§ 460. Special rules for long-term contracts

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. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title VIII § 804(a) · 100 Stat. 2085

   Enacted · 26 U.S.C. § 460

   Added Pub. L. 99–514, title VIII, § 804(a), Oct. 22, 1986, 100 Stat. 2358

   Source evidence

   Code source credit
   Added Pub. L. 99–514, title VIII, § 804(a), Oct. 22, 1986, 100 Stat. 2358

   Enacted provision · exact public law section
   (a) General Rule.— Subpart B of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new section: “SEC. 460. SPECIAL RULES FOR LONG-TERM CONTRACTS. “(a) Percentage of Completion-Capitalized Cost Method.— “(1) In general.— In the case of any long-term contract— “(A) 40 percent of the items with respect to such contract shall be taken into account under the percentage of completion method (as modified by subsection (b)), and “(B) 60 percent of the items with respect to such contract shall be taken into account under the taxpayer’s normal method of accounting. “(2) 40 percent look-back method to apply.— Upon completion of any long-term contract, the taxpayer shall pay (or shall be entitled to receive) interest determined by applying the look-back method of subsection (b)(3) to 40 percent of the items with respect to the contract. “(b) Percentage of Completion Method.— “(1) Subsection (a) Not to Apply Where Percentage of Completion Method Used.— Subsection (a) shall not apply to any long-term contract with respect to which amounts includible in gross income are determined under the percentage of completion method. “(2) Requirements of percentage of completion method.— In the case of any long-term contract with respect to which the percentage of completion method is used— “(A) the percentage of completion shall be determined by comparing costs allocated to the contract under subsection (c) and incurred before the close of the taxable year with the estimated total contract costs, and “(B) upon completion of the contract, the taxpayer shall pay (or shall be entitled to receive) interest computed under the look-back method of paragraph (3). “(3) Look-back method.— The interest computed under the look-back method of this subparagraph shall be determined by— “(A) first allocating income under the contract among taxable years before the year in which the contract is completed on the basis of the actual contract price and costs instead of the estimated contract price and costs, “(B) second, determining (solely for purposes of computing such interest) the overpayment or underpayment of tax for each taxable year referred to in paragraph (1) which would result solely from the application of paragraph (1), and “(C) then using the overpayment rate established by section 6621, compounded daily, on the overpayment or underpayment determined under paragraph (1). “(c) Allocation of Costs to Contract.— “(1) Direct and certain indirect costs.— In the case of a long-term contract, all costs (including research and experimental costs) which directly benefit, or are incurred by reason of, the long-term contract activities of the taxpayer shall be allocated to such contract in the same manner as costs are allocated to extended period long-term contracts under section 451 and the regulations thereunder. “(2) Costs identified under cost-plus and certain federal contracts.— In the case of a cost-plus long-term contract or a Federal long-term contract, any cost not allocated to such contract under paragraph (1) shall be allocated to such contract if such cost is identified by the taxpayer (or a related person), pursuant to the contract or Federal, State, or local law or regulation, as being attributable to such contract. “(3) Allocation of production period interest to contract.— “(A) In general.— Except as provided in subparagraphs (B) and (C), in the case of a long-term contract, interest costs shall be allocated to the contract in the same manner as interest costs are allocated to property produced by the taxpayer under section 263A(f). “(B) Production period.— In applying section 263A(f) for purposes of subparagraph (A), the production period shall be the period— “(i) beginning on the later of— “(I) the contract commencement date, or “(II) in the case of a taxpayer who uses an accrual method with respect to long-term contracts, the date by which at least 5 percent of the total estimated costs (including design and planning costs) under the contract have been incurred, and “(ii) ending on the contract completion date. “(C) Application of de minimis rule.— In applying section 263A(f) for purposes of subparagraph (A), paragraph (1)(B)(iii) of such section shall be applied on a contract-by-contract basis; except that, in the case of a taxpayer described in subparagraph (B)(i)(II) of this paragraph, paragraph (1)(B)(iii) of section 263A(f) shall be applied on a property-by-property basis. “(4) Certain costs not included.— This subsection shall not apply to any— “(A) independent research and development expenses, “(B) expenses for unsuccessful bids and proposals, and “(C) marketing, selling, and advertising expenses. “(5) Independent research and development expenses — For purposes of paragraph (4), the term ‘independent research and development expenses’ means any expenses incurred in the performance of research or development, except that such term shall not include— “(A) any expenses which are directly attributable to a long-term contract in existence when such expenses are incurred, or “(B) any expenses under an agreement to perform research or development. “(d) Federal Long-Term Contract.— For purposes of this section— “(1) In general.— The term ‘Federal long-term contract’ means any long-term contract— “(A) to which the United States (or any agency or instrumentality thereof) is a party, or “(B) which is a subcontract under a contract described in subparagraph (A). “(2) Special rules for certain taxable entities.— For purposes of paragraph (1), the rules of section 168(h)(2)(D) (relating to certain taxable entities not treated as instrumentalities) shall apply. “(e) Exception for Certain Construction Contracts.— “(1) In general.— Subsections (a), (b), and (c)(1) and (2) shall not apply to any construction contract entered into by a taxpayer— “(A) who estimates (at the time such contract is entered into) that such contract will be completed within the 2-year period beginning on the contract commencement date of such contract, and “(B) whose average annual gross receipts for the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $10,000,000. “(2) Determination of taxpayer’s gross receipts.— For purposes of paragraph (1), the gross receipts of— “(A) all trades or businesses (whether or not incorporated) which are under common control with the taxpayer (within the meaning of section 52(b)), and “(B) all members of any controlled group of corporations of which the taxpayer is a member, For the 3 taxable years of such persons preceding the taxable year in which the contract described in paragraph (1) is entered into shall be included in the gross receipts of the taxpayer for the period described in paragraph (1)(B). The Secretary shall prescribe regulations which provide attribution rules that take into account, in addition to the persons and entities described in the preceding sentence, taxpayers who engage in construction contracts through partnerships, joint ventures, and corporations. “(3) Controlled group of corporations.— For purposes of this subsection, the term ‘controlled group of corporations’ has the meaning given to such term by section 1563(a), except that— “(A) more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in section 1563(a)(1), and “(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. “(4) Construction contract.— For purposes of this subsection, the term ‘construction contract’ means any contract for the building, construction, reconstruction, or rehabilitation of, or the installation of any integral component to, or improvements of, real property. “(f) Long-Term Contract.—For purposes of this section.— “(1) In general.— The term ‘long-term contract’ means any contract for the manufacture, building, installation, or construction of property if such contract is not completed within the taxable year in which such contract is entered into. “(2) Special rule for manufacturing contracts.— A contract for the manufacture of property shall not be treated as a long-term contract unless such contract involves the manufacture of— “(A) any unique item of a type which is not normally included in the finished goods inventory of the taxpayer, or “(B) any item which normally requires more than 12 calendar months to complete (without regard to the period of the contract). “(3) Aggregation, etc.— For purposes of this subsection, under regulations prescribed by the Secretary— “(A) 2 or more contracts which are interdependent (by reason of pricing or otherwise) may be treated as 1 contract, and “(B) a contract which is properly treated as an aggregation of separate contracts may be so treated. “(g) Contract Commencement Date.— For purposes of this section, the term ‘contract commencement date’ means, with respect to any contract, the first date on which any costs (other than bidding expenses or expenses incurred in connection with negotiating the contract) allocable to such contract are incurred.”

2. 1987

   Pub. L. 100–203 title X § 10203(a) · 101 Stat. 1330

   1. Substituted · 26 U.S.C. § 460(a)

      Pub. L. 100–203 substituted “70 percent” for “40 percent” in par. (1)(B)

   2. Substituted · 26 U.S.C. § 460(a)

      Pub. L. 100–203 substituted “30 percent” for “60 percent” in par. (1)(B)

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 100–203 substituted “70 percent” for “40 percent” in par. (1)(A) and in heading and text of par. (2), and “30 percent” for “60 percent” in par. (1)(B).

   Enacted provision · exact public law section
   (a) In General.— Section 460(a) (relating to percentage of completion—capitalized cost method) is amended— (1) by striking out “40 percent” each place it appears in the text and heading thereof and inserting in lieu thereof “70 percent”, and (2) by striking out “60 percent” and inserting in lieu thereof “30 percent”.

3. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 5041(a)(1) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 460(a)(1)(A)

   Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70”

   Source evidence

   Code amendment note
   Subsec. (a)(1)(A). Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70”.

   Enacted provision · exact public law section
   (1) by striking out “70 percent” each place it appears (including in the heading of paragraph (2)) and inserting in lieu thereof “90 percent”, and

4. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 5041(a)(2) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 460(a)(1)(B)

   Pub. L. 100–647, § 5041(a)(2), substituted “10” for “30”

   Source evidence

   Code amendment note
   Subsec. (a)(1)(B). Pub. L. 100–647, § 5041(a)(2), substituted “10” for “30”.

   Enacted provision · exact public law section
   (2) by striking out “30 percent” in paragraph (1)(B) and inserting in lieu thereof “10 percent”.

5. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 5041(a)(1) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 460(a)(2)

   Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70” in heading and in text

   Source evidence

   Code amendment note
   Subsec. (a)(2). Pub. L. 100–647, § 5041(a)(1), substituted “90” for “70” in heading and in text.

   Enacted provision · exact public law section
   (1) by striking out “70 percent” each place it appears (including in the heading of paragraph (2)) and inserting in lieu thereof “90 percent”, and

6. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1008(c)(2)(B) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 460(b)(2)

   Pub. L. 100–647, § 1008(c)(2)(B), substituted “Except as provided in paragraph (4), in” for “In”

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 100–647, § 1008(c)(2)(B), substituted “Except as provided in paragraph (4), in” for “In”.

   Enacted provision · exact public law section
   (B) Section 460(6)(2) of the 1986 Code is amended by striking out “In” and inserting in lieu thereof “Except as provided in paragraph (4), in”.

7. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1008(c)(4)(B) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 460(b)(2)(B)

   Pub. L. 100–647, § 1008(c)(4)(B), inserted “(or, with respect to any amount received or accrued after completion of the contract, when such amount is so received or accrued)” after “contract”

   Source evidence

   Code amendment note
   Subsec. (b)(2)(B). Pub. L. 100–647, § 1008(c)(4)(B), inserted “(or, with respect to any amount received or accrued after completion of the contract, when such amount is so received or accrued)” after “contract”.

   Enacted provision · exact public law section
   (B) Subparagraph (B) of section 46()(b)(2) of the 1986 Code is amended by striking out “completion of the contract” and inserting in lieu thereof “completion of the contract (or, with respect to any amount received or accrued after completion of the contract, when such amount is so received or accrued)”,

8. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1008(c)(4)(A) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 460(b)(3)

   Pub. L. 100–647, § 1008(c)(4)(A), inserted at end “For purposes of the preceding sentence, any amount received or accrued after completion of the contract shall be taken into account by discounting (using the Federal mid-term rate determined under section 1274(d) as of the time such amount was received or accrued) such amount to its value as of the completion of the contract. The taxpayer may elect with respect to any contract to have the preceding sentence not apply to such contract.”

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 100–647, § 1008(c)(4)(A), inserted at end “For purposes of the preceding sentence, any amount received or accrued after completion of the contract shall be taken into account by discounting (using the Federal mid-term rate determined under section 1274(d) as of the time such amount was received or accrued) such amount to its value as of the completion of the contract. The taxpayer may elect with respect to any contract to have the preceding sentence not apply to such contract.”

   Enacted provision · exact public law section
   (A) Paragraph (3) of section 460(b) of the 1986 Code is amended by adding at the end thereof the fol lowing new sentences: “For purposes of the preceding sentence, any amount received or accrued after completion of the contract shall be taken into account by discounting (using the Federal mid-term rate determined under section 1274(d) as of the time such amount was received or accrued) such amount to its value as of the completion of the contract. The taxpayer may elect with respect to any contract to have the preceding sentence not apply to such contract.”

9. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1008(c)(1)(A) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 460(b)(3)

   Pub. L. 100–647, § 1008(c)(1)(A), substituted “paragraph” for “subparagraph”

   Target inherited from the preceding amendment note.

   Source evidence

   Code amendment note
   Pub. L. 100–647, § 1008(c)(1)(A), substituted “paragraph” for “subparagraph”.

   Enacted provision · exact public law section
   (A) by striking out “subparagraph” and inserting in lieu thereof “paragraph”,

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1008(c)(1)(B) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 460(b)(3)(B)

    Pub. L. 100–647, § 1008(c)(1)(B), substituted “subparagraph (A)” for “paragraph (1)” in two places

    Source evidence

    Code amendment note
    Subsec. (b)(3)(B). Pub. L. 100–647, § 1008(c)(1)(B), substituted “subparagraph (A)” for “paragraph (1)” in two places.

    Enacted provision · exact public law section
    (B) by striking out “paragraph (1)” each place it appears in subparagraph (B) and inserting in lieu thereof “subparagraph (A)”, and

11. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1008(c)(1)(C) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 460(b)(3)(C)

    Pub. L. 100–647, § 1008(c)(1)(C), substituted “subparagraph (B)” for “paragraph (1)”

    Source evidence

    Code amendment note
    Subsec. (b)(3)(C). Pub. L. 100–647, § 1008(c)(1)(C), substituted “subparagraph (B)” for “paragraph (1)”.

    Enacted provision · exact public law section
    (C) by striking out “paragraph (1)” in subparagraph (C) and inserting in lieu thereof “subparagraph (B)”.

12. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1008(c)(2)(A) · 102 Stat. 3342

    Added · 26 U.S.C. § 460(b)(4)

    Pub. L. 100–647, § 1008(c)(2)(A), added par. (4)

    Source evidence

    Code amendment note
    Subsec. (b)(4). Pub. L. 100–647, § 1008(c)(2)(A), added par. (4).

    Enacted provision · exact public law section
    (A) Section 460(b) of the 1986 Code (relating to percentage of completion method) is amended by adding at the end thereof the following new paragraph: “(4) Special rules.— “(A) Simplified method of cost allocation.— In the case of any long-term contract, the Secretary may prescribe a simplified procedure for allocation of costs to such contract in lieu of the method of allocation under subsection (c). “(B) Look-back method not to apply to certain con-tracts.— Paragraph (2)(B) and subsection (a)(2) shall not apply to any contract— “(i) the gross price of which (as of the completion of the contract) does not exceed the lesser of— “(I) $1,000,000, or “(II) 1 percent of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the contract was completed, and “(ii) which is completed within 2 years of the contract commencement date. For purposes of this subparagraph, rules similar to the rules of subsections (e)(2) and (f)(3) shall apply.”

13. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 5041(d) · 102 Stat. 3342

    Added · 26 U.S.C. § 460(b)(5)

    Pub. L. 100–647, § 5041(d), added par. (5)

    Source evidence

    Code amendment note
    Subsec. (b)(5). Pub. L. 100–647, § 5041(d), added par. (5).

    Enacted provision · exact public law section
    (d) Simplified Look-Back Method for Pass-Thru Entities.— Subsection (b) of section 460 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) Simplified look-back method for pass-thru entities.— “(A) In general.— In the case of a pass-thru entity— “(i) the look-back method of paragraph (3) shall be applied at the entity level, “(ii) in determining overpayments and underpayments for purposes of applying paragraph (3)(B)— “(I) any increase in the income under the con-tract for any taxable year by reason of the allocation under paragraph (3)(A) shall be treated as giving rise to an underpayment determined by applying the highest rate for such year to such increase, and “(II) any decrease in such income for any taxable year by reason of such allocation shall be treated as giving rise to an overpayment determined by applying the highest rate for such year to such decrease, and “(iii) any interest required to be paid by the taxpayer under paragraph (3) shall be paid by such entity (and any interest entitled to be received by the taxpayer under paragraph (3) shall be paid to such entity). “(B) Exceptions.— “(i) Closely held pass-thru entities.— This paragraph shall not apply to any closely held pass-thru entity. “(ii) Foreign contracts.— This paragraph shall not apply to any contract unless substantially all of the income from such contract is from sources in the United States. “(C) Other definitions.— For purposes of this paragraph— “(i) Highest rate.— The term ‘highest rate’ means— “(I) the highest rate of tax specified in section 11, or “(II) if at all times during the year involved more than 50 percent of the interests in the entity are held by individuals directly or through 1 or more other pass-thru entities, the highest rate of tax specified in section 1. “(ii) Pass-thru entity.— The term ‘pass-thru entity’ means any— “(I) partnership, “(II) S corporation, or “(III) trust. “(iii) Closely held pass-thru entity.— The term ‘closely held pass-thru entity’ means any pass-thru entity if, at any time during any taxable year for which there is income under the contract, 50 percent or more (by value) of the beneficial interests in such entity are held (directly or indirectly) by or for 5 or fewer persons. For purposes of the preceding sentence, rules similar to the constructive ownership rules of section 1563(e) shall apply.”

14. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 5041(b)(1) · 102 Stat. 3342

    Amended · 26 U.S.C. § 460(e)(1)

    Pub. L. 100–647, § 5041(b)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Subsections (a), (b), and (c)(1) and (2) shall not apply to any construction contract entered into by a taxpayer—

    Source evidence

    Code amendment note
    Subsec. (e)(1). Pub. L. 100–647, § 5041(b)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Subsections (a), (b), and (c)(1) and (2) shall not apply to any construction contract entered into by a taxpayer—

    “(A) who estimates (at the time such contract is entered into) that such contract will be completed within the 2-year period beginning on the contract commencement date of such contract, and “(B) whose average annual gross receipts for the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $10,000,000.”

    Enacted provision · exact public law section
    (1) Exception for home construction contracts.— Paragraph (1) of section 460(e) of the 1986 Code is amended to read as follows: “(1) In general.— Subsections (a), (b), and (c) (1) and (2) shall not apply to— “(A) any home construction contract, or “(B) any other construction contract entered into by a taxpayer— “(i) who estimates (at the time such contract is entered into) that such contract will be completed within the 2-year period beginning on the contract commencement date of such contract, and “(ii) whose average annual gross receipts for the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $10,000,000. In the case of a home construction contract with respect to which the requirements of clauses (i) and (ii) of subparagraph (B) are not met, section 263A shall apply notwithstanding subsection (c)(4) thereof.”

15. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 5041(b)(2) · 102 Stat. 3342

    Added · 26 U.S.C. § 460(e)(5)

    Pub. L. 100–647, § 5041(b)(2), added par. (5)

    Source evidence

    Code amendment note
    Subsec. (e)(5). Pub. L. 100–647, § 5041(b)(2), added par. (5).

    Enacted provision · exact public law section
    (2) Special treatment for other residential construction contracts.— Subsection (e) of section 460 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) Special rule for residential construction contracts which are not home construction contracts.— In the case of any residential construction contract which is not a home construction contract, subsection (a) shall be applied— “(A) by substituting ‘70 percent’ for ‘90 percent’ each place it appears, and “(B) by substituting ‘30 percent’ for ‘10 percent’.”

16. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 5041(b)(3) · 102 Stat. 3342

    Added · 26 U.S.C. § 460(e)(6)

    Pub. L. 100–647, § 5041(b)(3), added par. (6)

    Source evidence

    Code amendment note
    Subsec. (e)(6). Pub. L. 100–647, § 5041(b)(3), added par. (6).

    Enacted provision · exact public law section
    (3) Definitions.— Subsection (e) of section 460 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(6) Definitions relating to residential construction contracts.— For purposes of this subsection— “(A) Home construction contract.— The term ‘home construction contract’ means any construction contract if 80 percent or more of the estimated total contract costs (as of the close of the taxable year in which the contract was entered into) are reasonably expected to be attributable to the building, construction, reconstruction, or rehabilitation of— “(i) dwelling units contained in buildings containing 4 or fewer dwelling units, and “(ii) improvements to real property directly related to such dwelling units and located on the site of such dwelling units. For purposes of clause (i), each townhouse or rowhouse shall be treated as a separate building. “(B) Residential construction contract.— The term ‘residential construction contract’ means any contract which would be described in subparagraph (A) if clause (i) of such subparagraph reads as follows: “ ‘(i) dwelling units (as defined in section 167(k)), and’.”

17. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 5041(c) · 102 Stat. 3342

    Added · 26 U.S.C. § 460(h)

    Pub. L. 100–647, § 5041(c), added subsec. (h)

    Source evidence

    Code amendment note
    Subsec. (h). Pub. L. 100–647, § 5041(c), added subsec. (h).

    Enacted provision · exact public law section
    (c) Regulatory Authority.— Section 460 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(h) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations to prevent the use of related parties, pass-thru entities, intermediaries, options, or other similar arrangements to avoid the application of this section.”

18. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(a) · 103 Stat. 2106

    1. Substituted · 26 U.S.C. § 460(a)

       Pub. L. 101–239, § 7621(a), substituted “Requirement that percentage of completion method be used” for “Percentage of completion-capitalized cost method” in heading

    2. Amended · 26 U.S.C. § 460(a)

       Pub. L. 101–239, § 7621(a), amended text generally. Prior to amendment, text read as follows:

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 101–239, § 7621(a), substituted “Requirement that percentage of completion method be used” for “Percentage of completion-capitalized cost method” in heading and amended text generally. Prior to amendment, text read as follows:

    “(1) In general.—In the case of any long-term contract— “(A) 90 percent of the items with respect to such contract shall be taken into account under the percentage of completion method (as modified by subsection (b)), and “(B) 10 percent of the items with respect to such contract shall be taken into account under the taxpayer’s normal method of accounting. “(2) 90 percent look-back method to apply.—Upon completion of any long-term contract (or, with respect to any amount properly taken into account after completion of the contract, when such amount is so properly taken into account), the taxpayer shall pay (or shall be entitled to receive) interest determined by applying the look-back method of subsection (b)(3) to 90 percent of the items with respect to the contract.”

    Enacted provision · exact public law section
    (a) In General.— Subsection (a) of section 460 (relating to special rules for long-term contracts) is amended to read as follows: “(a) Requirement That Percentage of Completion Method Be Used.— In the case of any long-term contract, the taxable income from such contract shall be determined under the percentage of completion method (as modified by subsection (b)).”

19. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7811(e)(1) · 103 Stat. 2106

    Inserted · 26 U.S.C. § 460(a)(2)

    Pub. L. 101–239, § 7811(e)(1), inserted “(or, with respect to any amount properly taken into account after completion of the contract, when such amount is so properly taken into account)” after “any long-term contract”

    Source evidence

    Code amendment note
    Subsec. (a)(2). Pub. L. 101–239, § 7811(e)(1), inserted “(or, with respect to any amount properly taken into account after completion of the contract, when such amount is so properly taken into account)” after “any long-term contract”.

    Enacted provision · exact public law section
    (1) Paragraph (2) of section 460(a) is amended by inserting “(or, with respect to any amount properly taken into account after completion of the contract, when such amount is so properly taken into account)” after “any long-term contract”.

20. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(2)(A) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(1)

    Pub. L. 101–239, § 7621(c)(2)(A), substituted “paragraph (3)” for “paragraph (4)”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 101–239, § 7621(c)(2)(A), substituted “paragraph (3)” for “paragraph (4)”.

    Enacted provision · exact public law section
    (A) by striking “paragraph (4)” and inserting “paragraph (3)” and

21. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(2)(B) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(1)

    Pub. L. 101–239, § 7621(c)(2)(B), which directed the amendment of par. (1) by substituting “paragraph (2)” for “paragraph (3)”, was executed by making the substitution in subpar. (B) and concluding provisions to reflect the probable intent of Congress

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 101–239, § 7621(c)(2)(B), which directed the amendment of par. (1) by substituting “paragraph (2)” for “paragraph (3)”, was executed by making the substitution in subpar. (B) and concluding provisions to reflect the probable intent of Congress.

    Enacted provision · exact public law section
    (B) by striking “paragraph (3)” and inserting “paragraph (2)”.

22. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(1) · 103 Stat. 2106

    1. Redesignated · 26 U.S.C. § 460(b)(1)

       Pub. L. 101–239, § 7621(c)(1), redesignated par. (2) as (1)

    2. Struck · 26 U.S.C. § 460(b)(1)

       Pub. L. 101–239, § 7621(c)(1), struck out former par. (1) which read as follows: “Subsection (a) not to apply where percentage of completion method used.—Subsection (a) shall not apply to any long-term contract with respect to which amounts includible in gross income are determined under the percentage of completion method.”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 101–239, § 7621(c)(1), redesignated par. (2) as (1) and struck out former par. (1) which read as follows: “Subsection (a) not to apply where percentage of completion method used.—Subsection (a) shall not apply to any long-term contract with respect to which amounts includible in gross income are determined under the percentage of completion method.”

    Enacted provision · exact public law section
    (1) Subsection (b) of section 460 is amended by striking paragraph (1) and by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

23. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(1) · 103 Stat. 2106

    Redesignated · 26 U.S.C. § 460(b)(2)

    Pub. L. 101–239, § 7621(c)(1), redesignated par. (3) as (2). Former par. (2) redesignated (1)

    Source evidence

    Code amendment note
    Subsec. (b)(2). Pub. L. 101–239, § 7621(c)(1), redesignated par. (3) as (2). Former par. (2) redesignated (1).

    Enacted provision · exact public law section
    (1) Subsection (b) of section 460 is amended by striking paragraph (1) and by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

24. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7811(e)(4) · 103 Stat. 2106

    Inserted · 26 U.S.C. § 460(b)(2)

    Pub. L. 101–239, § 7811(e)(4), (6), inserted two sentences at end

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 101–239, § 7811(e)(4), (6), inserted two sentences at end.

    Enacted provision · exact public law section
    (4) Paragraph (2) of section 460(b) is amended by adding at the end the following new sentence: Contracts. “In the case of any long-term contract with respect to which the percentage of completion method is used, except for purposes of applying the look-back method of paragraph (3), any income under the contract (to the extent not previously includible in gross income) shall be included in gross income for the taxable year following the taxable year in which the contract was completed.”

25. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7811(e)(2) · 103 Stat. 2106

    1. Substituted · 26 U.S.C. § 460(b)(2)(B)

       Pub. L. 101–239, § 7811(e)(2), substituted “any amount properly taken into account” for “any amount received or accrued”

    2. Substituted · 26 U.S.C. § 460(b)(2)(B)

       Pub. L. 101–239, § 7811(e)(2), substituted “is so properly taken into account” for “is so received or accrued”

    Source evidence

    Code amendment note
    Subsec. (b)(2)(B). Pub. L. 101–239, § 7811(e)(2), substituted “any amount properly taken into account” for “any amount received or accrued” and “is so properly taken into account” for “is so received or accrued”.

    Enacted provision · exact public law section
    (2) Subparagraph (B) of section 460(b)(2) is amended— (A) by striking “any amount received or accrued” and inserting “any amount properly taken into account”, and (B) by striking “is so received or accrued” and inserting “is so properly taken into account”.

26. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(1) · 103 Stat. 2106

    Redesignated · 26 U.S.C. § 460(b)(3)

    Pub. L. 101–239, § 7621(c)(1), redesignated par. (4) as (3). Former par. (3) redesignated (2)

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 101–239, § 7621(c)(1), redesignated par. (4) as (3). Former par. (3) redesignated (2).

    Enacted provision · exact public law section
    (1) Subsection (b) of section 460 is amended by striking paragraph (1) and by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

27. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7811(e)(3) · 103 Stat. 2106

    1. Substituted · 26 U.S.C. § 460(b)(3)

       Pub. L. 101–239, § 7811(e)(3), in concluding provisions, substituted “any amount properly taken into account” for “any amount received or accrued”

    2. Substituted · 26 U.S.C. § 460(b)(3)

       Pub. L. 101–239, § 7811(e)(3), in concluding provisions, substituted “such amount was properly taken into account” for “such amount was received or accrued”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 101–239, § 7811(e)(3), in concluding provisions, substituted “any amount properly taken into account” for “any amount received or accrued” and “such amount was properly taken into account” for “such amount was received or accrued”.

    Enacted provision · exact public law section
    (3) Paragraph (3) of section 460(b) is amended— (A) by striking “any amount received or accrued” in the second sentence and inserting “any amount properly taken into account”, and (B) by striking “such amount was received or accrued” in the second sentence and inserting “such amount was properly taken into account”.

28. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(3) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(3)(B)

    Pub. L. 101–239, § 7621(c)(3), substituted “Paragraph (1)(B)” for “Paragraph (2)(B) and subsection (a)(2)” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (b)(3)(B). Pub. L. 101–239, § 7621(c)(3), substituted “Paragraph (1)(B)” for “Paragraph (2)(B) and subsection (a)(2)” in introductory provisions.

    Enacted provision · exact public law section
    (3) Paragraph (3) of section 460(b), as redesignated by paragraph (1), is amended by striking “Paragraph (2)(B) and subsection (a)(2)” and inserting “Paragraph (1)(B)”.

29. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(1) · 103 Stat. 2106

    Redesignated · 26 U.S.C. § 460(b)(4)

    Pub. L. 101–239, § 7621(c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (3)

    Source evidence

    Code amendment note
    Subsec. (b)(4). Pub. L. 101–239, § 7621(c)(1), redesignated par. (5) as (4). Former par. (4) redesignated (3).

    Enacted provision · exact public law section
    (1) Subsection (b) of section 460 is amended by striking paragraph (1) and by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

30. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(4)(A) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(4)(A)(i)

    Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)”

    Source evidence

    Code amendment note
    Subsec. (b)(4)(A)(i). Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)”.

    Enacted provision · exact public law section
    (A) by striking “paragraph (3)” each place it appears and inserting “paragraph (2)”,

31. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(4)(B) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(4)(A)(ii)

    Pub. L. 101–239, § 7621(c)(4)(B), substituted “paragraph (2)(B)” for “paragraph (3)(B)” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (b)(4)(A)(ii). Pub. L. 101–239, § 7621(c)(4)(B), substituted “paragraph (2)(B)” for “paragraph (3)(B)” in introductory provisions.

    Enacted provision · exact public law section
    (B) by striking “paragraph (3)(B)” and inserting “paragraph (2)(B)”, and

32. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(4)(C) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(4)(A)(ii)(I)

    Pub. L. 101–239, § 7621(c)(4)(C), substituted “paragraph (2)(A)” for “paragraph (3)(A)”

    Source evidence

    Code amendment note
    Subsec. (b)(4)(A)(ii)(I). Pub. L. 101–239, § 7621(c)(4)(C), substituted “paragraph (2)(A)” for “paragraph (3)(A)”.

    Enacted provision · exact public law section
    (C) by striking “paragraph (3)(A)” and inserting “paragraph (2)(A)”.

33. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(4)(A) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(b)(4)(A)(iii)

    Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)” in two places

    Source evidence

    Code amendment note
    Subsec. (b)(4)(A)(iii). Pub. L. 101–239, § 7621(c)(4)(A), substituted “paragraph (2)” for “paragraph (3)” in two places.

    Enacted provision · exact public law section
    (A) by striking “paragraph (3)” each place it appears and inserting “paragraph (2)”,

34. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(b) · 103 Stat. 2106

    Added · 26 U.S.C. § 460(b)(5)

    Pub. L. 101–239, § 7621(b), added par. (5)

    Source evidence

    Code amendment note
    Subsec. (b)(5). Pub. L. 101–239, § 7621(b), added par. (5).

    Enacted provision · exact public law section
    (b) Election to Use Modified Percentage of Completion Method.— Subsection (b) of section 460 (as amended by subsection (c)(1)) is amended by adding at the end thereof the following new paragraph: “(5) Election to use 10-percent method.— “(A) General rule.— In the case of any long-term contract with respect to which an election under this paragraph is in effect, the 10-percent method shall apply in determining the taxable income from such contract. “(B) 10-percent method.— For purposes of this paragraph— “(i) In general.— The 10-percent method is the percentage of completion method, modified so that any item which would otherwise be taken into account in computing taxable income with respect to a contract for any taxable year before the 10-percent year is taken into account in the 10-percent year. “(ii) 10-percent year.— The term ‘10-percent year’ means the 1st taxable year as of the close of which at least 10 percent of the estimated total contract costs have been incurred. “(C) Election.— An election under this paragraph shall apply to all long-term contracts of the taxpayer which are entered into during the taxable year in which the election is made or any subsequent taxable year. “(D) Coordination with other provisions.— “(i) Simplified method of cost allocation.— This paragraph shall not apply to any taxpayer which uses a simplified procedure for allocation of costs under paragraph (3)(A). “(ii) Look-back method.— The 10-percent method shall be taken into account for purposes of applying the look-back method of paragraph (2) to any taxpayer making an election under this paragraph.”

35. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(1) · 103 Stat. 2106

    Redesignated · 26 U.S.C. § 460(b)(5)

    Pub. L. 101–239, § 7621(c)(1), redesignated former par. (5) as (4)

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 101–239, § 7621(c)(1), redesignated former par. (5) as (4).

    Enacted provision · exact public law section
    (1) Subsection (b) of section 460 is amended by striking paragraph (1) and by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

36. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7811(e)(5) · 103 Stat. 2106

    Added · 26 U.S.C. § 460(e)(2)(C)

    Pub. L. 101–239, § 7811(e)(5), added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (e)(2)(C). Pub. L. 101–239, § 7811(e)(5), added subpar. (C).

    Enacted provision · exact public law section
    (5) Paragraph (2) of section 460(e) is amended by striking “and” at the end of subparagraph (A), by inserting “and” at the end of subparagraph (B), and by inserting after subparagraph (B) the following new subparagraph: “(C) any predecessor of the taxpayer or a person described in subparagraph (A) or (B),”.

37. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7621(c)(5) · 103 Stat. 2106

    1. Inserted · 26 U.S.C. § 460(e)(5)

       Pub. L. 101–239, § 7621(c)(5), inserted introductory provisions

    2. Struck · 26 U.S.C. § 460(e)(5)

       Pub. L. 101–239, § 7621(c)(5), struck out former introductory provisions which read as follows: “In the case of any residential construction contract which is not a home construction contract, subsection (a) shall be applied—”

    Source evidence

    Code amendment note
    Subsec. (e)(5). Pub. L. 101–239, § 7621(c)(5), inserted introductory provisions and struck out former introductory provisions which read as follows: “In the case of any residential construction contract which is not a home construction contract, subsection (a) shall be applied—”.

    Enacted provision · exact public law section
    (5) Paragraph (5) of section 460(e) is amended by striking so much of such paragraph as precedes subparagraph (A) and inserting the following: “(5) Special bulk for residential construction contracts which are not home construction contracts.— In the Case of any residential construction contract which is not a home construction contract, subsection (a) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1989) shall apply except that such subsection shall be applied—”.

38. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7815(e)(1)(A) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 460(e)(6)(A)

    Pub. L. 101–239, § 7815(e)(1)(A), substituted “activities referred to in paragraph (4) with respect to” for “the building, construction, reconstruction, or rehabilitation of”

    Source evidence

    Code amendment note
    Subsec. (e)(6)(A). Pub. L. 101–239, § 7815(e)(1)(A), substituted “activities referred to in paragraph (4) with respect to” for “the building, construction, reconstruction, or rehabilitation of”.

    Enacted provision · exact public law section
    (A) by striking “the building, construction, reconstruction, or rehabilitation of” and inserting “activities referred to in paragraph (4) with respect to”, and

39. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7815(e)(1)(B) · 103 Stat. 2106

    1. Added · 26 U.S.C. § 460(e)(6)(A)(i)

       Pub. L. 101–239, § 7815(e)(1)(B), added cl. (i)

    2. Struck · 26 U.S.C. § 460(e)(6)(A)(i)

       Pub. L. 101–239, § 7815(e)(1)(B), struck out former cl. (i) which read as follows: “dwelling units contained in buildings containing 4 or fewer dwelling units, and”

    Source evidence

    Code amendment note
    Subsec. (e)(6)(A)(i). Pub. L. 101–239, § 7815(e)(1)(B), added cl. (i) and struck out former cl. (i) which read as follows: “dwelling units contained in buildings containing 4 or fewer dwelling units, and”.

    Enacted provision · exact public law section
    (B) by striking clause (i) and inserting the following: “(i) dwelling units (as defined in section 167(k)) contained in buildings containing 4 or fewer dwelling units (as so defined), and”.

40. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 title XI § 11812(b)(8) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 460(e)(6)(A)(i)

    Pub. L. 101–508 substituted “section 168(e)(2)(A)(ii)” for “section 167(k)”

    Source evidence

    Code amendment note
    Subsec. (e)(6)(A)(i). Pub. L. 101–508 substituted “section 168(e)(2)(A)(ii)” for “section 167(k)”.

    Enacted provision · exact public law section
    (8) Clause (i) of section 460(e)(6)(A) is amended by striking “section 167(k)” and inserting “section 168(e)(2)(A)(ii)”.

41. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1704(t)(28) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 460(b)(1)

    Pub. L. 104–188, § 1704(t)(28), which directed that par. (1) be amended by substituting “the look-back method of paragraph (2)” for “the look-back method of paragraph (3)”, could not be executed, because that phrase does not appear in text. See 1989 Amendment note below

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 104–188, § 1704(t)(28), which directed that par. (1) be amended by substituting “the look-back method of paragraph (2)” for “the look-back method of paragraph (3)”, could not be executed, because that phrase does not appear in text. See 1989 Amendment note below.

    Enacted provision · exact public law section
    (28) Paragraph (1) of section 460(b) is amended by striking “the look-back method of paragraph (3)” and inserting “the look-back method of paragraph (2)”.

42. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1702(h)(15) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 460(e)(6)(B)

    Pub. L. 104–188, § 1702(h)(15), substituted “section 168(e)(2)(A)(ii)” for “section 167(k)”

    Source evidence

    Code amendment note
    Subsec. (e)(6)(B). Pub. L. 104–188, § 1702(h)(15), substituted “section 168(e)(2)(A)(ii)” for “section 167(k)”.

    Enacted provision · exact public law section
    (15) Subparagraph (B) of section 460(e)(6) is amended by striking “section 167(k)” and inserting “section 168(e)(2)(A)(ii)”.

43. 1997

    Pub. L. 105–34 § 1211(b)(1) · 111 Stat. 788

    Substituted · 26 U.S.C. § 460(b)(2)(C)

    Pub. L. 105–34, § 1211(b)(1), substituted “the adjusted overpayment rate (as defined in paragraph (7))” for “the overpayment rate established by section 6621”

    Source evidence

    Code amendment note
    Subsec. (b)(2)(C). Pub. L. 105–34, § 1211(b)(1), substituted “the adjusted overpayment rate (as defined in paragraph (7))” for “the overpayment rate established by section 6621”.

    Enacted provision · exact public law section
    (1) In general.— Subparagraph (C) of section 460(b)(2) is amended by striking “the overpayment rate established by section 6621” and inserting “the adjusted overpayment rate (as defined in paragraph (7))”.

44. 1997

    Pub. L. 105–34 § 1211(a) · 111 Stat. 788

    Added · 26 U.S.C. § 460(b)(6)

    Pub. L. 105–34, § 1211(a), added par. (6)

    Source evidence

    Code amendment note
    Subsec. (b)(6). Pub. L. 105–34, § 1211(a), added par. (6).

    Enacted provision · exact public law section
    (a) Look-Back Method Not To Apply in Certain Cases.— Subsection (b) of section 460 (relating to percentage of completion method) is amended by adding at the end the following new paragraph: “(6) Election to have look-back method not apply in de minimis cases.— “(A) Amounts taken into account after completion of contract.— Paragraph (1)(B) shall not apply with respect to any taxable year (beginning after the taxable year in which the contract is completed) if— “(i) the cumulative taxable income (or loss) under the contract as of the close of such taxable year, is within “(ii) 10 percent of the cumulative look-back taxable income (or loss) under the contract as of the close of the most recent taxable year to which paragraph (1)(B) applied (or would have applied but for subparagraph (B)). “(B) De minimis discrepancies.— Paragraph (1)(B) shall not apply in any case to which it would otherwise apply if— “(i) the cumulative taxable income (or loss) under the contract as of the close of each prior contract year, is within “(ii) 10 percent of the cumulative look-back income (or loss) under the contract as of the close of such prior contract year. “(C) Definitions.— For purposes of this paragraph— “(i) Contract year.— The term ‘contract year’ means any taxable year for which income is taken into account under the contract. “(ii) Look-back income or loss.— The look-back income (or loss) is the amount which would be the taxable income (or loss) under the contract if the allocation method set forth in paragraph (2)(A) were used in determining taxable income. “(iii) Discounting not applicable.— The amounts taken into account after the completion of the contract shall be determined without regard to any discounting under the 2nd sentence of paragraph (2). “(D) Contracts to which paragraph applies.— This paragraph shall only apply if the taxpayer makes an election under this subparagraph. Unless revoked with the consent of the Secretary, such an election shall apply to all long-term contracts completed during the taxable year for which election is made or during any subsequent taxable year.”.

45. 1997

    Pub. L. 105–34 § 1211(b)(2) · 111 Stat. 788

    Added · 26 U.S.C. § 460(b)(7)

    Pub. L. 105–34, § 1211(b)(2), added par. (7)

    Source evidence

    Code amendment note
    Subsec. (b)(7). Pub. L. 105–34, § 1211(b)(2), added par. (7).

    Enacted provision · exact public law section
    (2) Adjusted overpayment rate.— Subsection (b) of section 460 is amended by adding at the end the following new paragraph: “(7) Adjusted overpayment rates.— “(A) In general.— The adjusted overpayment rate for any interest accrual period is the overpayment rate in effect under section 6621 for the calendar quarter in which such interest accrual period begins. “(B) Interest accrual period.— For purposes of subparagraph (A), the term ‘interest accrual period’ means the period— “(i) beginning on the day after the return due date for any taxable year of the taxpayer, and “(ii) ending on the return due date for the following taxable year. For purposes of the preceding sentence, the term ‘return due date’ means the date prescribed for filing the return of the tax imposed by this chapter (determined without regard to extensions).”.

46. 2010

    Creating Small Business Jobs Act of 2010

    Pub. L. 111–240 title II § 2023(a) · 124 Stat. 2504

    Added · 26 U.S.C. § 460(c)(6)

    Pub. L. 111–240 added par. (6)

    Source evidence

    Code amendment note
    Subsec. (c)(6). Pub. L. 111–240 added par. (6).

    Enacted provision · exact public law section
    (a) In General.— Section 460(c) of the Internal Revenue Code of 1986 26 USC 460. is amended by adding at the end the following new paragraph: “(6) Special rule for allocation of bonus depreciation with respect to certain property.— “(A) In general.— Solely for purposes of determining the percentage of completion under subsection (b)(1)(A), the cost of qualified property shall be taken into account as a cost allocated to the contract as if subsection (k) of section 168 had not been enacted. “(B) Qualified property.— For purposes of this paragraph, the term ‘qualified property’ means property described in section 168(k)(2) which— “(i) has a recovery period of 7 years or less, and “(ii) is placed in service after December 31, 2009, and before January 1, 2011 (January 1, 2012, in the case of property described in section 168(k)(2)(B)).” .

47. 2013

    American Taxpayer Relief Act of 2012

    Pub. L. 112–240 title III § 331(b) · 126 Stat. 2313

    Inserted · 26 U.S.C. § 460(c)(6)(B)(ii)

    Pub. L. 112–240 inserted “, or after December 31, 2012, and before January 1, 2014 (January 1, 2015, in the case of property described in section 168(k)(2)(B))” before period at end

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B)(ii). Pub. L. 112–240 inserted “, or after December 31, 2012, and before January 1, 2014 (January 1, 2015, in the case of property described in section 168(k)(2)(B))” before period at end.

    Enacted provision · exact public law section
    (b) Special Rule for Federal Long-Term Contracts.— Clause (ii) of section 460(c)(6)(B) 26 USC 460. is amended by inserting “, or after December 31, 2012, and before January 1, 2014 (January 1, 2015, in the case of property described in section 168(k)(2)(B))” before the period.

48. 2014

    Tax Increase Prevention Act of 2014

    Pub. L. 113–295 div. A title I § 125(b) · 128 Stat. 4010

    Substituted · 26 U.S.C. § 460(c)(6)(B)(ii)

    Pub. L. 113–295 substituted “January 1, 2015 (January 1, 2016” for “January 1, 2014 (January 1, 2015”

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B)(ii). Pub. L. 113–295 substituted “January 1, 2015 (January 1, 2016” for “January 1, 2014 (January 1, 2015”.

    Enacted provision · exact public law section
    (b) Special Rule for Federal Long-Term Contracts.— Clause (ii) of section 460(c)(6)(B) is amended by striking “January 1, 2014 (January 1, 2015” and inserting “January 1, 2015 (January 1, 2016”.

49. 2015

    Department of Transportation Appropriations Act, 2016

    Pub. L. 114–113 § 143(b)(6)(I) · 129 Stat. 2242

    Amended · 26 U.S.C. § 460(c)(6)(B)(ii)

    Pub. L. 114–113, § 143(b)(6)(I), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “is placed in service after December 31, 2009, and before January 1, 2011 (January 1, 2012, in the case of property described in section 168(k)(2)(B)), or after December 31, 2012, and before January 1, 2016 (January 1, 2017, in the case of property described in section 168(k)(2)(B)).”

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B)(ii). Pub. L. 114–113, § 143(b)(6)(I), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “is placed in service after December 31, 2009, and before January 1, 2011 (January 1, 2012, in the case of property described in section 168(k)(2)(B)), or after December 31, 2012, and before January 1, 2016 (January 1, 2017, in the case of property described in section 168(k)(2)(B)).”

    Enacted provision · exact public law section
    Sec. 143. None of the funds made available by this Act may be used to mandate global positioning system (GPS) tracking in private passenger motor vehicles without providing full and appropriate consideration of privacy concerns under 5 U.S.C. chapter 5, subchapter II.

50. 2015

    Department of Transportation Appropriations Act, 2016

    Pub. L. 114–113 § 143(a)(2) · 129 Stat. 2242

    Substituted · 26 U.S.C. § 460(c)(6)(B)(ii)

    Pub. L. 114–113, § 143(a)(2), substituted “January 1, 2016 (January 1, 2017” for “January 1, 2015 (January 1, 2016”

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B)(ii). Pub. L. 114–113, § 143(a)(2), substituted “January 1, 2016 (January 1, 2017” for “January 1, 2015 (January 1, 2016”.

    Enacted provision · exact public law section
    Sec. 143. None of the funds made available by this Act may be used to mandate global positioning system (GPS) tracking in private passenger motor vehicles without providing full and appropriate consideration of privacy concerns under 5 U.S.C. chapter 5, subchapter II.

51. 2017

    Pub. L. 115–97 § 13201(b)(2)(A) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 460(c)(6)(B)(ii)

    Pub. L. 115–97, § 13201(b)(2)(A), substituted “January 1, 2027 (January 1, 2028” for “January 1, 2020 (January 1, 2021”

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B)(ii). Pub. L. 115–97, § 13201(b)(2)(A), substituted “January 1, 2027 (January 1, 2028” for “January 1, 2020 (January 1, 2021”.

    Enacted provision · exact public law section
    (A) Clause (ii) of section 460(c)(6)(B) 26 USC 460. is amended by striking “January 1, 2020 (January 1, 2021” and inserting “January 1, 2027 (January 1, 2028”.

52. 2017

    Pub. L. 115–97 § 13102(d)(1)(A) · 131 Stat. 2054

    Inserted · 26 U.S.C. § 460(e)(1)(B)

    Pub. L. 115–97, § 13102(d)(1)(A), in introductory provisions, inserted “(other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3))” after “taxpayer”

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B). Pub. L. 115–97, § 13102(d)(1)(A), in introductory provisions, inserted “(other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3))” after “taxpayer”.

    Enacted provision · exact public law section
    (A) by inserting “(other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3))” after “taxpayer” in the matter preceding clause (i), and

53. 2017

    Pub. L. 115–97 § 13102(d)(1)(B) · 131 Stat. 2054

    Amended · 26 U.S.C. § 460(e)(1)(B)(ii)

    Pub. L. 115–97, § 13102(d)(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “whose average annual gross receipts for the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $10,000,000.”

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B)(ii). Pub. L. 115–97, § 13102(d)(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “whose average annual gross receipts for the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $10,000,000.”

    Enacted provision · exact public law section
    (B) by amending clause (ii) to read as follows: “(ii) who meets the gross receipts test of section 448(c) for the taxable year in which such contract is entered into.” .

54. 2017

    Pub. L. 115–97 § 13102(d)(2) · 131 Stat. 2054

    1. Added · 26 U.S.C. § 460(e)(2)

       Pub. L. 115–97, § 13102(d)(2), added par. (2)

    2. Struck · 26 U.S.C. § 460(e)(2)

       Pub. L. 115–97, § 13102(d)(2), struck out former par. (2) which related to determination of taxpayer’s gross receipts

    Source evidence

    Code amendment note
    Subsec. (e)(2). Pub. L. 115–97, § 13102(d)(2), added par. (2) and struck out former par. (2) which related to determination of taxpayer’s gross receipts.

    Enacted provision · exact public law section
    (2) Conforming amendments.— Section 460(e) is amended by striking paragraphs (2) and (3), by redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph: “(2) Rules related to gross receipts test.— “(A) Application of gross receipts test to individuals, etc.— For purposes of paragraph (1)(B)(ii), in the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership. “(B) Coordination with section 481.— Any change in method of accounting made pursuant to paragraph (1)(B)(ii) shall be treated as initiated by the taxpayer and made with the consent of the Secretary. Such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.” .

55. 2017

    Pub. L. 115–97 § 13102(d)(2) · 131 Stat. 2054

    1. Redesignated · 26 U.S.C. § 460(e)(3)(6)

       Pub. L. 115–97, § 13102(d)(2), redesignated pars. (4) to (6) as (3) to (5), respectively

    2. Struck · 26 U.S.C. § 460(e)(3)(6)

       Pub. L. 115–97, § 13102(d)(2), struck out former par. (3) which related to controlled group of corporations

    Source evidence

    Code amendment note
    Subsec. (e)(3) to (6). Pub. L. 115–97, § 13102(d)(2), redesignated pars. (4) to (6) as (3) to (5), respectively, and struck out former par. (3) which related to controlled group of corporations.

    Enacted provision · exact public law section
    (2) Conforming amendments.— Section 460(e) is amended by striking paragraphs (2) and (3), by redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph: “(2) Rules related to gross receipts test.— “(A) Application of gross receipts test to individuals, etc.— For purposes of paragraph (1)(B)(ii), in the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership. “(B) Coordination with section 481.— Any change in method of accounting made pursuant to paragraph (1)(B)(ii) shall be treated as initiated by the taxpayer and made with the consent of the Secretary. Such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.” .

56. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 div. U title IV § 401(a)(116) · 132 Stat. 348

    Inserted · 26 U.S.C. § 460(b)(2)(A)

    Pub. L. 115–141 inserted comma after “first”

    Source evidence

    Code amendment note
    Subsec. (b)(2)(A). Pub. L. 115–141 inserted comma after “first”.

    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.

57. 2025

    Pub. L. 119–21 § 70301(a)(5)(D) · 139 Stat. 189

    Substituted · 26 U.S.C. § 460(c)(6)(B)

    Pub. L. 119–21, § 70301(a)(5)(D), substituted “which has a recovery period of 7 years or less.” for “which—

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (c)(6)(B). Pub. L. 119–21, § 70301(a)(5)(D), substituted “which has a recovery period of 7 years or less.” for “which—

    “(i) has a recovery period of 7 years or less, and “(ii) is placed in service before January 1, 2027 (January 1, 2028 in the case of property described in section 168(k)(2)(B)).”

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

58. 2025

    Pub. L. 119–21 § 70430(a)(1) · 139 Stat. 189

    1. Substituted · 26 U.S.C. § 460(e)(1)

       Pub. L. 119–21, § 70430(a)(1), in concluding provisions, substituted “residential construction contract” for “home construction contract”

    2. Substituted · 26 U.S.C. § 460(e)(1)

       Pub. L. 119–21, § 70430(a)(1), in concluding provisions, inserted “(determined by substituting ‘3-year’ for ‘2-year’ in subparagraph (B)(i) for any residential construction contract which is not a home construction contract)” after “the requirements of clauses (i) and (ii) of subparagraph (B)”

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (e)(1). Pub. L. 119–21, § 70430(a)(1), in concluding provisions, substituted “residential construction contract” for “home construction contract” and inserted “(determined by substituting ‘3-year’ for ‘2-year’ in subparagraph (B)(i) for any residential construction contract which is not a home construction contract)” after “the requirements of clauses (i) and (ii) of subparagraph (B)”.

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

59. 2025

    Pub. L. 119–21 § 70430(a)(1)(A) · 139 Stat. 189

    Substituted · 26 U.S.C. § 460(e)(1)(A)

    Pub. L. 119–21, § 70430(a)(1)(A), substituted “residential construction contract” for “home construction contract”

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (e)(1)(A). Pub. L. 119–21, § 70430(a)(1)(A), substituted “residential construction contract” for “home construction contract”.

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

60. 2025

    Pub. L. 119–21 § 70430(a)(2) · 139 Stat. 189

    1. Redesignated · 26 U.S.C. § 460(e)(4)

       Pub. L. 119–21, § 70430(a)(2), redesignated par. (5) as (4)

    2. Struck · 26 U.S.C. § 460(e)(4)

       Pub. L. 119–21, § 70430(a)(2), struck out former par. (4). Prior to amendment, text of par. (4) read as follows: “In the case of any residential construction contract which is not a home construction contract, subsection (a) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1989) shall apply except that such subsection shall be applied—

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (e)(4). Pub. L. 119–21, § 70430(a)(2), redesignated par. (5) as (4) and struck out former par. (4). Prior to amendment, text of par. (4) read as follows: “In the case of any residential construction contract which is not a home construction contract, subsection (a) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1989) shall apply except that such subsection shall be applied—

    “(A) by substituting ‘70 percent’ for ‘90 percent’ each place it appears, and “(B) by substituting ‘30 percent’ for ‘10 percent’.”

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

61. 2025

    Pub. L. 119–21 § 70430(a)(3) · 139 Stat. 189

    Substituted · 26 U.S.C. § 460(e)(4)(A)

    Pub. L. 119–21, § 70430(a)(3), substituted “paragraph (3)” for “paragraph (4)” in introductory provisions

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (e)(4)(A). Pub. L. 119–21, § 70430(a)(3), substituted “paragraph (3)” for “paragraph (4)” in introductory provisions.

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

62. 2025

    Pub. L. 119–21 § 70430(a)(2) · 139 Stat. 189

    Redesignated · 26 U.S.C. § 460(e)(5)

    Pub. L. 119–21, § 70430(a)(2), redesignated par. (5) as (4)

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (e)(5). Pub. L. 119–21, § 70430(a)(2), redesignated par. (5) as (4).

    Effective date note
    Amendment by section 70301(a)(5)(D) of Pub. L. 119–21 applicable to property acquired after Jan. 19, 2025, see section 70301(c) of Pub. L. 119–21, set out as a note under section 168 of this title. Amendment by section 70430(a) of Pub. L. 119–21 applicable to contracts entered into in taxable years beginning after July 4, 2025, see section 70430(c) of Pub. L. 119–21, set out as a note under section 56 of this title.

65 of 73 references resolved to an enrolled provision · 8 unresolved