§ 7519. Required payments for entities electing not to have required taxable year

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. 1987

   Pub. L. 100–203 title X § 10206(b)(1) · 101 Stat. 1330

   Enacted · 26 U.S.C. § 7519

   Added Pub. L. 100–203, title X, § 10206(b)(1), Dec. 22, 1987, 101 Stat. 1330–398

   Source evidence

   Code source credit
   Added Pub. L. 100–203, title X, § 10206(b)(1), Dec. 22, 1987, 101 Stat. 1330–398

   Enacted provision · exact public law section
   (1) In general.— Chapter 77 is amended by adding at the end thereof the following new section: “SEC. 7519. REQUIRED PAYMENTS FOR ENTITIES ELECTING NOT TO HAVE REQUIRED TAXABLE YEAR. “(a) General Rule.— This section applies to a partnership or S corporation for any taxable year, if— “(1) an election under section 444 is in effect for the taxable year, and “(2) the required payment determined under subsection (b) for such taxable year (or any preceding taxable year) exceeds $500. “(b) Required Payment.— For purposes of this section, the term ‘required payment’ means, with respect to any applicable election year of a partnership or S corporation, an amount equal to— “(1) the excess of the product of— “(A) the applicable percentage of the adjusted highest section 1 rate, multiplied by “(B) the net base year income of the entity, over “(2) the amount of the required payment for the preceding applicable election year. For purposes of paragraph (1)(A), the term ‘adjusted highest section 1 rate’ means the highest rate of tax in effect under section 1 as of the end of the base year plus 1 percentage point (or, in the case of applicable election years beginning in 1987, 36 percent). “(c) Refund of Payments.— If the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), then the entity shall be entitled to a refund of such excess. “(d) Net Base Year Income.— For purposes of this section— “(1) In general.— An entity’s net base year income shall be equal to the sum of— “(A) the deferral ratio multiplied by the entity’s net income for the base year, plus “(B) the excess (if any) of— “(i) the deferral ratio multiplied by the aggregate amount of applicable payments made by the entity during the base year, over “(ii) the aggregate amount of such applicable payments made during the deferral period of the base year. For purposes of this paragraph, the term ‘deferral ratio’ means the ratio which the number of months in the deferral period of the base year bears to the number of months in the partnership’s or S corporation’s taxable year. “(2) Net income.— Net income is determined by taking into account the aggregate amount of the following items— “(A) Partnerships.— In the case of a partnership, net income shall be the amount (not below zero) determined by taking into account the aggregate amount of the partnership’s items described in section 702(a) (other than credits). “(B) S corporations.— In the case of an S corporation, net income shall be the amount (not below zero) determined by taking into account the aggregate amount of the S corporation’s items described in section 1366(a) (other than credits). If the S corporation was a C corporation for the base year, its taxable income for such year shall be treated as its net income for such year. “(C) Certain limitations disregarded.— For purposes of subparagraph (A) or (B), any limitation on the amount of any item described in either such paragraph which may be taken into account for purposes of computing the taxable income of a partner or shareholder shall be disregarded. “(3) Applicable payments.— “(A) In general.— The term ‘applicable payment’ means amounts paid or incurred by a partnership or S corporation which are includible in gross income of a partner or shareholder. “(B) Exceptions.— The term ‘applicable payment’ shall not include any— “(i) gain from the sale or exchange of property between the partner or shareholder and the partnership or S corporation, and “(ii) dividend paid by the S corporation. “(4) Applicable percentage.— The applicable percentage is the percentage determined in accordance with the following table: “If the applicable election year of the partnership or S corporation begins during: The applicable percentage is:  1987 25  1988 50  1989 75  1990 or thereafter 100. “(e) Other Definitions and Special Rules.— For purposes of this section— “(1) Deferral period.— The term ‘deferral period’ has the meaning given to such term by section 444(b)(4). “(2) Years.— “(A) Base year.— The term ‘base year’ means, with respect to any applicable election year, the taxable year of the partnership or S corporation preceding such applicable election year. “(B) Applicable election year.— The term ‘applicable election year’ means any taxable year of a partnership or S corporation with respect to which an election is in effect under section 444. “(3) Requirement of reporting.— Each partnership or S corporation which makes an election under section 444 shall include on any required return or statement such information as the Secretary shall prescribe as is necessary to carry out the provisions of this section. (f) Administrative Provisions.— “(1) Regulations. In general.— Except as otherwise provided in this subsection or in regulations prescribed by the Secretary, any payment required by this section shall be assessed and collected in the same manner as if it were a tax imposed by subtitle C. “(2) Due date.— The amount of any payment required by this section shall be paid on or before April 15 of the calendar year following the calendar year in which the applicable election year begins (or such later date as may be prescribed by the Secretary). “(3) Interest.— For purposes of determining interest, any payment required by this section shall be treated as a tax; except that no interest shall be allowed with respect to any refund of a payment made under this section. “(4) Penalties.— “(A) In general.— In the case of any failure by any person to pay on the date prescribed therefor any amount required by this section, there shall be imposed on such person a penalty of 10 percent of the underpayment. For purposes of the preceding sentence, the term ‘underpayment’ means the excess of the amount of the payment required under this section over the amount (if any) of such payment paid on or before the date prescribed therefor. “(B) Negligence and fraud penalties made applicable.— For purposes of section 6653, any payment required by this section shall be treated as a tax. “(C) Willful 110110 Copy read “Willfull” failure.— If any partnership or S corporation willfully fails to comply with the requirements of this section, section 444 shall cease to apply with respect to such partnership or S corporation. “(g) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the provisions of this section and section 280H, including regulations for annualizing the income and applicable payments of an entity if the base year is a taxable year of less than 12 months.”

2. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(4)(A) · 102 Stat. 3342

   Amended · 26 U.S.C. § 7519(b)(2)

   Pub. L. 100–647, § 2004(e)(4)(A), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “the amount of the required payment for the preceding applicable election year.”

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 100–647, § 2004(e)(4)(A), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “the amount of the required payment for the preceding applicable election year.”

   Enacted provision · exact public law section
   (A) Paragraph (2) of section 7519(b) of the 1986 Code is amended to read as follows: “(2) the net required payment balance.”

3. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(5) · 102 Stat. 3342

   Amended · 26 U.S.C. § 7519(c)

   Pub. L. 100–647, § 2004(e)(5), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “If the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), then the entity shall be entitled to a refund of such excess.”

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 100–647, § 2004(e)(5), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “If the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), then the entity shall be entitled to a refund of such excess.”

   Enacted provision · exact public law section
   (5) Subsection (c) of section 7519 of the 1986 Code is amended to read as follows: “(c) Refund of Payments.— “(1) In general.— If, for any applicable election year, the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), the entity shall be entitled to a refund of such excess for such year. “(2) Termination of elections, etc.— If— “(A) an election under section 444 is terminated effective with respect to any year, or “(B) the entity is liquidated during any year, the entity shall be entitled to a refund of the net required payment balance. “(3) Date on which refund payable.— Any refund under this subsection shall be payable on later of— “(A) April 15 of the calendar year following— “(i) in the case of the year referred to in paragraph (1), the calendar year in which it begins, “(ii) in the case of the year referred to in paragraph (2), the calendar year in which it ends, or “(B) the day 90 days after the day on which claim therefor is filed with the Secretary.”

4. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(10) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 7519(d)(2)(A)

   Pub. L. 100–647, § 2004(e)(10), substituted “(other than credits and tax-exempt income)” for “(other than credits)”

   Source evidence

   Code amendment note
   Subsec. (d)(2)(A). Pub. L. 100–647, § 2004(e)(10), substituted “(other than credits and tax-exempt income)” for “(other than credits)”.

   Enacted provision · exact public law section
   (10) Subparagraphs (A) and (B) of section 7519(d)(2) of the 1986 Code are each amended by striking out “(other than credits)” and inserting in lieu thereof “(other than credits and tax-exempt income)”.

5. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(7) · 102 Stat. 3342

   1. Substituted · 26 U.S.C. § 7519(d)(2)(B)

      Pub. L. 100–647, § 2004(e)(7), (10), substituted “(other than credits and tax-exempt income)” for “(other than credits)”

   2. Inserted · 26 U.S.C. § 7519(d)(2)(B)

      Pub. L. 100–647, § 2004(e)(7), (10), inserted before period at end “(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))”

   Source evidence

   Code amendment note
   Subsec. (d)(2)(B). Pub. L. 100–647, § 2004(e)(7), (10), substituted “(other than credits and tax-exempt income)” for “(other than credits)” and inserted before period at end “(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))”.

   Enacted provision · exact public law section
   (7) Subparagraph (B) of section 7519(d)(2) of the 1986 Code is amended by inserting before the period at the end thereof the following: “(and such corporation shall be treated as an S corporation for such taxable year for purposes of paragraph (3))”.

6. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(14)(B) · 102 Stat. 3342

   Struck · 26 U.S.C. § 7519(d)(3)(A)

   Pub. L. 100–647, § 2004(e)(14)(B), struck out “or incurred” after “amounts paid”

   Source evidence

   Code amendment note
   Subsec. (d)(3)(A). Pub. L. 100–647, § 2004(e)(14)(B), struck out “or incurred” after “amounts paid”.

   Enacted provision · exact public law section
   (B) Subparagraph (A) of section 7519(d)(3) of the 1986 Code is amended by striking out “or incurred”.

7. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(9) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 7519(d)(4)

   Pub. L. 100–647, § 2004(e)(9), inserted at end “Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity’s net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.”

   Source evidence

   Code amendment note
   Subsec. (d)(4). Pub. L. 100–647, § 2004(e)(9), inserted at end “Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity’s net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.”

   Enacted provision · exact public law section
   (9) Paragraph (4) of section 7519(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Notwithstanding the preceding provisions of this paragraph, for taxable years beginning after 1987, the applicable percentage for any partnership or S corporation shall be 100 percent if more than 50 percent of such entity’s net income for the short taxable year which would have resulted if the entity had not made an election under section 444 would have been allocated to partners or shareholders who would not have been entitled to the benefits of section 806(e)(2)(C) of the Tax Reform Act of 1986 with respect to such income.”

8. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(8) · 102 Stat. 3342

   Added · 26 U.S.C. § 7519(d)(5)

   Pub. L. 100–647, § 2004(e)(8), added par. (5)

   Source evidence

   Code amendment note
   Subsec. (d)(5). Pub. L. 100–647, § 2004(e)(8), added par. (5).

   Enacted provision · exact public law section
   (8) Subsection (d) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(5) Treatment of guaranteed payments.— “(A) In general.— Any guaranteed payment by a partnership shall not be treated as an applicable payment, and the amount of the net income of the partnership shall be determined by not taking such guaranteed payment into account. “(B) Guaranteed payment.— For purposes of subparagraph (A), the term ‘guaranteed payment’ means any payment referred to in section 707(c).”

9. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 2004(e)(4)(B) · 102 Stat. 3342

   Added · 26 U.S.C. § 7519(e)(4)

   Pub. L. 100–647, § 2004(e)(4)(B), added par. (4)

   Source evidence

   Code amendment note
   Subsec. (e)(4). Pub. L. 100–647, § 2004(e)(4)(B), added par. (4).

   Enacted provision · exact public law section
   (B) Subsection (e) of section 7519 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(4) Net required payment balance.— The term ‘net required payment balance’ means the excess (if any) of— “(A) the aggregate of the required payments under this section for all preceding applicable election years, over “(B) the aggregate amount allowable as a refund to the entity under subsection (c) for all preceding applicable election years.”

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 2004(e)(6) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 7519(g)

    Pub. L. 100–647, § 2004(e)(6), substituted “including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where—

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 100–647, § 2004(e)(6), substituted “including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where—

    “(1) 2 or more applicable election years begin in the same calendar year, or “(2) the base year is a taxable year of less than 12 months” for “including regulations for annualizing the income and applicable payments of an entity if the base year is a taxable year of less than 12 months”.

    Enacted provision · exact public law section
    (6) Subsection (g) of section 7519 of the 1986 Code is amended by striking out “including regulations” and all that follows down through the period at the end thereof and inserting in lieu thereof “including regulations providing for appropriate adjustments in the application of this section and sections 280H and 444 in cases where— “(1) 2 or more applicable election years begin in the same calendar year, or “(2) the base year is a taxable year of less than 12 months.”

11. 1989

    Revenue Reconciliation Act of 1989

    Pub. L. 101–239 § 7821(b) · 103 Stat. 2106

    1. Struck · 26 U.S.C. § 7519(d)(4)

       Pub. L. 101–239, § 7821(b), struck out “for taxable years beginning after 1987,” before “the applicable percentage”

    2. Substituted · 26 U.S.C. § 7519(d)(4)

       Pub. L. 101–239, § 7821(b), substituted “unless more than 50 percent” for “if more than 50 percent”

    3. Substituted · 26 U.S.C. § 7519(d)(4)

       Pub. L. 101–239, § 7821(b), substituted “who would have been entitled” for “who would not have been entitled”

    Source evidence

    Code amendment note
    Subsec. (d)(4). Pub. L. 101–239, § 7821(b), struck out “for taxable years beginning after 1987,” before “the applicable percentage” and substituted “unless more than 50 percent” for “if more than 50 percent” and “who would have been entitled” for “who would not have been entitled”.

    Enacted provision · exact public law section
    (b) Amendments Related to Section 10206 of the 1987 Act.— Effective with respect to taxable years beginning after 1988, the last sentence of section 7519(d)(4) is amended— (1) by striking “for taxable years beginning after 1987,”, (2) by striking “if more than 50 percent” and inserting “unless more than 50 percent”, and (3) by striking “who would not have been entitled” and inserting “who would have been entitled”.

12. 1989

    Improved Penalty Administration and Compliance Tax Act

    Pub. L. 101–239 § 7721(c)(12) · 103 Stat. 2106

    Substituted · 26 U.S.C. § 7519(f)(4)(B)

    Pub. L. 101–239, § 7721(c)(12), substituted “part II of subchapter A of chapter 68” for “section 6653”

    Source evidence

    Code amendment note
    Subsec. (f)(4)(B). Pub. L. 101–239, § 7721(c)(12), substituted “part II of subchapter A of chapter 68” for “section 6653”.

    Enacted provision · exact public law section
    (12) Subparagraph (B) of section 7519(f)(4) is amended by striking “section 6653” and inserting “part II of subchapter A of chapter 68”.

13. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 title XI § 11704(a)(29) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 7519(c)(3)

    Pub. L. 101–508 substituted “payable on the later of” for “payable on later of”

    Source evidence

    Code amendment note
    Subsec. (c)(3). Pub. L. 101–508 substituted “payable on the later of” for “payable on later of”.

    Enacted provision · exact public law section
    (29) Paragraph (3) of section 7519(c) is amended by striking “payable on later of” and inserting “payable on the later of”.

14. 1997

    Pub. L. 105–34 title XII § 1281(d) · 111 Stat. 788

    Inserted · 26 U.S.C. § 7519(f)(4)(A)

    Pub. L. 105–34 inserted at end “No penalty shall be imposed under this subparagraph on any failure which is shown to be due to reasonable cause and not willful neglect.”

    Source evidence

    Code amendment note
    Subsec. (f)(4)(A). Pub. L. 105–34 inserted at end “No penalty shall be imposed under this subparagraph on any failure which is shown to be due to reasonable cause and not willful neglect.”

    Enacted provision · exact public law section
    (d) Failure To Make Required Payments.— Subparagraph (A) of section 7519(f)(4) is amended by adding at the end the following new sentence: “No penalty shall be imposed under this subparagraph on any failure which is shown to be due to reasonable cause and not willful neglect.”.

    Effective date note
    Amendment by Pub. L. 105–34 applicable to taxable years beginning after Aug. 5, 1997, see section 1281(e) of Pub. L. 105–34, set out as a note under section 6652 of this title.

17 of 17 references resolved to an enrolled provision