§ 537. Reasonable needs of the business

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. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 182 · 68A Stat. 182

   Enacted · 26 U.S.C. § 537

   Aug. 16, 1954, ch. 736, 68A Stat. 182

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 182

2. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title IX § 906(a) · 83 Stat. 487

   1. Amended · 26 U.S.C. § 537

      Pub. L. 91–172 designated existing provisions as subsec. (a)(1)

   2. Added · 26 U.S.C. § 537

      Pub. L. 91–172 added subsecs. (a)(2), (3) and (b)

   Source evidence

   Code amendment note
   Pub. L. 91–172 designated existing provisions as subsec. (a)(1) and added subsecs. (a)(2), (3) and (b).

   Enacted provision · exact public law section
   (a) General Rule.— Section 537 (relating to reasonable needs of the business) is amended to read as follows: “SEC. 537. REASONABLE NEEDS OF THE BUSINESS. “(a) General Rule.— For purposes of this part, the term ‘reasonable needs of the business’ includes— “(1) the reasonably anticipated needs of the business, “(2) the section 303 redemption needs of the business, and “(3) the excess business holdings redemption needs of the business. “(b) Special Rules.— For purposes of subsection (a)— “(1) Section 303 redemption needs.— The term ‘section 303 68A Stat. 88. 26 USC 303. redemption needs’ means, with respect to the taxable year of the corporation in which a shareholder of the corporation died or any taxable year thereafter, the amount needed (or reasonably anticipated to be needed) to make a redemption of stock included in the gross estate of the decedent (but not in excess of the maximum amount of stock to which section 303(a) may apply). “(2) Excess business holdings redemption needs.— The term ‘excess business holdings redemption needs’ means, with respect to taxable years of the corporation ending after May 26, 1969, the amount needed (or reasonably anticipated to be needed) to redeem from a private foundation stock which— “(A) such foundation held on May 26, 1969 (or which was received by such foundation pursuant to a will or irrevocable trust to which section 4943(c)(5) applies), and Ante, p. 507. “(B) constituted excess business holdings on May 26, 1969, or would have constituted excess business holdings as of such date if there were taken into account (i) stock received pursuant to a will or trust described in subparagraph (A), and (ii) the reduction in the total outstanding stock of the corporation which would have resulted solely from the redemption of stock held by the private foundation. “(3) Obligations incurred to make redemptions.— In applying paragraphs (1) and (2), the discharge of any obligation incurred to make a redemption described in such paragraphs shall be treated as the making of such redemption. “(4) No inference as to prior taxable tears.— The application of this part to any taxable year before the first taxable year specified in paragraph (1) or (2) shall be made without regard to the fact that distributions in redemption coming within the terms of such paragraphs were subsequently made.”

3. 1976

   Pub. L. 94–455 § 1901(a)(75)(A) · 90 Stat. 1520

   Struck · 26 U.S.C. § 537(b)(2)

   Pub. L. 94–455, § 1901(a)(75)(A), struck out “with respect to taxable years of the corporation ending after May 26, 1969” after “ ‘redemption needs’ means”

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 94–455, § 1901(a)(75)(A), struck out “with respect to taxable years of the corporation ending after May 26, 1969” after “ ‘redemption needs’ means”.

   Enacted provision · exact public law section
   (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,”.

4. 1976

   Pub. L. 94–455 § 1901(a)(75)(B) · 90 Stat. 1520

   Struck · 26 U.S.C. § 537(b)(4)

   Pub. L. 94–455, § 1901(a)(75)(B), struck out “or (2)” after “paragraph (1)”

   Source evidence

   Code amendment note
   Subsec. (b)(4). Pub. L. 94–455, § 1901(a)(75)(B), struck out “or (2)” after “paragraph (1)”.

   Enacted provision · exact public law section
   (B) Section 537(b)(4) (relating to inferences as to prior years) is amended by striking out “or (2)”.

5. 1978

   Pub. L. 95–600 title III § 371(c) · 92 Stat. 2763

   1. Added · 26 U.S.C. § 537(b)(4); 26 U.S.C. § 537(b)(5)

      Pub. L. 95–600 added par. (4)

   2. Redesignated · 26 U.S.C. § 537(b)(4); 26 U.S.C. § 537(b)(5)

      Pub. L. 95–600 redesignated former par. (4) as (5)

   Source evidence

   Code amendment note
   Subsec. (b)(4), (5). Pub. L. 95–600 added par. (4) and redesignated former par. (4) as (5).

   Enacted provision · exact public law section
   (c) Application of Accumulated Earnings Tax to Product Liability Loss Reserves.— Subsection (b) of section 537 (relating to 26 USC 537. special rules) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: “(4) Product liability loss reserves.— The accumulation of reasonable amounts for the payment of reasonably anticipated product liability losses (as defined in section 172(i)), as deter- Supra. mined under regulations prescribed by the Secretary, shall be treated as accumulated for the reasonably anticipated needs of the business.”

6. 1996

   Small Business Job Protection Act of 1996

   Pub. L. 104–188 title I § 1704(t)(33) · 110 Stat. 1755

   Substituted · 26 U.S.C. § 537(b)(4)

   Pub. L. 104–188 substituted “section 172(f)” for “section 172(i)”

   Source evidence

   Code amendment note
   Subsec. (b)(4). Pub. L. 104–188 substituted “section 172(f)” for “section 172(i)”.

   Enacted provision · exact public law section
   (33) Paragraph (4) of section 537(b) is amended by striking “section 172(i)” and inserting “section 172(f)”.

7. 2017

   Pub. L. 115–97 title I § 13302(c)(2)(B) · 131 Stat. 2054

   Inserted · 26 U.S.C. § 537(b)(4)

   Pub. L. 115–97 inserted “(as in effect before the date of enactment of the Tax Cuts and Jobs Act)” after “as defined in section 172(f)”

   Source evidence

   Code amendment note
   Subsec. (b)(4). Pub. L. 115–97 inserted “(as in effect before the date of enactment of the Tax Cuts and Jobs Act)” after “as defined in section 172(f)”.

   Enacted provision · exact public law section
   (B) Section 537(b)(4) is amended by inserting “(as in effect before the date of enactment of the Tax Cuts and Jobs Act)” after “as defined in section 172(f)”.

   Effective date note
   Amendment by Pub. L. 115–97 applicable to net operating losses arising in taxable years beginning after Dec. 31, 2017, see section 13302(e) of Pub. L. 115–97, set out as a note under section 172 of this title.

8 of 9 references resolved to an enrolled provision · 1 partial