 1388

    1. Added · 26 U.S.C. § 424(h)(2)

       Pub. L. 101–508, § 11801(c)(9)(F)(v)(I), added par. (2)

    2. Struck · 26 U.S.C. § 424(h)(2)

       Pub. L. 101–508, § 11801(c)(9)(F)(v)(I), struck out former par. (2) which related to special rules for sections 423 and 424 options and to an exception that such rules would not apply with respect to a modification, extension or renewal of a restricted stock option before Jan. 1, 1964, if the aggregate of the monthly fair market value for 12 consecutive months before date of modification, etc., divided by 12 is an amount less than 80% of the fair market value of such stock on the date of original granting or the date of modification, etc., whichever is higher

    Source evidence

    Code amendment note
    Subsec. (h)(2). Pub. L. 101–508, § 11801(c)(9)(F)(v)(I), added par. (2) and struck out former par. (2) which related to special rules for sections 423 and 424 options and to an exception that such rules would not apply with respect to a modification, extension or renewal of a restricted stock option before Jan. 1, 1964, if the aggregate of the monthly fair market value for 12 consecutive months before date of modification, etc., divided by 12 is an amount less than 80% of the fair market value of such stock on the date of original granting or the date of modification, etc., whichever is higher.

    Enacted provision · exact public law section
    (I) by striking paragraph (2) and inserting the following: “(2) Special rule for section 423 options.— In the case of the transfer of stock pursuant to the exercise of an option to which section 423 applies and which has been so modified, extended, or renewed, the fair market value of such stock at the time of the granting of the option shall be considered as whichever of the following is the highest— “(A) the fair market value of such stock on the date of the original granting of the option, “(B) the fair market value of such stock on the date of the making of such modification, extension, or renewal, or “(C) the fair market value of such stock at the time of the making of any intervening modification, extension, or renewal.

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

18. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(v)(III) · 104 Stat. 1388

    Struck · 26 U.S.C. § 424(h)(3)

    Pub. L. 101–508, § 11801(c)(9)(F)(v)(III), struck out at end “If a restricted stock option is exercisable after the expiration of 10 years from the date such option is granted, subparagraph (B) shall not apply unless the terms of the option are also changed to make it not exercisable after the expiration of such period.”

    Source evidence

    Code amendment note
    Subsec. (h)(3). Pub. L. 101–508, § 11801(c)(9)(F)(v)(III), struck out at end “If a restricted stock option is exercisable after the expiration of 10 years from the date such option is granted, subparagraph (B) shall not apply unless the terms of the option are also changed to make it not exercisable after the expiration of such period.”

    Enacted provision · exact public law section
    (III) by striking the sentence following paragraph (3)(C).

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

19. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(9)(F)(v)(II) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 424(h)(3)(B)

    Pub. L. 101–508, § 11801(c)(9)(F)(v)(II), substituted “section 423(b)(9)” for “sections 422(b)(6), 423(b)(9), and 424(b)(2)”

    Source evidence

    Code amendment note
    Subsec. (h)(3)(B). Pub. L. 101–508, § 11801(c)(9)(F)(v)(II), substituted “section 423(b)(9)” for “sections 422(b)(6), 423(b)(9), and 424(b)(2)”.

    Enacted provision · exact public law section
    (II) by striking “sections 422(b)(6), 423(b)(9), and 424(b)(2)” in paragraph (3)(B) and inserting “section 423(b)(9)”, and

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

20. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 title I § 1702(h)(13) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 424(c)(3)(B)

    Pub. L. 104–188 substituted “an incentive stock option or an option granted under an employee stock purchase plan” for “a qualified stock option, an incentive stock option, an option granted under an employee stock purchase plan, or a restricted stock option”

    Source evidence

    Code amendment note
    Subsec. (c)(3)(B). Pub. L. 104–188 substituted “an incentive stock option or an option granted under an employee stock purchase plan” for “a qualified stock option, an incentive stock option, an option granted under an employee stock purchase plan, or a restricted stock option”.

    Enacted provision · exact public law section
    (13) Subparagraph (B) of section 424(c)(3) is amended by striking “a qualified stock option, an incentive stock option, an option granted under an employee stock purchase plan, or a restricted stock option” and inserting “an incentive stock option or an option granted under an employee stock purchase plan”.

    Effective date note
    Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

21. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 div. U title IV § 401(a)(98) · 132 Stat. 348

    Substituted · 26 U.S.C. § 424(g)

    Pub. L. 115–141 substituted “sections 422(a)(2)” for “section 422(a)(2)”

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 115–141 substituted “sections 422(a)(2)” for “section 422(a)(2)”.

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

24 of 24 references resolved to an enrolled provision