§ 4945. Taxes on taxable expenditures

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. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title I § 101(b) · 83 Stat. 487

   Enacted · 26 U.S.C. § 4945

   Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 512

   Source evidence

   Code source credit
   Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 512

   Enacted provision · exact public law section
   (b) Amendment of Subtitle D.— Subtitle D (relating to miscellaneous 26 USC 4001–4931. excise taxes) is amended by adding at the end thereof the following new chapter: “CHAPTER 42.— PRIVATE FOUNDATIONS “Sec. 4940. Excise tax based on investment income. “Sec. 4941. Taxes on self-dealing. “Sec. 4942. Taxes on failure to distribute income. “Sec. 4943. Taxes on excess business holdings. “Sec. 4944. Taxes on investments which jeopardize charitable purpose. “Sec. 4945. Taxes on taxable expenditures. “Sec. 4946. Definitions and special rules. “Sec. 4947. Application of taxes to certain nonexempt trusts. “Sec. 4948. Application of taxes and denial of exemption with respect to certain foreign organizations. “SEC. 4940. EXCISE TAX BASED ON INVESTMENT INCOME. “(a) Tax-Exempt Foundations.— There is hereby imposed on each private foundation which is exempt from taxation under section 501(a) 68A Stat. 163. 26 USC 501. for the taxable year, with respect to the carrying on of its activities, a tax equal to 4 percent of the net investment income of such foundation for the taxable year. “(b) Taxable Foundations.— There is hereby imposed on each private foundation which is not exempt from taxation under section 501(a) for the taxable year, with respect to the carrying on of its activities, a tax equal to— “(1) the amount (if any) by which the sum of (A) the tax imposed under subsection (a) (computed as if such subsection applied to such private foundation for the taxable year), plus (B) the amount of the tax which would have been imposed under section 511 for the taxable year if such private foundation had been exempt from taxation under section 501(a), exceeds “(2) the tax imposed under subtitle A on such private foundation for the taxable year. “(c) Net Investment Income Defined.— “(1) In general.— For purposes of subsection (a), the net investment income is the amount by which (A) the sum of the gross investment income and the net capital gain exceeds (B) the deductions allowed by paragraph (3). Except to the extent inconsistent with the provisions of this section, net investment income shall be determined under the principles of subtitle A. “(2) Gross investment income.— For purposes of paragraph (1), the term ‘gross investment income’ means the gross amount of income from interest, dividends, rents, and royalties, but not including any such income to the extent included in computing the tax imposed by section 511. “(3) Deductions.— “(A) In general.— For purposes of paragraph (1), there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred for the production or collection of gross investment income or for the management, conservation, or maintenance of property held for the production of such income, determined with the modifications set forth in subparagraph (B). “(B) Modifications.— For purposes of subparagraph (A)— “(i) The deduction provided by section 167 shall be Post, pp. 625, 649. allowed, but only on the basis of the straight line method of depreciation. “(ii) The deduction for depletion provided by section 611 shall be allowed, but such deduction shall be determined 68A Stat. 207. 26 USC 611. without regard to section 613 (relating to percentage depletion). Post, p. 629. “(4) Capital gains and losses.— For purposes of paragraph (1) in determining net capital gain— “(A) There shall be taken into account only gains and losses from the sale or other disposition of property used for the production of interest, dividends, rents, and royalties, and property used for the production of income included in computing the tax imposed by section 511 (except to the extent Post, p. 536. gain or loss from the sale or other disposition of such property is taken into account for purposes of such tax). “(B) The basis for determining gain in the case of property held by the private foundation on December 31, 1969, and continuously thereafter to the date of its disposition shall be deemed to be not less than the fair market value of such property on December 31, 1969. “(C) Losses from sales or other dispositions of property shall be allowed only to the extent of gains from such sales or other dispositions, and there shall be no capital loss carryovers. “(5) Tax-exempt income.— For purposes of this section, net investment income shall be determined by applying section 103 Post, p. 656. (relating to interest on certain governmental obligations) and section 265 (relating to expenses and interest relating to tax-exempt 68A Stat. 78; 78 Stat. 56. income). “SEC. 4941. TAXES ON SELF-DEALING. “(a) Initial Taxes.— “(1) On self-dealer.— There is hereby imposed a tax on each act of self-dealing between a disqualified person and a private foundation. The rate of tax shall be equal to 5 percent of the amount involved with respect to the act of self-dealing for each year (or part thereof) in the taxable period. The tax imposed by this paragraph shall be paid by any disqualified person (other than a foundation manager acting only as such) who participates in the act of self-dealing. In the case of a government official (as defined in section 4946(c)), a tax shall be imposed by this paragraph only if such disqualified person participates in the act of self-dealing knowing that it is such an act. “(2) On foundation manager.— In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any foundation manager in an act of self-dealing between a disqualified person and a private foundation, knowing that it is such an act, a tax equal to 2½ percent of the amount involved with respect to the act of self-dealing for each year (or part thereof) in the taxable period, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who participated in the act of self-dealing. “(b) Additional Taxes.— “(1) On self-dealer.— In any case in which an initial tax is imposed by subsection (a)(1) on an act of self-dealing by a disqualified person with a private foundation and the act is not corrected within the correction period, there is hereby imposed a tax equal to 200 percent of the amount involved. The tax imposed by this paragraph shall be paid by any disqualified person (other than a foundation manager acting only as such) who participated in the act of self-dealing. “(2) On foundation manager.— In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the correction, there is hereby imposed a tax equal to 50 percent of the amount involved. The tax imposed by this paragraph shall be paid by any foundation manager who refused to agree to part or all of the correction. “(c) Special Rules.— For purposes of subsections (a) and (b)— “(1) Joint and several liability.— If more than one person is liable under any paragraph of subsection (a) or (b) with respect to any one act of self-dealing, all such persons shall be jointly and severally liable under such paragraph with respect to such act. “(2) $10,000 limit for management.— With respect to any one act of self-dealing, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $10,000. “(d) Self-Dealing.— “(1) In general.— For purposes of this section, the term ‘self-dealing’ means any direct or indirect— “(A) sale or exchange, or leasing, of property between a private foundation and a disqualified person; “(B) lending of money or other extension of credit between a private foundation and a disqualified person; “(C) furnishing of goods, services, or facilities between a private foundation and a disqualified person; “(D) payment of compensation (or payment or reimbursement of expenses) by a private foundation to a disqualified person; “(E) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation; and “(F) agreement by a private foundation to make any payment of money or other property to a government official (as defined in section 4946(c)), other than an agreement to employ such individual for any period after the termination of his government service if such individual is terminating his government service within a 90-day period. “(2) Special rules.— For purposes of paragraph (1)— “(A) the transfer of real or personal property by a disqualified person to a private foundation shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the foundation assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer; “(B) the lending of money by a disqualified person to a private foundation shall not be an act of self-dealing if the loan is without interest or other charge and if the proceeds of the loan are used exclusively for purposes specified in 68A Stat. 163. 26 USC 501. section 501(c)(3); “(C) the furnishing of goods, services, or facilities by a disqualified person to a private foundation shall not be an act of self-dealing if the furnishing is without charge and if the goods, services, or facilities so furnished are used exclusively for purposes specified in section 501(c)(3); 68A Stat 163. 26 USC 501. “(D) the furnishing of goods, services, or facilities by a private foundation to a disqualified person shall not be an act of self-dealing if such furnishing is made on a basis no more favorable than that on which such goods, services, or facilities are made available to the general public; “(E) except in the case of a government official (as defined in section 4946(c)), the payment of compensation (and the payment or reimbursement of expenses) by a private foundation to a disqualified person for personal services which are reasonable and necessary to carrying out the exempt purpose of the private foundation shall not be an act of self-dealing if the compensation (or payment or reimbursement) is not excessive; “(F) any transaction between a private foundation and a corporation which is a disqualified person (as defined in section 4946(a)), pursuant to any liquidation, merger, redemption, recapitalization, or other corporate adjustment, organization, or reorganization, shall not be an act of self-dealing if all of the securities of the same class as that held by the foundation are subject to the same terms and such terms provide for receipt by the foundation of no less than fair market value; and “(G) in the case of a government official (as defined in section 4946(c)), paragraph (1) shall in addition not apply to— “(i) prizes and awards which are subject to the provisions of section 74(b), if the recipients of such prizes and awards are selected from the general public, “(ii) scholarships and fellowship grants which are subject to the provisions of section 117(a) and are to be used for study at an educational institution described in section 151(e)(4), “(iii) any annuity or other payment (forming part of a stock-bonus, pension, or profit-sharing plan) by a trust which is a qualified trust under section 401, “(iv) any annuity or other payment under a plan which meets the requirements of section 404(a)(2), “(v) any contribution or gift (other than a contribution or gift of money) to, or services or facilities made available to, any such individual, if the aggregate value of such contributions, gifts, services, and facilities to, or made available to, such individual during any calendar year does not exceed $25, “(vi) any payment made under chapter 41 of title 5, United States Code, or 80 Stat. 432. 5 USC 4101–4118. “(vii) any payment or reimbursement of traveling expenses for travel solely from one point in the United States to another point in the United States, but only if such payment or reimbursement does not exceed the actual cost of the transportation involved plus an amount for all other traveling expenses not in excess of 125 percent of the maximum amount payable under section 5702(a) of title 5, United States Code, for like travel Ante, p. 190. by employees of the United States. “(e) Other Definitions.— For purposes of this section— “(1) Taxable period.— The term ‘taxable period’ means, with respect to any act of self-dealing, the period beginning with the date on which the act of self-dealing occurs and ending on whichever of the following is the earlier: (A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection 68A Stat. 770. 26 USC 6212. (a)(1) under section 6212, or (B) the date on which correction of the act of self-dealing is completed. “(2) Amount involved.— The term ‘amount involved’ means, with respect to any act of self-dealing, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that, in the case of services described in subsection (d)(2)(E), the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value— “(A) in the case of the taxes imposed by subsection (a), shall be determined as of the date on which the act of self-dealing occurs; and “(B) in the case of the taxes imposed by subsection (b), shall be the highest fair market value during the correction period. “(3) Correction.— The terms ‘correction’ and ‘correct’ mean, with respect to any act of self-dealing, undoing the transaction to the extent possible, but in any case placing the private foundation in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards. “(4) Correction Period.— The term ‘correction period’ means, with respect to any act of self-dealing, the period beginning with the date on which the act of self-dealing occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b)(1) under section 6212, extended by— “(A) any period in which a deficiency cannot be assessed 26 USC 6213. under section 6213 (a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about correction of the act of self-dealing. “SEC. 4942. TAXES ON FAILURE TO DISTRIBUTE INCOME. “(a) Initial Tax.— There is hereby imposed on the undistributed income of a private foundation for any taxable year, which has not been distributed before the first day of the second (or any succeeding) taxable year following such taxable year (if such first day falls within the taxable period), a tax equal to 15 percent of the amount of such income remaining undistributed at the beginning of such second (or succeeding) taxable year. The tax imposed by this subsection shall not apply to the undistributed income of a private foundation— “(1) for any taxable year for which it is an operating foundation (as defined in subsection (j)(3)), or “(2) to the extent that the foundation failed to distribute any amount solely because of an incorrect valuation of assets under subsection (e), if— “(A) the failure to value the assets properly was not willful and was due to reasonable cause, “(B) such amount is distributed as qualifying distributions (within the meaning of subsection (g)) by the foundation during the allowable distribution period (as defined in subsection (j)(4)), “(C) the foundation notifies the Secretary or his delegate that such amount has been distributed (within the meaning of subparagraph (B)) to correct such failure, and “(D) such distribution is treated under subsection (h)(2) as made out of the undistributed income for the taxable year for which a tax would (except for this paragraph) have been imposed under this subsection. “(b) Additional Tax.— In any case in which an initial tax is imposed under subsection (a) on the undistributed income of a private foundation for any taxable year, if any portion of such income remains undistributed at the close of the correction period, there is hereby imposed a tax equal to 100 percent of the amount remaining undistributed at such time. “(c) Undistributed Income.— For purposes of this section, the Definition. term ‘undistributed income’ means, with respect to any private foundation for any taxable year as of any time, the amount by which— “(1) the distributable amount for such taxable year, exceeds “(2) the qualifying distributions made before such time out of such distributable amount. “(d) Distributable Amount.— For purposes of this section, the Definition. term ‘distributable amount’ means, with respect to any foundation for any taxable year, an amount equal to— “(1) the minimum investment return or the adjusted net income (whichever is higher), reduced by “(2) the sum of the taxes imposed on such private foundation for the taxable year under subtitle A and section 4940. 26 USC 1–1563. “(e) Minimum Investment return.— “(1) In general.— For purposes of subsection (d), the minimum investment return for any private foundation for any taxable year is the amount determined by multiplying— “(A) the excess of (i) the aggregate fair market value of all assets of the foundation other than those being used (or held for use) directly in carrying out the foundation’s exempt purpose over (ii) the acquisition indebtedness with respect to such assets (determined under section 514(c)(1), but Post, p. 545. without regard to the taxable year in which the indebtedness was incurred), by “(B) the applicable percentage for such year, determined under paragraph (3). “(2) Valuation.— For purposes of paragraph (1)(A), the fair market value of securities for which market quotations are readily available shall be determined on a monthly basis. For all other assets, the fair market value shall be determined at such times and in such manner as the Secretary or his delegate shall by regulations prescribe. “(3) Applicable percentage.— For purposes of paragraph (1)(B), the applicable percentage for taxable years beginning in 1970 is 6 percent. The applicable percentage for any taxable year beginning after 1970 shall be determined and published by the Secretary or his delegate and shall bear a relationship to 6 percent which the Secretary or his delegate determines to be comparable to the relationship which the money rates and investment yields for the calendar year immediately preceding the beginning of the taxable year bear to the money rates and investment yields for the calendar year 1969. “(4) Transitional rules.— “For special rules applicable to organizations created before May 27, 1969, see section 101(1)(3) of the Tax Reform Act of 1969. Post, p. 534. “(f) Adjusted Net Income.— “(1) Defined.— For purposes of subsection (d), the term ‘adjusted net income’ means the excess (if any) of— “(A) the gross income for the taxable year (determined with the income modifications provided by paragraph (2)), over “(B) the sum of the deductions (determined with the deduction modifications provided by paragraph (3)) which would be allowed to a corporation subject to the tax imposed 78 Stat. 25, 118. 26 USC 11. by section 11 for the taxable year. “(2) Income modifications.— The income modifications referred to in paragraph (1)(A) are as follows: “(A) section 103 (relating to interest on certain governmental obligations) shall not apply, “(B) capital gains and losses from the sale or other disposition of property shall be taken into account only in an amount equal to any net short-term capital gain for the taxable year; and “(C) there shall be taken into account— “(i) amounts received or accrued as repayments of amounts which were taken into account as a qualifying distribution within the meaning of subsection (g)(1)(A) for any taxable year; “(ii) notwithstanding subparagraph (B), amounts received or accrued from the sale or other disposition of property to the extent that the acquisition of such property was taken into account as a qualifying distribution (within the meaning of subsection (g)(1)(B)) for any taxable year; and “(iii) any amount set aside under subsection (g)(2) to the extent it is determined that such amount is not necessary for the purposes for which it was set aside. “(3) Deduction modifications.— The deduction modifications referred to in paragraph (1)(B) are as follows: “(A) no deduction shall be allowed other than all the ordinary and necessary expenses paid or incurred for the production or collection of gross income or for the management, conservation, or maintenance of property held for the production of such income and the allowances for depreciation and depletion determined under section 4940(c)(3)(B), and “(B) section 265 (relating to expenses and interest relating to tax-exempt interest) shall not apply. “(4) Transitional rule.— For purposes of paragraph (2)(B), the basis (for purposes of determining gain) of property held by a private foundation on December 31, 1969, and continuously thereafter to the date of its disposition, shall be deemed to be not less than the fair market value of such property on December 31, 1969. “(g) Qualifying Distributions Defined.— “(1) In general.— For purposes of this section, the term ‘qualifying distribution’ means— “(A) any amount (including administrative expenses) paid to accomplish one or more purposes described in section Post, p. 553. 170(c)(2)(B), other than any contribution to (i) an organization controlled (directly or indirectly) by the foundation or one or more disqualified persons (as defined in section 4946) with respect to the foundation, except as provided in paragraph (3), or (ii) a private foundation which is not an operating foundation (as defined in subsection (j)(3)), except as provided in paragraph (3), or “(B) any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes described in section 170(c)(2)(B). Post, p. 553. “(2) Certain set-asides.— Subject to such terms and conditions as may be prescribed by the Secretary or his delegate, an amount set aside for a specific project which comes within one or more purposes described in section 170(c)(2)(B) may be treated as a qualifying distribution, but only if, at the time of the set-aside, the private foundation establishes to the satisfaction of the Secretary or his delegate that— “(A) the amount will be paid for the specific project within 5 years, and “(B) the project is one which can be better accomplished by such set-aside than by immediate payment of funds. For good cause shown, the period for paying the amount set aside may be extended by the Secretary or his delegate. “(3) Certain contributions to section 501(c)(3) organizations.— For purposes of this section, the term ‘qualifying distribution’ includes a contribution to a section 501(c)(3) organization 68A Stat. 163. 26 USC 501. described in paragraph (1)(A)(i) or (ii) if— “(A) not later than the close of the first taxable year after its taxable year in which such contribution is received, such organization makes a distribution equal to the amount of such contribution and such distribution is a qualifying distribution (within the meaning of paragraph (1) or (2), without regard to this paragraph) which is treated under subsection (h) as a distribution out of corpus (or would be so treated if such section 501(c)(3) organization were a private foundation which is not an operating foundation), and “(B) the private foundation making the contribution obtains adequate records or other sufficient evidence from such organization showing that the qualifying distribution described in subparagraph (A) has been made by such organization. “(h) Treatment of Qualifying Distributions.— “(1) In general.— Except as provided in paragraph (2), any qualifying distribution made during a taxable year shall be treated as made— “(A) first out of the undistributed income of the immediately preceding taxable year (if the private foundation was subject to the tax imposed by this section for such preceding taxable year) to the extent thereof, “(B) second out of the undistributed income for the taxable year to the extent thereof, and “(C) then out of corpus. For purposes of this paragraph, distributions shall be taken into account in the order of time in which made. “(2) Correction of deficient distributions for prior taxable years, etc.— In the case of any qualifying distribution which (under paragraph (1)) is not treated as made out of the undistributed income of the immediately preceding taxable year, the foundation may elect to treat any portion of such distribution as made out of the undistributed income of a designated prior taxable year or out of corpus. The election shall be made by the foundation at such time and in such manner as the Secretary or his delegate shall by regulations prescribe. “(i) Adjustment of Distributable Amount Where Distributions During Prior Years Have Exceeded Income.— “(1) In general.— If, for the taxable years in the adjustment period for which an organization is a private foundation— “(A) the aggregate qualifying distributions treated (under subsection (h)) as made out of the undistributed income for such taxable year or as made out of corpus (except to the extent subsection (g)(3) with respect to the recipient private Post, p. 552. foundation or section 170(b)(1)(E)(ii) applies) during such taxable years, exceed “(B) the distributable amounts for such taxable years (determined without regard to this subsection), then, for purposes of this section (other than subsection (h)), the distributable amount for the taxable year shall be reduced by an amount equal to such excess. “(2) Taxable years in adjustment period.— For purposes of paragraph (1), with respect to any taxable year of a private foundation the taxable years in the adjustment period are the taxable years (not exceeding 5) beginning after December 31, 1969, and immediately preceding the taxable year, “(j) Other Definitions.— For purposes of this section— “(1) Taxable period.— The term ‘taxable period’ means, with respect to the undistributed income for any taxable year, the period beginning with the first day of the taxable year and ending on the date of mailing of a notice of deficiency with respect to the tax 68A Stat. 770. 26 USC 6212. imposed by subsection (a) under section 6212. “(2) Correction period.— The term ‘correction period’ means, with respect to any private foundation for any taxable year, the period beginning with the first day of the taxable year and ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (b)) under section 6212, extended by— “(A) any period in which a deficiency cannot be assessed 26 USC 6213. under section 6213 (a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit a distribution of undistributed income under this section. “(3) Operating foundation.— For purposes of this section, the term ‘operating foundation’ means any organization— “(A) which makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially all of its adjusted net income (as defined in subsection (f)); and “(B) (i) substantially more than half of the assets of which are devoted directly to such activities or to functionally related businesses (as defined in paragraph (5)), or to both, or are stock of a corporation which is controlled by the foundation and substantially all of the assets of which are so devoted, “(ii) which normally makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated in an amount not less than two-thirds of its minimum investment return (as defined in subsection (e)), or “(iii) substantially all of the support (other than gross investment income as defined in section 509(e)) of which is Ante, p. 496. normally received from the general public and from 5 or more exempt organizations which are not described in section 4946 (a)(1)(H) with respect to each other or the recipient foundation; not more than 25 percent of the support (other than gross investment income) of which is normally received from any one such exempt organization; and not more than half of the support of which is normally received from gross investment income. “(4) Allowable distribution period.— The term ‘allowable Definition. distribution period’ means, with respect to any private foundation, the period beginning with the first day of the first taxable year following the taxable year in which the incorrect valuation (described in subsection (a)(2)) occurred and ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (a)) under section 6212 extended 68A Stat. 770. 26 USC 6212. by— “(A) any period in which a deficiency cannot be assessed under section 6213(a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit a distribution of undistributed income under this section. “(5) Functionally related business.— The term ‘functionally Definition. related business’ means— “(A) a trade or business which is not an unrelated trade or business (as defined in section 513), or Post, pp. 541, 542. “(B) an activity which is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which is related (aside from the need of the organization for income or funds or the use it makes of the profits derived) to the exempt purposes of the organization. “SEC. 4943. TAXES ON EXCESS BUSINESS HOLDINGS. “(a) Initial Tax.— “(1) Imposition.— There is hereby imposed on the excess business holdings of any private foundation in a business enterprise during any taxable year which ends during the taxable period a tax equal to 5 percent of the value of such holdings. “(2) Special rules.— The tax imposed by paragraph (1)— “(A) shall be imposed on the last day of the taxable year, but “(B) with respect to the private foundation’s holdings in any business enterprise, shall be determined as of that day during the taxable year when the foundation’s excess holdings in such enterprise were the greatest. “(b) Additional Tax.— In any case in which an initial tax is imposed under subsection (a) with respect to the holdings of a private foundation in any business enterprise, if, at the close of the correction period with respect to such holdings, the foundation still has excess business holdings in such enterprise, there is hereby imposed a tax equal to 200 percent of such excess business holdings. “(c) Excess Business Holdings.— For purposes of this section— Definition. “(1) In general.— The term ‘excess business holdings’ means, with respect to the holdings of any private foundation in any business enterprise, the amount of stock or other interest in the enterprise which the foundation would have to dispose of to a person other than a disqualified person in order for the remaining holdings of the foundation in such enterprise to be permitted holdings. “(2) Permitted holdings in a corporation.— “(A) In general.— The permitted holdings of any private foundation in an incorporated business enterprise are— “(i) 20 percent of the voting stock, reduced by “(ii) the percentage of the voting stock owned by all disqualified persons. In any case in which all disqualified persons together do not own more than 20 percent of the voting stock of an incorporated business enterprise, nonvoting stock held by the private foundation shall also be treated as permitted holdings. “(B) 35 percent rule where third person has effective control of enterprise.— If— “(i) the private foundation and all disqualified persons together do not own more than 35 percent of the voting stock of an incorporated business enterprise, and “(ii) it is established to the satisfaction of the Secretary or his delegate that effective control of the corporation is in one or more persons who are not disqualified persons with respect to the foundation, then subparagraph (A) shall be applied by substituting 35 percent for 20 percent. “(C) 2 percent de minimis rule.— A private foundation shall not be treated as having excess business holdings in any corporation in which it (together with all other private foundations which are described in section 4946(a)(1)(H)) owns not more than 2 percent of the voting stock and not more than 2 percent in value of all outstanding shares of all classes of stock. “(3) Permitted holdings in partnerships, etc.— The permitted holdings of a private foundation in any business enterprise which is not incorporated shall be determined under regulations prescribed by the Secretary or his delegate. Such regulations shall be consistent in principle with paragraphs (2) and (4), except that— “(A) in the case of a partnership or joint venture, ‘profits interest’ shall be substituted for ‘voting stock’, and ‘capital interest’ shall be substituted for ‘nonvoting stock’, “(B) in the case of a proprietorship, there shall be no permitted holdings, and “(C) in any other case, ‘beneficial interest’ shall be substituted for ‘voting stock’. “(4) Present holdings.— “(A) (i) In applying this section with respect to the holdings of any private foundation in a business enterprise, if such foundation and all disqualified persons together have holdings in such enterprise in excess of 20 percent of the voting stock on May 26, 1969, the percentage of such holdings shall be substituted for ‘20 percent,’ and for ‘35 percent’ (if the percentage of such holdings is greater than 35 percent), wherever it appears in paragraph (2), but in no event shall the percentage so substituted be more than 50 percent. “(ii) If the percentage of the holdings of any private foundation and all disqualified persons together in a business enterprise (or if the percentage of the holdings of the private foundation in such enterprise) decreases for any reason, clause (i) and subparagraph (D) shall, except as provided in the next sentence, be applied for all periods after such decrease by substituting such decreased percentage for the percentage held on May 26, 1969, but in no event shall the percentage substituted be less than 20 percent. For purposes of this clause, any decrease in percentage holdings attributable to issuances of stock (or to issuances of stock coupled with redemptions of stock) shall be determined only as of the close of each taxable year of the private foundation unless the aggregate of the percentage decreases attributable to the issuances of stock (or such issuances and redemptions) during such taxable year equals or exceeds 1 percent. “(iii) The percentage substituted under clause (i), and any percentage substituted under subparagraph (D), shall be applied both with respect to the voting stock and, separately, with respect to the value of all outstanding shares of all classes of stock. “(iv) In the case of any merger, recapitalization, or other reorganization involving one or more business enterprises, the application of clauses (i), (ii), and (iii) shall be determined under regulations prescribed by the Secretary or his delegate. “(B) Any interest in a business enterprise which a private foundation holds on May 26, 1969, if the private foundation on such date has excess business holdings, shall (while held by the foundation) be treated as held by a disqualified person (rather than by the private foundation)— “(i) during the 20-year period beginning on such date, if the private foundation has more than a 95 percent voting stock interest on such date, “(ii) except as provided in clause (i), during the 15-year period beginning on such date, if the foundation and all disqualified persons have more than a 75 percent voting stock interest (or more than a 75 percent profits or beneficial interest in the case of any unincorporated enterprise) on such date or more than a 75 percent interest in the value of all outstanding shares of all classes of stock (or more than a 75 percent capital interest in the case of a partnership or joint venture) on such date, or “(iii) during the 10-year period beginning on such date, in any other case. “(C) The 20-year, 15-year, and 10-year periods described in subparagraph (B) for the disposition of excess business holdings shall be suspended during the pendency of any judicial proceeding by the private foundation which is necessary to reform, or to excuse such foundation from compliance with, its governing instrument or any other instrument (as in effect on May 26, 1969) in order to allow disposition of such holdings. “(D) (i) If, at any time during the second phase, all disqualified persons together have holdings in a business enterprise in excess of 2 percent of the voting stock of such enterprise, then subparagraph (A)(i) shall be applied by substituting for ‘50 percent’ the following: ‘50 percent, of which not more than 25 percent shall be voting stock held by the private foundation’. “(ii) If, immediately before the close of the second phase, clause (i) of this subparagraph did not apply with respect to a business enterprise, then for all periods after the close of the second phase subparagraph (A)(i) shall be applied by substituting for ‘50 percent’ the following: ‘35 percent, or if at any time after the close of the second phase all disqualified persons together have had holdings in such enterprise which exceed 2 percent of the voting stock, 35 percent, of which not more than 25 percent shall be voting stock held by the private foundation’. “(iii) For purposes of this subparagraph, the term ‘second phase’ means the 15-year period immediately following the 20-year, 15-year, or 10-year period described in subparagraph (B), whichever applies, as modified by subparagraph (C). “(E) Clause (ii) of subparagraph (B) shall not apply with respect to any business enterprise if before January 1, 1971, one or more individuals who are substantial contributors (or members of the family (within the meaning of section 1946(d)) of one or more substantial contributors) to the private foundation and who on May 26, 1969, held more than 15 percent of the voting stock of the enterprise elect, in such manner as the Secretary or his delegate may by regulations prescribe, not to have such clause (ii) apply with respect to such enterprise. “(5) Holdings acquired by trust or will.— Paragraph (4) (other than subparagraph (B)(i)) shall apply to any interest in a business enterprise which a private foundation acquires under the terms of a trust which was irrevocable on May 26, 1969, or under the terms of a will executed on or before such date, which are in effect on such date and at all times thereafter, as if such interest were held on May 26, 1969, except that the 15-year and 10-year periods prescribed in clauses (ii) and (iii) of paragraph (4)(B) shall commence with respect to such interest on the date of distribution under the trust or will in lieu of May 26, 1969. “(6) 5-year period to dispose of gifts, bequests, etc.— Except as provided in paragraph (5), if, after May 26, 1969, there is a change in the holdings in a business enterprise (other than by purchase by the private foundation or by a disqualified person) which causes the private foundation to have— “(A) excess business holdings in such enterprise, the interest of the foundation in such enterprise (immediately after such change) shall (while held by the foundation) be treated as held by a disqualified person (rather than by the foundation) during the 5-year period beginning on the date of such change in holdings; or “(B) an increase in excess business holdings in such enterprise (determined without regard to subparagraph (A)), subparagraph (A) shall apply, except that the excess holdings immediately preceding the increase therein shall not be treated, solely because of such increase, as held by a disqualified person (rather than by the foundation). “(d) Definitions; Special Rules.— For purposes of this section— “(1) Business holdings.— In computing the holdings of a private foundation, or a disqualified person (as defined in section 4946) with respect thereto, in any business enterprise, any stock or other interest 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. The preceding sentence shall not apply with respect to an income or remainder interest of a private foundation in a trust described in section 4947(a)(2), but only if, in the case of property transferred in trust after May 26, 1969, such foundation holds only an income interest or only a remainder interest in such trust. “(2) Taxable period.— The term ‘taxable period’ means, with respect to any excess business holdings of a private foundation in a business enterprise, the period beginning on the first day on which there are such excess holdings and ending on the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212 in respect of such holdings. 68A Stat. 770. 26 USC 6212. “(3) Correction period.— The term ‘correction period’ means, with respect to excess business holdings of a private foundation in a business enterprise, the period ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (b)) under section 6212, extended by— “(A) any period in which a deficiency cannot be assessed under section 6213(a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit orderly disposition of such excess business holdings. “(4) Business enterprise.— The term ‘business enterprise’ does not include— “(A) a functionally related business (as defined in section 4942(j)(5)), or “(B) a trade or business at least 95 percent of the gross income of which is derived from passive sources. For purposes of subparagraph (B), gross income from passive sources includes the items excluded by section 512(b)(1), (2), (3), and (5), and income from the sale of goods (including Post, p. 538. 26 USC 512. charges or costs passed on at cost to purchasers of such goods or income received in settlement of a dispute concerning or in lieu of the exercise of the right to sell such goods) if the seller does not manufacture, produce, physically receive or deliver, negotiate sales of, or maintain inventories in such goods. “SEC. 4944. TAXES ON INVESTMENTS WHICH JEOPARDIZE CHARITABLE PURPOSE. “(a) Initial Taxes.— “(1) On the private foundation.— If a private foundation invests any amount in such a manner as to jeopardize the carrying out of any of its exempt purposes, there is hereby imposed on the making of such investment a tax equal to 5 percent of the amount so invested for each year (or part thereof) in the taxable period. The tax imposed by this paragraph shall be paid by the private foundation. “(2) On the management.— In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any foundation manager in the making of the investment, knowing that it is jeopardizing the carrying out of any of the foundation’s exempt purposes, a tax equal to 5 percent of the amount so invested for each year (or part thereof) in the taxable period, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who participated in the making of the investment. “(b) Additional Taxes.— “(1) On the foundation.— In any case in which an initial tax is imposed by subsection (a)(1) on the making of an investment and such investment is not removed from jeopardy within the correction period, there is hereby imposed a tax equal to 25 percent of the amount of the investment. The tax imposed by this paragraph shall be paid by the private foundation. “(2) On the management.— In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the removal from jeopardy, there is hereby imposed a tax equal to 5 percent of the amount of the investment. The tax imposed by this paragraph shall be paid by any foundation manager who refused to agree to part or all of the removal from jeopardy. “(c) Exception for Program-Related Investments.— For purposes of this section, investments, the primary purpose of which is to accomplish one or more of the purposes described in section 170(c) Post, p. 553. (2)(B), and no significant purpose of which is the production of income or the appreciation of property, shall not be considered as investments which jeopardize the carrying out of exempt purposes. “(d) Special Rules.— For purposes of subsections (a) and (b)— “(1) Joint and several liability.— If more than one person is liable under subsection (a)(2) or (b)(2) with respect to any one investment, all such persons shall be jointly and severally liable under such paragraph with respect to such investment. “(2) Limit for management.— With respect to any one investment, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $5,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $10,000. “(e) Definitions.— For purposes of this section— “(1) Taxable period.— The term ‘taxable period’ means, with respect to any investment which jeopardizes the carrying out of exempt purposes, the period beginning with the date on which the amount is so invested and ending on whichever of the following is the earlier: (A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 68A Stat. 770. 26 USC 6212. 6212, or (B) the date on which the amount so invested is removed from jeopardy. “(2) Removal from jeopardy.— An investment which jeopardizes the carrying out of exempt purposes shall be considered to be removed from jeopardy when such investment is sold or otherwise disposed of, and the proceeds of such sale or other disposition are not investments which jeopardize the carrying out of exempt purposes. “(3) Correction period.— The term ‘correction period’ means, with respect to any investment which jeopardizes the carrying out of exempt purposes, the period beginning with the date on which such investment is entered into and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b)(1) under section 6212, extended by— “(A) any period in which a deficiency cannot be assessed under section 6213(a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about removal from jeopardy. “SEC. 4945. TAXES ON TAXABLE EXPENDITURES. “(a) Initial Taxes.— “(1) On the foundation.— There is hereby imposed on each taxable expenditure (as defined in subsection (d)) a tax equal to 10 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the private foundation. “(2) On the management.— There is hereby imposed on the agreement of any foundation manager to the making of an expenditure, knowing that it is a taxable expenditure, a tax equal to 2½ percent of the amount thereof, unless such agreement is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who agreed to the making of the expenditure. “(b) Additional Taxes.— “(1) On the foundation.— In any case in which an initial tax is imposed by subsection (a)(1) on a taxable expenditure and such expenditure is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of the amount of the expenditure. The tax imposed by this paragraph shall be paid by the private foundation. “(2) On the management.— In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the correction, there is hereby imposed a tax equal to 50 percent of the amount of the taxable expenditure. The tax imposed by this paragraph shall be paid by any foundation manager who refused to agree to part or all of the correction. “(c) Special Rules.— For purposes of subsections (a) and (b)— “(1) Joint and several liability.— If more than one person is liable under subsection (a)(2) or (b)(2) with respect to the making of a taxable expenditure, all such persons shall be jointly and severally liable under such paragraph with respect to such expenditure. “(2) Limit for management.— With respect to any one taxable expenditure, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $5,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $10,000. “(d) Taxable Expenditure.— For purposes of this section, the term ‘taxable expenditure’ means any amount paid or incurred by a private foundation— “(1) to carry on propaganda, or otherwise to attempt, to influence legislation, within the meaning of subsection (e), “(2) except as provided in subsection (f), to influence the outcome of any specific public election, or to carry on, directly or indirectly, any voter registration drive, “(3) as a grant to an individual for travel, study, or other similar purposes by such individual, unless such grant satisfies the requirements of subsection (g), “(4) as a grant to an organization (other than an organization described in paragraph (1), (2), or (3) of section 509(a)), unless Ante, p. 496. the private foundation exercises expenditure responsibility with respect to such grant in accordance with subsection (h), or “(5) for any purpose other than one specified in section 170(c)(2)(B). Post, p. 553. “(e) Activities Within Subsection (d)(1).— For purposes of subsection (d)(1), the term ‘taxable expenditure’ means any amount paid or incurred by a private foundation for— “(1) any attempt to influence any legislation through an attempt to affect the opinion of the general public or any segment thereof, and “(2) any attempt to influence legislation through communication with any member or employee of a legislative body, or with any other government official or employee who may participate in the formulation of the legislation (except technical advice or assistance provided to a governmental body or to a committee or other subdivision thereof in response to a written request by such body or subdivision, as the case may be), other than through making available the results of nonpartisan analysis, study, or research. Paragraph (2) of this subsection shall not apply to any amount paid or incurred in connection with an appearance before, or communication to, any legislative body with respect to a possible decision of such body which might affect the existence of the private foundation, its powers and duties, its tax-exempt status, or the deduction of contributions to such foundation. “(f) Nonpartisan Activities Carried on by Certain Organizations.— Subsection (d)(2) shall not apply to any amount paid or incurred by any organization— “(1) which is described in section 501(c)(3) and exempt from taxation under section 501(a), “(2) the activities of which are nonpartisan, are not confined to one specific election period, and are carried on in 5 or more States, “(3) substantially all of the income of which is expended directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated, “(4) substantially all of the support (other than gross investment Ante, p. 496. income as defined in section 509(e)) of which is received from exempt organizations, the general public, governmental Post, p. 553. units described in section 170(c)(1), or any combination of the foregoing; not more than 25 percent of such support is received from any one exempt organization (for this purpose treating private foundations which are described in section 4946(a)(1)(H) with respect to each other as one exempt organization); and not more than half of the support of which is received from gross investment income, and “(5) contributions to which for voter registration drives are not subject to conditions that they may be used only in specified States, possessions of the United States, or political subdivisions or other areas of any of the foregoing, or the District of Columbia, or that they may be used in only one specific election period. In determining whether the organization meets the requirements of paragraph (4) for any taxable year of such organization, there shall be taken into account the support received by such organization during such taxable year and during the immediately preceding 4 taxable years of such organization (excluding therefrom any preceding taxable year which begins before January 1, 1970). Subsection (d)(4) shall not apply to any grant to an organization which meets the requirements of this subsection. “(g) Individual Grants.— Subsection (d)(3) shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the Secretary or his delegate, if it is demonstrated to the satisfaction of the Secretary or his delegate that— “(1) the grant constitutes a scholarship or fellowship grant which is subject to the provisions of section 117(a) and is to be used for study at an educational institution described in section 151(e)(4), “(2) the grant constitutes a prize or award which is subject to the provisions of section 74(b), if the recipient of such prize or award is selected from the general public, or “(3) the purpose of the grant is to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the grantee. “(h) Expenditure Responsibility.— The expenditure responsibility referred to in subsection (d)(4) means that the private foundation is responsible to exert all reasonable efforts and to establish adequate procedures— “(1) to see that the grant is spent solely for the purpose for which made, “(2) to obtain full and complete reports from the grantee on how the funds are spent, and “(3) to make full and detailed reports with respect to such expenditures to the Secretary or his delegate. “(i) Other Definitions.— For purposes of this section— “(1) Correction.— The terms ‘correction’ and ‘correct’ mean, with respect to any taxable expenditure, (A) recovering part or all of the expenditure to the extent recovery is possible, and where full recovery is not possible such additional corrective action as is prescribed by the Secretary or his delegate by regulations, or (B) in the case of a failure to comply with subsection (h)(2) or (h)(3), obtaining or making the report in question. “(2) Correction period.— The term ‘correction period’ means, with respect to any taxable expenditure, the period beginning with the date on which the taxable expenditure occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b)(1) under section 6212, extended by— 68A Stat. 770. 26 USC 6212. “(A) any period in which a deficiency cannot be assessed under section 6213(a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about correction of the taxable expenditure (except that such determination shall not be made with respect to any taxable expenditure within the meaning of paragraph (1), (2), (3), or (4) of subsection (d) because of any action by an appropriate State officer as defined in section 6104(c)(2)). Post, p. 523. “SEC. 4946. DEFINITIONS AND SPECIAL RULES. “(a) Disqualified Person.— “(1) In general.— For purposes of this chapter, the term ‘disqualified person’ means, with respect to a private foundation, a person who is— “(A) a substantial contributor to the foundation, “(B) a foundation manager (within the meaning of subsection (b)(1)), “(C) an owner of more than 20 percent of— “(i) the total combined voting power of a corporation, “(ii) the profits interest of a partnership, or “(iii) the beneficial interest of a trust or unincorporated enterprise, which is a substantial contributor to the foundation, “(D) a member of the family (as defined in subsection (d)) of any individual described in subparagraph (A), (B), or (C), “(E) a corporation of which persons described in subparagraph (A), (B), (C), or (D) own more than 35 percent of the total combined voting power, “(F) a partnership in which persons described in subparagraph (A), (B), (C), or (D) own more than 35 percent of the profits interest, “(G) a trust or estate in which persons described in subparagraph (A), (B), (C), or (D) hold more than 35 percent of the beneficial interest, “(H) only for purposes of section 4943, a private foundation— “(i) which is effectively controlled (directly or indirectly) by the same person or persons who control the private foundation in question, or “(ii) substantially all of the contributions to which were made (directly or indirectly) by the same person or persons described in subparagraph (A), (B), or (C), or members of their families (within the meaning of subsection (d)), who made (directly or indirectly) substantially all of the contributions to the private foundation in question, and “(I) only for purposes of section 4941, a government official (as defined in subsection (c)). “(2) Substantial contributors.— For purposes of paragraph (1), the term ‘substantial contributor’ means a person who is Ante, p. 493. described in section 507(d)(2). “(3) Stockholdings.— For purposes of paragraphs (1)(C)(i) and (1)(E), there shall be taken into account indirect stockholdings 68A Stat. 78. 26 USC 267. which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d). “(4) Partnerships; trusts.— For purposes of paragraphs (1)(C)(ii) and (iii), (1)(F), and (1)(G), the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d). “(b) Foundation Manager.— For purposes of this chapter, the term ‘foundation manager’ means, with respect to any private foundation— “(1) an officer, director, or trustee of a foundation (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the foundation), and “(2) with respect to any act (or failure to act), the employees of the foundation having authority or responsibility with respect to such act (or failure to act). “(c) Government Official.— For purposes of subsection (a)(1)(I) and section 4941, the term ‘government official’ means, with respect to an act of self-dealing described in section 4941, an individual who, at the time of such act, holds any of the following offices or positions (other than as a ‘special Government employee’, as defined in section 76 Stat. 1221; 82 Stat. 1115. 202(a) of title 18, United States Code): “(1) an elective public office in the executive or legislative branch of the Government of the United States, “(2) an office in the executive or judicial branch of the Government of the United States, appointment to which was made by the President, “(3) a position in the executive, legislative, or judicial branch of the Government of the United States— “(A) which is listed in schedule C of rule VI of the Civil Service Rules, or “(B) the compensation for which is equal to or greater than the lowest rate of compensation prescribed for GS–16 of the General Schedule under section 5332 of title 5, United States Code, 5 USC 5332 note. “(4) a position under the House of Representatives or the Senate of the United States held by an individual receiving gross compensation at an annual rate of $15,000 or more, “(5) an elective or appointive public office in the executive, legislative, or judicial branch of the government of a State, possession of the United States, or political subdivision or other area of any of the foregoing, or of the District of Columbia, held by an individual receiving gross compensation at an annual rate of $15,000 or more, or “(6) a position as personal or executive assistant or secretary to any of the foregoing. “(d) Members of Family.— For purposes of subsection (a)(1), the family of any individual shall include only his spouse, ancestors, lineal descendants, and spouses of lineal descendants. “SEC. 4947. APPLICATION OF TAXES TO CERTAIN NONEXEMPT TRUSTS. “(a) Application of Tax.— “(1) Charitable trusts.— For purposes of part II of subchapter F of chapter 1 (other than section 508(a), (b), and (c)) Ante, p. 492. and for purposes of this chapter, a trust which is not exempt from taxation under section 501(a), all of the unexpired interests in 68A Stat. 163. 26 USC 501. which are devoted to one or more of the purposes described in section 170(c)(2)(B), and for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a) Post, pp. 549, 558, 560–562. (2), or 2522 (or the corresponding provisions of prior law), shall be treated as an organization described in section 501(c)(3). For purposes of section 509(a)(3)(A), such a trust shall be treated as if organized on the day on which it first becomes subject to this paragraph. “(2) Split-interest trusts.— In the case of a trust which is not exempt from tax under section 501(a), not all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B), and which has amounts in trust for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, section 507 (relating to termination of private foundation status), section 508(e) (relating to governing instruments) to the extent applicable to a trust described in this paragraph, section 4941 (relating to taxes on self-dealing), section 4943 (relating to taxes on excess business holdings) except as provided in subsection (b)(3), section 4944 (relating to investments which jeopardize charitable purpose) except as provided in subsection (b)(3), and section 4945 (relating to taxes on taxable expenditures) shall apply as if such trust were a private foundation. This paragraph shall not apply with respect to— “(A) any amounts payable under the terms of such trust to income beneficiaries, unless a deduction was allowed under section 170(f)(2)(B), 2055(e)(2)(B), or 2522(c)(2)(B), “(B) any amounts in trust other than amounts for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such other amounts are segregated from amounts for which no deduction was allowable, or “(C) any amounts transferred in trust before May 27, 1969. “(3) Segregated amounts.— For purposes of paragraph (2)(B), a trust with respect to which amounts are segregated shall separately account for the various income, deduction, and other items properly attributable to each of such segregated amounts. “(b) Special Rules.— “(1) Regulations.— The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section. “(2) Limit to segregated amounts.— If any amounts in the trust are seggregated within the meaning of subsection (a)(2)(B) of this section, the value of the net assets for purposes of subsections Ante, p. 492. (c)(2) and (g) of section 507 shall be limited to such segregated amounts. “(3) Sections 4943 and 4944.— Sections 4943 and 4944 shall not apply to a trust which is described in subsection (a)(2) if— “(A) all the income interest (and none of the remainder interest) of such trust is devoted solely to one or more of the Post, p. 553. purposes described in section 170(c)(2)(B), and all amounts in such trust for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), Post, pp. 549, 558, 560–562. or 2522 have an aggregate value not more than 60 percent of the aggregate fair market value of all amounts in such trusts, or “(B) a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for amounts payable under the terms of such trust to every remainder beneficiary but not to any income beneficiary. “SEC. 4948. APPLICATION OF TAXES AND DENIAL OF EXEMPTION WITH RESPECT TO CERTAIN FOREIGN ORGANIZATIONS. “(a) Tax on Income of Certain Foreign Organizations.— In lieu of the tax imposed by section 4940, there is hereby imposed for each taxable year on the gross investment income (within the meaning of section 4940(c)(2)) derived from sources within the United States Post, p. 625. (within the meaning of section 861) by every foreign organization which is a private foundation for the taxable year a tax equal to 4 percent of such income. “(b) Certain Sections Inapplicable.— Section 507 (relating to termination of private foundation status), section 508 (relating to 68A Stat. 163. 26 USC 501. special rules with respect to section 501(c)(3) organizations), and this chapter (other than this section) shall not apply to any foreign organization which has received substantially all 01 its support (other than gross investment income) from sources outside the United States. “(c) Denial of Exemption to Foreign Organizations Engaged in Prohibited Transactions.— “(1) General rule.— A foreign organization described in subsection (b) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after December 31, 1969. “(2) Prohibited transactions.— For purposes of this subsection, the term ‘prohibited transaction’ means any act or failure to act (other than with respect to section 4942(e)) which would subject a foreign organization described in subsection (b), or a disqualified person (as defined in section 4946) with respect thereto, Post, p. 519. to liability for a penalty under section 6684 or a tax under section 507 if such foreign organization were a domestic organization. “(3) Taxable years affected.— “(A) Except as provided in subparagraph (B), a foreign organization described in subsection (b) shall be denied exemption from taxation under section 501(a) by reason of 68A Stat. 163. 26 USC 501. paragraph (1) for all taxable years beginning with the taxable year during which it is notified by the Secretary or his delegate that it has engaged in a prohibited transaction. The Publication in Federal Register. Secretary or his delegate shall publish such notice in the Federal Register on the day on which he so notifies such foreign organization. “(B) Under regulations prescribed by the Secretary or his delegate, any foreign organization described in subsection (b) which is denied exemption from taxation under section 501(a) by reason of paragraph (1) may, with respect to the second taxable year following the taxable year in which notice is given under subparagraph (A)(or any taxable year thereafter), file claim for exemption from taxation under section 501(a). If the Secretary or his delegate is satisfied that such organization will not knowingly again engage in a prohibited transaction, such organization shall not, with respect to taxable years beginning with the taxable year with respect to which such claim is filed, be denied exemption from taxation under section 501(a) by reason of any prohibited transaction which was engaged in before the date on which such notice was given under subparagraph (A). “(4) Disallowance of certain charitable deductions.— No gift or bequest shall be allowed as a deduction under section 170, Post, pp. 549, 558, 560–562. 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if made— “(A) to a foreign organization described in subsection (b) after the date on which the Secretary or his delegate publishes notice under paragraph (3)(A) that he has notified such organization that it has engaged in a prohibited transaction, and “(B) in a taxable year of such organization for which it is not exempt from taxation under section 501(a) by reason of paragraph (1).”

2. 1976

   Pub. L. 94–455 title XIX · 90 Stat. 1520

   1. Struck · 26 U.S.C. § 4945(g)

      Pub. L. 94–455, §§ 1901(b)(8)(H), 1906(b)(13)(A), struck out in provisions preceding par. (1) “or his delegate” after “Secretary”

   2. Substituted · 26 U.S.C. § 4945(g)

      Pub. L. 94–455, §§ 1901(b)(8)(H), 1906(b)(13)(A), substituted in par. (1) “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution described in section 151(e)(4)”

   Source evidence

   Code amendment note
   Subsec. (g). Pub. L. 94–455, §§ 1901(b)(8)(H), 1906(b)(13)(A), struck out in provisions preceding par. (1) “or his delegate” after “Secretary” and substituted in par. (1) “educational organization described in section 170(b)(1)(A)(ii)” for “educational institution described in section 151(e)(4)”.

   Enacted provision · exact public law
   TITLE XIX— REPEAL AND REVISION OF OBSOLETE, RARELY USED, ETC., PROVISIONS OF INTERNAL REVENUE CODE OF 1954 SUBTITLE A— AMENDMENTS OF INTERNAL REVENUE CODE GENERALLY SEC. 1901. AMENDMENTS OF SUBTITLE A; INCOME TAXES. (a) In General.— (1) Amendment of section 2.— Subsection (c) of section 2 (relating to certain married individuals living apart) is amended to read as follows: “(c) Certain Married Individuals Living Apart.— For purposes of this part, an individual shall be treated as not married at the close of the taxable year if such individual is so treated under the provisions of section 143 (b).” (2) Repeal of section 36.— Section 35 (relating to partially tax-exempt interest received by individuals) is repealed. (3) Amendment of section 39.— Section 39 (relating to certain uses of gasoline, special fuels, and lubricating oil) is amended by striking out subsections (b) and (c) and inserting after subsection (a) the following new subsection: “(b) Exception.— Credit shall not be allowed under subsection (a) for any amount payable under section 6421, 6424, or 6427, if a claim for such amount is timely filed and, under section 6421 (i), 6424 (f), or 6427(f), is payable under such section.” (4) Amendments of section 46.— (A) The second sentence of section 46(a)(4), as redesignated by this Act, is amended by striking out “section 408(e)” and inserting in lieu thereof “section 408(f)”. (B) Clause (iii) of section 46(c)(3)(B) (relating to public utility property) is amended by striking out “47 U.S.C., sec. 222(a)(5)” and inserting in lieu thereof “47 U.S.C. 222(a)(5)”. (5) Amendments or section 48.— (A) Section 48(a)(2)(B)(vi) (relating to section 38 property used outside the United States) is amended by striking out “; 43 U.S.C., sec. 1331)” and inserting in lieu thereof “(43 U.S.C. 1331))”. (B) Section 48(a)(2)(B)(viii) is amended by striking out “47 U.S.C., sec. 702” and inserting in lieu thereof “47 U.S.C. 702”. (6) Amendment of section 50a.— The second sentence of section 50A (a)(3) (relating to liability for tax) is amended by 26 USC 50A. striking out “section 408 (e)” and inserting in lieu thereof “section 408(f)”. (7) Repeal of section 51.— Subchapter A of chapter 1 is 26 USC 51. amended by striking out part V (relating to tax surcharge). (8) Amendments op section 62.— Section 62 (relating to definition 26 USC 62. of adjusted gross income) is amended by redesignating paragraph (11), as added by the Act of October 26, 1974 (Public Law 93–483), as paragraph (12). (9) Additional amendment of section 62.— Section 62(12), as redesignated by subparagraph (A) of this paragraph, is amended by striking out “trade or business to the extent” and inserting in lieu thereof “trade or business, to the extent”. (10) Definition of ordinary income.— Part I of subchapter B of chapter 1 (relating to definitions of gross income, adjusted 26 USC 61. gross income, and taxable income) is amended by adding at the end thereof the following new section: “SEC. 64. ORDINARY INCOME DEFINED. “For purposes of this subtitle, the term ‘ordinary income’ includes any gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as ‘ordinary income’ shall be treated as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b).” (11) Definition of ordinary loss.— Part I of subchapter B of chapter 1 (relating to definitions of gross 26 USC 61. income, adjusted gross income, and taxable income) is amended by adding at the end thereof the following new section: “SEC. 65. ORDINARY LOSS DEFINED. “For purposes of this subtitle, the term ‘ordinary loss’ includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as ‘ordinary loss’ shall be treated as loss from the sale or exchange of property which is not a capital asset.” (12) Amendment of section 72.— Section 72(d)(1) (relating 26 USC 72. to employees’ annuities) is amended by striking out “(whether or not before January 1, 1954)” and by striking out “(under this paragraph and prior income tax laws)”. (13) Additional amendment of section 72.— Section 72(m)(4)(A) (relating to assignments or pledges) is amended by striking out “an individual retirement amount” and inserting in lieu thereof “an individual retirement account”. (14) Repeal of section 76.— Section 76 (relating to mortgages 26 USC 76. made or obligations issued by joint stock land banks) is repealed. (15) Amendment of section 83.— Section 83(b)(2) (relating 26 USC 83. to election to include the value of restricted property in gross income) is amended by striking out “(or, if later, 30 days after 26 USC 1 note. the date of the enactment of the Tax Reform Act of 1969)”. (16) Amendment of section 101.— Section 101 is amended by 26 USC 101. striking out subsection (f) (relating to effective date of section). (17) Amendments of section 103.— (A) Section 103(a) (relating to tax-exempt interest), as 26 USC 103. amended by this Act, is amended by inserting “and” at the end of paragraph (1), by striking out paragraphs (2) and (3), and by redesignating paragraph (4) as paragraph (2). (B) Section 103 is amended by striking out subsection (b) (relating to certain exceptions) and by redesignating subsections (c), (d), (e) (f), and (g)(as added by this Act) as subsections (b), (c), (d), (e), and (f) respectively. (C) Section 103(b)(1) (relating to industrial development bonds), as redesignated by subparagraph (B) of this paragraph, is amended by inserting “or (2)” after “(a)(1)”. (D) Section 103(c)(2)(A) (relating to definition of arbitrage bonds), as redesignated by subparagraph (B) of this paragraph, is amended by inserting “or (2)” after “(a)(1)”. (E) Section 103(e) (relating to certain cross references) as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(e) Cross References.— “For provisions relating to the taxable status of— “(1) Puerto Rican bonds, see section 3 of the Act of March 2, 1917, as amended (48 U.S.C. 745). “(2) Virgin Islands insular and municipal bonds, see section 1 of the Act of October 27, 1919 (48 U.S.C. 1403). “(3) Certain obligations issued under title I of the Housing Act of 1949, see section 102(g) of title I of such Act (42 U.S.C. 1452(g)).” (18) Amendments of section 104.— (A) Section 104(a)(4) (relating to exclusion of compensation for injuries or sickness) is amended by striking out “;60 Stat. 1021” (B) Section 104(c)(2) as redesignated by section 505 of this Act, is amended to read as follows: “(2) For exclusion of part of disability retirement pay from the application of subsection (a)(4) of this section, see section 1403 of title 10, United States Code (relating to career compensation laws).” (19) Amendment of section 115.— Section 115 (relating to income of States, municipalities, etc.) is amended to read as follows: “SEC. 115. INCOME OF STATES, MUNICIPALITIES, ETC. “Gross income does not include— “(1) income derived from any public utility or the exercise of any essential governmental function and accruing to a State or any political subdivision thereof, or the District of Columbia; or “(2) income accruing to the government of any possession of the United States, or any political subdivision thereof.” (20) Amendment of section 116.— Subsection (a) of section 116 (relating to partial exclusion of dividends received by individuals) is amended by striking out “Effective with respect to any taxable year ending after July 31, 1954, gross income” and inserting in lieu thereof “Gross income”. (21) Amendment of section 124.— Section 124 (relating to cross references to other Acts) is amended to read as follows: “SEC. 124. CROSS REFERENCES TO OTHER ACTS. “(a) For exemption of— “(1) Adjustments of indebtedness under wage earners’ plans, see section 679 of the Bankruptcy Act (11 U.S.C. 1079). “(2) Allowances and expenditures to meet losses sustained by persons serving the United States abroad, due to appreciation of foreign currencies, see section 5943 of title 5, United States Code. “(3) Amounts credited to the Maritime Administration under section 9(b)(6) of the Merchant Ship Sales Act of 1946, see section 9(c)(1) of that Act (50 U.S.C. App. 1742). “(4) Benefits under laws administered by the Veterans’ Administration, see section 3101 of title 38, United States Code. “(5) Earning of ship contractors deposited in special reserve funds, see section 607(d) of the Merchant Marine Act, 1936 (46 U.S.C. 1177). “(6) Income derived from Federal Reserve banks, including capital stock and surplus, see section 7 of the Federal Reserve Act (12 U.S.C. 531). “(7) Railroad retirement annuities and pensions, see section 12 of the Railroad Retirement Act of 1935 (45 U.S.C. 2281). “(8) Railroad unemployment benefits, see section 2(e) of the Railroad Unemployment Insurance Act (45 U.S.C. 352). “(9) Special pensions of persons on Army and Navy medal of honor roll, see 38 U.S.C. 562(a)–(c). “(b) For extension of military income-tax-exemption benefits to commissioned officers of Public Health Service in certain circumstances, see section 212 of the Public Health Service Act (42 U.S.C. 213).” (22) Amendment of section 143.— Section 143 (relating to 26 USC 143. determination of marital status) is amended by striking out “this part” each place it appears and inserting in lieu thereof “this part and part V”. (23) Amendment of section 151.— Section 151 (e)(4)(defining 26 USC 151. student and educational institution) is amended to read as follows: “(4) Student defined.— For purposes of paragraph (1)(B)(ii), the term ‘student’ means an individual who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins— “(A) is a full-time student at an educational organization described in section 170(b)(1)(A)(ii); or “(B) is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization described in section 170(b)(1)(A)(ii) or of a State or political subdivision of a State.” (24) Amendments or section 152.— (A) Section 152(a)(defining dependent) is amended— 26 USC 152. (i) by inserting “or” at the end of paragraph (8), (ii) by striking out “, or” at the end of paragraph (9) and inserting in lieu thereof a period, and (iii) by striking out paragraph (10). (B) Section 152(b)(3) (relating to rules concerning the definition of dependent) is amended to read as follows: “(3) The term ‘dependent’ does not include any individual who “Dependent.” is not a citizen or national of the United States unless such individual is a resident of the United States or of a country contiguous to the United States. The preceding sentence shall not exclude from the definition of ‘dependent’ any child of the tax-payer legally adopted by him, if, for the taxable year of the tax-payer, the child has as his principal place of abode the home of the taxpayer and is a member of the taxpayer’s household, and if the taxpayer is a citizen or national of the United States.” (25) Amendments of section 164.— Section 164(d)(2) (relating 26 USC 164. to apportionment of taxes on real property between the seller and purchaser) is amended by striking out subparagraphs (B) and (C), and by redesignating subparagraph (D) as subparagraph (B). (26) Amendments of section 165.— Section 165 (relating 26 USC 165. to deduction of losses) is amended by striking out subsection (i) (relating to property confiscated by Cuba), and by redesignating subsection (j) as subsection (i). (27) Amendments or section 167.— (A) Section 167 (d) (relating to agreement as to useful life for depreciation) is amended by striking out “after the date of enactment of this title” and inserting in lieu thereof “after August 16, 1954”. (B) Section 167(f)(2)(defining personal property) is amended by striking out “the date of the enactment of the Revenue Act of 1962” and inserting in lieu thereof “October 16, 1962”. (C) Section 167(1)(4)(A) (relating to election as to increased-capacity property) is amended by striking out “within 180 days after the date of the enactment of this subparagraph” and inserting in lieu thereof “before June 29, 1970,”. (28) Amendments of section 170.— (A) (i) Section 170 (relating to charitable deductions) is amended by striking out subsections (f)(6) and (g) (relating to unlimited charitable deductions allowed for taxable years beginning before January 1, 1975), and by redesignating subsections (h), (i), and (j) as subsections (g), (h), and (i), respectively. (ii) Section 170(b)(1) (relating to percentage limitations on deductions for individuals) is amended by striking out subparagraph (C) (relating to unlimited deductions), and by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively. (iii) Section 170(b)(1)(A)(vii) is amended by striking out “subparagraph (E)” and inserting in lieu thereof “subparagraph (D)”. (iv) Section 170(b)(1)(B)(ii) is amended by striking out “subparagraph (D)” and inserting in lieu thereof “subparagraph (C)”. (v) Section 170(c) (relating to definition of charitable contribution) is amended by striking out in the last sentence “subsection (h)” and inserting in lieu thereof “subsection (g)”. (vi) Section 170(e)(1)(B)(ii) (relating to certain contributions of ordinary income and capital gain property) is amended by striking out “subsection (b)(1)(E)” and inserting in lieu thereof “subsection (b)(1)(D)”. (B) Section 170(d)(1)(A) (relating to carryover of excess charitable contributions) is amended by striking out “(30 percent, in the case of a contribution year beginning before January 1, 1970)”. (C) Section 170(h) (relating to disallowance of deductions in certain cases), as redesignated by subparagraph (A)(i) of this paragraph, is amended by striking out “64 Stat. 996;”. (D) Section 170(i) (relating to cross references), as redesignated by subparagraph (A)(i) of this paragraph, is amended to read as follows: “(i) Other Cross References.— “(1) Fer charitable contributions of estates and trusts, see section 642(c). “(2) For nondeductibilit; of contributions by common trust funds, see section 584. “(3) For charitable contributions of partners, see section 702. “(4) For charitable contributions of nonresident aliens, see section 873. “(5) For treatment of gifts for benefit of or use in connection with the Naval Academy as gifts to or for use of the United States, see section 6973 of title 10, United States Code. “(6) For treatment of gifts accepted by the Secretary of State under the Foreign Service Act of 1946 as gifts to or for the use of the United States, see section 1021(e) of that Act (22 U.S.C. 809(e)). “(7) For treatment of gifts of money accepted by the Attorney General for credit to the ‘Commissary Funds, Federal Prisons’ as gifts to or for the use of the United States, see section 2 of the Act of May 15, 1952. as amended by the Act of July 9, 1952 (31 U.S.C. 7 25s–4).” (29) Amendments of section 172.— (A) (i) Section 172(b)(1) (relating to years to which loss Ante, p. 1755. may be carried) is amended by striking out subparagraph (E). (ii) Section 172(b)(3) is amended by striking out subparagraphs 26 USC 172. (E) and (F). (B) Section 172(c) (relating to definition of net operating loss) is amended by striking out “(for any taxable year ending after December 31, 1953)”. (C) (i) Section 172 (relating to net operating loss deduction) is amended by striking out subsections (f), (g), and (i), and by redesignating subsections (h), (j), (k), and (1) as subsections (f) , (g). (h), and (i), respectively. (ii) Section 172(b)(1)(C) (relating to regulated transportation corporations) is amended by striking out “subsection (j)(1)” and “subsection (j)”, and inserting in lieu thereof “subsection (g)(1)” and “subsection (g)”, respectively. (iii) Paragraphs (1)(D) and (3)(C)(i) of section 172 Post, p. 1920. (b) (relating to net operating loss carryovers and carry-backs) are each amended by striking out “subsection (k)” and inserting in lieu thereof “subsection (h)”. (iv) Section 172(b)(2) (relating to amount of carrybacks and carryovers) is amended by striking out “subsections (i) and (j)” and inserting in lieu thereof Subsection (g)”. (D) Section 172(e) (relating to law applicable to computations) is amended by striking out the last sentence. (E) Section 172(g)(2) (relating to certain regulated transportation corporations), as redesignated by subparagraph (C) of this paragraph, is amended by striking out paragraph (4). (30) Amendments of sections 174 and 175.— Section 174(a)(2) 26 USC 174, 175. (A)(1) (relating to research and development expenditures) and section 175(d)(1)(A) (relating to soil and water conservation expenditures) are each amended by striking out “the date on which this title is enacted,” and inserting in lieu thereof “August. 16, 1954,”. (31) Repeal of section 187.— Section 187 (relating to rapid 26 USC 187. amortization for certain coal mine safety equipment) is repealed. (32) Amendment of section 219.— Section 219(b)(2)(A)(iv) 26 USC 219. (disqualifying governmental plan participants from contributing to individual retirement accounts, etc.) is amended by striking out “division” and inserting in lieu thereof “subdivision”. (33) Repeat of section 242.— Section 242 (relating to partially 26 USC 242. tax-exempt interest received by corporations) is repealed. (34) Amendments of section 243.— (A) Section 243(a)(2) (relating to the dividends received deduction) is amended by inserting after “Small Business Investment Act of 1958” the following: “(15 U.S.C. 661 and following)”. (B) Section 243(b)(2)(A) (relating to dividends received by a member of an affiliated group) is amended by striking out “(except that in the case of a taxable year of a member beginning in 1963 and ending in 1964, if the election is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, such election shall be effective for such taxable year of such member, if such member consents to such election with respect to such taxable year)”. (35) Amendment of section 247.— Section 247(b)(2) (relating to preferred stock) is amended to read as follows: “(2) Preferred stock.— “(A) In general.— The term ‘preferred stock’ means stock issued before October 1, 1942, which during the whole of the taxable year (or the part of the taxable year after its issue) was stock the dividends in respect of which were cumulative, limited to the same amount, and payable in preference to the payment of dividends on other stock. “(B) Certain stock issued on or after October 1, 1942.— Stock issued on or after October 1, 1942, shall be deemed for purposes of this paragraph to have been issued before October 1, 1942, if it was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock (including stock which is preferred stock by reason of this subparagraph or subparagraph (D)), but only to the extent that the par or stated value of the new stock does not exceed the par, stated, or face value of the bonds or debentures issued before October 1, 1942, or the other preferred stock, which such new stock is issued to refund or replace. “(C) Determination under regulations.— The determination of whether stock was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock, shall be made under regulations prescribed by the Secretary. “(D) Issuance of stock.— For purposes of subparagraph (B), issuance of stock includes issuance either by the same or another corporation in a transaction which is a reorganization (as defined in section 368(a)), a transaction to which section 371 (relating to insolvency reorganizations) applies, 26 USC 1081. or a transaction subject to part VI of subchapter 0 (relating to exchanges in SEC. obedience orders), or the respectively corresponding provisions of the Internal Revenue Code of 1939.” (36) Amendment of section 248.— Section 248(c) (relating to organizational expenditures) is amended by striking out “the date of enactment of this title” and inserting in lieu thereof “August 16, 1954”, (37) Amendment of section 265.— Section 265(2) (relating to tax-exempt interest) is amended by striking out “(other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)”, (38) Amendment of section 269.— Section 269 (relating to 26 USC 269. acquisitions made to evade or avoid income tax) is amended by striking out subsection (c) (relating to presumption in the ease of disproportionate purchase price). (39) Amendment of section 275.— Section 275(a)(1)(C) 26 USC 275. relating to nondeductible taxes) is amended by striking out (“, and corresponding provisions of prior revenue laws”. (40) Amendments of section 281.— (A) Section 281(d)(1)(A) (relating to definition of terminal 26 USC 281. railroad corporation) is amended by inserting after “Interstate Commerce Act” the following: “(49 U.S.C. 1 and following) (B) Section 281 (relating to terminal railroad corporations and their shareholders) is amended by striking out subsection (e) (relating to taxable years ending before October 23, 1962) and by redesignating subsection (f) as subsection (e). (41) Amendment of section 301.— Section 301 (relating to distributions 26 USC 301. of property) is amended by striking out subsection (e) (relating to certain distributions by personal service corporations). (42) Amendments of section 311.— (A) Section 311(d)(1) (relating to appreciated property 26 USC 311. used to redeem stock) is amended by striking out “then again shall be recognized” and inserting in lieu thereof “then a gain shall be recognized”. (B) (i) Section 311(d)(2) (relating to exceptions and limitations) is amended by striking out subparagraph (C) (relating to certain distributions before December 1, 1974) and by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs (C), (D). (E), and (F), respectively. (ii) The amendments made by clause (i) shall apply only 26 USC 311 note. with respect to distributions after November 30, 1974. (C) Section 311(d)(2)(C), as redesignated by subparagraph (B) of this paragraph, is amended by striking out “26 Stat. 209;” and “38 Stat. 730;”. (43) Amendments of section 312.— (A) Section 312(d)(1) (relating to certain distributions 26 USC 312. of stock and securities) is amended by striking out “this Code” each place it appears and inserting in lieu thereof “this title”. (B) Section 312 (relating to earnings and profits) is amended by striking out subsection (h) (relating to personal service corporations) and by redesignating subsections (i) and (j) as subsections (h) and (i), respectively. (C) Subsection (i) of section 312 (relating to distribution of proceeds of certain loans), as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(i) Distribution of Proceeds of Loan Insured by the United States.— If a corporation distributes property with respect to its stock and if, at the time of distribution— “(1) there, is outstanding a loan to such corporation which was made, guaranteed, or insured by the United States (or by any agency or instrumentality thereof), and “(2) the amount of such loan so outstanding exceeds the adjusted basis of the property constituting security for such loan, then the earnings and profits of the corporation shall be increased by the amount of such excess, and (immediately after the distribution) shall be decreased by the amount of such excess. For purposes of paragraph (2), the adjusted basis of the property at the time of distribution shall be determined without regard to any adjustment under section 1016(a)(2) (relating to adjustment for depreciation, etc.). For purposes of this subsection, a commitment to make, guarantee, or insure a loan shall be treated as the making, guaranteeing, or insuring of a loan.” (D) Section 312(j)(3) (relating to foreign investment companies), as redesignated by subsection (b)(32)(B)(i), is amended to read as follows: “(3) Partial liquidations and redemptions.— If a foreign investment company (as defined in section 1246) distributes amounts in partial liquidation or in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of the company accumulated after February 28, 1913, attributable to the stock so redeemed.” (44) Amendment of section 333.— Section 333(a)(1) (relating to election as to recognition of gain in certain liquidations) is amended by striking out “on or after June 22, 1954”. (45) Amendment of section 334.— Section 334(b)(2)(A) (relating to liquidation of subsidiary) is amended to read as follows: “(A) the distribution is pursuant to a plan of liquidation adopted not more than 2 years after the date of the transaction described in subparagraph (B) (or, in the case of a series of transactions, the date of the last such transaction); and”. (46) Amendments of section 337.— (A) Section 337(a) (relating to nonrecognition of gain or loss on certain liquidations) is amended to read as follows: “(a) General Rule.— If, within the 12month period beginning on the date on which a corporation adopts a plan of complete liquidation, all of the assets of the corporation are distributed in complete liquidation, less assets retained to meet claims, then no gain or loss shall be recognized to such corporation from the sale or exchange by it of property within such 12month period.” (B) The first sentence, of section 337(d) (relating to certain minority stockholders) is amended by striking out “on or after January 1, 1958”. (47) Repeal of section 342.— Section 342 (relating to the liquidation of certain foreign personal holding companies) is repealed. (48) Amendments of section 351.— (A) Section 351(a) (relating to transfer to corporation controlled by transferor) is amended by striking out “(including, in the case of transfers made on or before June 30, 1967, an investment company)”. (B) Section 351(d) (relating to application of June 30, 1967, date) is amended to read as follows: “(d) Exception.— This section shall not apply to a transfer of property to an investment company.” (C) The amendments made by this paragraph shall take effect with respect to transfers of property occurring after the date of the enactment of this Act. (49) Repeal of section 363.— Section 363 (a cross reference to 26 USC 363. other sections) is repealed. (50) Amendments of section 371.— Section 371 (a)(1) (relating 26 USC 371. to certain reorganization exchanges by corporations) is amended— (A) by striking out “49 Stat. 922;” and (B) by striking out “(52 Stat. 883–905; 11 U.S.C., chapter 10) or the corresponding provisions of prior law” and inserting in lieu thereof “(11 U.S.C. 501 and following)”. (51) Amendment of section 372.— Section 372(a) (relating 26 USC 372. to basis in connection with bankruptcy proceedings) is amended by striking out “54 Stat. 709;”. (52) Repeal of section 373.— Section 373 (relating to nonrecognition 26 USC 373. of loss in certain railroad reorganizations) is repealed. (53) Amendment of section 374 .— Section 374(a)(1) (relating 26 USC 374. to non recognition of gain or loss in certain railroad reorganizations) is amended by striking out “49 Stat. 922;”. (54) Amendment of section 381.— Section 381 (c) (relating to 26 USC 381. items carried over in certain corporate acquisitions) is amended by striking out paragraph (20). (55) Repeal of sections 391 through 395.— Subchapter C of 26 USC 391–395. chapter 1 (relating to corporate distributions and adjustments) is amended by striking out part VII (relating to effective dates of subchapter C). (56) Amendments of section 401.— (A) Paragraphs (12) and (13) of section 401(a) (relating 26 USC 401. to requirements for qualification) are each amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (B) Paragraph (15) of section 401(a) is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu 29 USC 1001 note. thereof “September 2, 1974,”. (C) Paragraph (19) of section 401(a) is amended by striking out “enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (D) The last sentence of section 401(a) is amended to read as follows: “Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of such section.” (57) Amendments of section 402.— (A) Section 402(a)(4) (relating to distributions made to 26 USC 402. nonresident alien individuals) is amended by striking out “basic salary” each place it appears therein and inserting in lieu thereof “basic pay”, and by amending the last sentence in such paragraph to read as follows: “In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code.” (B) Section 402 (relating to taxability of beneficiary of employees’ trusts) is amended by striking out subsection (d) (relating to certain trust agreements made before October 21, 1942), (C) (i) So much of the third sentence of section 402(e)(4) 26 USC 402. (A) (relating to definition of lump sum distributions) as precedes “a distribution of an annuity contract” is amended to read as follows: “Except for purposes of subsection (a)(2) and section 403(a)(2),”. (ii) The amendment made by clause (i) shall apply with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date. (58) Amendment of section 403.— The last two sentences of section 403(a)(4) (relating to taxation of employee annuities) are amended to read as follows: “For purposes of this title, a transfer described in subparagraph (B)(1) shall be treated as a rollover contribution described in section 408(d)(3). Subparagraph (B)(ii) does not apply in the case of a transfer to an employees’ trust, or annuity plan if any part of a payment described in subparagraph (A) is attributable to an annuity plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan.” (59) Amendment of section 404.— Section 404 (relating to deduction for contributions to pension plans, etc.) is amended by striking out subsection (d) (relating to carryover of pre–1954 unused deductions). (60) Amendment of section 409.— Section 409(b)(3)(C) (relating to tax-free rollovers of individual retirement bonds) is amended by striking out “section 403(d)(3).” and inserting in lieu thereof “section 408 (d)(3).” (61) Amendments of section 410.— (A) Subparagraphs (C) and (D) of section 410(a)(5) (relating to breaks in service) are each amended by striking out “purposes of subsection (a)(1)” and inserting in lieu thereof “purposes of paragraph (1)”. (B) Paragraph (1)(C) of section 410(c) (relating to application of minimum participation standards) is amended by striking out “the date of the enactment of the Employee 29 USC 1001 note. Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974,”. (C) Paragraph (2) of section 410(c) is amended by striking out “the day before the date of the enactment of this section” and inserting in lieu thereof “September 1, 1974”. (62) Amendments of section 411.— (A) Subsection (a) of section 411 (relating to minimum vesting standards) is amended by striking out “subsection (a)(8)” and inserting in lieu thereof “paragraph (8)”. (B) Subsection (a)(3)(D)(iii) of section 411 is amended— (i) by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and “the date of the enactment of such Act” and inserting in lieu thereof in both such places “September 2, 1974”, and (ii) by striking out “the date of the enactment of the Act” and inserting in lieu thereof “September 2, 1974,”. (C) The heading for subparagraph (C) of section 411 (a)(7) is amended to read as follows: “(C) Repayment of subparagraph (b) distributions.—” (D) Subsection (b)(1)(D)(i) and (e)(1)(C) of section 411 are each amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. 29 USC 1001 note. (E) Subsection (e)(2) of section 411 is amended by striking out “the date before the date of the enactment of the Employee Retirement Income Security Act of 1974” and 26 USC 411. inserting in lieu thereof “September 1, 1974”. (63) Amendments of section 412.— (A) Subsection (h) of section 412 (relating to minimum 26 USC 412. funding standards) is amended by striking out “the day before the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 1, 1974”. (B) Subsection (h)(5) of section 412 is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (64) Amendments of section 414.— (A) The heading for section 414(f) (relating to multi-employer 26 USC 414. plans) is amended to read as follows: ‘(f) Multiemployer Plan.—” (B) Section 414(1) (relating to mergers and consolidations of plans or transfers of plan assets) is amended by striking out “the date of the enactment of the Employee Retirement Income Security Act of 1974” and inserting in lieu thereof “September 2, 1974”. (65) Amendments of section 415.— (A) Section 415(b)(2)(A) (relating to adjustments for 26 USC 415. certain forms of benefits) is amended by striking out “and 409(b)(3)(C)” and inserting in lieu thereof “and 409(b)(3)(C))”. (B) Section 415(b)(2)(B) is amended by striking out “(as defined in section 401(a)(11)(II)(iii))” and inserting in lieu thereof “(as defined in section 401 (a)(11)(G)(iii))”. (66) Amendments of section 453.— (A) Section 453(c)(3) (relating to adjustment in tax for 26 USC 453. amounts previously taxed) is amended by striking out “corresponding provisions of the Internal Revenue Code, of 1939” and inserting in lieu thereof “corresponding provisions of the Internal Revenue Code of 1954”. (B) Section 453(d)(4)(B) (relating to liquidations to which section 337 applies) is amended by striking out “or section 617(d)(1)” and inserting in lieu thereof “, 617(d)” (67) Amendment of section 455.— Section 455(c)(3)(B) 26 USC 455. (relating to prepaid subscription income) is amended by striking out “for his first taxable year (i) which begins after December 31, 1957, and (ii) in which he receives prepaid subscription income in the trade or business” and inserting in lieu thereof “for his first taxable year in which he receives prepaid subscription income in the trade or business”. (68) Amendment of section 458.— Section 456(c)(3)(B) 26 USC 456. (relating to election without consent with respect to treatment of prepaid dues) is amended by striking out “for its first taxable year (i) which begins after December 31, 1960, and (ii)” and inserting in lieu thereof “for its first taxable year”. (69) Amendments of section 461.— (A) Section 461(c) (relating to accrual of real property taxes) is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (B) Section 461(c)(2) (relating to elections without consent), as redesignated by subparagraph (A), is amended by striking out “his first taxable year which begins after December 31, 1953, and ends after the date of enactment of this title in which the taxpayer” and inserting in lieu thereof “his first taxable year in which he”. (70) Amendments of section 481.— (A) Section 481(b) (relating to limitation on tax where substantial adjustments are required by a change in accounting method) is amended by striking out paragraphs (4), (5), and (6) (relating to pre–1954 adjustments). (B) Section 481(b)(1) and (2) are each amended by striking out “, other than the amount of such adjustments to which paragraph (4) or (5) applies,” each place it appears. (71) Amendments of section 508.— (A) Subsections (a) and (b) of section 508 (relating to special rules relating to 501(c)(3) organizations) are each amended by striking out the hist sentence therein. (B) Section 508(e)(2) (relating to special rules for existing private foundations) is amended by striking out subparagraph (A) (relating to taxable years beginning before 1972), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking out “(B)” in subparagraph (B)(as so redesignated) and inserting in lieu thereof “(A)”. (C) Section 508(d)(2)(A) (relating to disallowance of deductions for certain charitable gifts or bequests) is amended by striking out “(e)(2)(B) and (C)” and inserting in lieu thereof “(e)(2)”. (72) Amendments of section 514.— (A) Section 514(c)(1) (relating to definition of acquisition indebtedness) is amended by striking out the comma at the end of subparagraph (C) and all that follows, and inserting in lieu thereof a period. (B) Section 514 (relating to unrelated debt-financed income) is amended by striking out subsection (f) (relating to definition of business lease), by striking out subsection (g) (relating to definition of business lease indebtedness), and by redesignating subsection (h) as subsection (f). (C) Section 514(b)(3)(C)(iii) (relating to definition of debt-financed property) is amended to read as follows: “(iii) shall not apply to property subject to a lease which is a business lease (as defined in this section immediately before the enactment of the Tax Reform Act of 1976).” (D) Section 514(f) (relating to personal property leased with real property), as redesignated by subparagraph (B) of this paragraph, is amended by striking out “and the term ‘premises’ include” and inserting in lieu thereof “includes”. (73) Amendments of section 534.— (A) Section 534(b) (relating to mailing notices of deficiency) is amended by striking out the last sentence, (B) Subsection (e) of section 534 (relating to effective date of section) is repealed. (74) Amendment of section 533.— Section 535(b)(1) (relating 26 USC 535. to adjustments in computing accumulated taxable income) is amended by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)”. (75) Amendments of section 537.— (A) Section 537(b)(2) (relating to definition of excess 26 USC 537. business holdings redemption needs) is amended by striking out “, with respect to taxable years of the corporation ending after May 26, 1969,”. (B) Section 537(b)(4) (relating to inferences as to prior years) is amended by striking out “or (2)”. (76) Amendments of section 542.— (A) Section 542(a)(2) (relating to definition of personal 26 USC 542. holding company) is amended by striking out the last sentence. (B) Section 542(b)(2) (relating to ineligible affiliated group) is amended by striking out “, other than an affiliated group of railroad corporations the common parent of which would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942,”. (C) Section 542(c)(2) (relating to financial institutions) is amended by striking out “without regard to subparagraphs (D) and (E) thereof”, (D) Section 542(c)(8) (relating to small business investment companies) is amended by inserting after “Small Business Investment Act of 1958” the following: “(15 U.S.C. 661 and following)”. (77) Amendments of section 545.— (A) Section 545(b)(1) (relating to deduction of taxes in 26 USC 545. computing undistributed personal holding company income) is amended— (i) in the first sentence, by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)”; and (ii) by striking out the last two sentences (relating to deduction of taxes). (B) Section 545(b) (relating to adjustments in computing undistributed personal holding company income) is amended by striking out paragraph (7) (relating to payment of indebtedness incurred before 1934). (C) Section 545(c)(2)(A) (relating to corporations to which special adjustment applies) is amended by striking out “the date of enactment of this subsection” and inserting in lieu thereof “February 26, 1964”. (78) Amendment of section 547.— Section 547 (relating to the 26 USC 547. deduction of deficiency dividends) is amended by striking out subsection (h) (relating to the effective date). ‘ (79) Amendment of section 551.— Section 551(c) (relating to 26 USC 551. foreign personal holding company income tax returns), as redesignated by subsection (b)(1)(F) of this section, is amended by striking out “taxable income, foreign personal holding com-pany,” and inserting in lieu thereof “taxable income, foreign personal holding company income,”. (80) Amendment of section 554.— The first sentence of section 556(b)(1) (relating to deduction of taxes in computing undistributed foreign personal holding company income) is amended by striking out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 1, 1940)”. (81) Amendment of section 584.— Section 564 (relating to dividend carryovers) is amended by striking out subsection (c) (relating to carryovers from pre–1954 years). (82) Repeal of section 583.— Section 583 (relating to deduction of dividends paid on certain preferred stock by banks or trust companies) is repealed. (83) Repeal of section 592.— Section 592 (relating to the deduction by mutual savings banks for repayment of certain loans) is repealed. (84) Amendments of section 593.— (A) Section 593(b)(2) (relating to additions to bad debt reserves for mutual savings banks, etc.) is amended by striking out, in the table in subparagraph (A), the following: “1969 60 percent 1970 57 percent 1971 54 percent 1972 51 percent 1973 49 percent 1974 47 percent 1975 45 percent” (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(2) Certain pre-1963 reserves.— Notwithstanding the second sentence of paragraph (1), any amount allocated pursuant to paragraph (5)(as in effect immediately before the enactment of the Tax Reform Act of 1976) during a taxable year beginning before January 1, 1977, to the reserve for losses on qualifying real property loans out of the surplus, undivided profits, and bad debt reserves (determined as of December 31, 1962) attributable to the period before the first taxable year beginning after December 31, 1951, shall not be treated as a reserve for bad debts for any purpose other than determining the amount referred to in subsection (b)(1)(B), and for such purpose such amount shall be treated as remaining in such reserve.” (C) Section 593 is amended by striking out subsection (d) (relating to taxable years beginning in 1962 and ending in 1963), and by redesignating subsections (e) and (f) as subsections (d) and (e),respectively. (D) Section 593(b)(2)(E)(1) is amended by striking out “subsection (f)” and inserting in lien thereof “subsection (e)”- (85) Repeal of section 601.— Subchapter H of chapter 1 relating to 26 USC 601. banking institutions) is amended by striking out part III (relating to special deduction for bank affiliates). (86) Amendments of section 613a.— (A) Section 613A(b)(1)(C) (relating to exemption for 26 USC 613A. certain domestic gas wells) is amended by striking out “within the meaning of section 613(b)(1)(A)”. (B) Section 613A(c)(6)(i) (relating to limitations on percentage depletion in case of oil and gas wells) is amended by striking out “determined with” and inserting in lieu thereof “determined without”. (87) Amendments of section 614.— (A) (i) Section 614(c) (relating to aggregation of mineral 26 USC 614. interests in mines) is amended by striking out paragraph (4) (relating to special rule as to exploration deductions prior to aggregation). (ii) The amendment made by clause (i) shall apply with 26 USC 614 note. respect to elections to form aggregations of operating mineral interests made under section 614(c)(1) of the Internal Revenue Code of 1954 for taxable years beginning after December 31, 1976. (B) The third sentence of section 614(c)(2) (relating to election to treat a single interest as more than one property) is amended to read as follows: “A separate property so formed may, under regulations prescribed by the Secretary, be included as a part of an aggregation in accordance with paragraphs (1) and (3).” (C) Section 614(c)(3) (relating to manner and scope of election) is amended to read as follows: “(3) Manner and scope of election.— The elections provided by paragraphs (1) and (2) shall be made, in accordance with regulations prescribed by the Secretary, not later than the time prescribed for filing the return (including extensions thereof) for the first taxable year— “(A) in which, in the ease of an election under paragraph (1), any expenditure for development or operation in respect of the separate operating mineral interest is made by the taxpayer after the acquisition of such interest, or “(B) in which, in the case of an election under paragraph (2), expenditures for development or operation of more than one mine in respect of a property are made by the taxpayer after the acquisition of the property. An election made under paragraph (1) or (2) for a taxable year shall be binding upon the taxpayer for such year and all subsequent taxable years, except that the Secretary may consent to a different treatment of any interest with respect to which an election has been made.” (88) Repeal or section 615.— Section 615 (relating to deduction 26 USC 615. of pre–1970 exploration expenses) is repealed. (89) Amendment of section 617.— Section 617(a)(2)(B) 26 USC 617. (relating to time and scope of election to deduct certain mining exploration expenditures) is amended by striking out. “may not be revoked after the last day of the third month following the month in which the final regulations issued under the authority of this subsection are published in the Federal Register“, unless” and inserting in lieu thereof “may not be revoked unless”. (90) Repeal of section 632.— Section 632 (relating to tax in 26 USC 632. case of sale of oil and gas properties) is repealed. (91) Amendment of section 691.— Section 691(c)(1)(B) 26 USC 691. (relating to deduction for estate tax) is amended by striking out the last sentence. (92) Amendment of section 692.— The heading of section 692 (relating to income taxes of members of Armed Forces who die in a combat zone) is amended by striking out “ON” the first time it appeals in the section heading and inserting in lieu thereof “OF”. (93) Amendment of section 751.— Section 751(c) (relating to unrealized receivables) is amended by striking out “1254(a), or 1250(a),” and inserting in lieu thereof “1245(a), 1250(a),”. (94) Repeal of section 771.— Part IV of subchapter K of chapter 1 (relating to effective date of subchapter K) is repealed. (95) Amendments of section 802.— (A) Section 802(a)(1) (relating to tax imposed on life insurance companies) is amended by striking out “beginning after December 31, 1957,”. (B) Section 802(a)(2) (relating to alternative tax in case of capital gains) is amended by striking out “beginning after December 31, 1961,”. (C) Section 802(a) is amended by striking out paragraph (3) (relating to special rules for 1959 and 1960). (96) Amendments of section 804.— (A) Section 804(a) is amended by sticking out paragraph (6) (relating to certain exceptions). (B) Section 804(b)(2) (relating to short-term capital gains) is amended by striking out “In the case of a taxable year beginning after December 31, 1958, the” and inserting in lieu thereof “The”. (97) Amendments of section 805.— (A) Section 805(b)(3)(B) (relating to average earnings rate) is amended to read as follows: “(B) Special rule.— For purposes of subparagraph (A), the current earnings rate for tiny taxable year of any company which, for such year, is an insurance company (but not a life insurance company) shall be determined as if this part applied to such company for such year.” (B) Section 805(b)(4)(B) (relating to basis of assets) is amended by striking out “(determined without regard to fair market value on December 31, 1958)”. (C) Section 805(d) (relating to pension plan reserves) is amended to read as follows: “(d) Pension Plan Reserves.— For purposes of this part, the term ‘pension plan reserves’ means that portion of the life insurance reserves which is allocable to contracts— “(1) purchased under contracts entered into with trusts which (as of the time the contracts were entered into) were deemed to be (A), trusts described in section 401(a) and exempt from tax under section 501(a), or (B) trusts exempt from tax under section 185 of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws; “(2) purchased under contracts entered into under plans which (as of the time the, contracts were entered into) were deemed to be plans described in section 403(a), or plans meeting the requirements of paragraphs (3), (4), (5), and (6) of section 165(a) of the Internal Revenue Code of 1939; “(3) provided for employees of the life insurance company under a plan which, for the taxable year, meets the requirements of paragraphs (3), (4), (5), (6), (7), (8), (11), (12), (13), (14), (15), (16), (19), and (20) of section 401(a); “(4) purchased to provide retirement annuities for its employees by an organization which (as of the time the contracts were purchased) was an organization described in section 501(c)(3) which was exempt from tax under section 501(a) or was an organization exempt from tax under section 101(6) of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws, or purchased to provide retirement annuities for employees described in section 403(b)(1)(A)(ii) by an employer which is a State, a political subdivision of a state, or an agency or instrumentality of any one or more of the foregoing; or “(5) purchased under contracts entered into with trusts which (at the time the contracts were entered into) were individual retirement accounts described in section 408(a) or under contracts entered into with individual retirement annuities described in section 408(b).” (98) Amendments of section 809.— (A) Section 809(b) (relating to definition of gain and loss 26 USC 809. from operations) is amended by striking out paragraph (4). (B) (i) Section 809(d) (relating to life insurance company deductions) is amended by striking out paragraph (11) relating to mutualization distributions before 1963), and by redesignating paragraph (12) as paragraph (11). (ii) Section 809(e) is amended by striking out “subsection (d)(12)” and inserting in lieu thereof “subsection (d)(11)”, (C) Section 809 (relating to computation of gain and loss from operations) is amended by striking out subsection (g) (relating to deduction for certain mutualization distributions before 1963). (99) Amendment of section 812.— Section 812(b)(1) (relating 26 USC 812. to years to which operating losses of an insurance company may be carried), other than the last sentence thereof, as added by section 806(d)(1)(A) of this Act, is amended to read as follows: “(1) Years to which loss may be carried.— The loss from operations for any taxable year (hereinafter in this section referred to as the ‘loss year’) shall be— “(A) an operations loss carryback to each of the 3 taxable years preceding the loss year, “(B) an operations loss carryover to each of the 5 taxable years following the loss year, and “(C) subject to subsection (e), if the life insurance company is a new company for the loss year, an operations loss carryover to each of the 3 taxable years following the 5 taxable years described in subparagraph (B).” (100) Amendments of section 817.— Section 817 (relating to 26 USC 817. rules applicable to certain gains and losses) is amended by striking out subsection (c) (relating to treatment of pre–1959 capital losses) and subsection (e) (relating to certain 1958 reinsurance transactions). (101) Amendment of section 818.— Section 818 (relating to 26 USC 818. life insurance accounting provisions) is amended by striking out subsection (e) (relating to certain rules applicable to taxable years 1957, 1958, and 1959). and by redesignating subsections (f) and (g) as subsections (e) and (f), respectively. (102) Amendments of section 819.— (A) The first sentence of section 819(a)(2)(A) (relating 26 USC 819. to definition of minimum figure for foreign life insurance companies) is amended to read as follows: “The minimum figure is the amount determined by multiplying the tax-payer’s total insurance liabilities on United States business by a percentage for the taxable year to be determined and proclaimed by the Secretary.” (B) The second sentence of section 819(a)(2)(A) is amended by striking out “under clause (ii)” and inserting in lieu thereof “under the preceding sentence”. (C) Clause (i) of section 819(b)(2)(B) (relating to distributions pursuant to certain mutualizations) is amended to read as follows: “(i) the minimum figure for 1958 determined under subsection (a)(2)(A) computed by using a percentage of 9 percent in lieu of the percentage determined and proclaimed by the Secretary, or”. (103) Amendments of section 820.— (A) Section 820(c) (relating to optional treatment of certain reinsured policies) is amended by striking out paragraph (6) (relating to reimbursement for 1957 income taxes), and by redesignating paragraph (7) as paragraph (6). (B) The last sentence of section 820(c) is amended by striking out “(5). and (6) and the rules prescribed under paragraph (7)” and inserting in lieu thereof “and (5) and the rules prescribed under paragraph (6)”. (104) Amendments of section 821.— (A) Section 821(a) (relating to imposition of tax on certain mutual insurance companies) is amended by striking out “beginning after December 31, 1963,”. (B) Section 821(c)(1) (relating to alternative tax for certain small insurance companies) is amended by striking out “In the ease of taxable years beginning after December 31, 1963. there is” and inserting in lieu thereof “There is”. (C) Section 821 (relating to tax on certain mutual insurance companies) is amended by striking out subsection (e) (relating to 1962 transitional rules) and by redesignating subsection (f) as subsection (e). (105) Amendments of section 822.— (A) Section 822(c)(5) (relating to deduction of interest) is amended by striking out “(other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)”. (B) The last sentence of section 822(d)(2) (relating to amortization of premium and accrual of discount) is amended by striking out “For taxable years beginning after December 31, 1962. no accrual” and inserting in lieu thereof “No accrual”. (106) Amendments of section 825.— Section 825(g) (relating to unused loss deduction of certain insurance companies) is amended by striking out paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (107) Amendment of section 831.— Section 831(a) (relating to tax on certain insurance companies) is amended by striking out “or the taxable income” and inserting in lieu thereof “on the taxable income.” (108) Amendments of section 832.— Paragraphs (1) and (6) of section 832(b)(definitions relating to insurance company taxable income) are each amended by striking out “Convention” and inserting in lieu thereof “Association”. (109) Amendments of section 851.— (A) Section 851(a)(1) (relating 26 USC 851. to definition of regulated investment company) is amended by striking out “54 Stat. 789;”. (B) Section 851(b)(1) (relating to regulated investment companies) is amended by stinking out “which began after December 31, 1941”, (110) Amendments of section 852.— (A) Subparagraph (C) of section 852(b)(3) (relating to 26 USC 852. method of taxation of regulated investment companies and their shareholders) is amended by striking out the third sentence. (B) (i) Section 852(b)(3)(D)(iii) is amended by striking out “by 75 percent of so much of such amounts as equals the amount subject to tax in accordance with section 1201 (a)(1)(A) and by 70 percent (72 percent in the case of a Post, p, 1786. taxable year beginning after December 31, 1969, and before January 1, 1971) of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)(1)(B) or (2)” and inserting in lieu thereof “by 70 percent of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)”. (ii) The amendment made by clause (i) shall not be considered 26 USC 852 note. to affect the amount of any increase in the basis of stock under the provisions of section 852(b)(3)(D)(iii) of the Internal Revenue Code of 1954 which is based upon amounts subject to tax under section 1201 of such Code in taxable years beginning before January 1, 1975. (C) Section 852(d) is amended by inserting after “Investment Company Act of 1940” the following: “(15 U.S.C. 80a–l and following)”. (111) Amendments of section 856.— (A) Section 856(c)(1) (relating to real estate investment 26 USC 856. trusts) is amended by striking out “which began after December 31, 1960”. (B) Section 856(c)(6)(D) (relating to definition of other terms) is amended by inserting after “Investment Company Act of 1940, as amended” the following: “(15 U.S.C. 80a–1 and following)”. (112) Amendment of section 857.— Section 857(b)(3)(C) 26 USC 857. (relating to the taxation of capital gains in the case of real estate investment trusts) is amended by striking out the last sentence. (113) Amendments of section 864.— (A) Subsection (a) of section 864 (definitions relating to 26 USC 864. determinations of sources of income) is amended to read as follows: “(a) Produced.— For purposes of this part, the term ‘produced’ “Produced.” includes created, fabricated, manufactured, extracted, processed, cured, or aged.” (B) Clauses (i) and (iii) of section 864(c)(4)(B) and subparagraph (C) of section 864(c)(5) (relating to effectively connected income) are each amended by striking out “sale” each place it appears and inserting in lieu thereof “sale or exchange”. (C) Section 864(c)(4)(B)(iii) (relating to effectively connected income) is amended by striking out “sold” and inserting in lieu thereof “sold or exchanged”. (114) Amendment of section 905.— Section 905(b) (relating to proof of foreign tax credits) is amended by striking out the last sentence (relating to the treatment of certain royalty payments). (115) Amendment of section 911.— Section 911(c) (relating to earned income from sources without the United States) is amended by striking out paragraph (7) (relating to taxable years ending in 1963, 1964, or 1965). (116) Amendment of section 921.— Section 921 (relating to definition of Western Hemisphere Trade Corporation) is amended by striking out the last sentence, (relating to taxable years before 1954). (117) Amendments of section 931.— Section 931 (relating to income from sources within possession) is amended by striking out subsection (h) (relating to certain persons taken as prisoners of war while working in a possession), and by redesignating subsection (i) as subsection (h). (118) Amendment of section 934.— Section 934(b) (relating to gross income received by a corporation from the Virgin Islands) is amended by striking out the last sentence. (119) Amendment of section 951.— Section 951 (a)(1) (relating to treatment, of subpart F income) is amended by striking out “beginning after December 31, 1962”. (120) Repeal of section 972.— Section 972 (relating to consolidation of export trade corporations) is repealed. (121) Amendment of section 1001.— Section 1001(c) (relating to recognition of gain or loss) is amended to read as follows: “(c) Recognition of Gain or Loss.— Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section, on the sale or exchange of property shall be recognized.” (122) Amendments of section 1015.— (A) Subparagraph (A) of section 1015(d)(1) (relating to increased ‘basis for gift tax paid) is amended by striking out “the date of the enactment of the Technical Amendments Act of 1958” and inserting in lieu thereof “September 2, 1958”. (B) Subparagraph (B) of section 1015(d)(1) is amended by striking out “the date of the enactment of the Technical Amendments Act of 1958” and inserting in lieu thereof “September 2, 1958,”. (123) Amendment of section 1016.— Section 1016(a) (relating to adjustments to basis) is amended by striking out paragraph (19). (124) Amendment of section 1018.— Section 1018 (relating to adjustment of capital structure before September 22, 1938) is amended by striking out “54 Stat. 709;”. (125) Repeal of section 1020.— Section 1020 (relating to election in respect of depreciation allowed before 1952) is repealed. (126) Repeal of section 1022.— (A) Section 1022 (relating to the basis of certain foreign personal holding company stock) is repealed. (B) The repeal made by subparagraph (A) shall apply with respect to stock or securities acquired from a decedent dying after the date of the enactment of this Act. (127) Amendment of section 1024.— Section 1024 (containing cross references) is amended by striking out paragraph (4). (128) Amendments of section 1033.— (A) Section 1033(a) (relating to involuntary conversions) 26 USC 1033. is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (B) Section 1033(a)(2) (relating to conversion into money), as redesignated by subparagraph (A) of this paragraph and as amended by this Act, is amended— (i) by striking out “where disposition occurred after 1950” in the paragraph heading; (ii) by striking out “(g)” each place it appears and inserting in lieu thereof “(h)”; (iii) by striking out “and the disposition of the converted property (as defined in paragraph (2)) occurred after December 31, 1950,” in the text; and (iv) by adding at the end thereof the following new subparagraph: “(E) Definitions.— For purposes of this paragraph— “(i) Control.— The term ‘control’ means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. “(ii) Disposition of the converted property.— The term ‘disposition of the converted property’ means the destruction, theft, seizure, requisition, or condemnation of the converted property, or the sale or exchange of such property under threat or imminence of requisition or condemnation.” (C) Section 1033 (relating to involuntary conversions) is amended by striking out subsection (b) (relating to certain conversions occurring before 1954) and by redesignating subsections (c), (d), (e), (f), (g), and (h), as subsections (b), (c), (d), (e), (f), and (g), respectively. (D) The first sentence of section 1033(b) (relating to basis of a property acquired through involuntary conversions), as redesignated by subparagraph (G) of this paragraph, is amended by striking out “or (2)” and inserting in lieu thereof “or section 112(f)(2) of the Internal Revenue Code of 1939”. (E) Section 1033(f)(2) (relating to condemnation of real property), as redesignated by subparagraph (C) of this paragraph, is amended to read as follows: “(2) Limitation.— Paragraph (1) shall not apply to the purchase of stock in the acquisition of control of a corporation described in subsection (a)(2)(A).” (F) Section 1033(g)(4) (relating to condemnation of real property), as amended by section 2140(a) of this Act, is amended by striking out “(a)(3)(B)(i)” and inserting in lieu thereof“(a)(2)(B)(i)”. (129) Amendments of section 1034.— (A) Section 1034(a) (relating to gain on sale of residence) 26 USC 1034. is amended by striking out “after December 31, 1953,”. (B) Section 1034(b)(defining adjusted sales price) is amended by striking out paragraph (3) (relating to effective date of subsection (b)). (C) Section 1034(d) (relating to certain limitations) is amended by striking out “or section 112 (n) of the Internal Revenue Code of 1939”. (D) Section 1034(i) (relating to involuntary conversions) is amended to read as follows: “(ii) Special Rule for Condemnation.— In the case of the seizure, requisition, or condemnation of a residence, or the sale or exchange of a residence under threat or imminence thereof, the provisions of this section, in lieu of section 1033 (relating to involuntary conversions), shall be applicable if the taxpayer so elects. If such election is made, such seizure, requisition, or condemnation shall be treated as the sale of the residence. Such election shall he made at such time and in such manner as the Secretary shall prescribe by regulations.” (E) Section 1034(j) (relating to statute of limitations) is amended by striking out “after December 31, 1950,”. (130) Amendment of section 1037.— Section 1037(b)(1) (relating to certain exchanges of United States obligations) is amended by striking out “section 1232(a)(2)(A)” and inserting in lieu thereof “section 1232 (a)(2) (B)”. (131) Amendment of section 1051.— Section 1051 (relating to property acquired before 1929 during affiliation) is amended by striking out the last two sentences. (132) Amendments of section 1081.— (A) Subsection (e) of section 1081 (relating to distributions required by the SEC) is amended to read as follows: “(c) Distribution of Stock or Securities Only.— If there is distributed, in obedience to an order of the Securities and Exchange Commission, to a shareholder in a corporation which is a registered holding company or a majority-owned subsidiary company, stock or securities (other than stock or securities which are nonexempt property), without the surrender by such shareholder of stock or securities in such corporation, no gain to the distributee from the receipt of the stock or securities so distributed shall be recognized.” (B) Section 1081(f) (relating to conditions for application of section) is amended by striking out “Except in the case of a distribution described in subsection (c)(2), the provisions” and inserting in lien thereof “The provisions”, and by striking out “49 Stat. 820;”. (C) Section 1081(g) (relating to applicability of other provisions) is amended by striking out “If a distribution described in subsection (c)(2). or an” and inserting in lieu thereof “If an”, and by striking out the comma after “Commission”. (133) Amendments of section 1083.— (A) Section 1083(a) is amended by striking out “49 Stat. 820;”. (B) Section 1083(b) is amended by striking out “49 Stat. 804;”. (C) Section 1083(e)(4) is amended by striking out “49 Stat. 820;”. (134) Repeal of section 1111.— Part IX of subchapter O of chapter 1 (relating to distributions pursuant to orders enforcing the antitrust laws) is repealed. (135) Amendments of section 1201.— (A) Section 1201(a) (relating to the alternative tax on capital gain) is amended to read as follows: “(a) Corporations.— If for any taxable year a corporation has a net capital gain, then, in lien of the tax imposed by sections 11. 511, 821 (a) or (c) and 831(a), there is hereby imposed a tax (if such tax is less than the tax imposed by such sections) which shall consist of the sum of— “(1) a tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this subsection had not been enacted, plus “(2) a tax of 30 percent of the net capital gain.” (B) Section 1201(c) (relating to computation of alternative 26 USC 1201. tax) is amended to read as follows: “(c) Computation of Tax Where Capital Gain Exceeds $50,000.— The tax computed for purposes of subsection (b)(3) shall be the amount by which a tax determined under section 1 or 511 on an amount equal to the taxable income (but not less than 50 percent of the net capital gain) for the taxable year exceeds a tax determined under section 1 or 511 on an amount, equal to the sum of (A) the amount subject to tax under subsection (b)(1) plus (B) an amount equal to 50 percent of the sum referred to in subsection (b)(2)(A).” (C) (i) Section 1201 is amended by striking out subsection (d)(defining subsection (d) gain) and by redesignating subsection (e) as subsection (d). (ii) Section 1201(b)(2)(A) (relating to alternative tax on noncorporate taxpayers) is amended by striking out “the amount of the subsection (d) gain” and inserting in lieu thereof “the sum of the long-term capital gains for the taxable year, but not to exceed $50,000 ($25,000 in the case of a married individual filing a separate return)”. (iii) Section 1201(b)(3) is amended by striking out “the amount of the subsection (d) gain” and inserting in lieu thereof “the sum referred to in subparagraph (A)”. (136) Amendments of section 1222.— (A) Paragraph (9) of section 1222 (relating to definition 26 USC 1222. of terms applicable to capital gains and losses) is amended to read as follows: “(9) Capital gain net income.— The term ‘capital gain net income’ means the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges.” (B) Paragraph (11) of section 1222 (relating to definition of terms applicable to capital gains and losses) is amended to read as follows: “(11) Net capital gain.— The term ‘net capital gain’ means “Net capita] gain.” the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year.” (137) Amendment of section 1233.— Section 1283((3) (relating 26 USC 1233. to certain options to sell) is amended by striking out “the date of enactment of this title” and inserting in lieu thereof “August 16, 1954”. (138) Amendment of section 1237.— Section 1237 (relating 26 USC 1237. to real property subdivided for sale) is amended by striking out subsection (d) (relating to effective date). (139) Repeal of section 1240.— Section 1240 (relating to taxability 26 USC 1240. to employee of certain termination payments) is repealed. (140) Amendment of section 1245.— Section 1245(b)(7)(B) 26 USC 1245. (relating to transfers to tax-exempt organization where property will be used in unrelated business) is amended by striking out “such organization acquiring such property,”. (141) Amendment of section 1246.— Section 1246(f) (relating 26 USC 1246. to gain on foreign investment company stock) is amended by striking out “beginning after December 31, 1962”. (142) Amendment of section 1311.— Paragraphs (2)(A), (2)(B), and (3) of section 1311(b) (relating to mitigation of effect of limitations) are each amended by striking out “Tax Court of the United States” and inserting in lieu thereof “Tax Court”. (143) Repeal of section 1315.— Section 1315 (relating to effective date of part II of subchapter Q of chapter 1) is repealed. (144) Repeal of section 1321.— Part III of subchapter Q of chapter 1 (relating to involuntary liquidation of LIFO inventories) is repealed. (145) Repeal of sections 1331 through 1337.— (A) Part IV of subchapter Q of chapter 1 (relating to war loss recoveries) is repealed. (B) The repeal by subparagraph (A) shall apply with respect to war loss recoveries in taxable years beginning after December 31, 1976. (146) Amendment of section 1341.— Section 1341(b)(2) (relating to claim of right) is amended by striking out the last sentence. (147) Repeal of section 1342.— Section 1342 (relating to computation of tax on certain amounts recovered as a result of a patent infringement suit) is repealed. (148) Repeal of section 134A.— Section 1346 (relating to recovery of unconstitutional Federal taxes) is repealed. (149) Amendments of section 1372.— (A) Section 1372(b)(1) (relating to effect of election under subchapter S) is amended by striking out “(other than the tax imposed by section 1378)” and inserting in lieu thereof “(other than as provided by section 58(d)(2) and by section 1378)”. (B) Section 1372(c) (relating to subchapter S elections by small business corporations) is amended to read as follows: “(c) Where and How Made.— An election under subsection (a) may be made by a small business corporation for any taxable year at any time during the first month of such taxable year, or at any time Regulations. during the month preceding such first month. Such election shall be made in such manner as the Secretary shall prescribe by regulations.” (C) Section 1372 is amended by striking out subsection (g) (relating to certain elections for years beginning before 1961). (150) Amendments of section 1374.— (A) Section 1374(b) (relating to net operating losses of subchapter S corporations) is amended by adding at the end thereof the following new sentence: “The deduction allowed by this subsection shall, for purposes of this chapter, be considered as a deduction attributable to a trade or business carried on by the shareholder.” (B) Subsection (d) of section 1374 (relating to treatment of net operating losses of subchapter S corporations) is repealed. (151) Amendments of section 1375.— (A) The heading of subsection (b) of section 1375 is amended by striking out “Received Credit Not Allowed” and inserting in lieu thereof “Not Treated as Such for Certain Purposes”. (B) Section 1375 (f) (relating to elections as to certain distributions) is amended by striking out paragraph (3). (152) Amendment of section 1378.— Section 1378(b) (relating 26 USC 1378. to the taxation of capital gain in the case of electing small business corporations) is amended by striking out the last sentence. (153) Amendments of section 1388.— (A) Section 1388(c)(2)(B)(i) (relating to patronage 26 USC 1388. dividends) is amended by striking out “the date of the enactment of the Revenue Act of 1962” and inserting in lieu thereof “October 16, 1962”. (B) Section 1388(h)(2)(B)(i) (relating to perunit retain certificates) is amended by striking out “the date of the enactment of Ibis subsection” and inserting in lieu thereof “November 13, 1966”. (154) Amendments of section 1401.— (A) Section 1401(a) (relating to rate of tax on self-employment 26 USC 1401. income) is amended to read as follows: “(a) Old-Age, Survivors, and Disability Insurance.— In addition to other taxes, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to 7.0 percent of the amount of the self-employment income for such taxable year.” (B) Section 1401(b) (relating to rate of tax on self-employment income for hospital insurance) is amended by striking out paragraphs (1) and (2) and by redesignating paragraphs (3), (4), (5), and (6), as paragraphs (1), (2), (3) and (4), respectively. (155) Amendments of section 1402.— (A) Paragraph (1) of section 1402(b) (relating to definition 26 USC 1402. of self-employment income) is amended to read as follows: “(1) that part of the net earnings from self-employment which is in excess of (i) an amount equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) 42 USC 430. which is effective for the calendar year in which such taxable year begins, minus (ii) the amount of the wages paid to such individual during such taxable years; or”. (B) Section 1402 amended by striking out subsection (g) 26 USC 1402. (relating to treatment of self-employment income for years prior to 1962). and by redesignating subsections (h) and (i) as subsections (g) and (h). respectively. (C) Section 1402(g)(2) (relating to self-employment income, of members of certain religious faiths), as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: “(2) Time for filing applications.— For purposes of this subsection, an application must be filed on or before the time prescribed for filing the return (including any extension thereof) for the first, taxable year for which the individual has self-employment income (determined without regard to this subsection or subsection (c)(6)), except that an application filed after such date but on or before the last day of the third calendar month following the calendar month in which the taxpayer is first notified in writing by the Secretary that a timely application for an exemption from the tax imposed by this chapter has not been filed by him shall be deemed to be filed timely.” (156) Repeal of section 1465.— Section 1465 (relating to definition 26 USC 1465. of withholding agent) is repealed. (157) Amendments of section 1481.— (A) Section 1481(a)(1)(A) (relating to mitigation of 26 USC 1481. effect of renegotiation of Government contracts) is amended by striking out “within the meaning of the Federal renegotiation act applicable to such transaction” and inserting in lieu thereof “within the meaning of the Renegotiation Act of 1951, as amended (50 U.S.C. App, 1211 and following)”. (B) Section 1481(a)(1) (relating to renegotiation) is amended by striking out subparagraph (D). (C) Subparagraphs (B) and (C) of section 1481(a)(1) are each amended by striking out “applicable Federal renegotiation act” and inserting in lieu thereof “Renegotiation Act of 1951, as amended”. (158) Amendment of section 1551.— Section 1551(a) (relating to disallowance of surtax exemption) is amended by striking out “determined under subjection (d)” and inserting in lieu thereof “determined under subsection (c)”. (159) Amendment of section 1552.— The first sentence of section 1552(a) (relating to earnings and profits of an affiliated group) is amended by striking out “beginning after December 31, 1953, and ending after the date of enactment of this title,”. (b) Conforming and Clerical Amendments.— (1) Amendments conforming to repeal of sections 35 and 242.— (A) Section 36, as amended by this Act, is amended by striking out “sections 32 and 35” and inserting in lieu thereof “section 32”. (B) Section 41(b)(2) is amended by striking out “section 35 (relating to partially tax-exempt interest)”. (C) Section 46(a)(3) is amended by striking out subparagraph (B), by inserting “and” at the end of subparagraph (A), and by redesignating subparagraph (C) as subparagraph (B). (D) Section 50A(a)(3) is amended by striking out subparagraph (B) and redesignating subparagraphs (C), (D), and (E), as subparagraphs (B), (C), and (D), respectively. (E) (i) The heading of paragraph (1) of section 171(a) is amended to read “(1) Taxable bonds.—”. (ii) The heading of paragraph (2) of section 171(a) is amended to read “(2) Tax-exempt bonds.—”, (iii) Section 171(a) is amended by striking out paragraph (3) and by redesignating paragraph (4) as paragraph (3). (iv) Section 171(b)(1)(B)(n) is amended by striking out “subsection (c)(1)(B)” and inserting in lieu thereof “subsection (a)(1)”. (v) So much of section 171(c) as precedes paragraph (2) is amended to read as follows: “(c) Election as to Taxable Bonds.— “(1) Eligibility to elect; bonds with respect to which election permitted.— In the case of bonds the interest on which is not excludable from gross income, this section shall apply only if the taxpayer has so elected.”, (F) (i) Section 551 is amended by striking out subsection (c), and by redesignating subsections (d), (e), (f), and (g), as subsections (c), (d), (e), and (f), respectively. (ii) Section 1016(a)(13) is amended by striking out “section 551(f)” and inserting in lieu thereof “section 551(e)”. (G) Section 584(c)(2) is amended to read as follows: “(2) Dividends received.— The proportionate share of each participant in the amount of dividends received by the common trust fund and to which section 116 applies shall be considered for purposes of such section as having been received by such participant.” (H) (i) Section 642(a) is amended by striking out paragraph 26 USC 642. (1), and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (ii) Section 41(d) is amended by striking out “section 26 USC 41. 642(a)(3)” and inserting in lieu thereof “section 642(a)(2)”. (iii) Section 901(g)(3), as amended by this Act, is 26 USC 901. amended by striking out “section 642(a)(2)” and inserting in lieu thereof “section 642(a)(1)”. (I) (i) Section 702(a) is amended by striking out paragraph 26 USC 702. (7) and by redesignating paragraphs (8) and (9) as paragraphs (7) and (8), respectively. (ii) Section 702(b) is amended by striking out “paragraphs (1) through (8)” and inserting in lieu thereof “paragraphs (1) through (7)”. (iii) Section 1402(a) is amended by striking out “702(a) 26 USC 1402. (9)” each place it appears and inserting in lieu thereof “702 (a)(8)”. (J) (i) Section 804(a) is amended by striking out paragraph 26 USC 804. (3), and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4),respectively. (ii) Section 243(b)(3)(C)(iii), as redesignated by paragraph 26 USC 243. (21)(A) of this subsection, is amended by striking out “sections 804(a)(4)” and inserting in lieu thereof “sections 804(a)(3)”. (iii) Section 804(a)(2) is amended by striking out “paragraph (5)” and inserting in lieu thereof “paragraph (4)”, and by striking out “paragraph (4)” and inserting in lieu thereof “paragraph (3)”. (iv) Section 809(d)(10) is amended by striking out “section 26 USC 809. 804(a)(4)”, and inserting in lieu thereof “section 804(a)(3)”. (v) Section 1561(a)(3) is amended by striking out “sections 26 USC 1561. 804(a)(4)” and inserting in lieu thereof “sections 804 (a)(3)”. (vi) Section 1564(a)(1)(C) is amended by striking out 26 USC 1564. “sections 804(a)(4)” inserting in lieu thereof “sections 804 (a)(3)”. (K) Section 804(a)(2)(A) is amended by striking out clause, (ii). by inserting “and” at the end of clause (i), and by redesignating clause (iii) as clause (ii). (L) (i) Section 809(d)(8)(A) is amended by striking out clause (ii), by inserting “and” at the end of clause (i), and by redesignating clause (iii) as clause (ii). (ii) Section 809(d)(8)(B) is amended by striking out “subparagraph (A)(iii)” and inserting in lieu thereof “subparagraph (A)(ii)”. (M) Sections 804(a)(1),804(a)(2), 809(a)(1),809(b)(1)(A) and 809(b)(2)(A) are each amended by striking out “, partially tax-exempt interest,”. (N) Section 809(e) is amended by striking out paragraph (6), and by redesignating paragraph (7) as paragraph (6). (O) Section 815(b)(2)(A)(iii) is amended by striking out 26 USC 815. “the deduction for partially tax-exempt interest provided 26 USC 242. by section 242 (as modified by section 804(a)(3)),” and by striking out the comma after “809(d)(8)(B))”. (P) Section 822(c)(2) is amended by striking out “partially tax-exempt interest and”. (Q) Section 822(c)(6)(A) is amended by striking out “or to the deduction provided in section 242 for partially tax-exempt interest”. (R) Section 822(c)(7) is amended by striking out “partially tax-exempt interest and to”. (S) Section 822(d)(2) is amended by striking out “, the deduction provided in subsection (c)(1), and the deduction allowed by section 242 (relating to partially tax-exempt interest)” and inserting in lieu thereof “and the deduction provided in subsection (c)(1)”. (T) Section 832(c)(5)(A) is amended by striking out “or to the deductions provided in section 242 for partially tax-exempt interest”. (U) Section 832(c)(12) is amended by striking out “partially tax-exempt interest and to”. (V) Sections 852(b)(1) and 857(b)(1) are each amended by striking out the last sentence. (W) Section 1244(c)(1)(E) is amended by striking out “sections 172,242,243” and inserting in lieu thereof “sections 172, 243”. (X) Section 1402 (a)(2) is amended by striking out “(other than interest described in section 35)”. (Y) Section 1503(b)(3) is amended by striking out subparagraph (C). (Z) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking out the item relating to section 35. (AA) The table of sections for part VIII of subchapter B of chapter 1 is amended by striking out the item relating to section 242. (2) Amendment conforming to repeal of section 51.— The table of parts for subchapter A of chapter 1 is amended by striking out the item relating to part V. (3) Amendments conforming to auditions of sections 84 and 65.— (A) Paragraphs (1)(C), (5HA), (6)(D), and (12) of section 341(e) are each amended by striking out “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)” each place it appears and inserting in lieu thereof “ordinary income”. (B) Section 483(f)(3) is amended by striking out “no part of any gain on such” and inserting in lieu thereof “all of the gain, if any, on such” and by striking out “gain from the sale or exchange of a capital asset or property described in section 1231” and inserting in lieu thereof “ordinary income”. (C) Section 707(b)(2) is amended by striking out “as gain from the sale or exchange of property other than a capital asset” and inserting in lieu thereof “as ordinary income”. (D) Paragraphs (1) and (2) of section 735(a) are each amended by striking out “gain or loss from the sale or exchange of property other than a capital asset” and inserting in lieu thereof “as ordinary income or as ordinary loss, as the case may be”. (E) Section 1236 (b) is amended by striking out “loss from 26 USC 1236. the sale or exchange of property which is not a capital asset” and inserting in lieu thereof “ordinary loss”. (F) Sections 1242 and 1243 are each amended by striking 26 USC 1242, 1243. out “a loss from the sale or exchange of property which is not a capital asset” each place it appears and inserting in lieu thereof “an ordinary loss”. (G) Section 1244 is amended by striking out “a loss from 26 USC 1244. the sale or exchange of an asset which is not a capital asset” each place it appears and inserting in lieu thereof “an ordinary loss”. (H) Section 1248(g)(3)(B), as redesignated by this Act, 26 USC 1248. is amended by striking out “gain from the sale of an asset which is not a capital asset” and inserting “ordinary income”. (I) The following provisions are each amended by striking out “gain from the sale or exchange of property which is not a capital asset” each place it appears and inserting in lieu thereof “ordinary income”: sections 341(a). 871(a)(1)(C)(i) and (ii), 881(a)(3)(A) and (B), 996(d)(1) and (2), 1037(b)(1)(A), 1232(a)(2)(A) and (B), 1232(c), 1246(a), and 1385(c)(2)(C). (J) The following provisions are each amended by striking out “gain from the sale of property which is not a capital asset” and inserting in lieu thereof “ordinary income”: sections 306(a)(1)(A),306(a)(1)(B), and 306(f). (K) The following provisions are each amended by striking out “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231” each place it appears and inserting in lieu thereof “ordinary income”: sections 80(c)(1), 163(d)(3) and (5), 613(a), 617 (d)(1). 995(b)(1)(C). 1238, 1245(a)(1), 1249(a), 1250 (f) and (g), 1251 (b)(3)(B), (c)(1), and (c)(2), and 1252(a)(1). (4) Clerical amendments conforming to additions of sections 64 and 65.— (A) The table of sections for part I of subchapter B of chapter 1 is amended by adding at the end thereof the following new items: “Sec. 64. Ordinary income defined. “Sec. 65. Ordinary loss defined.” (B) The heading for part I of subchapter B of chapter 1 is amended by striking out “AND TAXABLE INCOME” and inserting in lieu thereof “TAXABLE INCOME, ETC.” ETC.” (C) The table of parts for subchapter B of chapter 1 is amended by striking out “and taxable income.” in the item relating to part. I and inserting in lieu thereof “taxable income, etc.” (5) Amendment conforming to repeat, of section 70.— The table of sections for part II of subchapter B of chapter 1 is amended by striking out the item relating to section 76. (6) Amendments conforming to amendment of section 103.— (A) Section 6049(b)(2)(A) is amended by striking out 26 USC 6049. “section 103(a)(1) or (3)” and inserting in lieu thereof “section 103(a)”. (B) Section 852(a)(1)(B), as added by this Act, is amended by striking out “section 103(a)(1)” and inserting in lieu thereof “section 103 (a)”. (7) Amendments conforming to amendment of section 143.— (A) (i) Part V of subchapter B of chapter 1 is amended by striking out section 153 (relating to determination of marital status) and by redesignating section 154 as section 153. (ii) The table of sections for part V of subchapter B of chapter 1 is amended by striking out the items relating to sections 153 and 154 and inserting in lieu thereof the following: “Sec. 153. Cross references.”. (B) Section 152(a)(9) is amended by striking out “section 153” and inserting in lieu thereof “section 143”. (C) Section 153, as redesignated by subparagraph (A) of this paragraph, is amended by adding at the end thereof the following new paragraph: “(5) For determination of marital status, see section 143.” (8) Amendments conforming to amendment of section 151.— (A) The following provisions are each amended by striking out “educational institution (as defined in section 151 Q(4))” each place it appears and inserting in lieu thereof educational organization described in section 170(b)(1)(A)(ii)”: sections 117(a)(1)(A), 117(b)(1), 117(b)(2), 152(d), 170(g)(1)(B)(as redesignated by subsection (a)(28) 26 USC 117, 152, 170, 403. (A)(i) of this section!, and 403(b)(1)(A)(ii). (B) Section 103(c)(3)(A), as redesignated by subsection (a)(17) of this section, is amended by striking out “educational institution (within the meaning of section 151(e)(4))” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”, (C) Section 163(b)(1) is amended by striking out “educational institution (as defined in section 151(e)(4)) and which is provided for a student of such institution” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization”. (D) (i) Subparagraphs (A), (B), and (C) of section 415 (c)(4) are each amended by striking out “educational institution” each place it appears and inserting in lieu thereof “educational organization”. (ii) Subparagraph (D)(ii) of section 415(c)(4) is amended to read as follows: “(ii) For purposes of this paragraph the term ‘educational organization’ means an educational organization described in section 170(b)(1)(A)(ii).” (iii) Section 415(c)(4) is amended by striking out “educational institutions” from the paragraph heading and inserting in lieu thereof “educational organizations”. (E) Section 508(c)(2)(A) is amended to read as follows: “(A) educational organizations described in section 170 (b)(1)(A)(u),and”. (F) Section 512(b)(15)(B), as redesignated by section 1951(b)(8)(A) of this Act, is amended by striking out “edu-cational institution (as defined in section 151(e)(4))” and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”. (G) Section 1303(d) is amended by striking out “educational 26 USC 1303. institution (as defined in section 151(e)(4))” each place it appears and inserting in lieu thereof “educational organization described in section 170(b)(1)(A)(ii)”. (H) Sections 4941(d)(2)(G)(ii) and 4945(g)(1) each 26 USC 4941, 4945. are amended by striking out “educational institution described in section 151(e)(4)” and inserting in lieu thereof “educational organization described in section 170(b)(1)(AHii)”. (9) Amendments conforming to the amendments of section 152.— Section 2(b)(3)(B) is amended by striking out clause (ii), 26 USC 2. by adding “or” at the end of clause (i), and by redesignating clause (ii) as clause (ii). (10) Amendment conforming to the amendment of section 112.— (A) Section 374(e)(2) is amended by striking out “section Ante, p. 296. 172(j)” and inserting in lieu thereof “172(g)”. (B) Section 904(f)(2)(B)(i) and 904(f)(4)(B)(i), as Ante, p. 1624. amended by this Act, are each amended by striking out “section 172(k)(1)” and inserting in lieu thereof “section 172(h)”. (11) Amendments conforming to repeal of section 187.— (A) Section 48(a)(8) (relating to section 38 property) is 26 USC 48. amended by striking out “187,”. (B) The table of sections for part VI of subchapter B of chapter 1 is amended by striking out the item relating to section 187. (C) Section 1082(a)(2)(B) (relating to basis for determining gain 26 USC 1082. or loss) is amemled by striking out “187,”. (D) Section 1245(a)(2) (relating to gain from dispositions 26 USC 1245. of certain depreciable property) is amended by striking out “187,” each place it appears. (12) Amendments conforming to the repeal of section 342.— (A) Section 551(f), as redesignated by paragraph (1)(F) 26 USC 551. of this subsection, is amended by striking out paragraph (3). (B) The table of subparts for part II of subchapter C of chapter 1 is amended by striking out the item relating to subpart C and inserting in lieu thereof: “Subpart C. Collapsible corporations,” (C) The table of sections for subpart C of part II of subchapter C of chapter 1 is amended by striking out the item relating to section 342. (D) The heading of subpart C of part II of subchapter C of chapter 1 is amended to read as follows: “Subpart C— Collapsible Corporations”. (13) Amendments conforming to the repeal of section 303.— The table of sections for subpart C of part III of subchapter C of chapter 1 is amended by striking out the item relating to section 363. (14) Amendments conforming to the repeal of section 373.— (A) Section 372(b)(1) is amended by striking out “373 26 USC 372. (b) or”. (B) Section 374(b) is amended to read as follows: “(b) Basis.— “(1) Railroad corporations.— If the property of a railroad corporation, as defined in section 77(m) of the Bankruptcy Act (11 U.S.C. 205 (m)), was acquired after December 31, 1938, in pursuance of an order of the court having jurisdiction of such corporation— “(A) in a receivership proceeding, or “(B) in a proceeding under section 77 of the Bankruptcy Act, and the acquiring corporation is a railroad corporation (as defined in section 77(m) of the Bankruptcy Act) organized or made use of to effectuate a plan of reorganization approved by the court, in such proceeding, the basis shall be the same as it would be in the hands of the railroad corporation whose property was so acquired, increased in the amount of gain recognized under subsection (a)(2) to the transferor on such transfer. “(2) Property acquired by street, suburban, or interurban electric railway corporation.— If the property of any street, suburban, or interurban electric railway corporation engaged as a common carrier in the transportation of persons or property in interstate commerce was acquired after December 31, 1934, in pursuance of an order of the court having jurisdiction of such corporation in a proceeding under section 77 of the Bankruptcy Act (11 U.S.C. 501 and following), and the acquiring corporation is a street, suburban, or interurban electric railway engaged as a common carrier in the transportation of persons or property in interstate commerce, organized or made use of to effectuate a plan of reorganization approved by the court in such proceeding, then, notwithstanding the provisions of section 270 of the Bankruptcy Act (11 U.S.C. (570), the basis shall be the same as it would be in the hands of the corporation whose property was so acquired.” (C) Section 374(c)(8) is amended by striking out “subsection (b)” and inserting in lieu thereof “subsection (b)(1)”. . .. (D) Section 1232(b)(2) is amended by striking out “section 371, 373, or 374” and inserting in lieu thereof “section 371 or 374”. (E) The table of sections for part IV of subchapter C of chapter 1 is amended by striking out the item relating to section 373. (15) Amendment conforming to repeal of sections 391 through 395.— The table of parts for subchapter C of chapter 1 is amended by striking out the item relating to part VII. (16) Amendment conforming to the amendments of section 481.— Section 381 (c) is amended by striking out paragraph (21). (17) Amendment conforming to the amendments of section 545.— Section 381(c)(15) is amended by striking out “subsections (b)(7) and (c)” and inserting in lieu thereof “subsection (c)”. (18) Amendment conforming to the repeal of section 583.— The table of sections for part I of subchapter H of chapter 1 is amended by striking out the item relating to section 583. (19) Amendment conforming to the repeal of section 592.— The table of sections for part II of subchapter H of chapter 1 is amended by striking out the item relating to section 592. (20) Amendments conforming to the repeal of section 601.— (A) Section 535(b) is amended by striking out paragraph 26 USC 535. (8). (B) (i) Section 545(b) is amended by striking out paragraph 26 USC 545. (6), and by redesignating paragraph (8) as paragraph (6). (ii) Section 545(b)(2) is amended by striking out “paragraph (8)” and inserting in lieu thereof “paragraph (6)”. (iii) Section 545(c)(5) is amended by striking out “subsection (b)(8)” and inserting in lieu thereof “subsection (b)(6)”. (C) The table of parts for subchapter H of chapter 1 is amended by striking out the item relating to part III. (21) Amendments conforming to the repeal of section 615.— (A) (i) Section 243(b)(3)(C) is amended— 26 USC 243. (I) by striking out clauses (ii) and (iii) and inserting in lieu thereof the following; “(ii) $400,000 limitation for certain exploration expenditures under section 617(h)(1),”, and (II) by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively. (ii) Section 1564(h)(2)(C) is amended by striking out 26 USC 1564. “section 243(b)(3)(C)(v)” and inserting in lieu thereof “243(b)(3)(C)(iv)”. (B) Section 381(c)(10) is amended to read us follows: 26 USC 381. “(10) Treatment of certain mining develops cent and exploration expenses of distributor or transfer or corporation.— The acquiring corporation shall be entitled to deduct, as if it were the distributor or transferor corporation, expenses deferred under section 616 (relating to certain development expenditures) if the distributor or transferor corporation has so elected. For the purpose of applying the limitation provided in section 617(h), if, for any taxable year, the distributor or transferor corporation was allowed a deduction under section 617(a), the acquiring corporation shall be deemed to have been allowed such deduction.” (C) Section 617(h)(1) is amended by striking out “and 26 USC 617. section 615(a) and the amounts which are or have been treated as deferred expenses under section 615(b)” and inserting in lieu thereof “and subsection (a) of section 615 (as in effect before the enactment of the Tax Reform Act of 1976)”. (D) Section 617(h)(3) is amended to read as follows: “(3) Application of paragraph (2)(b).— Paragraph (2) (B) shall apply with respect to nil amounts deducted before the latest such transfer from the individual or corporation to the taxpayer. Paragraph (2)(B) shall apply only if— “(A) the taxpayer acquired any mineral property from the individual or corporation under circumstances which make paragraph (7), (8), (11), (15), (17), (20), or (22) of section 113(a) of the Internal Revenue Code of 1939 apply to such transfer; or “(B) the taxpayer acquired any mineral property from the individual or corporation under circumstances which make section 334(b), 362 (a) and (b), 372(a), 374(b)(1), 1051, or 1082 apply to such transfer.” (E) Section 617 is amended by adding at the end thereof the following new subsection: “(i) Certain Pre-1970 Exploration Expenditures.— If— “(1) the taxpayer receives mineral property in a transaction as a result of which the basis of such property in the hands of the transferee is determined by reference to the basis in the hands of the transferor, “(2) an election made by the transferor under subsection (e) of section 615(e)(as in effect before the enactment of the Tax Reform Act of 1976) applied with respect to expenditures which were made by him and which were properly chargeable to such property, and “(3) the taxpayer has made or makes an election under subsection (a), then in the application of this section with respect to the transferee, the amounts allowed as deductions under such section 615 to the transferor, which (but for the transferor’s election) would be reflected in the adjusted basis of such property in the hands of the transferee, shall be treated as expenditures allowed as deductions under subsection (a) to the transferor.” (F) Section 703 (b) is amended by striking out “under section 615 (relating to pre–1970 exploration expenditures),”. (G) Section 1016 (a) is amended by striking out paragraph (I?)-. (H) The table of sections for part. I of subchapter I of chapter 1 is amended by striking out the item relating to section 615. (22) Amendments conforming to the repeal of section 632.— (A) The table of sections for part III of subchapter I of chapter 1 is amended by striking out the item relating to section 632. (B) Section 5(b) is amended by striking out paragraph (1). (23) Amendment conforming to the repeal of section 771.— The table of parts for’ subchapter K of chapter 1 is amended by striking out the item relating to part IV. (24) Amendment conforming to the amendment of section 802.— Section 815(c)(3)(B) is amended by striking out “(determined without regard to section 802(a)(3))”. (25) Amendment conforming to the amendment of section 812.— Section 844(b)(2) is amended by striking out “section 812(b)(1)(A)(iii)” and inserting in lieu thereof “section 812 (b)(1)(C)”. (26) Amendments conforming to the amendments of section 804.— (A) Paragraphs (5) and (6) of section 861(a) (relating to items treated as income from within United States) are each amended by striking out in the heading “sale” and inserting in lieu thereof “sale or exchange”, and by striking out “sale” in the text and inserting in lieu thereof “sale or exchange”. (B) section 861(e)(1) (relating to income from certain aircraft and vessels) is amended by striking out “sale or other disposition” and inserting in lieu thereof “sale, exchange, or other disposition”. (C) Paragraphs (5) and (6) of section 862(a) (relating to items treated as income from without the United States) 26 USC 863. and paragraphs (2) and (3) of section 863(b) (relating to sources of income) are each amended by striking out “sale” and inserting in lieu thereof “sale or exchange”. (D) Paragraph (2) of section 863(b) (relating to sources 26 USC 863. of income) is amended by striking out “sold” each place it appears and inserting in lieu thereof “sold or exchanged”. (27) Amendments conforming to the repeal of section 972.— (A) Section 970(b)(1) (relating to inclusion of certain 26 USC 970. previously excluded amounts of sub part F income) is amended by striking out “application of section 972” and inserting in lieu thereof “treatment (under section 972 as in effect before the date of the enactment of the Tax Reform Act of 1976) of two or more controlled foreign corporations which are export trade corporations as a single controlled foreign corporation ”. (B) The table of sections for subpart G of part III of subchapter N of chapter 1 is amended by striking out the item relating to section 972. (28) Amendments conforming to the amendment of section 1001.— (A) Subsection (c) of section 331 is amended to read as 26 USC 331. follows: “(c) Cross Reference.— “For general rule for determination of the amount of gain or loss recognized, see section 1001.” (B) (i) Section 1002 (relating to recognition of gain or 26 USC 1002. loss) is repealed. (ii) The table of sections for part I of subchapter 0 of chapter 1 is amended by striking out the item relating to section 1002. (29) Amendments conforming to the repeal of section 1920.— (A) The third sentence of subsection (a) of section 1016 is 26 USC 1016. amended by striking out “under section 1020” and inserting in lieu thereof “under section 1020 (as in effect before the date of the enactment of the Tax Reform Act of 1976)”, Ante, p. 1520; (B) The table of sections for part II of subchapter O of chapter 1 is amended by striking out the item relating to section 1020. (30) Amendments conforming to the repeal of section 1022.— (A) Section 1016(a) is amended— 26 USC 1016. (i) by striking out paragraph (21), and (ii) by redesignating paragraphs (20) and (22) as paragraphs (19) and (20), respectively. (B) The amendment made by subparagraph (A)(i) shall 26 USC 1016 note. apply with respect to stock or securities acquired from a decedent dying after the date of the enactment of this Act. (C) Tho table of sections for part II of subchapter O of chapter 1 is amended by striking out the item relating to section 1022, ~ (31) Amendments conforming to amendments of section 1033.— (A) Section 1250(d)(4)(B) is amended by striking out 26 USC 1250. “1033(a)(3)(A)” and inserting in lieu thereof “1033(a)(2)(A)” (B) Section 1250(d)(4)(C) and (D) are each amended by striking out “1033(a)(3)” and inserting in lieu thereof “1033(a)(2)”. (C) Section 6212(c)(2)(B) is amended by striking out “1033(a)(3)(C) and (D)” and inserting in lieu thereof “1033 (aj (2)(C) and (D)”. (D) Section 6504(4) is amended by Striking out “1033(a)(3)(C) and (D)” and inserting in lieu thereof “1033(a)(2)(C) and (D)”. (E) Sections 1071(b) and 1250(d)(4)(D) are each amended by striking out “1033(c)” and inserting in lieu thereof “1033(b)”. (32) Amendments conforming to the repeal of section 1111.— (A) Section 301 is amended by striking out subsection (f), and by redesignating subsection (g) as subsection (e). (B) (i) Section 312 is amended by striking out subsection (k), and by redesignating subsections (1) and (m) as subsections (j) and (k), respectively, (ii) Section 1246(g) is amended by striking out “312(1)” and inserting in lieu thereof “312 (j)”. (iii) Sections 964(a) and 1248(c)(1) are each amended by striking out “312 (m)(3)” and inserting in lieu thereof “312 (k)” (iv) Subsection (d) of section 1377, as added by this Act, is amended by striking out “312(m)” and inserting in lieu thereof “312(k)”. (C) Section 535(b) is amended by striking out paragraphs (9) and (10). (D) Section 543(a)(1) is amended by inserting “and” at the end of subparagraph (A), and by striking out subparagraphs (B) and (C) and inserting in lieu thereof the following: “(B) interest on amounts set aside in a reserve fund under section 511 or 607 of the Merchant Marine Act, 1936 (46 U.S.C. 1161 or 1177).” (E) Section 545(b) is amended by striking out paragraphs (10) and (11). (F) Section 553(a)(1) is amended to read as follows: “(1) Dividends, etc.— Dividends, interest, royalties, and annuities.” (G) Section 556(b) is amended by striking out paragraphs (7) and (8). (H) Section 561(b) is amended to read as follows: “(b) Special Rules Applicable.— In determining the deduction for dividends paid, the rules provided in section 562 (relating to rules applicable in determining dividends eligible for dividends paid deduction) and section 563 (relating to dividends paid after the close of the taxable year) shall be applicable.” (I) The table of parts for subchapter O of chapter 1 is amended by striking out the item relating to part IX. (33) Amendments conforming to amendment of section 1222.— (A) Section 57(a)(9)(A) is amended by striking out “the amount by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “the net capital gain”. (B) So much of the first sentence of section 57(a)(9)(B) as precedes “by a fraction” is amended to read as follows: “In the case of a corporation having a net capital gain for the taxable year, an amount equal to the product obtained by multiplying the net capital gain”. (C) Section 527(b)(2) is amended by striking out “net 26 USC 527. section 1201 gain” and inserting in lieu thereof “net capital gain”. (D) Sections 535(b)(6) and 545(b)(5) are each amended— 26 USC 535, 545. (1) by striking out from the paragraph heading “Long-term” and inserting in lieu thereof “Net”, (2) by striking out from the text “the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year” each place it appears and inserting in lieu thereof’ “the net capital gain for the taxable year”, and (3) by striking out from the text “such excess” each place it appears and inserting in lieu thereof “such net capital gain”. (E) Section 802(a)(2) is amended— 26 USC 802. (i) by striking out “the net long-term capital gain of any life insurance company exceeds the net short-term capital loss” and inserting in lieu thereof “any life insurance company has a net capital gain”, and (ii) by striking out “such excess” each place it appears and inserting in lieu thereof “such net capital gain”. (F) Section 804(a)(2) is amended by 26 USC 804. striking out “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (G) Sections 809(b)(1)(B) and 809(b)(2)(B) are each 26 USC 809. amended by striking out “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (H) Section 815(b)(2)(A)(ii) is amended by striking out 26 USC 815. “by which the net long-term capital gain exceeds the net short-term capital loss” and inserting in lieu thereof “of the net capital gain”. (I) Section 852(b)(2)(A) is amended by striking out 26 USC 852. “the excess, if any, of the net long-term capital gain over the net short-term capital loss” and inserting in lieu thereof “the amount of the net capital gain, if any”. (J) (i) Section 852(b)(3)(A) is amended to read as follows: “(A) Imposition of tax.— There is hereby imposed for each taxable year in the case of every regulated investment company a tax, determined as provided in section 1201 (a), on the excess, if any, of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.” (ii) The second sentence of section 852(b)(3)(C) is amended by striking out “excess of the net long-term capital gain over the net short-term capital loss” each place it appears and inserting in lien thereof “net capital gain”. (K) The second sentence of section 857(b)(3)(C) is 26 USC 857. amended by striking out “excess of the net long-term capital gain over the net short-term capital loss” each place it appears and inserting in lieu thereof “net capital gain”. (L) Section 1201(b) is amended by striking out “net section 26 USC 1201. 1201 gain” each place it appears and inserting in lieu thereof “net capital gain”. (M) The first sentence of section 1202 is amended to read as follows: “If for any taxable year, a taxpayer other than a corporation has a net capital gain, 50 percent of the amount of the net capital gain shall be a deduction from gross income.” (N) Sections 381(e)(3)(B), 381(c)(3)(C), 852(d), 4940 (c)(1), and 4940(c)(4) are each amended by striking out “net capital gain” and inserting in lieu thereof “capital gain net income”. (O) Section 1212(a)(1) is amended by striking out “net capital gain” each place it appears and inserting in lieu thereof “capital gain net income”, and by striking out “net capital gains” and inserting in lieu thereof “capital gain net income”. (P) Section 1247(a)(1)(B) is amended by striking out “the excess (determined as if such corporation were a domestic corporation) of the net long-term capital gain over the net short-term capital loss” and inserting in lieu thereof “the amount (determined as if such corporation were a domestic corporation) of the net capital gain”. (Q) (i) Section 1375(a)(1) is amended by striking out “the excess of the corporation’s net long-term capital gain over its short-term capital loss” and inserting in lieu thereof “the corporation’s net capital gain”. (ii) The second sentence of section 1375(a)(1) is amended by striking out “such excess” and inserting in lieu thereof “such net capital gain”. (iii) Section 1375(a)(3) is amended by striking out “the excess of an electing small business corporation’s net long-term capita] gain over its net short-term capital loss” and inserting in lieu thereof “an electing small business corporation’s net capital gain”. (R) The following provisions are each amended by striking out “the excess of the net long-term capital gain over the net short-term capital loss,” and inserting in lieu thereof “the net capital gain”: Sections 1247(a)(2)(A)(i), 1247(a)(2) 26 USC 1247, 1378. (C), 1247(d)(1) and (2). 1378(a)(1), 1378(b)(1), and 1378 (c)(8). (34) Amendment conforming to the repeal of section 1240.— The table of sections of part IV of subchapter P of chapter 1 is amended by striking out the item relating to section 1240. (35) Amendment conforming to the repeal of section 1315.— The table of sections for part II of subchapter Q of chapter 1 is amended by striking out the item relating to section 1315. (36) Amendments conforming to the repeal of section 1321.— (A) Section 472 is amended by striking out subsection (f). (B) Section 6422, as amended by this Act, is amended by striking out paragraph (2), and by redesignating paragraphs (3) through (13) as paragraphs (2) through (12), respectively. (C) Section 6504 is amended by striking out paragraph (1). (D) Section 6515 is amended by striking out paragraph (1). (E) The table of parts for subchapter Q of chapter 1 is amended by striking out the item relating to part III. (37) Amendments conforming to the repeal of sections 1331 through 1337.— (A) The third sentence of section 901(a) is amended by 26 USC 901. striking out “under section 1333 (relating to war loss recoveries) or”. _ . (B) Section 936(a)(2), as added by this Act, is 26 USC 936. amended— (i) by inserting “or” at the end of subparagraph (C), and (ii) by striking out subparagraph (D). (C) Section 6212(c),(2) is amended by striking out subparagraph 26 USC 6212. (D). (D) Section 6515 is amended by striking out paragraph 26 USC 6515. (6). (E) Section 6515, as amended by this Act, is amended by striking out paragraph (2), and by redesignating paragraphs (3), (4), (5), (6), (7), and (8) as paragraphs (1), (2), (3), (4). (5),and (6) respectively. (F) The table of parts tor subchapter Q of chapter 1 is amended by striking out the item relating to part IV. (38) Amendment conforming to the repeal of section 1342.— The table of sections for part V of subchapter Q of chapter 1 is amended by striking out the item relating to section 1342. (39) Amendments conforming to the repeal of section 1340.— (A) The table of sections for part VI of subchapter Q of chapter 1 is amended by striking out the item relating to section 1346. (B) Section 6504 is amended by striking out paragraph Post, p. 1829. (7). (40) Amendment conforming to amendment of section 1372.— Section 58(d)(2) is amended by striking out “, notwithstanding 26 USC 58. the provisions of section 1371(b)(1),” (41) Amendment conforming to the repeal of section 1465.— The table of sections for subchapter C of chapter 3 is amended by striking out the item relating to section 1465. (c) Amendments to Provisions Referring to Territories.— (1) Section 37(f) is amended by striking out “a Territory,”. Ante, p. 1559. 26 USC 105, 273, 454. 26 USC 117. (2) Sections 105(e)(2), 273, and 454(b)(2) are each amended by striking out a Territory.”. (3) Section 117(b)(2)(A)(iv) is amended by striking out “a territory,”. (4) Section 162(a) is amended by striking out “territory”. 26 USC 162. 26 USC 581. (5) Section 581 is amended by striking out “, of any State, or of any Territory” and inserting m lieu thereof “or of any State”, and by striking out “, Territorial,”. (6) Section 801(b)(3) is amended by striking out “or 26 USC 801. Territorial”. (7) Section 861(a)(1) is amended by striking out “, any Territory, 26 USC 861. any political subdivision of a Territory.”. (8) Paragraphs (6) and (7) of section 1014(b) are each 26 USC 1014. amended by striking out “Territory.”. (9) Section 1221 (5) is amended by striking out “or Territory,”. 26 USC 1221. 26 USC 2 note. (d) Effective Date.— Except as otherwise expressly provided in this section, the amendments made by this section shall apply with respect to taxable years beginning after December 31, 1976. The amendments made by subsections (a)(29) and (b)(10) shall apply with respect to taxable years ending after the date of the enactment of this Act. SEC. 1902. AMENDMENTS OF SUBTITLE B; ESTATE AND GIFT TAXES. (a) In General.— (1) Amendments of section 2012.— (A) Section 2012(b) (relating to credit for gift tax) is amended— (i) by Striking out “(b) in applying,” and inserting in lieu thereof “(b) Valuation Reductions.—In applying,”, and (ii) by striking out in paragraphs (2) and (3) “ deduction)—then” and inserting in lieu thereof “deduction), then”. (B) Section 2012(c) (relating to gift by spouse or third party) is amended by striking out “(c) Where the decedent” and inserting in lieu thereof “(c) Where Gift Considered Made One-Half by Spouse.—Where the decedent”. (C) Section 2012(d)(1) (relating to computation of amount of gift tax) is amended by striking out “(d)(1) For purposes of” and inserting in lieu thereof the following: “(d) Computation of Amount of Gift Tax Paid.— “(1) Amount of tax.— For purposes of”. (D) Section 2012(d)(2) (relating to credit for gift tax) is amended by striking out “(2) For purposes” and inserting in lieu thereof: “(2) Amount of gift.—For purposes”., (2) Amendments of section 2013.— Section 2013(d)(3) is amended by striking out “, or the corresponding provision of prior law,”. (3) Amendment of section 2038.— Section 2038 (relating to revocable transfers) is amended by striking out subsection (c) (relating to effect of disability in certain cases). (4) Amendments of section 2055.— (A) Section 2055(b) (relating to powers of appointment) is amended to read as follows: “(b) Powers of Appointment.— Property includible in the decedent’s gross estate under section 2041 (relating to powers of appointment) received by a donee described in this section shall, for purposes of this section, be considered a bequest of such decedent.” (B) Section 2055(f) (relating to cross references) is amended to read as follows: (f) Cross References.— “(1) For option as to time for valuation for purpose of deduction under this section, see section 2032. “(2) For exemption of gifts and bequests to or for the benefit of Library of Congress, see section 5 of the Act of March 3, 1925, as amended (2 U.S.C. 161). “(3) For treatment of gifts and bequests for the benefit of the Office of Naval Records and History as gifts or bequests to or for the use of the United States, see section 7222 of title 10, United States Code. “(4) For treatment of gifts and bequests to or for the benefit of National Park Foundation as gifts or bequests to or for the use of the United States, see section 8 of the Act of December 18, 1967 (16 U.S.C. 191). “(5) For treatment of gifts, devises, or bequests accepted by the Secretary of State under the Foreign Service Act of 1946 as gifts, devices, or bequests to or for the use of the United States, see section 1021(e) of that Act (22 U.S.C. 869(e)) . “(6) For treatment of gifts or bequests of money accepted by the Attorney General for credit to ‘Commissary Funds, Federal Prisons/ as gifts or bequests to or for the use of the United States, see section 2 of the Act of May 15, 1952, as amended by the Act of July 9, 1952 (31 U.S.C. 725s–4). “(7) For payment of tax on gifts and bequests of United States obligations to the United States, see section 24 of the Second Liberty Bond Act (31 U.S.C. 757e), “(8) For treatment of gifts and bequests for benefit of the Naval Academy as gifts or bequests to or for the use of the United States, see section 6973 of title 10, United States Code. _ “(9) For treatment of gifts and bequests for benefit of the Naval Academy Museum as gifts or bequests to or for the use of the United States, see section 6974 of title 10, United States Code. “(10) For exemption of gifts and bequests received by National Archives Trust Fund Board, see section 2308 of title 44, United States Code.” (5) Amendments of section 2100.— (A) Section 2106(a)(2)(F) (relating to cross references 26 USC 2106. concerning the charitable deduction for estate tax purposes) is amended to read as follows: “(F) Cross References.— “(1) For option as to time for valuation for purposes of deduction under this section, see section 2032. “(2) For exemption of certain bequests for the benefit of the United States and for rules of construction for certain bequests, see section 2C55(O.” (B) Section 2106 (relating to taxable estate of nonresidents) is amended by striking out subsection (c) (relating to treatment of United States bonds). (6) Amendment of sections 2107 and 2108.— Section 2107(a) (relating 26 USC 2107, 2108. to estate tax on expatriates) and section 2108(a) (relating to application of pre–1967 estate tax provisions) are each amended by striking out “the date, of enactment of this section” and inserting in lieu thereof “November 13, 1966”. (7) Amendment relating to section 2201.— (A) Section 6(b)(1) of the Act of January 2, 1975 (Public Law 93–597; 88 Stat. 1950) is amended by striking out 26 USC 2201. “Section 2210” and inserting in lieu thereof “Section 2201”. (B) The amendment made by subsection (A) is effective 26 USC 2201 note. 26 USC 2202. July 1, 1973. (8) Repeal of section 2202.— Section 2202 (relating to missionaries in foreign service) is repealed. (9) Amendment of section 2204.— The last sentence of section 2204(b) (relating to the discharge from personal liability of a fiduciary other than the executor) is amended by striking out “has not been” and inserting in lieu thereof 26 USC 2204. “has been”. (10) Amendment of section 2501.— Section 2501(a)(1) (relating 26 USC 2501. to imposition of gift tax) is amended to read as follows: “(1) General rule.— A tax, computed as provided in section 2502, is hereby imposed for each calendar quarter on the transfer of property by gift during such calendar quarter by any individual, resident or nonresident.” (11) Amendment of section 2522.— Subsection (d) of section 26 USC 2522. 2522 (relating to cross references) is amended to read as follows: “(d) Cross Reference.— “For exemption of certain gifts to or for the benefit of the United States and for rules of construction with respect to certain gifts, see section 2055(f).” (12) Amendments to sections referring to territories.— (A) The following provisions are each amended by striking out “Territory,”: sections 2055(a)(1), 2056(c)(2)(B), 26 USC 2055, 2056, 2106. and 2106(a)(2)(A)(i). (B) The following provisions are each amended by striking out “or Territory”: sections 2011(a), 2011(e), and 2053 (C) Section 2016 is amended by striking out “Territory or”. (D) Sections 2522(a)(1) and 2522(b)(1) are. each amended by striking out “Territory,”. (E) Section 2523(f)(1) is amended by striking out “Territory, or”. (b) Conforming and Clerical Amendments.— (1) Amendment conforming to repeal of section 2202.— The table of sections for subchapter C of chapter 11 is amended by striking out the item relating to section 2202. (2) Amendments conforming to amendment of section 2055.— (A) Section 6503, as amended by this Act, is amended by striking out subsection (e), and by redesignating subsections (f), (g) (h), and (i) as subsections (e), (f), (g), and (h), respectively. (B) Section 6167(h)(2) is amended by striking out “section 6503(f)” and inserting in lieu thereof “section 6503(e)”. (c) Effective Dates.— (1) Estate tax amendments.— The amendments made by paragraphs (1) through (10), and paragraphs (14)(A), (B),and (C), of subsection (a), and by subsection (b) shall apply in the case of estates of decedents dying after the date of the enactment of this Act, and the amendment made by paragraph (11) of subsection (a) shall apply in the case of estates of decedents dying after December 31, 1970. (2) Gift tax amendments.— The amendments made by paragraphs (12), (13), and (14)(D) and (E) of subsection (a) shall apply with respect to gifts made after December 31, 1976. SEC. 1903. AMENDMENTS OF SUBTITLE C; EMPLOYMENT TAXES. (a) In General.— (1) Amendments of sections 3101 and 3111.— (A) Section 3101(a) (relating to rate of tax on employees for old-age, survivors, and disability insurance) and section 26 USC 3111. 3111(a) (relating to rate of tax on employers for such insurance) are each amended by striking out paragraphs (1), (2), (3), and (4), and by redesignating paragraphs (5) and (6) as paragraphs (1) and (2), respectively. (B) Section 3101(b) (relating to rate of tax on employees for hospital insurance) and section 3111(b) (relating to rate of tax on employers for such insurance) are each amended by striking out paragraphs (1) and (2), and by redesignating paragraphs (3), (4), (5), and (6) as paragraphs (1), (2), (3), and (4), respectively. (2) Repeal of section 3113.— Section 3113 (relating to application of social security tax on District of Columbia credit unions) is repealed. (3) Amendments of section 3121.— (A) Section 3121(b) (relating to employment) is amended— (i) by striking out “performed after 1936 and prior to 1955 which was employment for purposes of subchapter A of chapter 9 of the Internal Revenue Code of 1939 under the law applicable to the period in which such service was performed, and any service, of whatever nature, performed after 1954” and inserting in lieu thereof “, of whatever nature, performed”, and (ii) by striking out “, in the case of service performed after 1954,”. (B) Section 3121(b)(1) is amended by striking out “65 26 USC 3121. Stat. 119;”. (C) Section 3121(b)(6)(B)(v) is amended by striking out “Secretary of the Treasury” and inserting in lieu thereof “Secretary of Transportation”. (D) Section 3121(g)(3) (relating to agricultural labor) is amended by striking out “46 Stat. 1550, § 3;”. (E) Section 3121(k)(1) (relating to exemption of certain organizations) is amended by striking out subparagraphs (F) and (H) and by redesignating subparagraph (G) as subparagraph (F). (F) Section 3121 (1)(2) (relating to employees of foreign subsidiaries) is amended by striking out “, but in no case prior to January 1, 1955”. (G) Section 3121 (m)(1) (relating to service in the uniformed services) is amended by striking out “after December 1956”. (4) Amendments of section 3122.— The last sentence of section 3122 (relating to Federal service) is amended by striking out 26 USC 3122. “Secretary” each place it appears and inserting in lieu thereof “Secretary of Transportation”. (5) Amendment of section 3123.— Section 3125(c) (relating 26 USC 3125. to returns in the case of Governmental employees in the District of Columbia) is amended by striking out “Commissioners of the District of Columbia or such agents as they may designate” and by inserting in lieu thereof “Mayor of the District of Columbia of such agents as he may designate”. (6) Amendment of section 3201.— Section 3201 (relating to 26 USC 3201. rate of tax on railroad employees) is amended— (A) by striking out “oi the Internal Revenue Code of 1954” each place it appears; (B) by striking out “of such Code”; (C) by striking out “after September 30, 1973, as is” and inserting in lieu thereof “as is”; and (D) by striking out “any month after September 30, 1973” and inserting in lieu thereof “any month”. (7) Amendments of section 3202.— (A) The second sentence of section 3202(a) (relating to 26 USC 3202. reduction of tax by railroad employer) is amended— (i) by striking out “after September 30, 1973,” each place it appears; (ii) by striking out “after September 30, 1973 and the aggregate” and inserting in lieu thereof “and the aggregate” (iii) by striking out “of the Internal Revenue Code of 1954” each place it appears; and (iv) by inserting a comma immediately after “for any month” each place it appears. (B) Section 3202(b) (relating to indemnification of employer) is amended by striking out “made”. (8) Amendments of section 3211.— Section 3211(a) (relating 26 USC 3211. to rate of tax on railroad employee representatives) is amended— (A) by striking out “3111(a), 3111(b)” and inserting in lieu thereof “3111(a), and 3111(b)”; (B) by striking out “of the Internal Revenue Code of 1954” each place it appears; (C) by striking out “rendered by him after September 30, 1973,” and inserting in lieu thereof “rendered by him”; and (D) by striking out “after September 30, 1973”. (9) Amendments of section 3221.— (A) The first sentence of section 3221(a) (relating to rate of tax on railroad employers) is amended— (i) by striking out “after September 30, 1973,” each place it appears; (ii) by striking out “after September 30, 1973: except that” and inserting in lieu thereof “, except that”; (iii) by striking out “after September 30, 1973 of the aggregate” and inserting in lieu thereof “of the aggregate”; (iv) by striking out “of the Internal Revenue Code of 1954” each place it appears; and (v) by inserting a comma before “the tax imposed”. (B) Section 3221(b) (relating to rate of tax on railroad employers) is amended to read as follows: “(b) The rate of tax imposed by subsection (a) shall be increased by the rate of tax imposed with respect to wages by section 3111(a) plus the rate imposed by section 3111(b).” (C) Section 3221(c) (relating to additional railroad retirement tax) is amended— (i) by striking out “(1) at the rate of 2 cents for the period beginning November 1, 1966, and ending March 31, 1970, and (2) commencing April 1, 1970,” and (ii) by striking out “commencing with the quarter beginning April 1, 1970”. (10) Amendments of section 3231.— (A) Section 3231(a)(defining employer) is amended by striking out “44 Stat. 577;”. (B) Section 3231(b)(defining employee) is amended by striking out. “50 Stat. 312;”. (C) Section 3231(e)(defining employee representative) is amended by striking out “44 Stat. 577;”. (D) Section 3231(d)(7)(defining service) is amended by striking out “50 Stat, 308;”. (11) Amendments of section 3301.— Section 3301 (relating to Federal unemployment tax rate) is amended— (A) by striking out “the calendar year 1970 and each calendar year thereafter” and inserting in lieu thereof “each calendar year”, and (B) by striking out the last sentence. (12) Amendments of section 3302.— (A) Section 3302(a) (relating to credits against tax) is amended by striking out “(10month period in the case of October 31, 1972)”. (B) Section 3302(b) (relating to additional credit) is amended— (i) by striking out “(10month period in the case of October 31, 1972)”, and (ii) by striking out “12 or 10month period, as the case may be,” and inserting in lieu thereof “12month period”. (C) (i) Section 3302(c) (relating to limitation on credits 26 USC 3302. against unemployment tax) is amended by striking out paragraph (2) and the unnumbered paragraph immediately following such paragraph (2) (relating to advances made to a State unemployment account before September 13, 1960), and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3),respectively. (ii) Section 3302(c)(2) (relating to advances made to a State unemployment account after September 12, 1960), as redesignated by clause (i) of this subparagraph, is amended by striking out “on or after the date of the enactment of the Employment Security Act of 1960”, and by striking out “paragraphs (1) and (2)” and inserting in lieu thereof “paragraph (1)”. (iii) Section 3302(c)(3) (relating to reductions with respect to certain agreements under the Trade Act of 1974),as redesignated by clause (i) of this subparagraph, is amended by striking out “paragraphs (1), (2), and (3)” and inserting in lieu thereof “paragraphs (1) and (2)”. (iv) Section 3302 (d)(3) (relating to effect of repayment of advances) is amended by striking out “or (3)”. (v) Section 3302(d)(4), (5), and (6) (relating to special rules) are each amended by striking out “subsection (c)(3)” each place it appears and inserting in lieu thereof “subsection (c)(2)”. (vi) Section 3302(d)(7) (relating to determination and certification of percentages) is amended by striking out “subsection (c)(3)(B) or (C)” and inserting in lieu thereof “subsection (c)(2)(B) or (C)”. (D) Section 3302(d) (relating to special rules for credits against the unemployment tax) is amended by striking out paragraph (8)(a cross reference). (13) Amendments to section 3303.— Section 3303 (b) (relating 26 USC 3303. to certification with respect to additional credit allowance) is amended— (A) by striking out “(10month period in the case of October 31, 1972) ” each place it appears, (B) by striking out “12 or 10month period, as the case may be,” each place it appears in paragraphs (1) and (2), and inserting in lieu thereof “12month period”, and (C) by striking out “12 or 10month period, as the case may be,” in paragraph (3) and inserting in lieu thereof “12month period,”. (14) Amendments to section 3304.— (A) Section 3304(a)(3) (relating to requirements) is 26 USC 3304. amended by striking out “49 Stat, 640; 52 Stat. 1104, 1105;”. (B) Section 3304(c) (relating to certification) is amended by striking out “(10month period in the case of October 31, 1972)”. (15) Amendments of section 3305.— (A) Section 3305(g) (relating to vessels operated by 26 USC 3305. general agents of the United States) is amended by striking out “on or after July 1, 1953,”. (B) Section 3305 (h) (relating to certain contributions to States) is amended by striking out “on or after July 1, 1953, and”. (C) Section 3305(j) (relating to denial of credits in certain cases) is amended by striking out “after December 31, 1971,”. (16) Amendments of section 3300.— (A) Section 3306(c)(9) (relating to the exclusion of service performed by certain employees and employee representatives from the definition of employment) is amended by striking out “52 Stat. 1094, 1095;”. (B) Section 3306(c)(18) (relating to the exclusion of certain service performed by nonresident aliens from the definition of employment) is amended by inserting after the “Immigration and Nationality Act, as amended” the following: “(8U.S.C. 1101(a)(15)(F) or (J))”. (C) Section 3306(f) (relating to the definition of an unemployment fund) is amended by striking out “49 Stat. 640; 52 Stat. 1104, 1105;”. . (D) Section 3306(n) (relating to vessels operated by general agents of the United States) is amended by striking out “on or after July 1, 1953,”. (17) Amendment of section 3402.— Section 3402(1)(3)(B) (relating to marital status) is amended by striking out “section 2(b)” and inserting in lieu thereof “section 2 (a)”. (b) Amendment Conforming to the Repeal of Section 3113.— The table of sections for subchapter B of chapter 21 is amended by striking out the item relating to section 3113. (c) Amendments to Profusions Referring to Territories.— Sections 3401(c) and 3404 are each amended by striking out “Territory,” each place it appears. (d) Effective Dates.— The amendments made by this section shall apply with respect to wages paid after December 31, 1976, except that the amendments made to chapter 22 of the Internal Revenue Code of 26 USC 3201. 1954 shall apply with respect to compensation paid for services rendered after December 31, 1976. SEC. 1904. AMENDMENTS OF SUBTITLE D; MISCELLANEOUS EXCISE TAXES. (a) In General.— (1) Amendments of chapter 31.— (A) So much of chapter 31 (relating to retailers excise taxes) as precedes section 4041 is amended to read as follows: “Sec. 4041. Imposition of tax.” (B) Section 4041(g) (relating to exemptions from fuel taxes) is amended to read as follows: “(g) Other Exemptions.— Under regulations prescribed by the Secretary, no tax shall be imposed under this section— “(1) on any liquid sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221(d)(3)); “(2) with respect to the sale of any liquid for the exclusive use of any State, any political subdivision of a State, or the District of Columbia, or with respect to the use by any of the foregoing of any liquid as a fuel; “(3) upon the sale of any liquid for export, or for shipment to a possession of the United States, and in due course so exported or shipped; and “(4) with respect to the sale of any liquid to a nonprofit educational organization for its exclusive use, or with respect to the use by a nonprofit educational organization of any liquid as a fuel. For purposes of paragraph (4), the term ‘nonprofit educational organization’ “Nonprofit educational organization.” means an educational organization described in section 170(h)(1)(A)(ii) which is exempt from income tax under section 501(a). The term also includes a school operated as an activity of an organization described in section 501(c)(3) which is exempt from income tax under section 501(a), if such school normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.” (C) Section 4041 (relating to tax on fuels) is amended by 26 USC 4041. adding at the end thereof the following new subsection: “(i) Sales by United States, Etc.— The taxes imposed by this section shall apply with respect to liquids sold at retail by the United States, or by any agency or instrumentality of the United States, unless sales by such agency or instrumentality are by statute specifically exempted from such taxes.” (D) Chapter 31 is amended by striking out section 4042 (a cross reference) and subchapter F (special provisions 26 USC 4042, 4054–4058. applicable to retailers taxes). (2) Amendments of section 421a.— (A) Section 4216 (relating to definition of price) is 26 USC 4216. amended by redesignating subsections (e), (f), and (g) as subsections (d), (e).and (f), respectively. (B) Paragraphs (3), (4). and (5) of section 4216(b) (relating to constructive sales price) are each amended by striking out “subsections (a) and (f)” each place it appears and inserting in lieu thereof “subsections (a) and (e)”. (3) Amendment of section 4217.— Section 4217(d) (relating 26 USC 4217. to lease treated as sale) is amended by striking out paragraph (4) (relating to certain 1958 transitional rules). (4) Repeal of section 4223.— Section 4223 (relating to floor-stock 26 USC 4226. taxes imposed before 1967) is repealed. (5) Amendment of section 4227.— Section 4227 (relating to 26 USC 4227. cross references) is amended to read as follows: “SEC. 4227. CROSS REFERENCE. “For credit for taxes on tires and inner tubes, see section 6416(c).” (6) Amendment of section 4263.— Section 4253 (relating to 26 USC 4253. exemptions from the tax on communications services) is amended by adding at the end thereof the following new subsections: “(i) State and Local Governmental Exemption.— Under regulations prescribed by the Secretary, no tax shall be imposed under section 4251 upon any payment received for services or facilities furnished to the government of any State, or any political subdivision thereof, or the District of Columbia. “(j) Exemption foe Nonprofit Educational Organizations.— Under regulations prescribed by the Secretary, no tax shall be imposed under section 4251 on any amount paid by a nonprofit educational organization for services or facilities furnished to such organization. For purposes of this subsection, the term ‘nonprofit educational organization’ means an educational “Nonprofit educational organization.” organization described in section 170(b)(1)(A)(ii) which is exempt from income tax under section 501(a). The term also includes a school operated as an activity of an organization described in section 501(c)(3) which is exempt from income tax under section 501(a), if such school normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.” (7) Amendments of section 4201.— (A) Subsections (a) and (b) of section 4261 (relating to tax on transportation of persons by air) are each amended by striking out “which begins after June 30, 1970,”. (B) Section 4261(c) is amended by striking out “and begins after June 30, 1970”. (8) Amendment of section 4271.— Section 4271 (a) (relating to tax on transportation of property by air) is amended by striking out “which begins after June 30, 1970,”. (9) Repeal of section 4292.— Section 4292 (relating to State and local governmental exemption from the tax on communications services) is repealed. (10) Repeal of section 4284.— Section 4294 (relating to exemption of nonprofit educational organizations from the tax on communications services) is repealed. (11) Repeal of section 4295.— Section 4295 (across reference) is repealed. (12) Amendment of of after 34.— Chapter 34 (relating to documentary stamp taxes) is amended to read as follows: “CHAPTER 34— POLICIES ISSUED BY FOREIGN INSURERS “Sec. 4371. Imposition of tax. “Sec. 4372. Definitions. “Sec. 4373. Exemptions. “Sec. 4374. Liability for tax. “SEC. 4371. IMPOSITION OF TAX. “There is hereby imposed, on each policy of insurance, indemnity bond, annuity contract, or policy of reinsurance issued by any foreign insurer or reinsurer, a tax at the following rates: “(1) Casualty insurance and indemnity bonds.— 4 cents on each dollar, or fractional part thereof, of the premium paid on the policy of casualty insurance or the indemnity bond, if issued to or for, or in the name of, an insured as defined in section 4372(d); “(2) Life insurance, sickness and accident policies, and annuity contracts.— 1 cent on each dollar, or fractional part thereof, of the premium paid on the policy of life, sickness, or accident insurance, or annuity contract, unless the insurer is subject to tax under section 819; and “(3) Reinsurance.— 1 cent on each dollar, or fractional part thereof, of the premium paid on the policy of reinsurance covering any of the contracts taxable under paragraph (1) or (2). “SEC. 4372. DEFINITIONS. “(a) Foreign Insurer or Reinsurer.— For purposes of section 4371, the term ‘foreign insurer or reinsurer’ means an insurer or reinsurer who is a nonresident alien individual, or a foreign partnership, or a foreign corporation. The term includes a nonresident alien individual, foreign partnership, or foreign corporation which shall become bound by an obligation of the nature of an indemnity bond. The term does not include a foreign government, or municipal or other corporation exercising the taxing power. “(b) Policy of Casualty Insurance.— For purposes of section 4371(1), the term ‘policy of casualty insurance’ means any policy Ante, p. 1812. (other than li fe) or other instrument by whatever name called whereby a contract of insurance is made, continued, or renewed. “(c) Indemnity Bond.— For purposes of this chapter, the term ‘indemnity bond’ means any instrument by whatever name called whereby an obligation of the nature of an indemnity, fidelity, or surety bond is made, continued, or renewed. The term includes any bond for indemnifying any person who shall have become bound or engaged as surety, and any bond for the due execution or performance of any contract, obligation, or requirement, or the duties of any office or position, and to account for money received by virtue thereof, where a premium is charged for the execution of such bond. “(d) Insured.— For purposes of section 4371 (1), the term ‘insured’ means— “(1) a domestic corporation or partnership, or an individual resident of the United States, against, or with respect to, hazards, risks, losses, or liabilities wholly or partly within the United States, or “(2) a foreign corporation, foreign partnership, or nonresident individual, engaged in a trade or business within the United States, against, or with respect to, hazards, risks, losses, or liabilities within the United States. “(e) Policy of Life, Sickness, or Accident Insurance, or Annuity Contract.— For purposes of section 4371(2), the term ‘policy of life, sickness, or accident insurance, or annuity contract’ means any policy or other instrument by whatever name called whereby a contract of insurance Or an annuity contract is made, continued, or renewed with respect to the life or hazards to the person of a citizen or resident of the United States. “(f) Policy of Reinsurance.— For purposes of section 4371(3), the term ‘policy of reinsurance’ means any policy or other instrument by whatever name called whereby a contract or reinsurance is made, continued, or renewed against, or with respect to, any of the hazards, risks, losses, or liabilities covered by contracts taxable under paragraph (1) or (2) of section 4371. “SEC. 4373. EXEMPTIONS. “The tax imposed by section 4371 shall not apply to— “(1) Domestic agent.— Any policy, indemnity bond, or annuity contract signed or countersigned by an officer or agent of the insurer in a State, or in the District of Columbia, within which such insurer is authorized to do business; or “(2) Indemnity bond.— Any indemnity bond required to be filed by any person to secure payment of any pension, allowance, allotment, relief, or insurance by the United States, or to secure a duplicate for, or the payment of, any bond, note, certificate of indebtedness, war-saving certificate, warrant, or check, issued by the United States. “SEC. 4374. LIABILITY FOR TAX. “The tax imposed by this chapter shall be paid, on the basis of a return, by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit the same are made, signed, issued, or sold. The United States or any agency or instrumentality thereof shall not be liable for the tax,” (13) Amendment of section 4493.— (A) Section 4493(b)(1) (relating to certain persons engaged in foreign air commerce) is amended by striking out “beginning on or after July 1, 1970”. (B) Section 4493(b)(2) is amended by striking out the last sentence. (14) Amendment of chapter 37.— So much of chapter 37 as precedes section 4501 (relating to tax on sugar) is amended to read as follows: “CHAPTER 37— SUGAR “Sec. 4501. Imposition of tax. “Sec. 4502. Definitions, “Sec. 4503. Exemptions for sugar manufactured for home consumption.” (15) Repeal of sections 4591 through 4597.— Chapter 38 (relating to import taxes on oleomargarine) is repealed. (16) Repeal of sections 4801 through 4806.— Subchapter B of chapter 39 (relating to tax on white phosphorus matches) is repealed. (17) Repeal of sections 4811 through 4826.— Subchapter C of chapter 39 (relating to tax on unadulterated butter) is repealed. (18) Repeal of sections 4881 through 4886.— Subchapter E of chapter 39 (relating to tax on circulation other than of national banks) is repealed. (19) Amendment of section 4901.— Section 4901 (relating to payment of occupational taxes) is amended by striking out subsection (c). (20) Amendment of section 4905.— Section 4905(a) (relating to liability for occupational taxes in case of death or change of location) is amended by striking out “wife” and inserting in lieu thereof “spouse”. (21) Repeal of section 4911 through 4931.— (A) Chapter 41 (relating to interest equalization tax) is repealed. (B) The repeal made by subparagraph (A) shall apply with respect to acquisitions of stock and debt obligations made after June 30, 1974. (22) Amendments of section 4973.— (A) So much of section 4973(a) (relating to tax on excess contributions) as follows “of any individual,” in paragraph (3) thereof is amended to read as follows: “there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts, annuities, or bonds (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account, annuity, or bond (determined as of the close of the taxable year). in the case of an endowment contract described in section 408(b), the tax imposed by this section does not apply to any amount allocable to life, health, accident, or other insurance under such contract. The tax imposed by this subsection shall be paid by such individual.” (B) Section 4973(c) is amended by striking out “subsection 26 USC 4973. (a)(3)” and inserting in lieu thereof “subsection (a)(2)”. (b) Conforming and Clerical Amendments.— (1) Amendments conforming to amendment of chapter 31.— (A) Section 6416(a)(1) is amended by striking out 26 USC 6416. “(retailers taxes)” and inserting in lieu thereof “(special fuels)”, (B) Section 6416 (e) is amended by striking out “subchapter E of”. (2) Amendment conforming to amendment of section 4216.— Section 6416(b)(1) is amended by striking out “section 4216(f)(2) and (3)” and inserting in lieu thereof “section 4216 (e)(2) and (3)” (3) Amendment conforming to the repeal of section 4226.— The table of sections for subchapter G of chapter 32 is amended by striking out the item relating to section 4226. (4) Amendment conforming to the repeal of sections 4292, 4294, and 4295.— The table of sections for subchaptet E of chapter 33 is amended by striking out the items relating to sections 4292, 4294, and 4295. (5) Amendments conforming to the amendment of chapter 34.— (A) Section 7270 is amended by striking out “the affixing 26 USC 7270. of stamps on insurance policies, etc.” and inserting in lieu thereof “liability for tax on policies issued by foreign insurers”. (B) Section 6808 is amended by striking out paragraph 26 USC 6808. (4). (6) Amendments conforming to the amendment of chapter 37.— (A) Section 7240 is amended by striking out “subchapter 26 USC 7240. A of”. (B) Section 7655(a) is amended— 26 USC 7655. (i) by striking out “Subchapter A of chapter 37” in paragraph (5) and inserting in lieu thereof “Chapter 37”, and (ii) by redesignating paragraph (5) as paragraph (3). (7) Amendments conforming to repeal of sections 4591 through 4597.— (A) Section 6808 is amended by striking out paragraph 26 USC 6808. (7). (B) (i) Section 7234 (relating to violations of laws concerning 26 USC 7234. oleomargarine or adulterated butter operations) is repealed. (ii) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7234. (C) (i) Section 7265 (relating to other offenses concerning 26 USC 7265. oleomargarine or adulterated butter operations) is repealed. (ii) The table of sections for subchapter B of chapter 75 is amended by striking out the item relating to section 7265. (D) Section 7611(a), as redesignated by this Act, is Ante, p. 1699. amended by striking out paragraph (1). (E) The table of chapters for subtitle D is amended by striking out the item relating to chapter 38, (8) Amendments conforming to repeal of sections 4801 through 4806.— (A) Section 4905(b) is amended to rend as follows: “(b) Registration.— “For registration in case of wagering, see section 1412.” (B) Section 6808 is amended by striking out paragraph (12). (C) Section 7012 is amended by striking out subsection (D) (i) Section 7239 (relating to violations of laws concerning white phosphorus matches) is repealed. (ii) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7239. (E) (i) Sections 7267 and 7274 (relating to offenses and penalties concerning white phosphorus matches) are each repealed. (ii) The table of sections for subchapter B of chapter 75 is amended by striking out the items relating to sections 7267 and 7274. (F) Section 7272(b) is amended by striking out “4804” (G) Section 7303 is amended by striking out paragraph (6) (H) (i) Part II of subchapter C of chapter 75 (relating to provisions common to forfeitures) is amended by striking out section 7328 (relating to confiscation of white phosphorus 26 USC 7328, 7329. matches), and by redesignating section 7329 (relating to cross references) as section 7328. (ii) The table of sections for part II of subchapter C of chapter 75 is amended by striking out the last two items and inserting in lieu thereof the following: “Sec. 7328. Cross references.” (9) Amendments conforming to repeat, of sections 4811 through 4826.— (A) Section 6808 (relating to cross references) is amended by striking out paragraph (10). (B) (i) Section 7235 (relating to violations of laws concerning adulterated butter and process or renovated butter) is repealed. (ii) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7235. (C) (i) Section 7264 (relating to offenses concerning renovated or adulterated butter) is repealed. (ii) The table of sections for subchapter B of chapter 75 is amended by striking out the item relating to section 7264. (D) Section 7303 is amended by striking out paragraphs (3), (4), and (5), and by redesignating paragrapns (7) and (8) as paragraphs (2) and (3), respectively. (E) Section 7611(a), as redesignated by this Act, is amended by striking out paragraph (2) , and by redesignating paragraphs (5) and (6) as paragraphs (1) and (2), respectively. (10) Amendments conforming to the repeal of sections 4911 through 4931.— (A) (i) (I) Section 263, as amended by this Act, is amended 26 USC 263. by striking out subsections (a)(3) and (d) (relating to the allowance of deductions for payment of interest equalization tax), and by redesignating subsections (e), (f), and (g) as subsections (d), (c),and (f), respectively. (II) Section 263(d), as redesignated by clause (i)(I) of this subparagraph, is amended by striking out “subsection (f)” and inserting in lieu thereof “subsection (e)”, (ii) Section 6011 (relating to requirement of return, statement, or 26 USC 6011. list) is amended by striking out subsection (d) (relating to interest equalization tax returns, etc.), and by redesignating subsections (e) and (f) as subsections (c) and (d), respectively. (iii) (I) Section 6076 (relating to time for filing interest 26 USC 6076. equalization tax returns) is repealed. (II) The table of sections for part V of subchapter A of chapter 61 is amended by sticking out the item relating to section 6076. (iv) Section 6611 (relating to interest on overpayments) 26 USC 6611. is amended by striking out subsection (h) (relating to over-payments of interest equalization tax) and by redesignating subsection (i) as subsection (h). (v) Section 6651 (relating to failure to file tax return 26 USC 6651. or to pay tax) is amended by striking out subsection (e) (relating to certain interest equalization tax returns). (vi) (I) Section 6680 (relating to failure to file interest 26 USC 6680. equalization tax returns) is repealed. (II) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to section 6680. (vii) The amendments made by this subparagraph shall 26 USC 263 note. apply with respect to acquisitions of stock or debt obligations made after June 30, 1974, except that the repeal of paragraph (2) of section 6011(d) under clause (ii) shall apply with respect to loans and commitments made after such date. (B) Section 861(a)(1)(G) (relating to income from 26 USC 861. sources within the United States) is amended— (i) by striking out “section 4912(c)” and inserting in lieu thereof “subsection (c) of section 4912 (as in effect before July 1, 1974)”; and (ii) by striking out “section 4912(c)(2)” and inserting in lieu thereof “subsection (c)(2) of such section”. (C) The second sentence of section 1232(b)(2) (relating 26 USC 1232. to the definition of the issue price of bonds and other evidences of indebtedness) is amended by striking out “section 4911” anrl inserting in lieu thereof “section 4911, as in effect before July 1, 1974”. (D) (i) Section 6681 (relating to false equalization tax 26 USC 6681. certificates) is repealed. (ii) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to section 6681. (iii) The amendments made by this subparagraph shall 26 USC 6681 note. apply with respect to actions occurring after June 30, 1974. (E) (i) Section. 6689 (relating to failure by certain foreign 26 USC 6689. issuers and obligors to comply with United States investment equalization tax requirements) is repealed. (ii) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to section 6689. (iii) The amendments made by this subparagraph shall apply with respect to stock or debt obligations issued after June 30, 1974. (F) (i) Section 7241 (relating to penalty for fraudulent equalization tax certificates) is repealed. (ii) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7241. (iii) The amendments made by this subparagraph shall apply with respect to statements and certificates executed after June 30, 1974. (G) The table of chapters for subtitle D is amended by striking out the item relating to chapter 41. (c) Amendment to Provision Referring to Territories.— Section 4482 (c)(1) is amended by striking out “, a Territory of the United States,”. (d) Effective Date.— Except as otherwise provided in this section, the amendments made by this section shall take effect on the first day of the first month which begins more than 90 days after the date of the enactment of this Act. SEC. 1905. AMENDMENTS OF SUBTITLE E; ALCOHOL, TOBACCO, AND CERTAIN OTHER EXCISE TAXES. (a) In General.— (1) Amendment of section 5005.— Section 5005(c)(2) (relating to transfers in bond of distilled spirits) is amended by striking out the last two sentences and inserting in lieu thereof the following: “Such relief from liability shall be effective from the time of removal from the transferor’s bonded premises, or from the time of divestment of interest, whichever is later.” (2) Amendments of section 5008.— (A) Section 5008(b)(1) (relating to abatement, remission, refund, and allowance for loss of destruction of distilled spirits) is amended by inserting immediately after “the tax imposed by this chapter” the following: “or by section 7652”. (B) Section 5008(b)(2) is amended by striking out “the taxes imposed under section 5001(a)(1)” and all that follows and inserting in lieu thereof the following: “the taxes imposed under section 5001(a)(1), under subpart B of this part, or under section 7652 on the spirits so destroyed, to the proprietor of the distilled spirits plant who withdrew the distilled spirits on payment or determination of tax.” (C) Subsections (c)(1) and (d)(1) of section 5008 are each amended by inserting immediately after “under section 5001(a)(1)” the following: “or under section 7652”. (D) Section 5008(d)(1) is amended by striking out “, on or after July 1, 1959,”. (3) Amendment of section 5009.— Section 5009(b)(3) is amended by striking out “46 Stat. 694;”. (4) Amendment of section 5025.— Section 5025 (j) (relating to stabilization of distilled spirits) is amended by striking out “the bottling of distilled spirits,” and inserting in lieu thereof “the bottling of distilled spirits, or preparatory to exportation,”. (5) Amendment of section 5054.— Section 5054 (relating to determination and collection of tax on beer) is amended by striking out subsection (c) (relating to stamps or other devices as evidence of payment of tax) and by redesignating subsection (d) as subsection (c). (6) Amendments of section 5061.— (A) Section 5061(a) (relating to collections of alcohol 26 USC 5061. taxes) is amended by striking out the last sentence. (B) Section 5061(b) (relating to methods of collection) is amended to read as follows: “(b) Exceptions.— Notwithstanding the provisions of subsection (a), any taxes imposed on, or amounts to be paid or collected in respect of, distilled spirits, wines, rectified distilled spirits and wines, and beer under— “(1) section 5001(a)(5), (6),or (7), “(2) section 5006(c) or (d), “(3) section 5026(a)(2), “(4) section 5041 (d), “(5) section5043(a)(3), “(6) section5054(a)(3) or (4),or “(7) section5505(a), shall be immediately due and payable at the time provided by such provisions (or if no specific time for payment is provided, at the time the event referred to in such provision occurs). Such taxes and amounts shall be assessed and collected by the Secretary on the basis of the information available to him in the same manner as taxes payable by return but with respect to which no return has been filed.” (C) Section 5061(c) (relating to applicability of other provisions of law) is amended to read as follows: “(c) Import Duties.— The internal revenue taxes imposed by this part shall be in addition to any import duties unless such duties are specifically designated as being in lieu of internal revenue tax.” (7) Amendment of section 5113.— Section 5113(f)(1) (relating 26 USC 5113. to retail dealers in liquors) is amended by striking out “wines or beer” and inserting in lieu thereof “distilled spirits, wines, or beer”. (8) Amendments of section 5117.— Section 5117 (relating 26 USC 5117. to prohibited purchases by dealers) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the fol lowing new subsection: “(b) Limited Retail Dealers.— A limited retail dealer may lawfully purchase distilled spirits for resale from a retail dealer in liquors.” (9) Amendment of section 5121.— Section 5121(c) (relating 26 USC 5121. to limited retail dealers) is amended to read as follows: “(c) Limited Retail Dealers.— Every limited retail dealer shall pay a special tax of $4.50 for each calendar month in which sales are made as such dealer; except that the special tax shall be $2.20 for each calendar month in which only sales of beer or wine are made.” (10) Amendment of section 3122.— Section 5122(c) (relating 26 USC 5122. to definition of limited retail dealer) is amended by striking out “beer or wine” each place it appears and inserting in lieu thereof “distilled spirits, wine, or beer”. (11) Amendment of section 5131.— Section 5131(a) (relating 26 USC 5131. to eligibility for drawback) is amended by striking out “produced in a domestic registered distillery or industrial alcohol plant and withdrawn from bond, or using distilled spirits withdrawn from the bonded premises of a distilled spirits plant,”. (12) Amendment of section 5142.— Section 5142(c) (relating to payment of occupational taxes) is amended to read as follows: “(c) How Paid.— “(1) Payment by return.— The special taxes imposed by this part shall he paid on the basis of a return under such regulations as the Secretary shall prescribe. “(2) Stamp denoting payment of tax.— After receiving a properly executed return and remittance of any special tax imposed by this subpart, the Secretary shall issue to the taxpayer an appropriate stamp as a receipt denoting payment of the tax. This paragraph shall not apply in the case of a return covering liability for a past period.” (13) Amendments of section 5171.— Section 5171(b) (relating to permits for operation of business as distillers, etc.) is amended— (A) in paragraph (1), by striking out “49 Stat. 978;”, and (B) by striking out paragraph (3) (relating to continuance of business after June 30, 1959, pending application for permit). (14) Amendment of section 5174.— Section 5174(a)(2)(A) (relating to withdrawal bonds for distilled spirits) is amended by striking out “such spirits” and inserting in lieu thereof “distilled spirits from bond”. (15) Amendment of section 5232.— Section 5232(a) (relating to transfer of imported distilled spirits) is amended by striking out “and the importer” and inserting in lieu thereof “and the importer, or the person bringing such distilled spirits into the United States,”. (16) Amendment of section 5233.— Section 5233(b)(4) (relating to bottling requirements) is amended by striking out “49 Stat. 977;”. (17) Amendment of section 5234.— The first sentence of section 5234(a)(2) (relating to the mingling of distilled spirits) is amended by striking out “8 years” and inserting in lieu thereof “20 years”. (18) Amendment of section 5314.— Section 5314(a)(2) (relating to application of certain provisions to Puerto Rico) is amended by striking out “section 5001(a)(4)” and inserting in lieu thereof “section 5001(a)(10)”. _ (19) Repeal of section 5315.— Section 5315 (relating to the status of certain distilled spirits on July 1, 1959) is repealed. (20) Amendments of section 5368.— (A) The heading of section 5368 is amended to read as follows: “SEC. 5368. GAUGING AND MARKING.” (B) Section 5368(b) (relating to removal of wines) is amended to read as follows: “(b) Marking.— Wines shall be removed in such containers (including vessels, vehicles, and pipelines) bearing such marks and labels, evidencing compliance with this chapter, as the Secretary may by regulations prescribe.” (21) Amendment of section 5392.— Section 5392(f)(defining own production) is amended by striking out “49 Stat. 990;”. (22) Amendments of section 5601.— Section 5601(b) (relating to presumptions in the case of criminal penalties) is amended to read as follows: “(b) Presumption.— Whenever on trial for violation of subsection (a)(4) the defendant is shown to have been at the site or place where, and at the time when, the business of a distiller or rectifier was so engaged in or carried on, such presence of the defendant shall be deemed sufficient, evidence to authorize conviction, unless the defendant explains such presence, to the satisfaction of the jury (or of the court when tried without jury).” (23) Amendments of section 5685.— (A) Section 5685(a) (relating to penalty for possession 26 USC 5685. of devices for emitting gas, smoke, etc.) is amended by striking out “section 5848” and inserting in lieu thereof “section 5845”. (B) Section 5685(c) (relating to forfeiture of firearms, devices, etc.) is amended by striking out “section 5862” and inserting in lieu thereof “section 5872”. (C) Section 5685(d) (relating to the definition of machine gun) is amended to read as follows: “(d) Definition of Machine Gun.— As used in this section, the term ‘machine gun’ means a machine gun as defined in section 5845(b).” (24) Amendment of section 5701.— Section 5701(e) (relating 26 USC 5701. to imported tobacco products, etc.) is amended by striking out “such articles” and inserting in lieu thereof “such articles, unless such import duties are imposed in lieu of internal revenue tax”. (25) Amendments of section 5703.— (A) Section 5703(a)(2) (relating to transfer of liability 26 USC 5703. for tobacco taxes) is amended by adding at the end thereof the following new sentence: “All provisions of this chapter applicable to tobacco products and cigarette, papers and tubes in bond shall be applicable to such articles returned to bond upon withdrawal from the market or returned to bond after previous removal for a tax-exempt purpose.” (B) The second sentence of section 5703(b) (relating to method of payment of tobacco taxes) is amended by striking out “, except that the taxes shall continue to be paid by stamp until the Secretary or his delegate provides, by regulations, for the payment, of the taxes on the basis of a return”. (C) Section 5703 is amended by striking out subsection (c) (relating to stamps to evidence tobacco taxes) and by redesignating subsections (d) and (e) as subsections (c) and (d), respectively. (26) Amendments of section 3704.— Subsections (c) and (d) of section 5704 (relating to exemptions from tobacco taxes) are 26 USC 5704. each amended by inserting after “to a manufacturer of tobacco products or cigarette papers and tubes” the following: “or to the proprietor of an export warehouse”. (27) Amendment of section 5712.— Section 5712 (relating to 26 USC 5712. application for permit) is amended by striking out the last sentence. (28) Amendments of section 572a.— (A) The heading of section 5723 is amended by striking 26 USC 5723. out “NOTICES, AND STAMPS” and inserting in lieu thereof “AND NOTICES”. (B) Section 5723(b) (relating to marks, and so forth, on packages) is amended to rend as follows: “(b) Marks, Labels, and Notices.— Every package of tobacco products Regulation. or cigarette papers or tubes shall, before removal, bear the marks, labels, and notices, if any, that the Secretary by regulation prescribes.” (b) Conforming and Clerical Amendments.— (1) Amendments conforming to amendment of section 5054.— (A) Section 5676 (relating to beer stamp penalties) is repealed. (B) The table of sections for part III of subchapter J of chapter 51 is amended by striking out the item relating to section 5676. (2) Amendments conforming to amendments of section 5081.— (A) Section 5007(b)(1) is amended by striking out the second sentence. (B) Section 5026(b) is amended by striking out “Except as provided in subsection (a)(2), the taxes” and inserting in lieu thereof “The taxes”. (C) Section 5043(b) is amended by striking out “Except as provided in subsection (a)(3), the taxes” and inserting in lieu thereof “The taxes”. (D) Section 5662 is amended by striking out “stamp,” each place it appears. (E) (i) Section 5689 (relating to penalty and forfeiture for tampering with a stamp machine) is repealed. (ii) The table of sections for part IV of subchapter J of chapter 51 is amended by striking out the item relating to section 5689. (iii) Section 5061 is amended by striking out subsection (d). (3) Amendments conforming to amendment of section 5142.— (A) (i) Section 5104 (relating to method of payment of tax on stills) is repealed. (ii) The table of sections for subpart C of part II of subchapter A of chapter 51 is amended by striking out the item relating to section 5104. (B) Section 5111(a) is amended by striking out the second sentence. (C) Section 5121(a) is amended by striking out the second sentence. (D) (i) Section 5144 (relating to supply of stamps) is repealed. (ii) The table of sections for subpart G of part II of subchapter A of chapter 51 is amended by striking out the item relating to section 5144. (E) Section 5148(3) is amended by striking out “penalties” and inserting in lieu thereof “penalties, authority for assessments,”. (4) Amendment conforming to the repeal of section 5315.— The table of sections for part III of subchapter E of chapter 51 is amended by striking out the item relating to section 5315. (5) Amendment conforming to the amendment of section 5358.— The item relating to section 5368 in the table of sections for part II of subchapter E of chapter 51 is amended to read as follows: “Sec. 5368. Gauging and marking.” (6) Amendments conforming to the amendment of section 5001.— (A) Section 5105 (b)(2) is amended by striking out “, 5601 26 USC 5105. (b)(1),”. (B) Section 5177(b)(2) is amended by striking out “5601 26 USC 5177. (b)(2),” and inserting in lieu thereof “5601 (b),”. (C) Section 5179(b)(1) is amended by striking out “, 5601 26 USC 5179. (b)(1)”. (D) Section 5222(d) is amended by striking out “5601(b) 26 USC 5222. (3), 5601(b)(4)”. (E) Section 5505(i) is amended by striking out “5601(b) 26 USC 5505. (1),”. (7) Amendments conforming to the amendment of section 5723.— (A) Paragraphs (2) and (3) of section 5751(a) are each 26 USC 5751. amended by striking out “notices, and stamps” and inserting in lieu thereof “and notices”. (B) (i) Section 5752 is amended to read as follows: “SEC. 5752. RESTRICTIONS RELATING TO MARKS, LABELS, NOTICES, AND PACKAGES. “No person shall, with intent to defraud the United States, destroy, obliterate, or detach any mark, label, or notice prescribed or authorized, by this chapter or regulations thereunder, to appear on, or be affixed to, any package of tobacco products or cigarette papers or tubes, before such package is emptied.” (ii) Section 5762(a) is amended by striking out paragraphs 26 USC 5762. (8), (7), (8), (9), (10), and (11) and inserting in lieu thereof the following: “(6) Destroying, obliterating, or detaching marks, labels, or notices before packages are emptied.— Violates any provision of section 5752;”. (iii) The item relating to section 5752 in the table of sections for subchapter E of chapter 52 is amended to read as follows: “Sec. 5752. Restrictions relating to marks, labels, notices, and packages.” (C) (i) Section 5763(a)(2) is amended by striking out 26 USC 5763. “notices, and stamps” and inserting in lieu thereof “and notices”. (ii) Section 5763(b) is amended by striking out “internal revenue stamps,”. (D) The item relating to section 5723 in the table of sections for subchapter C of chapter 52 is amended to read as follows: “Sec. 5723. Packages, marks, labels, and notices.” (c) Amendments to Provisions Referring to Territories.— (1) Section 5114(b) is amended by striking out “or Territory” 26 USC 5114. each place it appears and by striking out “Territories,”. (2) Section 5214(a)(2) is amended by striking out “or Territory 26 USC 5214. ” each place it appears. (3) Section 5272(b) is amended by striking out “and 26 USC 5272. Territories”. (4) Section 5362(c)(9) is amended by striking out “and 26 USC 5362. Territories”. (5) Section 5551(b)(2) is amended by striking out “Territory, 26 USC 5551. or”. (6) Section 5685(a) is amended by striking out “Territory 26 USC 5685. or”. (d) Effective Date.— The amendments made by this section shall take effect on the first day of the first month which begins more than 90 days after the date of the enactment of this Act. SEC. 1906. AMENDMENTS OF SUBTITLE F; PROCEDURE AND ADMINISTRATION. (a) In General.— (1) Amendments of section 6013.— (A) Section 6013(b)(2)(C) (relating to petition to the Tax Court) is amended by striking out “of the United States”. (B) The heading of section 6013(d) is amended to read as follows: “(d) Special Rules.—”. (C) Section 6013(d)(1) (relating to joint return after death of one spouse) is amended by striking out “and” at the end of subparagraph (A) and inserting in lieu thereof “or”, and by striking out “and” at the end of the subparagraph (B). (2) Amendment of section 6015.— Section 6015 (relating to declaration of estimated tax by individuals) is amended by striking out subsection (j) (relating to an effective date provision). (3) Amendment of section 6037.— Section 6037 (relating to returns of subchapter S corporations) is amended by striking out “section 1371(a)(2)” and inserting in lieu thereof “section 1371 (b)” (4) Amendment of section 6046.— Section 6046(e) (relating to information as to organization of foreign corporation) is amended to read as follows: “(e) Limitation.— No information shall be required to be furnished under this section with respect to any foreign corporation unless such information was required to be furnished under regulations which have been in effect for at least 90 days before the date on which the United States citizen, resident, or person becomes liable to file a return required under subsection (a).” (5) Amendment of section 6051.— Section 6051(a) (relating to information required to be furnished to employees) is amended by striking out “and” where it appears at the end of paragraph (6). (6) Amendments of section 6065.— Section 6065 (relating to verification of returns) is amended by striking out subsection (b) (relating to verification by oath), and by striking out in subsection (a) the following: “(a) Penalties of Perjury.—”. (7) Repeat, of section 6105.— Section 6105 (relating to compilation of data for certain excess profits tax cases) is repealed. (8) Amendment of section 6111.— Section 6111 (relating to cross references), as redesignated by this Act, is amended to read as follows: “SEC. 6111. CROSS REFERENCE. “For inspection of records, returns, etc., concerning gasoline or lubricating oils, see section 4102.” (9) Amendment of section 6152.— Section 6152(a)(1) (relating to installment payments by corporations) is amended to read as follows: “(1) Corporations.— A corporation subject to the taxes imposed 26 USC 1. by chapter 1 may elect to pay the unpaid amount of such taxes in two equal installments.” (10) Amendments of section bib4.— (A) Section 6154(c)(1)(B) (relating to definition of estimated 26 USC 6154. tax) is amended— (i) by adding “and” after the comma at the end of clause (i), and (ii) by striking out clauses (ii) and (iii) and inserting in lieu thereof the following: “(ii) in the case of a taxable year beginning before January 1, 1977, the amount of the corporation’s temporary estimated tax exemption for such year.” (B) Section 6154(c)(2)(A)(ii) (relating to temporary estimated tax payments) is amended by striking out “clauses (ii) and (iii)” and inserting in lieu thereof “clause (ii)”. (C) Section 6154(c)(2)(B) (relating to estimated tax) is amended by striking out the following: “1968, 1969, 1970, 1971, and 1972 100 percent   1973 80 percent   1974 60 percent”. (D) Section 6154(c) (relating to estimated tax) is amended by striking out paragraph (3) (relating to transitional exemption for taxable years beginning before 1972). (11) Amendments of section 6157.— (A) Section 6157 (relating to payment of Federal unemployment 26 USC 6157. tax) is amended by striking out subsection (c) (relating to special rides for 1970 and 1971), and by redesignating subsection (d) as subsection (c). (B) Section 6157(a) is amended by striking out “subsections (c) and (d)” and inserting in lieu thereof “subsection (c)” (12) Repeal of section 6162.— Section 6162 (relating to payment 26 USC 6162. of tax on gain on liquidation of certain personal holding companies) is repealed. (13) Amendment of section 6205.— Section 6205 (a)(4) (relating 26 USC 6205. to District of Columbia as employer) is amended by striking out “Commissioners of the District of Columbia and each agent designated by them” and inserting in lieu thereof “Mayor of the District of Columbia and each agent designated by him”. (14) Amendment of section 6207.— Section 6207 (relating to 26 USC 6207. cross references) is amended by striking out paragraph (7). (15) Amendment of section 6213.— Section 6213(a) (relating Ante, p. 1698. to time for filing petition with the Tax Court) is amended by striking out “States of the Union and the District of Columbia” and inserting in lieu thereof “United States”. (16) Amendment of section 6215.— Section 6215(b)(5)(a 26 USC 6215. cross reference) is amended by striking out “60 Stat. 48;”. (17) Amendment of section 6302.— Section 6302(b) (relating 26 USC 6302. to collection of certain excise taxes) is amended by striking out “sections 4501 (a) or 4511 of chapter 37, or section 4701 or 4721 of chapter 39” and inserting in lien thereof “section 4501(a) of chapter 37”. (18) Repeal of section 6304.— Section 6304 (relating to a cross 26 USC 6304. reference) is repealed. (19) Amendment of section 6313.— Section 6313 (relating to 26 USC 6313. fractional parts of a cent) is amended by striking out “not payable by stamp”. (20) Amendments of section 6326.— (A) Paragraph (2) of section 6326 (cross references) is amended by striking out “52 Stat. 851;”. (B) Paragraph (3) of section 6326 is amended by striking out “52 Stat. 867” (C) Paragraph (4) of section 6326 is amended by striking out “52 Stat. 867–877;”. (D) Paragraph (5) of section 6326 is amended by striking out “52 Stat. 938;”. (21) Amendment of section 6365.— Section 6365 (b) (relating to definition of governor) is amended by striking out “Commissioner of the District of Columbia” and inserting in lieu thereof “Mayor of the District of Columbia”. (22) Amendment of section 6412.— Section 6412(a) (relating to floor stock refunds) is amended by redesignating paragraphs (2) and (4) as paragraphs (1) and (2), respectively. (23) Amendments of section 6413.— (A) Section 6413(a)(4) (relating to District of Columbia as employer) is amended by striking out “Commissioners of the District of Columbia and each agent designated by them” and inserting in lieu thereof “Mayor of the District of Columbia and each agent designated by him”. (B) (i) Section 6413 (c)(1) (relating to refunds of certain employment taxes) is amended to read as follows: “(1) In General.— If by reason of an employee receiving wages from more than one employer during a calendar year the wages received by him during such year exceed the contribution and benefit base (as determined under section 230 of the Social 42 USC 430. Security Act) which is effective with respect to such year, the employee shall be entitled (subject to the provisions of section 31 (b)) to a credit or refund of any amount of tax, with respect to such wages, imposed by section 3101 or section 3201, or by both such sections, and deducted from the employee’s wages (whether or not paid to the Secretary), which exceeds the tax with respect to the amount of such wages received in such year which is equal “Wages.” to such contribution and benefit base. The term ‘wages’ as used in this paragraph shall, for purposes of this paragraph, include ‘compensation’ as defined in section 3231(e).” (ii) So much of section 6413(c)(2)(A) (relating to Federal employees) as follows “and the term ‘wages’ includes” is amended to read as follows: “for purposes of this subsection the amount, not to exceed an amount equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) for any calendar year with respect to which such contribution and benefit base is effective, determined by each such head or agent as constituting wages paid to an employee.” (iii) The amendments made by clauses (i) and (ii) shall apply with respect to remuneration paid after December 31, 1976. (C) Section 6413(c)(2)(F) (relating to government employees in the District of Columbia) is amended by striking out “Commissioners of the District of Columbia and each agent designated by them” and inserting in lieu thereof “Mayor of the District of Columbia and each agent designated by him”. (D) Section 6418(c)(3) (relating to special refunds) is 26 USC 6413. amended by striking out “after 1967”. (24) Amendments of section 6416.— (A) Section 6416(a)(3) (relating to special rules for 26 USC 6416. refund of overpayment of tax) is amended by redesignating subparagraphs (C) and (D) as subparagraphs (A) and (B), respectively, (B) (i) Section 6416(b)(2) (relating to overpayments of certain excise taxes), as amended by section 2108 of this Act, Post, p. 1904. is amended by striking out subparagraphs (G), (H), (I), and (J), and by redesignating subparagraphs (F), (K), (L), (M), (R), (8), and (T) as subparagraphs (E), (F), (G), (H), (I), (J),and (K),respectively. (ii) The repeals made by clause (i) shall apply with 26 USC 6416 note. respect to the use or resale for use of liquids after December 31, 1976. (25) Repeal of section 6417.— Section 6417 (relating to coconut 26 USC 6417. and palm oil) is repealed. (26) Amendments of section 6420.— (A) Section 6420(b) (relating to time for filing refund 26 USC 6420. claims on gasoline) is amended to read as follows: “(b) Time fob Filing Claims; Period Covered.— Not more than one claim may be filed under this section by any person with respect to gasoline used during his taxable year, and no claim shall be allowed under this section with respect to gasoline used during any taxable year unless filed by such person not later than the time prescribed by law for filing a claim for credit or refund of overpayment of income tax for such taxable year. For purposes of this subsection, a person’s taxable year shall be his taxable year for purposes of subtitle A.” 26 USC 1. (B) Section 6420(e)(1) (relating to application of other laws) is amended by striking out “apply in in respect” and inserting in lieu thereof “apply in respect’”. (C) (i) Section 6420 is amended by striking out subsection (g) (relating to effective date) and by redesignating subsections (h) and (i) as subsections (g) and (h), respectively. (ii) Section 6420(a) is amended by striking out “subsection (h)” and inserting in lieu thereof “subsection (g)”. (D) Section 6420(g) (relating to income tax credit in lieu of gas tax refund), as redesignated by subparagraph (C)(i) of this paragraph, is amended by strikingout “with respect to gasoline used after June 30, 1965,” and “for gasoline used after June 30, 1965”. (27) Amendments of section 6421.— (A) (i) Subsections (a) and (e)(3) of section 6421 (relating 26 USC 6421. to nonhighway use of gasoline) are each amended by striking out “after June 30, 1970,”. (ii) The amendments made by clause (i) shall only 26 USC 6421 note. apply with respect, to gasoline used as a fuel after June 30, 1970. (B) Section 6421(c) (relating to nonhighway use of gasoline) is amended to read as follows: “(c) Time for Filing Claims; Period Covered.— “(1) In general.— Except as provided in paragraph (2), not more than one claim may be filed under subsection (a), and not more than one. claim may be filed under subsection (b), by any person with respect to gasoline used during his taxable year; and no claim shall be allowed under this paragraph with respect to gasoline used during any taxable year unless filed by such person not later than the time prescribed by law for filing a claim for credit or refund of overpayment of income tax for such taxable year. For purposes of this subsection, a person’s taxable year shall be his taxable year for purposes of subtitle A. “(2) Exception.— If $1,000 or more is payable under this section to any person with respect to gasoline used during any of the first three Quarters of his taxable year, a claim may be filed under this section by such person with respect to gasoline used during such quarter. No claim filed under this paragraph shall be allowed unless filed on or before the last day of the first quarter following the quarter for which the claim is filed.” (C) Section 6421(h) (relating to effective dates) is amended by striking out “after June 30, 1956, and”. (D) Section 6421 (i) (relating to income tax credit in lieu of refund) is amended— (i) by striking out, in paragraph (1), “with respect to gasoline used after June 30, 1965,”, (ii) by striking out, in paragraph (2), “subsection (c)(3)(B)” and inserting in lieu thereof “subsection (c)(2)”, and (iii) by striking out, in paragraph (3), “for gasoline used after June 30, 1965.” (28) Amendments of Section 6422.— (A) Paragraph (9) of section 6422 (relating to cross references), as redesignated by section 1901(b)(36)(B), is amended by striking out “60 Stat. 48;”. (B) Paragraph (11) of section 6422, as so redesignated, is amended by striking out “47 Stat. 1516;”. (29) Amendments of section 6423.— (A) Section 6423(b) (relating to filing of refund claim in case of alcohol and tobacco taxes) is amended to read as follows: “(b) Filing of claims.— No credit or refund of any amount to which subsection (a) applies shall be allowed or made unless a claim therefor has been filed by the person who paid the a mount claimed, and unless such claim is filed within the time prescribed by law and in accordance with regulations prescribed by the Secretary. Al] evidence relied upon in support of such claim shall be clearly set forth and submitted with the claim.” (B) Section 6123 is amended by striking out subsection (c) (relating to suits barred on April 30, 1958) and by redesignating subsections (d) and (e) as subsections (c) and (d), respectively. (C) Section 6423 (c) (relating to application of section), as redesignated by subparagraph (B) of this paragraph, is amended by adding “and” at the end of paragraph (1), by striking out “, and” at the end of paragraph (2) and inserting in lieu thereof a period, and by striking out paragraph (3). (30) Amendments of section 6424.— (A) The last sentence of section 6424(b)(1) (relating to refund claims with respect to lubricating oil) is amended by striking out “, except that a person’s first taxable year beginning after December 31, 1965, shall include the period after December 31, 1965, and before tile beginning of such first taxable year”. (B) Section 6424 (relating to lubricating oil not used in highway motor vehicles) is amended by striking out subsection (f) (relating to effective date of section), and by redesignating subsections (g) and (h) as subsections (f) and (g), respectively. (31) Amendments of section 6427.— (A) Subsections (a), (b), and (c) of section 6427 (relating 26 USC 6427. to fuels not used for taxable purposes) are each amended by striking out “, after June 30, 1970,” (B) The amendments made by subparagraph (A) shall 26 USC 6427 note. apply only with respect to fuel used or resold after June 30, 1970. (32) Amendments of section 6504.— (A) Section 6504 (relating to cross references) is amended 26 USC 6504. by striking out paragraphs (13) and (14) and inserting in lieu thereof: “(13) Assessments to recover excessive amounts paid under section 6420 (relating to gasoline used on farms), 6421 (relating to gasoline used for certain nonhighway purposes or by local transit systems), 6424 (relating to lubricating oil not used in highway motor vehicles), or 6427 (relating to fuels not used for taxable purposes) and assessments of civil penalties under section 6675 for excessive claims under section 6420, 6421, 6424, or 6427, see section 6206.” (B) Section 6504, as amended by this Act, Is further amended by redesignating paragraphs (2), (3), (4), (5), (9), (19), (11), (12), (13), and (15) as paragraphs (1), (2), (3), (4), (5), (6), (7), (8), (9), and (10), respectively. (33) Amendments of section 6511.— (A) Section 6511(d)(2)(A)(ii) (relating to net operating 26 USC 6511. loss carryback) is amended by striking out “September 1, 1959, or” and by striking out “, whichever is the later”. (B) Section 6511(d)(5) is amended by striking out “the later of the following dates: (A)”, and by striking out “, or (B) December 31, 1965”. (34) Amendment of section 6601.— Section 6601(h) (relating 26 USC 6601. to interest on estimated tax payments) is amended by striking out “(or section 59 of the Internal Revenue Code of 1939)”. 53 Stat. 32. 26 USC 6654. (35) Amendment of section 6654.— Section 6654 (relating to payment of estimated income tax) is amended by striking out subsection (h) (relating to applicability of section). (36) Amendment of section 6802.— Section 6802(2) (relating 26 USC 6802. to supply and distribution of stamps) is amended by striking out the semicolon at the end and inserting in lieu thereof a period. (37) Amendment of section 6803.— Section 6803 (relating to 26 USC 6803. accounting and safeguarding is amended to read as follows: “SEC. 6803. ACCOUNTING AND SAFEGUARDING. “(a) Bond.— In cases coining within the provisions of paragraph (2) of section 6802, the Secretary may require a bond, with sufficient sureties, in a sum to be fixed by the Secretary, conditioned for the faithful return, whenever so required, of all quantities or amounts undisposed of and for the payment monthly for all quantities or amounts sold or not remaining on hand. “(b) Regulations.— The Secretary may from time to time make such regulations as he may find necessary to insure the safekeeping or prevent the illegal use of all adhesive stamps referred to in paragraph (2) of section 6802.” (38) Amendment of section 6863.— Section 6863(b)(3) (relating to stay of sale of seized property pending Tax Court decision) is amended by striking out subparagraph (C) (relating to effective date). (39) Amendment of section 7012.— Section 7012 (relating to cross references), as amended by section 1904(b)(8)(C) of this Act, is amended to read as follows: “SEC. 7012. CROSS REFERENCES. “(1) For provisions relating to registration in connection with firearms, see sections 5802, 5841, and 5861. “(2) For special rules with respect to registration by persons engaged in receiving wagers, see section 4412. “(3) For provisions relating to registration in relation to the production or importation of gasoline, see section 4101. “(4) For provisions relating to registration in relation to the manufacture or production of lubricating oils, see section 4101. “(5) For penalty for failure to register, see section 7272. “(6) For other penalties for failure to register with respect to wagering, see section 7262.” (40) Amendment of section 7103.— Section 7103 (relating to cross references regarding bonds) is amended by striking out subsection (d). ‘ (41) Amendments of section 7271.— Section 7271 (relating to penalties for offenses concerning stamps) is amended by striking out paragraph (2), and by redesignating paragraphs’ (3) and (4) as paragraphs (2) and (3), respectively. (42) Amendment of section 7272.— Section 7272(b) (relating to cross references) is amended by striking out “4722, 4753,”. (43) Amendments of section 7326.— Section 7326 (relating to disposal of forfeited property) is amended— (A) by striking out “section 5862(b)” and inserting in lieu thereof “section 5872(b)”, and (B) by redesignating subsection (c) as subsection (b). (44) Amendments of section 7422.— Section 7422(c) (relating to suits against collection officers) is amended by striking out “instituted after June 15, 1942,”, and by striking out “where the petition to the Tax Court was filed after such date”. (45) Amendments of section 7428.— (A) Paragraph (1) of section 7428 (cross references), as redesignated by this Act, is amended by striking out “52 Stat, 851;”. (B) Paragraph (2) of such section 7428 is amended by striking out “52 Stat. 867;”. (C) Paragraph (3) of such section 7428 is amended by Striking out “52 Stat. 876–877;”. (D) Paragraph (4) of such section 7428 is amended by striking out “52 Stat. 938;”. (46) Amendments of section 7448.— (A) Subsection (a)(6) of section 7448 (relating to annuities to widows and dependent children of Tax Court judges) is amended— (i) by striking out “The term ‘widow’ means a surviving wife of,” and inserting in lieu thereof “The term ‘surviving spouse’ means a surviving spouse of”; and (ii) by striking out “the mother of issue” and inserting in lieu thereof “a parent of issue”. (B) Section 7448(h) is amended— (i) by striking out “surviving widow or widower” and inserting in lieu thereof “surviving spouse”; (ii) by striking out “such widow” each place it appears and inserting in lieu thereof “such surviving spouse”; (iii) by striking out “a widow” each place it appeal’s and inserting in lieu thereof “a surviving spouse”; (iv) by striking out “widow’s” each place it appears and inserting in lieu thereof “surviving spouse’s”; and (v) by striking out “surviving her” and inserting hi lieu thereof “surviving such spouse”. (C) Sections 7448 (h) and (o) are each amended by striking 26 USC 7448. out “she” and inserting in lieu thereof “such spouse”. (D) Section 7448 (o) is amended by striking out “her” and inserting in lieu thereof “such spouse’s”. (E) Sections 7448 (d), (j), (m), (n), (o), and (q) are each amended by striking out “widow” each place it appears and inserting in lieu thereof “surviving spouse”. (F) The section heading for section 7448 is amended by striking out “WIDOWS” and inserting in lieu thereof “SURVIVING SPOUSES”. (47) Amendments of section 7471.— (A) Subsection (a) of section 7471 (relating to Tax Court 26 USC 7471. employees) is amended by striking out “is authorized in accordance with the civil service laws to appoint, and in accordance with the Classification Act of 1949 (63 Stat. 954; 5 U.S.C. chapter 21), as amended, to fix the compensation of,” and inserting in lieu thereof “is authorized to appoint, in accordance with the provisions of title 5, United States Code, governing appointment in the competitive service, and 5 USC 101 et seq. 5 USC 5101, 5331. to fix the basic pay of, in accordance with chapter 51 and subchapter III of chapter 53 of such title,”. (B) Subsection (b) of section 7471 is amended by striking out “as provided in the Travel Expense Act of 1949 (63 Stat. 166; 5 U.S.C. chapter 16).” and inserting in lieu thereof “as provided in chapter 57 of title 5, United States Code.” 5 USC 5701. 26 USC 7476. (48) Amendment of section 7476.— Section 7476(a) (relating to declaratory judgments) is amended by striking out so much thereof as follows paragraph (2)(B) and inserting in lieu thereof the following: “upon the filing of an appropriate pleading, the Tax Court may make a declaration with respect to such initial qualification or continuing qualification. Any such declaration shall have the force and effect of a decision of the Tax Court, and shall be reviewable, as such.” (49) Amendment of section 7502.— Section 7502(b) (relating 26 USC 7502. to timely mailing treated as timely filing and paying) is amended by striking out “United State Post Office” and inserting in lieu thereof “United States Postal Service”. (50) Amendments of section 7507.— Paragraphs (2) and (3) of section 7507(c) (relating to insolvent hanks) are each amended 26 USC 7507. by striking out “after May 28, 1938,”. (51) Amendments of section 7508.— (A) The heading of section 7508 (relating to time for 26 USC 7508. performing certain acts) is amended by striking out “BY REASON OF WAR” and inserting in lieu thereof “BY REASON OF SERVICE IN COMBAT ZONE”. (B) Section 7508(a) (relating to time to be disregarded) is amended by striking out “States of the Union and the District of Columbia” each place it appears and inserting in lieu thereof “United States”. (52) Amendments of section 7509.— Section 7509 (relating to expenditures incurred by the Post Office Department) is amended— (A) in the section heading, by striking out “POST OFFICE DEPARTMENT” and inserting in lieu thereof “UNITED STATES POSTAL SERVICE”; (B) by striking out “Post Office Department” each place it appears and inserting in lieu thereof “United States Postal Service”; (C) by striking out “such Department” and inserting in lieu thereof “such Service”; and (D) by striking out “, together with the receipts required to be deposited under section 6803(a),”, (53) Amendment or section Tear.— Section 7621 (b) (relating to boundaries of internal revenue districts) is amended to read as follows: “(b) Boundaries.— For the purpose mentioned in subsection (a), the President may subdivide any State or the District of Columbia, or may unite into one district two or more States.” (54) Repeal of section 7G4t.— Subchapter C of chapter 78 (relating to supervision of operations of certain manufacturers) is repealed. (55) Amendments of section 7052.— Section 7652(b)(3) (relating to disposition of internal revenue collections) is amended— (A) by striking out subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B). (B) by striking out “approved emergency relief purposes and essential public projects as provided in subparagraph (B)” and inserting in lieu thereof “emergency relief purposes and essential public projects, with the prior approval of the President or his designated representative”, and (C) by striking out “, including payments under subparagraph (B),”. (56) Amendment of section 7653.— Section 7653(d)(a cross reference) is amended by striking out “c. 512, 64 Stat. 392, section 30;”. (57) Amendments of section 7701.— (A) Section 7701(a)(11) (relating to definitions of Secretary) is amended to read as follows: “(11) Secretary of the treasury and secretary.— “(A) Secretary of the treasury.— The term ‘Secretary of the Treasury’ means the Secretary of the Treasury, personally, and shall not include any delegate of his. “(B) Secretary.— The term ‘Secretary’ means the Secretary or the Treasury or his delegate.”. (B) Section 7701(a)(12)(A) (relating to definition of Secretary or his delegate) is amended to read as follows: “(A) In general.— The term ‘or his delegate’— “(i) when used with reference to the Secretary of the Treasury, means any officer, employee, or agency of the Treasury Department duly authorized by the Secretary of the Treasury directly, or indirectly by one or more redelegations of authority, to perform the function mentioned or described in the context; and “(ii) when used with reference to any other official of the United States, shall be similarly construed.” (58) Amendment of section 7803.— Section 7803 (relating 26 USC 7803. to other personnel) is amended by redesignating subsection (d) as subsection (c). (59) Amendment of section 7809.— Section 7809(a) (relating 26 USC 7809. to deposit of collections) is amended by striking out “4735, 4762,”. (b) Conforming and Clerical Amendments.— (1) Amendment conforming to the repeal of section 6105.— The table of sections for subchapter B of chapter 61 is amended by striking out the item relating to section 6105. (2) Amendment conforming to amendment of section 6111.— The item relating to section 6111 in the table of sections for subchapter B of chapter 61 is amended to read as follows: “Sec. 6111. Cross reference.” (3) Amendments conforming to amendments of section 6154.— (A) Paragraph (1)(B) of section 6655(e) is amended: 26 USC 6655. (i) by adding “and” at the end of clause (i), and (ii) by striking out clauses (ii) and (iii) and inserting in lieu thereof the following: “(ii) in the case of a taxable year beginning before January 1, 1977, the amount of the corporation’s temporary estimated tax exemption for such year.” (B) Paragraph (2)(B) of section 6655(e) is amended by striking out “clauses (ii) and (iii)” and inserting in lieu thereof “clause (ii)”. (C) (i) Section 6655(e) is amended by striking out paragraph (3) and by redesignating paragraph (4) as paragraph (3). (ii) Section 243(b)(3)(C)(iv), as redesignated by section Ante, p. 1797. 1901 (b)(20)(A) of this Act, is amended by striking out “sections 6154(c)(2) and (3)” and inserting in lieu thereof “section 6154(c)(2)”, and by striking out. “sections 6655(e)(2) and (3)” and inserting in lieu thereof “section 6655(e)(2)”. (4) Amendment conforming to the re feat, of section 6162.— The table of sections for subchapter B of chapter 62 is amended by striking out the item relating to section 6162. (5) Amendment conforming to the repeal of section 6304.— The table of sections for subchapter A of chapter 64 is amended by striking out the item relating to section 6304. (6) Amendments conforming to the amendment of section 6416.— (A) Subparagraph (A) of section 6420(c)(3) is amended 26 USC 6420. to read as follows: “(A) by the owner, tenant, or operator of a farm, in connection with cultivating the soil, or in connection with raising or harvesting any agricultural or horticultural commodity, including the raising, shearing, feeding, caring for, training, and management of livestock, bees, poultry, and fur-bearing animals and wildlife, on a farm of which he is the owner, tenant, or operator; except that, if such use is by any person other than the owner, tenant, or operator of such farm, then for purposes of this subparagraph, in applying subsection (a) to this subparagraph, the owner, tenant, or operator of the farm on which gasoline or a liquid taxable under section 26 USC 4041. 4041 issued shall be treated as the user and the ultimate purchaser of such gasoline or liquid;”. (B) The amendments made by subparagraph (A) shall apply with respect to the use of liquids after December 31, 1970. (7) Amendment conforming to the repeal of section 6417.— The table of sections for subchapter B of chapter 65 is amended Ante, p. 1827. by striking out the item relating to section 6417. (8) Amendment conforming to amendment of section 6420.— Section 39(a)(1) is amended by striking out “section 6420(h)” and inserting in lieu thereof “section 6420(g)”. (9) Amendment conforming to amendment of section 6424.— Section 39(a)(3) is amended by striking out “section 6424(g)” Ante, p, 1829. and inserting in lieu thereof “section 6424(f)”. (10) Amendment conforming to amendment of section 7448.— The item relating to section 7448 in the table of sections for part I of subchapter C of chapter 76 is amended to read as follows: “Sec. 7448. Annuities of surviving spouses and dependent children.”. (11) Amendment conforming to amendment of section 7508.— The item relating to section 7508 in the table of sections for chapter 77 is amended to read as follows: “Sec. 7508. Time for performing certain acts postponed by reason of service in combat gone.”. (12) Amendment conforming to amendment of section 7500.— The item relating to section 7509 in the table of sections for chapter 77 is amended to read as follows: “Sec. 7509. Expenditures incurred by the United States Postal Service,”. (13) Amendment conforming to repeal of section 7641.— The table of subchapters for chapter 78 is amended by striking Ante, p. 1832. 26 USC 1 el seq. out the item relating to subchapter C. (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”. (B) The following provisions are each amended by striking 26 USC 4293, 4483, 5551, 7801, 7802, 9006, 9007. 26 USC 3121, 3303, 3304, 3305, 3306, 9005, 9007, 9010, 9012. 26 USC 31. 26 USC 3304. out “Secretary” each place it appears and inserting in lieu thereof “Secretary of the Treasury”: sections 4293, 4483 (b), 5551, 7801(b). 7802(a), 9006(a), 9006(b), and 9007(d). (C) The following provisions are each amended by striking out “to the Secretary” each place it appears and inserting in lieu thereof “to the Secretary of the Treasury”: sections 3121 (b)(12)(B). 3303(b), 3304(a)(3). 3304(c), 3305(j), 3306(c)(12)(B), 9005(a), 9007(b), 9010(b), and 9012(e)(3). (D) Section 31(b)(1) is amended by striking out “(or his delegate)”. (E) The last sentence of section 3304(c) is amended by striking out “the Secretary shall” and inserting in lieu thereof “the Secretary of Labor shall”. (F) Section 3310(d)(2) is amended by striking out “the 26 USC 3310. Secretary’s action” each place it appears and inserting in lieu thereof “the Secretary of Labor’s action”. (G) Section 3221(a) and 3221(c) are each amended by 26 USC 3221. striking out “of the Treasury” each place it appears. (H) Section 3310(e) is amended by striking out “of 26 USC 3310. the Secretary” and inserting in lieu thereof “of the Secretary of Labor”. (I) Section 4412(c) is amended by striking out “he or his 26 USC 4412. delegate” and inserting in lieu thereof “the Secretary”. (J) Section 5845(f) is amended by striking out “of the 26 USC 5845. Treasury or his delegate”. (K) Section 6402(b) is amended by striking out “(or his 26 USC 6402. delegate)”. (L) Section 7458 is amended by striking out “nor his 26 USC 7458. delegate”. (M) Section 7514 is amended by striking out “functions of 26 USC 7514. the Secretary” and inserting in lieu thereof “functions of the Secretary of the Treasury”. (c) Amendments to Sections Referring to Territories.— (1) Section 6871(a) is amended by striking out “or Territory”. 26 USC 6871. 26 USC 7622. 26 USC 7701. (2) Section 7622(b) is amended by striking out “, Territory,”. (3) Section 7701(a)(4) is amended by striking out “or Territory”. (d) Effective Date.— (1) General rule.— Except as otherwise expressly provided in this section, the amendments made by this section shall take effect on the first day of the first month which begins more than 90 days after the date of the enactment of this Act. (2) Amendments relating to income tax.— The amendments made by this section, when relating to a tax imposed by chapter 26 USC 1, 1401. 1 or chapter 2 of the Internal Revenue Code of 1954, shall take effect with respect to taxable years beginning after December 31, 1976. SEC. 1907. AMENDMENTS OF SUBTITLE G; THE JOINT COMMITTEE ON INTERNAL REVENUE TAXATION. (a) In General.— (1) Amendment of section 8001.— Section 8001 (relating to 26 USC 8001. creation of the Joint Committee) is amended by striking out “Joint Committee on Internal Revenue Taxation” and inserting in lieu thereof “Joint Committee on Taxation”. (2) Amendment of section 8004.— Section 8004 (relating to 26 USC 8004. compensation of staff) is amended by striking out “compensation of a clerk” and inserting in lieu thereof “compensation of the Chief of Staff of the Joint Committee”. (3) Amendment of section 8021.— Section 8021(d) (relating 26 USC 8021. to authority to make expenditures) is amended to read as follows: “(d) To Make Expenditures.— The Joint Committee, or any subcommittee thereof, is authorized to make such expenditures as it deems advisable.”. (4) Amendment of section 8023.— Section 8023(c) (relating 26 USC 8023. to reorganization plans) is amended to read as follows: “(c) Application of Subsections (a) and(b).— Subsections (a) and (b) shall be applied in accordance with their provisions without regard to any reorganization plan becoming effective on, before, or after the date of the enactment of this subsection.”. (5) All references in any other statute, or in any rule, regulation, or order, to the Joint Committee on Internal be venue Taxation shall be considered to be made to the Joint Committee on Taxation. (b) Amendments Conforming to the Amendment of Section 8001.— (1) The heading of subtitle G is amended by striking out “Internal Revenue”, (2) The table of subtitles for the Internal Revenue Code of 1954 is amended by striking out the item relating to subtitle G and inserting in lieu thereof the following: “Subtitle G. The Joint Committee on Taxation.”. (c) Effective Date.— The amendments made by this section shall take effect on the first day of the first month which begins more than 90 days after the date of the enactment of this Act. SEC. 1908. EFFECTIVE DATE OF CERTAIN DEFINITIONS AND DESIGNATIONS For purposes of any amendment made by any provision of this Act (other than this title)— (1) which contains a term the meaning of which is defined in or modified by any provision of this title, and (2) which has an effective date earlier than the effective date of the provision of this title defining or modifying such term, that definition or modification shall be considered to take effect as of such earlier effective date. Subtitle B— Amendments of Code Provisions With Limited Current Application; Repeals and Savings Provisions SEC. 1951. PROVISIONS OF SUBTITLE A (a) References to Internal Revenue Code.— Except as otherwise expressly provided, whenever in this section a reference is made to a section or other provision, the reference shall be considered to be made 26 USC 1. to a section or other provision of the Internal Revenue Code of 1954. (b) Amendments.— (1) Amendment of section 72.— (A) Repeal.— Section 72 (relatinfi to annuities) is amended by striking out subsection (i) (relating to joint and survivor annuities where first annuitant died in 1951, 1952, or 1953). (B) Savings provision.— Notwithstanding subparagraph (A), if the provisions of section 72(i) applied to amounts received in taxable years beginning before January 1, 1977, under an annuity contract, then amounts received under such contract on or after such date shall be treated as if such provisions were not repealed. (2) Amendments of section 108.— (A) Repeal.— Section 108 (relating to income from discharge of indebtedness) is amended by striking out subsection (b) (relating to certain railroad corporations) and by striking out of subsection (a) the following: “(a) Special Rule of Exclusion.—”. (B) Savings provision.— If any discharge, cancellation, 26 USC 108 note. or modification of indebtedness of a railroad corporation occurs in a taxable year beginning after December 31, 1976, pursuant to an order of a court in a proceeding referred to in section 108(b)(A) or (13) which commenced before January 1, 1960, then, notwithstanding the amendments made by subparagraph (A), the provisions of subsection (b) of section 108 shall be considered as not repealed with respect to such discharge, cancellation, or modification of indebtedness. (3) Amendments of section 164.— (A) Repeal.— Section 164 (relating to taxes) is amended 26 USC 164. by striking out subsection (f) (relating to payments for municipal services in atomic energy communities) and by redesignating subsection (g) as subsection (f). (B) Savings provision.— Notwithstanding subparagraph 26 USC 164 note. (A), any amount paid or accrued in a taxable year beginning after December 31, 1976, to the Atomic Energy Commission or its successors for municipal-type services shall be allowed as a deduction under section 164 if such amount would have been deductible by reason of section 164(f)(as in effect for a taxable year ending on December 31, 1976) and if the amount is paid or accrued with respect to real property in a community (within the meaning of section 21 b. of the Atomic Energy Community Act of 1955 (42 U.S.C. 2304 (b))) in which the Commission on December 31, 1976, was rendering municipal-type services for which it received compensation from the owners of property within such community. (4) Repeal of section 168.— (A) Repeal.— Section 168 (relating to amortization of 26 USC 168. emergency facilities) is repealed. (B) Savings provision.— Notwithstanding the repeal 26 USC 168 note. made by subparagraph (A), if a certificate was issued before January 1, 1960, with respect to an emergency facility which is or has been placed in service before the date of the enactment of this Act, the provisions of section 168 shall not, with respect to such facility, be considered repealed. The benefit of deductions by reason of the preceding sentence shall be allowed to estates and trusts in the same manner as in the case of an individual. The allowable deduction shall be apportioned between the income beneficiaries and the fiduciary in accordance with regulations prescribed under section 642(f). (5) Amendment of section 171.— (A) Repeal.— (i) Section 171(b)(1)(B) (relating to amount of 26 USC 171. bond premium) is amended by striking out clause (iii) (relating to certain bonds acquired before 1958). (ii) Section 171(b)(1)(B)(i) is amended by striking out “clause (ii) or (iii) applies,” and inserting in lieu thereof “clause (ii) applies, or”, and by inserting “and” at the end thereof. (iii) Section 171 (b)(1)(B)(ii) is amended by striking out “. or” and inserting “, and” in lieu thereof. (iv) The second sentence in section 171 (b)(2) is amended by striking out “or (iii)”. (B) Savings provision.— Notwithstanding the amendments made by subparagraph (A), in the case of a bond the interest on which is not excludable from gross income— (i) which was issued after January 22, 1951, with a call date not more than 3 years after the date of such issue, and (ii) which was acquired by the taxpayer after January 22, 1954, and before January 1, 1958, the bond premium for a taxable year beginning after December 31, 1975, shall not be determined under section 171(b)(1)(B)(i) but shall be determined with reference to the amount payable on maturity, and if the bond is called before its maturity, the bond premium for the year in which the bond is called shall be determined in accordance with the provisions of section 171 (b)(2). (6) Amendment of section 333.— (A) Repeal.— Section 333 (relating to election as to recognition of gain in certain liquidations) is amended by striking out subsection (g) (relating to the liquidation of certain personal holding companies). (B) Savings provision.— Nothwithstanding subparagraph (A), if any corporation meets all the requirements of section 333(g)(2)(B), as in effect before its repeal by this Act, the liquidation of such corporation shall be treated as if paragraphs (2), (3), and (4) of section 333(g) had not been repealed. (C) Phase-in of 12month holding period requirement.— For purposes of subparagraph (B), the period for holding of stock specified in section 333(g)(2)(A)(u), as in effect before such repeal, shall— (i) in the case of taxable years beginning in 1977, be considered to be “9 months”; and (ii) in the case of taxable years beginning after December 31, 1977, be considered to be “1 year”. (7) Amendment of section 453.— (A) Repeal.— Section 453(b)(2) (relating to limitation on use of installment sales method) is amended to read as follows: “(2) Limitation.— Paragraph (1) shall apply only if in the taxable year of the sale or other disposition— “(A) there are no payments, or “(B) the payments (exclusive of evidences of indebtedness or the purchaser) do not exceed 30 percent of the selling price.”. (B) Savings provision.— Notwithstanding subparagraph (A), in the case of installment payments received during taxable years beginning after December 31, 1976, on account of a sale or other disposition made during a taxable year beginning before January 1, 1954, subsection (b)(1) of section 453 (relating to sales of realty and casual sales of personalty) shall apply only if the income was (by reason of section 53 Stat. 24. 44(b) of the Internal Revenue Code of 1939) returnable on the basis and in the manner prescribed in section 44(a) of such Code. (8) Amendments of section 512.— (A) Repeal.— Section 512(b) (relating to unrelated business 26 USC 512. taxable income) is amended by striking out paragraphs (13) and (14) and by redesignating paragraphs (15), (16), and (17) as paragraphs (13), (14), and (15), respectively. (B) Savings provision.— Notwithstanding subparagraph 26 USC 512 note. (A), income received in a taxable year beginning after December 31, 1975, shall be excluded from gross income in determining unrelated business taxable income, if such income would have been excluded by paragraph (13) or (14) of section 512(b) if received in a taxable year beginning before such date. Any deductions directly connected with income excluded under the preceding sentence in determining unrelated business taxable income shall also be excluded for such purpose. (9) Amendment of section 545.— (A) Repeal.— Section 545(b) (relating to adjustments in 26 USC 545. computing undistributed personal holding company income) is amended by striking out paragraph (9) (relating to deductions on account of certain liens in favor of the United States). (B) Savings provision.— Notwithstanding subparagraph 26 USC 545 note. (A), if any amount was deducted under paragraph (9) of section 545(b) in a taxable year beginning before January 1, 1977, on account of a lien which is satisfied or released in a taxable year beginning on or after such date, the amount so deducted shall be included in income, for purposes of section 545, as provided in the second sentence of such paragraph. Shareholders of any corporation which has amounts included in its income by reason of the preceding sentence may elect to compute the income tax on dividends attributable to amounts so included as provided in the third sentence of such paragraph. (10) Amendments of section 691.— (A) Repeal.— Section 691 (relating to income in respect 26 USC 691. of decedents) is amended by striking out subsection (e) (relating to certain installment obligations transmitted at death) and by redesignating subsection (f) as subsection (e). (B) Savings provision.— Notwithstanding subparagraph 26 USC 691 note. (A), any election made under section 691(e) to have subsection (a)(4) of such section apply in the case of an installment obligation shall continue to be effective with respect to taxable years beginning after December 31, 1976. Section 691(c) shall not apply in respect of any amount included in gross income by reason of the preceding sentence. The liability under bond filed under section 44(d) of the Internal Revenue Code of 1939 (or corresponding provisions of prior law) in 53 Stat. 24. respect of which such an election applies is hereby released with respect to taxable years to which such election applies. (11) Amendments of section 817.— (A) Repeal.— Section 817 is amended by striking out 26 USC 817. subsection (d) (relating to certain gains occurring before 1959). (B) Savings provision.— Notwithstanding subparagraph 26 USC 817 note. (A), any gain in a taxable year beginning after December 31, 1976, from any sale or other disposition of property prior to January 1, 1959, would be excluded or not taken into account for purposes of part 1 of subchapter L of chapter Ante, p. 1839. 1 if subsection (d) of section 817 of such Code were still in effect for such taxable year, such gain shall be excluded for purposes of such part. (12) Repeal of section 1347.— (A) Repeal.— Section 1347 (relating to certain claims filed against the United States before January 1, 1958) is repealed. (B) Savings provision.— Notwithstanding subparagraph (A), if amounts received in a taxable year beginning after December 31, 1976, would have been subject to the provisions of section 1347 if received in a taxable year beginning before such date, the tax imposed by section 1 attributable to such receipt shall be computed as if section 1347 had not been repealed. (13) Repeal of section 1471.— (A) Repeal.— Subchapter A of chapter 4 (relating to recovery of excessive profits on certain Government contracts) is repealed. (B) Savings provision.— If the amount of profit required to be paid into the Treasury under section 2382 or 7300 of title 10, United States Code, is not voluntarily paid, the Secretary of the Treasury or his delegate shall collect the same under the methods employed to collect taxes under subtitle A. All provisions of law (including penalties) applicable with respect to such taxes and not inconsistent with section 2382 or 7300 of title 10 of such Code, shall apply with respect to the assessment, collection, or payment of excess profits to the Treasury as provided in the preceding sentence, and to refunds by the Treasury of overpayments of excess profits into the Treasury. (14) Amendment of section 1481.— (A) Repeal.— Section 1481 (relating to mitigation of effect of renegotiation of Government contracts) is amended by striking out subsection (d) (relating to renegotiation for years prior to 1954). (B) Savings provision.— If, during a taxable year beginning after December 31, 1976, a recovery of excessive profits through renegotiation which relates to profits of a taxable 53 Stat. 1. year subject to the Internal Revenue Code of 1939, the adjustments in respect to such renegotiation shall be made under section 3806 of such Code. (c) Conforming and Clerical Amendments.— (1) Amendment conforming to the amendment of section 1017.— Section 1017 is amended by striking out “section 108(a)” each time it appears therein and inserting in lieu thereof “section 108”. (2) Amendments conforming to repeal of section 168.— (A) Section 1238 is amended by striking out “(relating to amortization deduction of emergency facilities)” and inserting in lieu thereof “(as in effect before its repeal by the Tax Ante, p. 1520. 26 USC 642, 1082. Ante, p. 1837. 26 USC 1245, 1250. Reform Act. of 1976)”. (B) Sections 642(f) and 1082(a)(2)(B) are each amended by striking out “168,”. (C) Sections 1245(a)(2) and 1250(b)(3) are each amended by striking out “168,” each place it appears and inserting in lieu thereof “168 (as in effect before its repeal by the Tax Reform Act of 1976),”. (D) The table of sections for part VI of subchapter B of chapter 1 is amended by striking out the item relating to section 168. Ante, p. 1837. (3) Amendments conforming to the repeal of section 1347.— (A) Section 5(b) is amended by striking out paragraph 26 USC 5. (5) and by redesignating paragraphs (2), (3), and (4), as paragraphs (1), (2), and (3), respectively. (B) The table of sections for part VI of subchapter Q of chapter 1 is amended by striking out the item relating to section 1347. Ante, p. 1840. (C) The heading of part VI of subchapter Q of chapter 1 is amended to read as follows: “PART VI— MAXIMUM RATE ON PERSONAL SERVICE INCOME.” (D) The table of parts for subchapter Q of chapter 1 is amended by striking out the item relating to part VI and inserting in lieu thereof the following: “Part VI. Maximum rate on personal service income.” (4) Amendment conforming to the repeal of section 1471.— The table of subchapters for chapter 4 is amended by striking out the item relating to subchapter A. (d) Effective Date.— Except as otherwise expressly provided, the 26 USC 72 note. amendments made by this section shall apply with respect to taxable years beginning after December 31, 1976. SEC. 1952. PROVISIONS OF SUBCHAPTER D OF CHAPTER 39; COTTON FUTURES. (a) Short Title.— This section may be cited as the “United States Cotton Futures Act”. (b) Repeal of Tax on Cotton Futures.— Subchapter D of chapter 39 (relating to tax on cotton futures) is repealed. 26 USC 4851. (c) Definitions.— For purposes of this section— (1) Cotton futures contract.— The term “cotton futures contract” means any contract of sale of cotton for future delivery made at, on, or in any exchange, board of trade, or similar institution or place of bus mess which has been designated a “contract market” by the Commodity Futures Trading Commission pursuant to the Commodity Exchange Act and the term “contract of 7 USC 1. sale” as so used shall be held to include sales, agreements of sale, and agreements to sell. (2) Future delivery.— The term “future delivery” shall not include any cash sale of cotton for deferred shipment or delivery. (3) Person.— The term “person” includes an individual, trust, estate, partnership, association, company, or corporation. (4) Secretary.— The term “Secretary” means the Secretary of Agriculture of the United States. (5) Standards.— The term “standards” means the official cotton standards of the United States established by the Secretary pursuant to the United States Cotton Standards Act, as emended. (d) Bona Fide Spot Markets and Commercial Differences.— (1) Definition.— For purposes of this section, the only markets which shall be considered bona fide spot markets shall be those which the Secretary shall, from time to time, after investigation, determine and designate to be such, and which we shall give public notice. (2) Determination.— In determining, pursuant to the provisions of this section, what markets are bona fide spot markets, the Secretary is directed to consider only markets in “which spot cotton is sold in such volume and under such conditions as customarily to reflect accurately the value of middling cotton and the differences between the prices or values of middling cotton and of other grades of cotton for which standards shall have been established by the Secretary; except that if there are not sufficient places, in the markets of which are made bona fide sales of spot cotton of grades for which standards are established by the Secretary, to enable him to designate at least five spot markets in accordance with subsection (f)(3), he shall, from data as to spot sales collected by him, make rules and regulations for determining the actual commercial differences in the value of spot cotton of the grades established by him as reflected by bona fide sales of spot cotton, of the same or different, grades, in the market selected and designated by him, from time to time, for that purpose, and in that event differences in value of cotton of various grades involved in contracts made pursuant to subsection (f)(1) and (2) shall be determined in compliance with such rules and regulations. It shall be the duty of any person engaged in the business of dealing in cotton, when requested by the Secretary or any agent acting under his instructions, to answer correctly to the best of his knowledge, under oath or otherwise, all questions touching his knowledge of the number of bales, the classification, the price or bona fide price offered, and other trims of purchase or sale, of any cotton involved in any transaction participated in by him, or to produce all books, letters, papers, or documents in his possession or under his control relating to such matter. (3) Withholding information.— Any person engaged in the business of dealing in cotton who shall, within a reasonable time prescribed by the Secretary or any agent acting under his instructions, willfully fail or refuse to answer questions or to produce books, letters, papers, or documents, as required under paragraph (2) of this subsection, or who shall willfully give any answer that is false or misleading, shall, upon conviction thereof, be fined not more than $500. (e) Form and Validity of Cotton Futures Contracts.— Each cotton futures contract shall be a basis grade contract, or a tendered grade contract, or a specific grade contract as specified in subsections (f), (g), or (h) and shall be in writing plainly stating, or evidenced by written memorandum showing, the terms of such contract, including the quantity of the cotton involved and the names and addresses of the seller and buyer in such contract, and shall be signed by the party to be charged, or by his agent in his behalf. No cotton futures contracts which does not conform to such requirements shall be enforceable by, or on behalf of, any party to such contract or his privies. (f) Basis Grade Contracts.— (1) Conditions.— Each basis grade cotton futures contract shall comply with each of the following conditions: (A) Conformity with regulations.— Conform to the regulations made pursuant to this section. (B) Specification of grade, price, and dates of sale and settlement.— Specify the basis grade for the cotton involved in the contract, which shall be one of the grades for which standards are established by the Secretary, except grades prohibited from being delivered on a contract made under this subsection by subparagraph (E), the price per pound at which the cotton of such basis grade is contracted to be bought or sold, the date when the purchase or sale was made, and the month or months in which the contract is to be fulfilled or settled; except that middling shall be deemed the basis £ade incorporated into the contract if no other basis grade specified either in the contract or in the memorandum evidencing the same. (C) Provision for delivery of standard grades only.— Provide that the cotton dealt with therein or delivered thereunder shall be of or within the grades for which standards are established by the Secretary except grades prohibited from being delivered on a contract made under this subsection by subparagraph (E) and no other grade or grades. (D) Provision for settlement on basis of actual commercial differences.— Provide that in case cotton of grade other than the basis grade be tendered or delivered in settlement of such contract, the differences above or below the contract price which the receiver shall pay for such grades other than the basis grade shall be the actual commercial differences, determined as hereinafter provided, (E) Prohibition of delivery of inferior cotton.— Provide that cotton that, because of the presence of extraneous matter of any character, or irregularities or defects, is reduced in value below that of low middling, or cotton that is below the grade of low middling, or, if tinged, cotton that is below the grade of strict middling, or, if yellow stained, cotton that is below the grade of good middling, the grades mentioned being of the official cotton standards of the United States, or cotton that is less than seven-eighths of an inch in length of staple, or cotton of perished staple, or of immature staple, or cotton that is “gin cut” or reginned, or cotton that is “repacked” or “false packed” or “mixed packed” or “water packed”, shall not be delivered on, under, or in settlement of such contract. (F) Provisions for tender in full, notice of delivery date, and certificate of grade.— Provide that all tenders of cotton under such contract shall be the full number of bales involved therein, except that such variations of the number of bales may be permitted as is necessary to bring the total weight of the cotton tendered within the provisions of the contract as to weight; that, on the fifth business day prior to delivery, the person making the tender shall give to the person receiving the same written notice of the date of delivery, and that, on or prior to the date so fixed for delivery, and in advance of final settlement of the contract, the person making the tender shall furnish to the person receiving the same a written notice or certificate stating the grade of each individual bale to be delivered and, by means of marks or numbers, identifying each bale with its grade. (G) Provision for tender and settlement in accordance with government classification.— Provide that all tenders of cotton and settlements therefor under such contract shall be in accordance with the classification thereof made under the regulations of the Secretary by such officer or officers of the Government as shall be designated for the purpose, and the costs of such classification shall be fixed, assessed, col- Regulations. lected, and paid as provided in such regulations. The Secretary is authorized to prescribe regulations for carrying out the purposes of this subparagraph and the certificates of the officers of the Government, as to the classification of any cotton for the purposes of this subparagraph shall be accepted in the courts of the United States in all suits between the parties to such contract, or their privies, as prima facie evidence of the true classification of the cotton involved. (2) Incorporation of conditions in contracts.— The provisions of paragraphs (1)(C), (D), (E), (F), and (G) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandums evidencing the same, at or prior to the time the same is signed, the phrase “Subject to United States Cotton Futures Act, subsection (f).” (3) Delivery allowances.— For the purpose of this subsection, the differences above or below the contract price which the receiver shall pay for cotton of grades above or below the basic grade in the settlement of a contract of sale for the future delivery of cotton shall be determined by the actual commercial differences in value thereof upon the sixth business day prior to the day fixed, in accordance with paragraph (1)(F), for the delivery of cotton on the contract, established by the sale of spot cotton in the spot markets of not less than five places designated for the purpose from time to time by the Secretary, as such values were established by the sales of spot cotton, in such designated five or more markets. For purposes of this paragraph, such values in the such spot markets shall be based upon the standards for grades of cotton established by the Secretary. Whenever the value Rules and regulations. of one grade is to be determined from the sale or sales of spot cotton of another grade or grades, such value shall be fixed in accordance with rules and regulations which shall be prescribed for the purpose by the Secretary. (g) Tendered Grade Contracts.— (1) Conditions.— Each tendered grade cotton future contract shall comply with each of the following conditions: (A) Compliance with subsection (f).— Comply with all the terms and conditions of subsection (f) not inconsistent with this subsection; and (B) Provision for contingent specific performance.— Provide that, in case cotton of grade or grades other than the basis grade specified in the contract shall be tendered in performance of the contract, the parties to such contract may agree, at the time of the tender, as to the price of the grade or grades so tendered, and that if they shall not then agree as to such price, then, and in that event, the buyer of said contract shall have the right to demand the specific fulfillment of such contract by the actual delivery of cotton of the basis grade named therein and at the price specified for such basis grade in said contract. (2) Incorporation of conditions in contract.— Contracts made in compliance, with this subsection shall be known as “subsection (g) Contracts”. The provisions of this subsection shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandum evidencing the same, at or prior to the time the same is signed, the phrase “Subject to United States Cotton Futures Act, subsection (g)”. (3) Application of subsection.— Nothing in this subsection shall be so construed as to authorize any contract in which, or in the settlement of or in respect to which, any device or arrangement whatever is resorted to, or any agreement is made, for the determination or adjustment of the price of the grade or grades tendered other than the basis grade specified in the contract by any “fixed difference” system, or by arbitration, or by any other method not provided for by this section. (h) Specific Grade Contracts.— (1) Conditions.— Each specific grade cotton futures contract shall comply with each of the following conditions: (A) Conformity with rulesand regulations.— Con form to the rules and regulations made pursuant to this section. (B) Specification of grade, price, dates of sale and delivery.— Specify the grade, type, sample, or description of the cotton involved in the contract, the price per pound at which such cotton is contracted to be bought or sold, the date of the purchase or sale, and the time when shipment or delivery of such cotton is to be made. (C) Prohibition of delivery of other than specified grade.— Provide that cotton of or within the grade or of the type, or according to the sample or description, specified in the contract shall be delivered thereunder, and that no cotton which does not conform to the type, sample, or description, or which is not of or within the grade specified in the contract shall be tendered or delivered thereunder. (D) Provision for specific performance.— Provide that the delivery of cotton under the contract shall not be effected by means of “setoff” or “ring” settlement, but only by the actual transfer of the specified cotton mentioned in the contract. (2) Incorporation of conditions in contract.— The provisions of paragraphs (1)(A), (C). and (D) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the document or memorandum evidencing the same, at or prior to the time the same is entered into, the words “Subject to United States Cotton Futures Act, subsection (h)”. Ante, p. 1841. (3) Application of subsection.— This subsection shall not be construed to apply to any contract of sale made in compliance with subsection (f) or (g). (i) Liability of Principal for Acts of Agent.— When construing and enforcing the provisions of this section, the act, omission, or failure of any official, agent, or other person acting for or employed by any association, partnership, or corporation within the scope of his employment or office shall, in every case, also be deemed the act, omission, or failure of such association, partnership, or corporation, as well as that of the person. (j) Regulations.— The Secretary is authorized to make such regulations with the force and effect of law as he determines may be necessary to carry out the provisions of this section and the powers vested in him by this section. (k) Validations.— Any person who knowingly violates any regulation made in pursuance of this section, shall, upon conviction thereof be fined not less than $100 nor more than $500, for each violation thereof, in the discretion of the court, and, in case of natural persons, may, in addition be punished by imprisonment for not less than 30 days nor more than 90 days, for each violation, in the discretion of the court except that this subsection shall not apply to violations subject to subsection (d)(3). (l) Applicability to Contracts Prior to Effective Date.— The provisions of this section shall not apply to any cotton futures contract entered into prior to the effective date of this section or to any act or failure to act by any person prior to such effective date and all such prior contracts, acts or failure to act shall continue to be governed by 26 USC 1. the applicable provisions of the Internal Revenue Code of 1954 as in effect prior to the enactment of this section. All designations of bona fide spot markets and all rules and regulations issued by the Secretary pursuant to the applicable provisions of the Internal Revenue Code of 1954 which were in effect on the effective date of this section, shall remain fully effective as designations and regulations under this section until superseded, amended, or terminated by the Secretary. (m) Authorization.— There are authorized to be appropriated such sums as may be necessary to carry out this section. (n) Conforming and Clerical, Amendments.— (1) Section 6808 (relating to cross references) is amended by striking out paragraph (2), and by redesignating paragraphs (3), (6), and (11) as paragraphs (1), (2), and (3), respectively. (2) (A) Section 7233 (relating to failure to pay tax on cotton futures) is repealed. (B) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7233. (3) (A) Section 7263 (relating to penalties concerning cotton futures) is repealed. (B) The table of sections for subchapter B of chapter 75 is amended by striking out the item relating to section 7263. (4) (A) Subchapter E of chapter 76 (relating to miscellaneous provisions regarding cotton futures contracts) is repealed. (B) The table of subchapters for chapter 76 is amended by striking out the items relating to subchapter E. (5) Chapter 39 (relating to regulatory taxes) is amended by striking out the chapter heading and the table of subchapters. (6) The table of chapters for subtitle D is amended by striking out the item relating to chapter 39. (o) Effective Date.— The provisions of this section shall take effect on the 90th day after the date of the enactment of this Act.

3. 1976

   Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520

   Struck · 26 U.S.C. § 4945(h); 26 U.S.C. § 4945(i)

   Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wher­ever appearing

   Source evidence

   Code amendment note
   Subsecs. (h), (i). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wher­ever appearing.

   Enacted provision · exact public law section
   (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.

4. 1980

   Pub. L. 96–596 § 2(a)(1)(F) · 94 Stat. 3469

   Substituted · 26 U.S.C. § 4945(b)(1)

   Pub. L. 96–596, § 2(a)(1)(F), substituted “taxable period” for “correction period”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 96–596, § 2(a)(1)(F), substituted “taxable period” for “correction period”.

   Enacted provision · exact public law section
   (F) Section 4945(b)(1) (relating to additional taxes on taxable expenditures).

5. 1980

   Pub. L. 96–596 § 2(a)(2)(E) · 94 Stat. 3469

   Substituted · 26 U.S.C. § 4945(i)(2)

   Pub. L. 96–596, § 2(a)(2)(E), substituted provision defining taxable period as the period beginning with the date on which the taxable expenditure occurs and ending on the earlier of the date of mailing a notice of deficiency with respect to the tax imposed by subsec. (a)(1) of this section under section 6212 of this title or the date on which the tax imposed by subsec. (a)(1) of this section is assessed for provision defining correction period as the period beginning with the date on which the taxable expenditure occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (b)(1) of this section under section 6212 of this title, extended by any period in which the deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines to be reasonable and necessary, except that such determination not be made with respect to any taxable expenditure within the meaning of pars. (1), (2), (3), or (4) of subsec. (d) of this section because of any action by an appropriate State officer

   Source evidence

   Code amendment note
   Subsec. (i)(2). Pub. L. 96–596, § 2(a)(2)(E), substituted provision defining taxable period as the period beginning with the date on which the taxable expenditure occurs and ending on the earlier of the date of mailing a notice of deficiency with respect to the tax imposed by subsec. (a)(1) of this section under section 6212 of this title or the date on which the tax imposed by subsec. (a)(1) of this section is assessed for provision defining correction period as the period beginning with the date on which the taxable expenditure occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (b)(1) of this section under section 6212 of this title, extended by any period in which the deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines to be reasonable and necessary, except that such determination not be made with respect to any taxable expenditure within the meaning of pars. (1), (2), (3), or (4) of subsec. (d) of this section because of any action by an appropriate State officer.

   Enacted provision · exact public law section
   (E) Paragraph (2) of section 4945(i) is amended to read as follows: “(2) Taxable period.— The term ‘taxable period’ means, with respect to any taxable expenditure, the period beginning with the date on which the taxable expenditure occurs and ending on the earlier of— “(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212, or “(B) the date on which the tax imposed by subsection (a)(1) is assessed.”

6. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 div. A title III § 302(b) · 98 Stat. 494

   1. Changed · 26 U.S.C. § 4945(d)(4)

      Pub. L. 98–369, in amending par. (4) generally, divided existing provisions into subpars. (A) and (B)

   2. Inserted · 26 U.S.C. § 4945(d)(4)

      Pub. L. 98–369, in inserted reference in subpar. (A) to exempt foundations (as defined in section 4940(d)(2))

   Source evidence

   Code amendment note
   Subsec. (d)(4). Pub. L. 98–369, in amending par. (4) generally, divided existing provisions into subpars. (A) and (B) and inserted reference in subpar. (A) to exempt foundations (as defined in section 4940(d)(2)).

   Enacted provision · exact public law section
   (b) Requirement of Expenditure Responsibility Not To Apply to Certain Operating Foundations.— Paragraph (4) of section 4945(d) (defining taxable expenditure) is amended to read as follows: “(4) as a grant to an organization unless— “(A) such organization is described in paragraph (1), (2), or (3) of section 509(a) or is an exempt operating foundation Ante, p. 779. (as defined in section 4940(d)(2)), or “(B) the private foundation exercises expenditure responsibility with respect to such grant in accordance with subsection (h), or”.

7. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title I § 122(a)(2)(B) · 100 Stat. 2085

   Inserted · 26 U.S.C. § 4945(g)(2)

   Pub. L. 99–514 inserted “(without regard to paragraph (3) thereof)” after “section 74(b)”

   Source evidence

   Code amendment note
   Subsec. (g)(2). Pub. L. 99–514 inserted “(without regard to paragraph (3) thereof)” after “section 74(b)”.

   Enacted provision · exact public law section
   (B) Paragraph (2) of section 4945(g) is amended by striking out “section 74(b)” and inserting in lieu thereof “section 74(b) (without regard to paragraph (3) thereof)”.

8. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 title I § 1001(d)(1)(B) · 102 Stat. 3342

   Amended · 26 U.S.C. § 4945(g)(1)

   Pub. L. 100–647 amended par. (1) generally. Prior to amendment, par. (1) read as follows: “the grant constitutes a scholarship or fellowship grant which is subject to the provisions of section 117(a) and is to be used for study at an educational organization described in section 170(b)(1)(A)(ii),”

   Source evidence

   Code amendment note
   Subsec. (g)(1). Pub. L. 100–647 amended par. (1) generally. Prior to amendment, par. (1) read as follows: “the grant constitutes a scholarship or fellowship grant which is subject to the provisions of section 117(a) and is to be used for study at an educational organization described in section 170(b)(1)(A)(ii),”.

   Enacted provision · exact public law section
   (B) Paragraph (1) of section 4945(g) of the 1986 Code is amended to read as follows: “(1) the grant constitutes a scholarship or fellowship grant which would be subject to the provisions of section 117(a) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) and is to be used for study at an educational organization described in section 170(b)(1)(A)(ii),”.

9. 2006

   Pub. L. 109–280 § 1212(e)(1)(A) · 120 Stat. 780

   Substituted · 26 U.S.C. § 4945(a)(1)

   Pub. L. 109–280, § 1212(e)(1)(A), substituted “20 percent” for “10 percent”. See Codification note above

   Source evidence

   Code amendment note
   Subsec. (a)(1). Pub. L. 109–280, § 1212(e)(1)(A), substituted “20 percent” for “10 percent”. See Codification note above.

   Enacted provision · exact public law section
   (A) in paragraph (1), by striking “10 percent” and inserting “20 percent”, and

10. 2006

    Pub. L. 109–280 § 1212(e)(1)(B) · 120 Stat. 780

    Substituted · 26 U.S.C. § 4945(a)(2)

    Pub. L. 109–280, § 1212(e)(1)(B), substituted “5 percent” for “2½ percent”. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (a)(2). Pub. L. 109–280, § 1212(e)(1)(B), substituted “5 percent” for “2½ percent”. See Codification note above.

    Enacted provision · exact public law section
    (B) in paragraph (2), by striking “2½ percent” and inserting “5 percent”.

11. 2006

    Pub. L. 109–280 § 1212(e)(2) · 120 Stat. 780

    1. Substituted · 26 U.S.C. § 4945(c)(2)

       Pub. L. 109–280, § 1212(e)(2), substituted “$10,000,” for “$5,000,” See Codification note above

    2. Substituted · 26 U.S.C. § 4945(c)(2)

       Pub. L. 109–280, § 1212(e)(2), substituted “$20,000.” for “$10,000.” See Codification note above

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 109–280, § 1212(e)(2), substituted “$10,000,” for “$5,000,” and “$20,000.” for “$10,000.” See Codification note above.

    Enacted provision · exact public law section
    (2) Increased limitation for managers.— Section 4945(c)(2) 26 USC 4945. is amended— (A) by striking “$5,000,” and inserting “$10,000,”, and (B) by striking “$10,000.” and inserting “$20,000.”.

12. 2006

    Pub. L. 109–280 § 1244(b) · 120 Stat. 780

    Amended · 26 U.S.C. § 4945(d)(4)(A)

    Pub. L. 109–280, § 1244(b), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “such organization is described in paragraph (1), (2), or (3) of section 509(a) or is an exempt operating foundation (as defined in section 4940(d)(2)), or”. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (d)(4)(A). Pub. L. 109–280, § 1244(b), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “such organization is described in paragraph (1), (2), or (3) of section 509(a) or is an exempt operating foundation (as defined in section 4940(d)(2)), or”. See Codification note above.

    Enacted provision · exact public law section
    (b) Taxable Expenditures.— Subparagraph (A) of section 4945(d)(4) is amended to read as follows: “(A) such organization— “(i) is described in paragraph (1) or (2) of section 509(a), “(ii) is an organization described in section 509(a)(3) (other than an organization described in clause (i) or (ii) of section 4942(g)(4)(A)), or “(iii) is an exempt operating foundation (as defined in section 4940(d)(2)), or” .

13. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 div. A title II § 221(a)(106) · 128 Stat. 4010

    Struck · 26 U.S.C. § 4945(f)

    Pub. L. 113–295 struck out “(excluding therefrom any preceding taxable year which begins before January 1, 1970)” after “taxable years of such organization” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (f). Pub. L. 113–295 struck out “(excluding therefrom any preceding taxable year which begins before January 1, 1970)” after “taxable years of such organization” in concluding provisions.

    Enacted provision · exact public law section
    (106) Taxes on taxable expenditures.— Section 4945(f) is amended by striking “(excluding therefrom any preceding taxable year which begins before January 1, 1970)”.

    Effective date note
    Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

14 of 16 references resolved to an enrolled provision · 2 partial